AMERICAN EAGLE OUTFITTERS INC, 10-Q filed on 12/9/2013
Quarterly Report
Document and Entity Information
9 Months Ended
Nov. 2, 2013
Dec. 6, 2013
Document Information [Line Items]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Nov. 02, 2013 
 
Document Fiscal Year Focus
2013 
 
Document Fiscal Period Focus
Q3 
 
Trading Symbol
AEO 
 
Entity Registrant Name
AMERICAN EAGLE OUTFITTERS INC 
 
Entity Central Index Key
0000919012 
 
Current Fiscal Year End Date
--02-01 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
192,789,779 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Nov. 2, 2013
Feb. 2, 2013
Oct. 27, 2012
Current assets:
 
 
 
Cash and cash equivalents
$ 354,284 
$ 509,119 
$ 544,683 
Short-term investments
2,930 
121,873 
 
Merchandise inventory
518,904 
332,452 
481,208 
Assets held for sale
4,666 
9,499 
9,682 
Accounts receivable
59,277 
46,321 
47,432 
Prepaid expenses and other
107,292 
73,805 
65,326 
Deferred income taxes
46,510 
58,230 
59,203 
Total current assets
1,093,863 
1,151,299 
1,207,534 
Property and equipment, at cost, net of accumulated depreciation
630,206 
500,134 
527,376 
Intangible assets, at cost, net of accumulated amortization
44,427 
38,136 
38,459 
Goodwill
13,792 
11,484 
11,492 
Non-current deferred income taxes
19,086 
31,282 
23,199 
Other assets
38,712 
23,718 
25,073 
Total assets
1,840,086 
1,756,053 
1,833,133 
Current liabilities:
 
 
 
Accounts payable
353,228 
176,874 
213,197 
Accrued compensation and payroll taxes
32,522 
65,533 
51,992 
Accrued rent
75,680 
77,873 
76,769 
Accrued income and other taxes
9,002 
29,155 
38,133 
Unredeemed gift cards and gift certificates
24,689 
46,458 
23,089 
Current portion of deferred lease credits
13,954 
13,381 
13,886 
Other liabilities and accrued expenses
29,382 
26,628 
26,432 
Total current liabilities
538,457 
435,902 
443,498 
Non-current liabilities:
 
 
 
Deferred lease credits
65,004 
59,571 
63,220 
Non-current accrued income taxes
20,777 
19,011 
27,110 
Other non-current liabilities
23,139 
20,382 
15,734 
Total non-current liabilities
108,920 
98,964 
106,064 
Commitments and contingencies
   
   
   
Stockholders' equity:
 
 
 
Preferred stock, $0.01 par value; 5,000 shares authorized; none issued and outstanding
   
   
   
Common stock, $0.01 par value; 600,000 shares authorized; 249,566 shares issued; 192,787, 192,604 and 197,870 shares outstanding, respectively
2,496 
2,496 
2,496 
Contributed capital
577,108 
627,065 
599,343 
Accumulated other comprehensive income
23,483 
29,297 
29,179 
Retained earnings
1,587,320 
1,553,058 
1,522,805 
Treasury stock, 56,779, 56,962 and 51,696 shares, respectively
(997,698)
(990,729)
(870,252)
Total stockholders' equity
1,192,709 
1,221,187 
1,283,571 
Total liabilities and stockholders' equity
$ 1,840,086 
$ 1,756,053 
$ 1,833,133 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Per Share data, unless otherwise specified
Nov. 2, 2013
Feb. 2, 2013
Oct. 27, 2012
Preferred stock, par value
$ 0.01 
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
5,000 
5,000 
5,000 
Preferred stock, issued
Preferred stock, outstanding
Common stock, par value
$ 0.01 
$ 0.01 
$ 0.01 
Common stock, shares authorized
600,000 
600,000 
600,000 
Common stock, shares issued
249,566 
249,566 
249,566 
Common stock, shares outstanding
192,787 
192,604 
197,870 
Treasury stock, shares
56,779 
56,962 
51,696 
Consolidated Statements of Operations and Retained Earnings (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Nov. 2, 2013
Oct. 27, 2012
Nov. 2, 2013
Oct. 27, 2012
Total net revenue
$ 857,305 
$ 910,374 
$ 2,264,095 
$ 2,358,749 
Cost of sales, including certain buying, occupancy and warehousing expenses
558,430 
531,284 
1,456,116 
1,428,182 
Gross profit
298,875 
379,090 
807,979 
930,567 
Selling, general and administrative expenses
205,725 
219,128 
574,314 
579,350 
Loss on impairment of assets
19,316 
 
19,316 
442 
Depreciation and amortization expense
31,998 
31,421 
97,271 
96,130 
Operating income
41,836 
128,541 
117,078 
254,645 
Other income, net
520 
2,822 
987 
5,986 
Income before income taxes
42,356 
131,363 
118,065 
260,631 
Provision for income taxes
17,453 
48,922 
45,592 
91,309 
Income from continuing operations
24,903 
82,441 
72,473 
169,322 
Loss from discontinued operations, net of tax
 
(3,833)
 
(31,990)
Net income
24,903 
78,608 
72,473 
137,332 
Basic income per common share:
 
 
 
 
Income from continuing operations
$ 0.13 
$ 0.42 
$ 0.38 
$ 0.86 
Loss from discontinued operations
 
$ (0.02)
 
$ (0.16)
Net income per basic share
$ 0.13 
$ 0.40 
$ 0.38 
$ 0.70 
Diluted income per common share:
 
 
 
 
Income from continuing operations
$ 0.13 
$ 0.41 
$ 0.37 
$ 0.85 
Loss from discontinued operations
 
$ (0.02)
 
$ (0.16)
Net income per diluted share
$ 0.13 
$ 0.39 
$ 0.37 
$ 0.69 
Cash dividends per common share
$ 0.125 
$ 1.610 
$ 0.250 
$ 1.830 
Weighted average common shares outstanding - basic
192,818 
197,173 
192,753 
196,177 
Weighted average common shares outstanding - diluted
194,612 
201,967 
195,021 
200,041 
Retained earnings, beginning
1,588,094 
1,770,546 
1,553,058 
1,771,464 
Net income
24,903 
78,608 
72,473 
137,332 
Cash dividends and dividend equivalents
(25,099)
(324,588)
(49,673)
(368,649)
Reissuance of treasury stock
(578)
(1,761)
11,462 
(17,342)
Retained earnings, ending
$ 1,587,320 
$ 1,522,805 
$ 1,587,320 
$ 1,522,805 
Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Nov. 2, 2013
Oct. 27, 2012
Nov. 2, 2013
Oct. 27, 2012
Net income
$ 24,903 
$ 78,608 
$ 72,473 
$ 137,332 
Other comprehensive (loss) gain:
 
 
 
 
Foreign currency translation (loss) gain
(914)
1,106 
(5,814)
520 
Other comprehensive (loss) gain:
(914)
1,106 
(5,814)
520 
Comprehensive income
$ 23,989 
$ 79,714 
$ 66,659 
$ 137,852 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Nov. 2, 2013
Oct. 27, 2012
Operating activities:
 
 
Net income
$ 72,473 
$ 137,332 
Loss from discontinued operations, net of tax
 
31,990 
Income from continuing operations
72,473 
169,322 
Adjustments to reconcile net income to net cash from operating activities:
 
 
Depreciation and amortization
98,873 
97,720 
Share-based compensation
(1,793)
45,458 
Provision for deferred income taxes
23,565 
(21,233)
Tax benefit from share-based payments
8,172 
5,072 
Excess tax benefit from share-based payments
(8,267)
(4,365)
Foreign currency transaction loss
798 
24 
Loss on impairment of assets
19,316 
449 
Changes in assets and liabilities:
 
 
Merchandise inventory
(185,474)
(113,509)
Accounts receivable
(13,060)
(7,735)
Prepaid expenses and other
(33,867)
8,896 
Other assets
(5,403)
(9,574)
Accounts payable
164,988 
36,713 
Unredeemed gift cards and gift certificates
(21,601)
(21,908)
Deferred lease credits
6,310 
(6,896)
Accrued compensation and payroll taxes
(33,261)
9,461 
Accrued income and other taxes
(18,394)
9,642 
Accrued liabilities
(151)
13,280 
Total adjustments
751 
41,495 
Net cash provided by operating activities
73,224 
210,817 
Investing activities:
 
 
Capital expenditures for property and equipment
(217,214)
(71,223)
Purchase of assets in acquisition
(20,751)
 
Acquisition of intangible assets
(1,528)
(958)
Purchase of available-for-sale securities
(17,373)
(10,069)
Sale of available-for-sale securities
125,982 
36,415 
Net cash used for investing activities
(130,884)
(45,835)
Financing activities:
 
 
Payments on capital leases
(1,393)
(2,515)
Repurchase of common stock as part of publicly announced programs
(33,051)
 
Repurchase of common stock from employees
(23,343)
(4,125)
Net proceeds from stock options exercised
3,323 
43,914 
Excess tax benefit from share-based payments
8,267 
4,365 
Cash dividends paid
(48,181)
(360,498)
Net cash used for financing activities
(94,378)
(318,859)
Effect of exchange rates changes on cash
(2,797)
264 
Cash flows of discontinued operations
 
 
Net cash used for operating activities
 
(20,481)
Net cash used for investing activities
 
(768)
Net cash used for financing activities
   
   
Effect of exchange rates changes on cash
   
   
Net cash used for discontinued operations
 
(21,249)
Net decrease in cash and cash equivalents
(154,835)
(174,862)
Cash and cash equivalents - beginning of period
509,119 
719,545 
Cash and cash equivalents - end of period
354,284 
544,683 
Supplemental disclosure of cash flow information:
 
 
Cash paid during the period for income taxes
60,689 
79,547 
Cash paid during the period for interest
$ 297 
$ 247 
Interim Financial Statements
Interim Financial Statements

1. Interim Financial Statements

The accompanying Consolidated Financial Statements of American Eagle Outfitters, Inc. (the “Company”) at November 2, 2013 and October 27, 2012 and for the 13 and 39 week periods ended November 2, 2013 and October 27, 2012 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Certain notes and other information have been condensed or omitted from the interim Consolidated Financial Statements presented in this Quarterly Report on Form 10-Q. Therefore, these Consolidated Financial Statements should be read in conjunction with the Company’s Fiscal 2012 Annual Report. In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and those described in the footnotes that follow) considered necessary for a fair presentation have been included. The existence of subsequent events has been evaluated through the filing date of this Quarterly Report on Form 10-Q.

As used in this report, all references to “we,” “our” and the “Company” refer to American Eagle Outfitters, Inc. and its wholly owned subsidiaries. “American Eagle Outfitters,” “American Eagle,” “AEO” and the “AE Brand” refer to our American Eagle Outfitters stores. “aerie” refers to our aerie® by American Eagle® stores. “AEO Direct” refers to our e-commerce operations, ae.com and aerie.com. “77kids” refers to the 77kids by american eagle® stores and related e-commerce operations which the Company exited in Fiscal 2012.

The Company’s business is affected by the pattern of seasonality common to most retail apparel businesses. The results for the current and prior periods are not necessarily indicative of future financial results.

Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. At November 2, 2013, the Company operated in one reportable segment.

In Fiscal 2012, the Company exited the 77kids business, which included all 22 stores and related e-commerce operations. These Consolidated Financial Statements reflect the results of 77kids as a discontinued operation for all periods presented. Refer to Note 13 to the Consolidated Financial Statements for additional information regarding the discontinued operations of 77kids.

Fiscal Year

The Company’s financial year is a 52/53 week year that ends on the Saturday nearest to January 31. As used herein, “Fiscal 2015,” “Fiscal 2014” “Fiscal 2013” refers to the 52 week periods ending January 31, 2016, January 31, 2015 and February 1, 2014, respectively. “Fiscal 2012” refers to the 53 week period ended February 2, 2013. “Fiscal 2011” and “Fiscal 2010” refer to the 52 week periods ended January 28, 2012 and January 29, 2011, respectively.

Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of our contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, our management reviews its estimates based on currently available information. Changes in facts and circumstances may result in revised estimates.

 

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”). ASU 2013-02 requires an entity to provide additional information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. The amendments are effective prospectively for reporting periods beginning after December 15, 2012. ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income. Because the standard only affects the presentation of comprehensive income and does not impact what is included in comprehensive income, ASU 2013-02 did not have a significant impact on the Company’s Consolidated Financial Statements.

Foreign Currency Translation

In accordance with Accounting Standards Codification (“ASC”) 830, Foreign Currency Matters, assets and liabilities denominated in foreign currencies were translated into United States dollars (“USD”) (the reporting currency) at the exchange rates prevailing at the balance sheet date. Revenues and expenses denominated in foreign currencies were translated into USD at the monthly average exchange rates for the period. Gains or losses resulting from foreign currency transactions are included in the results of operations, whereas, related translation adjustments are reported as an element of other comprehensive income in accordance with ASC 220, Comprehensive Income.

Revenue Recognition

Revenue is recorded for store sales upon the purchase of merchandise by customers. The Company’s e-commerce operation records revenue upon the estimated customer receipt date of the merchandise. Shipping and handling revenues are included in total net revenue. Sales tax collected from customers is excluded from revenue and is included as part of accrued income and other taxes on the Company’s Consolidated Balance Sheets.

Revenue is recorded net of estimated and actual sales returns and deductions for coupon redemptions and other promotions. The Company records the impact of adjustments to its sales return reserve quarterly within total net revenue and cost of sales. The sales return reserve reflects an estimate of sales returns based on projected merchandise returns determined through the use of historical average return percentages.

Revenue is not recorded on the purchase of gift cards. A current liability is recorded upon purchase, and revenue is recognized when the gift card is redeemed for merchandise. Additionally, the Company recognizes revenue on unredeemed gift cards based on an estimate of the amounts that will not be redeemed (“gift card breakage”), determined through historical redemption trends. Gift card breakage revenue is recognized in proportion to actual gift card redemptions as a component of total net revenue. For further information on the Company’s gift card program, refer to the Gift Cards caption below.

The Company recognizes royalty revenue generated from its franchise agreements based on a percentage of merchandise sales by the franchisee. This revenue is recorded as a component of total net revenue when earned.

Cost of Sales, Including Certain Buying, Occupancy and Warehousing Expenses

Cost of sales consists of merchandise costs, including design, sourcing, importing and inbound freight costs, as well as markdowns, shrinkage and certain promotional costs (collectively “merchandise costs”) and buying, occupancy and warehousing costs. Buying, occupancy and warehousing costs consist of compensation, employee benefit expenses and travel for our buyers and certain senior merchandising executives; rent and utilities related to our stores, corporate headquarters, distribution centers and other office space; freight from our distribution centers to the stores; compensation and supplies for our distribution centers, including purchasing, receiving and inspection costs; and shipping and handling costs related to our e-commerce operation. Gross profit is the difference between total net revenue and cost of sales.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of compensation and employee benefit expenses, including salaries, incentives and related benefits associated with our stores and corporate headquarters. Selling, general and administrative expenses also include advertising costs, supplies for our stores and home office, communication costs, travel and entertainment, leasing costs and services purchased. Selling, general and administrative expenses do not include compensation, employee benefit expenses and travel for our design, sourcing and importing teams, our buyers and our distribution centers as these amounts are recorded in cost of sales.

 

Other Income, Net

Other income, net consists primarily of interest income/expense, foreign currency transaction gain/loss and realized investment gains/losses.

Other-than-Temporary Impairment

The Company evaluates its investments for impairment in accordance with ASC 320, InvestmentsDebt and Equity Securities (“ASC 320”). ASC 320 provides guidance for determining when an investment is considered impaired, whether impairment is other-than-temporary, and measurement of an impairment loss. An investment is considered impaired if the fair value of the investment is less than its cost. If, after consideration of all available evidence to evaluate the realizable value of its investment, impairment is determined to be other-than-temporary, then an impairment loss is recognized in the Consolidated Statement of Operations equal to the difference between the investment’s cost and its fair value. Additionally, ASC 320 requires additional disclosures relating to debt and equity securities both in the interim and annual periods as well as requires the Company to present total other-than-temporary impairment (“OTTI”) with an offsetting reduction for any non-credit loss impairment amount recognized in other comprehensive income (“OCI”). There was no net impairment loss for investment securities recognized in earnings during the 13 and 39 weeks ended November 2, 2013 or October 27, 2012.

Cash and Cash Equivalents, Short-term Investments and Long-term Investments

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

As of November 2, 2013, short-term investments include treasury bills with a maturity of greater than three months, but less than one year.

As of November 2, 2013, long-term investments include term deposits with an original maturity of greater than one year. Long-term investments are recorded within other assets on the Company’s Consolidated Balance Sheets.

Unrealized gains and losses on the Company’s available-for-sale securities are excluded from earnings and are reported as a separate component of stockholders’ equity, within accumulated other comprehensive income, until realized. When available-for-sale securities are sold, the cost of the securities is specifically identified and is used to determine any realized gain or loss.

Refer to Note 3 to the Consolidated Financial Statements for information regarding cash and cash equivalents and investments.

Merchandise Inventory

Merchandise inventory is valued at the lower of average cost or market, utilizing the retail method. Average cost includes merchandise design and sourcing costs and related expenses. The Company records merchandise receipts at the time at which both title and risk of loss for the merchandise transfers to the Company.

The Company reviews its inventory levels to identify slow-moving merchandise and generally uses markdowns to clear merchandise. Additionally, the Company estimates a markdown reserve for future planned permanent markdowns related to current inventory. Markdowns may occur when inventory exceeds customer demand for reasons of style, seasonal adaptation, changes in customer preference, lack of consumer acceptance of fashion items, competition, or if it is determined that the inventory in stock will not sell at its currently ticketed price. Such markdowns may have a material adverse impact on earnings, depending on the extent and amount of inventory affected. The Company also estimates a shrinkage reserve for the period between the last physical count and the balance sheet date. The estimate for the shrinkage reserve, based on historical results, can be affected by changes in merchandise mix and changes in actual shrinkage trends.

Income Taxes

The Company calculates income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires the use of the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on the difference between the Consolidated Financial Statement carrying amounts of existing assets and liabilities and their respective tax bases as computed pursuant to ASC 740. Deferred tax assets and liabilities are measured using the tax rates, based on certain judgments regarding enacted tax laws and published guidance, in effect in the years when those temporary differences are expected to reverse. A valuation allowance is established against the deferred tax assets when it is more likely than not that some portion or all of the deferred taxes may not be realized. Changes in the Company’s level and composition of earnings, tax laws or the deferred tax valuation allowance, as well as the results of tax audits may materially impact the Company’s effective income tax rate.

The Company evaluates its income tax positions in accordance with ASC 740, which prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements tax positions taken or expected to be taken on a tax return, including a decision whether to file or not to file in a particular jurisdiction. Under ASC 740, a tax benefit from an uncertain position may be recognized only if it is “more likely than not” that the position is sustainable based on its technical merits.

The calculation of the deferred tax assets and liabilities, as well as the decision to recognize a tax benefit from an uncertain position and to establish a valuation allowance require management to make estimates and assumptions. The Company believes that its assumptions and estimates are reasonable, although actual results may have a positive or negative material impact on the balances of deferred tax assets and liabilities, valuation allowances or net income.

Refer to Note 10 to the Consolidated Financial Statements for additional information regarding income taxes.

Property and Equipment

Property and equipment is recorded on the basis of cost, including costs to prepare the asset for use, with depreciation computed utilizing the straight-line method over the assets’ estimated useful lives. The useful lives of our major classes of assets are as follows:

 

Buildings    25 years
Leasehold improvements    Lesser of 10 years or the term of the lease
Fixtures and equipment    5 years

In accordance with ASC 360, Property, Plant, and Equipment (“ASC 360”), the Company evaluates long-lived assets for impairment at the individual store level, which is the lowest level at which individual cash flows can be identified, for stores that have been open for a period of time sufficient to reach maturity. Impairment losses are recorded on long-lived assets used in operations when events and circumstances indicate that the assets are impaired and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. When events such as these occur, the impaired assets are adjusted to their estimated fair value and an impairment loss is recorded.

On September 5, 2013, the Company announced plans to close its Warrendale, Pennsylvania distribution center and transfer the operations to its new Hazelton, Pennsylvania facility, as the Warrendale facility is not physically or geographically capable of supporting the Company’s long-term expansion goals. This announcement resulted in $19.3 million of pre-tax asset impairments during the 13 weeks ended November 2, 2013. Refer to Note 14 to the Consolidated Financial Statements for additional information regarding exits and disposal costs.

The Company had $4.7 million, $9.5 million and $9.7 million of long-lived assets held-for-sale as of November 2, 2013, February 2, 2013 and October 27, 2012, respectively. These long-lived corporate assets, which the Company believes will be sold within one year, are recorded at their estimated net realizable value, less disposal costs, which resulted in a $5.0 million reduction in carrying value during the 13 weeks ended May 4, 2013, recorded in depreciation and amortization expense within the Company’s Consolidated Financial Statements.

Refer to Note 6 to the Consolidated Financial Statements for additional information regarding property, plant and equipment.

Goodwill

The Company’s goodwill is primarily related to the acquisition of its importing operations, Canadian business and recently acquired operations in Hong Kong and China. In accordance with ASC 350, Intangibles – Goodwill and Other (“ASC 350”), the Company evaluates goodwill for possible impairment on at least an annual basis and last performed an annual impairment test as of February 2, 2013. As a result of the Company’s annual goodwill impairment test, the Company concluded that its goodwill was not impaired.

Refer to Note 12 to the Consolidated Financial Statements for additional information on the Company’s acquisition of its Hong Kong and China operations.

 

Intangible Assets

Intangible assets are recorded on the basis of cost with amortization computed utilizing the straight-line method over the assets’ estimated useful lives. The Company’s intangible assets, which primarily include trademark assets, are generally amortized over 15 to 25 years.

The Company evaluates intangible assets for impairment in accordance with ASC 350 when events or circumstances indicate that the carrying value of the asset may not be recoverable. Such an evaluation includes the estimation of undiscounted future cash flows to be generated by those assets. If the sum of the estimated future undiscounted cash flows are less than the carrying amounts of the assets, then the assets are impaired and are adjusted to their estimated fair value. No intangible asset impairment charges were recorded in the 13 and 39 weeks ended November 2, 2013 and October 27, 2012.

Refer to Note 7 to the Consolidated Financial Statements for additional information regarding intangible assets.

Gift Cards

The value of a gift card is recorded as a current liability upon purchase, and revenue is recognized when the gift card is redeemed for merchandise. The Company estimates gift card breakage and recognizes revenue in proportion to actual gift card redemptions as a component of total net revenue. The Company determines an estimated gift card breakage rate by continuously evaluating historical redemption data and the time when there is a remote likelihood that a gift card will be redeemed. The Company recorded $1.1 million and $1.0 million of revenue related to gift card breakage during the 13 weeks ended November 2, 2013 and October 27, 2012, respectively. During both the 39 weeks ended November 2, 2013 and October 27, 2012, the Company recorded $4.3 million of revenue related to gift card breakage.

Deferred Lease Credits

Deferred lease credits represent the unamortized portion of construction allowances received from landlords related to the Company’s retail stores. Construction allowances are generally comprised of cash amounts received by the Company from its landlords as part of the negotiated lease terms. The Company records a receivable and a deferred lease credit liability at the lease commencement date (date of initial possession of the store). The deferred lease credit is amortized on a straight-line basis as a reduction of rent expense over the term of the original lease (including the pre-opening build-out period) and any subsequent renewal terms. The receivable is reduced as amounts are received from the landlord.

Co-branded Credit Card and Customer Loyalty Program

The Company offers a co-branded credit card (the “AEO Visa Card”) and a private label credit card (the “AEO Credit Card”). These credit cards are issued by a third-party bank (the “Bank”), and the Company has no liability to the Bank for bad debt expense, provided that purchases are made in accordance with the Bank’s procedures. Once a customer is approved to receive the AEO Visa Card or the AEO Credit Card and the card is activated, the customer is eligible to participate in the credit card rewards program. Customers who make purchases earn discounts in the form of savings certificates when certain purchase levels are reached. Also, AEO Visa Card customers who make purchases at other retailers where the card is accepted earn additional discounts. Savings certificates are valid for 90 days from issuance.

Points earned under the credit card rewards program on purchases are accounted for by analogy to ASC 605-25, Revenue Recognition, Multiple Element Arrangements (“ASC 605-25”). The Company believes that points earned under its point and loyalty programs represent deliverables in a multiple element arrangement rather than a rebate or refund of cash. Accordingly, the portion of the sales revenue attributed to the award points is deferred and recognized when the award is redeemed or when the points expire. Additionally, credit card reward points earned on non-AE or aerie purchases are accounted for in accordance with ASC 605-25. As the points are earned, a current liability is recorded for the estimated cost of the award, and the impact of adjustments is recorded in cost of sales.

The Company offers its customers the AEREWARD$sm loyalty program (the “Program”). Under the Program, customers accumulate points based on purchase activity and earn rewards by reaching certain point thresholds during three-month earning periods. Rewards earned during these periods are valid through the stated expiration date, which is approximately one month from the mailing date of the reward. These rewards can be redeemed for a discount on a purchase of merchandise. Rewards not redeemed during the one-month redemption period are forfeited. The Company determined that rewards earned using the Program should be accounted for in accordance with ASC 605-25. Accordingly, the portion of the sales revenue attributed to the award credits is deferred and recognized when the awards are redeemed or expire.

 

Segment Information

In accordance with ASC 280, Segment Reporting (“ASC 280”), the Company has identified three operating segments (American Eagle Brand retail stores, aerie retail stores and AEO Direct) that reflect the basis used internally to review performance and allocate resources. All of the operating segments have been aggregated and are presented as one reportable segment, as permitted by ASC 280.

Reclassification

Certain reclassifications have been made to the Consolidated Financial Statements for prior periods in order to conform to the current period presentation.

Cash and Cash Equivalents, Short-term Investments and Long-term Investments
Cash and Cash Equivalents, Short-term Investments and Long-term Investments

3. Cash and Cash Equivalents, Short-term Investments and Long-term Investments

The following table summarizes the fair market values for the Company’s cash and marketable securities, which are recorded on the Consolidated Balance Sheets:

 

(In thousands)    November 2,
2013
     February 2,
2013
     October 27,
2012
 

Cash and cash equivalents:

        

Cash

   $ 306,572       $ 257,191       $ 389,664   

Treasury bills

     25,863         —           19,129   

Money-market

     21,849         221,929         107,821   

Commercial paper

     —           29,999         28,069   
  

 

 

    

 

 

    

 

 

 

Total cash and cash equivalents

   $ 354,284       $ 509,119       $ 544,683   

Short-term investments:

        

Treasury bills

   $ 2,930       $ 109,305       $ —     

Term-deposits

     —           12,568         —     
  

 

 

    

 

 

    

 

 

 

Total short-term investments

   $ 2,930       $ 121,873       $ —     

Long-term investments:

        

Term-deposits

   $ 9,588       $ —         $ —     
  

 

 

    

 

 

    

 

 

 

Total long-term investments

   $ 9,588       $ —         $ —     
  

 

 

    

 

 

    

 

 

 

Total

   $ 366,802       $ 630,992       $ 544,683   
  

 

 

    

 

 

    

 

 

 

Proceeds from the sale of investments were $126.0 million and $36.4 million for the 39 weeks ended November 2, 2013 and October 27, 2012, respectively. The purchase of investments was $17.4 million and $10.1 million for the 39 weeks ended November 2, 2013 and October 27, 2012, respectively.

There were no unrecognized gains or losses for the Company’s available-for-sale securities for the 39 weeks ended November 2, 2013 or October 27, 2012.

Fair Value Measurements
Fair Value Measurements

4. Fair Value Measurements

ASC 820, Fair Value Measurement Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. Fair value is defined under ASC 820 as the exit price associated with the sale of an asset or transfer of a liability in an orderly transaction between market participants at the measurement date.

Financial Instruments

Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. In addition, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

 

    Level 1 — Quoted prices in active markets for identical assets or liabilities.

 

    Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

    Level 3 — Unobservable inputs (i.e., projections, estimates, interpretations, etc.) that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

As of November 2, 2013 and October 27, 2012, the Company held certain assets that are required to be measured at fair value on a recurring basis. These include cash equivalents, short-term investments and long-term investments.

In accordance with ASC 820, the following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of November 2, 2013 and October 27, 2012:

 

     Fair Value Measurements at November 2, 2013  
(In thousands)    Carrying
Amount
     Quoted Market
Prices in Active
Markets for
Identical Assets
(Level 1)
     Significant Other
Observable
Inputs (Level 2)
     Significant
Unobservable
Inputs
(Level 3)
 

Cash and cash equivalents:

           

Cash

   $ 306,572       $ 306,572       $ —         $ —     

Treasury bills

     25,863         25,863         —           —     

Money-market

     21,849         21,849         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash and cash equivalents

   $ 354,284       $ 354,284       $ —         $ —     

Short-term investments:

           

Treasury bills

   $ 2,930       $ 2,930       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total short-term investments

   $ 2,930       $ 2,930       $ —         $ —     

Long-term investments:

           

Term-deposits

   $ 9,588       $ 9,588       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total long-term investments

   $ 9,588       $ 9,588       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 366,802       $ 366,802       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Fair Value Measurements at October 27, 2012  
(In thousands)    Carrying
Amount
     Quoted Market
Prices in Active
Markets for
Identical Assets
(Level 1)
     Significant Other
Observable
Inputs (Level 2)
     Significant
Unobservable
Inputs
(Level 3)
 

Cash and cash equivalents:

           

Cash

   $ 389,664       $ 389,664       $ —         $ —     

Money-market

     107,821         107,821         —           —     

Treasury bills

     19,129         19,129         —           —     

Commercial paper

     28,069         28,069         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash and cash equivalents

   $ 544,683       $ 544,683       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

In the event the Company holds Level 3 investments, a discounted cash flow model is used to value those investments. There were no Level 3 investments at November 2, 2013 or October 27, 2012.

Non-Financial Assets

The Company’s non-financial assets, which include goodwill, intangible assets and property and equipment, are not required to be measured at fair value on a recurring basis. However, if certain triggering events occur, or if an annual impairment test is required, and the Company is required to evaluate the non-financial instrument for impairment, a resulting asset impairment would require that the non-financial asset be recorded at the estimated fair value. As a result of the Company’s annual goodwill impairment test performed as of February 2, 2013, the Company concluded that its goodwill was not impaired.

 

During the 13 weeks ended November 2, 2013, the Company announced plans to close its Warrendale facility. Certain long-lived assets, including the Warrendale, Pennsylvania distribution center, were measured at fair value on a nonrecurring basis using Level 3 inputs as defined in ASC 820. Certain long-lived assets related to this distribution center were determined to be unable to recover their respective carrying values over their remaining useful life and were written down to fair value, resulting in a loss of $19.3 million, which is recorded as a loss on impairment of assets within the Consolidated Statements of Operations. Refer to Note 14 to the Consolidated Financial Statements for additional information regarding exit and disposal costs.

Earnings per Share
Earnings per Share

5. Earnings per Share

The following is a reconciliation between basic and diluted weighted average shares outstanding:

 

     13 Weeks Ended      39 Weeks Ended  
(In thousands)    November 2,
2013
     October 27,
2012
     November 2,
2013
     October 27,
2012
 

Weighted average common shares outstanding:

           

Basic number of common shares outstanding

     192,818         197,173         192,753         196,177   

Dilutive effect of stock options and non-vested restricted stock

     1,794         4,794         2,268         3,864   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted number of common shares outstanding

     194,612         201,967         195,021         200,041   
  

 

 

    

 

 

    

 

 

    

 

 

 

Equity awards to purchase approximately 2.9 million and 1.8 million shares of common stock during the 13 and 39 weeks ended November 2, 2013 and approximately 1.5 million and 2.8 million shares of common stock during the 13 and 39 weeks ended October 27, 2012, respectively, were outstanding, but were not included in the computation of weighted average diluted common share amounts as the effect of doing so would be anti-dilutive.

There were 0.9 and 0.8 million shares for the 13 and 39 weeks ended November 2, 2013, respectively, and no shares for both the 13 and 39 weeks ended October 27, 2012 of restricted stock units that were outstanding but not included in the computation of weighted average diluted common share amounts as the effect of doing so would be anti-dilutive. Additionally, approximately 1.0 million shares of restricted stock units for both the 13 and 39 weeks ended November 2, 2013 were not included in the computation of weighted average diluted common share amounts because the number of shares ultimately issued is contingent on the Company’s performance compared to pre-established annual performance goals.

Refer to Note 9 to the Consolidated Financial Statements for additional information regarding share-based compensation.

Property and Equipment
Property and Equipment

6. Property and Equipment

Property and equipment consists of the following:

 

(In thousands)    November 2,
2013
    February 2,
2013
    October 27,
2012
 

Property and equipment, at cost

   $ 1,594,326      $ 1,417,933      $ 1,453,625   

Less: Accumulated depreciation

     (964,120     (917,799     (926,249
  

 

 

   

 

 

   

 

 

 

Property and equipment, net

   $ 630,206      $ 500,134      $ 527,376   
  

 

 

   

 

 

   

 

 

 
Intangible Assets
Intangible Assets

7. Intangible Assets

Intangible assets consist of the following:

 

(In thousands)    November 2,
2013
    February 2,
2013
    October 27,
2012
 

Trademarks and other intangibles, at cost

   $ 52,484      $ 44,272      $ 44,106   

Less: Accumulated amortization

     (8,057     (6,136     (5,647
  

 

 

   

 

 

   

 

 

 

Intangible assets, net

   $ 44,427      $ 38,136      $ 38,459   
  

 

 

   

 

 

   

 

 

 
Other Credit Arrangements
Other Credit Arrangements

8. Other Credit Arrangements

In Fiscal 2012, the Company entered into a five-year, $150.0 million syndicated, unsecured, revolving credit agreement (the “Credit Agreement”). The primary purpose of the Credit Agreement is to provide additional access to capital for general corporate purposes, growth initiatives and the issuance of letters of credit.

The Credit Agreement contains financial covenants that require the Company to maintain certain coverage and leverage ratios, and various customary affirmative and negative covenants such as the ability to incur additional debt not otherwise permitted under the Credit Agreement.

The Credit Agreement has various borrowing options, including rates of interest that are based on (i) an Adjusted London Interbank Offered Rate (“LIBOR” as defined in the Credit Agreement) plus a margin ranging from 1.00% to 1.75% based on a defined leverage ratio, payable at the end of the applicable interest period; and (ii) a Base Rate (as defined in the Credit Agreement), plus a margin ranging from 0.00% to 0.75% based on a defined leverage ratio, payable quarterly.

Under the Credit Agreement, the Company is also required to pay a commitment fee ranging from 0.175% to 0.30%, based on the defined leverage ratio, on the unused portion of the total lender commitments.

As of November 2, 2013, the Company was in compliance with the terms of the Credit Agreement and had $8.3 million outstanding in letters of credit and no borrowings.

Additionally, the Company has borrowing agreements with two separate financial institutions under which it may borrow an aggregate of $135.0 million USD for the purposes of trade letter of credit issuances. The availability of any future borrowings under the trade letter of credit facilities is subject to acceptance by the respective financial institutions.

As of November 2, 2013, the Company had outstanding trade letters of credit of $69.2 million.

Share-Based Compensation
Share-Based Compensation

9. Share-Based Compensation

The Company accounts for share-based compensation under the provisions of ASC 718, Compensation – Stock Compensation (“ASC 718”), which requires companies to measure and recognize compensation expense for all share-based payments at fair value. Total share-based compensation expense included in the Consolidated Statements of Operations for the 13 and 39 weeks ended November 2, 2013 was a net benefit of $11.5 million ($7.1 million, net of tax) and $1.8 million ($1.1 million, net of tax), respectively. The net benefit is due to a reversal of previously recorded performance-based expense resulting from current business performance compared to targets. Total share-based compensation expense included in the Consolidated Statements of Operations for the 13 and 39 weeks ended October 27, 2012 was $17.7 million ($10.9 million, net of tax) and $45.4 million ($28.0 million, net of tax), respectively.

Stock Option Grants

The Company grants both time-based and performance-based stock options under its 2005 Stock Award and Incentive Plan. Time-based stock option awards vest over the requisite service period of the award or to an employee’s eligible retirement date, if earlier. Performance-based stock option awards vest over one year and are earned if the Company meets pre-established performance goals.

 

A summary of the Company’s stock option activity for the 39 weeks ended November 2, 2013 follows:

 

     Options     Weighted-
Average
Exercise Price
     Weighted-
Average
Remaining
Contractual
Term
     Aggregate
Intrinsic Value
 
     (In thousands)            (In years)      (In thousands)  

Outstanding — February 2, 2013

     4,629      $ 16.29         

Granted

     376      $ 22.55         

Exercised (1)

     (250   $ 13.36         

Cancelled

     (76   $ 23.44         
  

 

 

   

 

 

    

 

 

    

 

 

 

Outstanding — November 2, 2013

     4,679      $ 16.83         3.0       $ 6,064   
  

 

 

   

 

 

    

 

 

    

 

 

 

Vested and expected to vest — November 2, 2013

     4,604      $ 16.83         2.9       $ 5,978   
  

 

 

   

 

 

    

 

 

    

 

 

 

Exercisable — November 2, 2013 (2)

     1,291      $ 11.20         3.6       $ 5,079   

 

(1) Options exercised during the 39 weeks ended November 2, 2013 had exercise prices ranging from $4.24 to $19.28.
(2) Options exercisable represent “in-the-money” vested options based upon the weighted-average exercise price of vested options compared to the Company’s stock price at November 2, 2013.

The weighted-average grant date fair value of stock options granted during the 39 weeks ended November 2, 2013 and October 27, 2012 was $4.17 and $3.72, respectively. The aggregate intrinsic value of options exercised during the 39 weeks ended November 2, 2013 and October 27, 2012 was $1.3 million and $24.9 million, respectively.

Cash received from the exercise of stock options was $3.3 million for the 39 weeks ended November 2, 2013 and $43.9 million for the 39 weeks ended October 27, 2012. The actual tax benefit realized from stock option exercises totaled $8.2 million for the 39 weeks ended November 2, 2013 and $5.1 million for the 39 weeks ended October 27, 2012.

The fair value of stock options was estimated based on the closing market price of the Company’s common stock on the date of the grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

 

     39 Weeks Ended  

Black-Scholes Option Valuation Assumptions

   November 2,
2013
    October 27,
2012
 

Risk-free interest rate (1)

     0.3     0.6

Dividend yield

     2.0     2.8

Volatility factor (2)

     34.4     41.2

Weighted-average expected term (3)

     2.5 years        4.0 years   

Expected forfeiture rate (4)

     8.0     8.0

 

(1) Based on the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected life of our stock options.
(2) Based on a combination of historical volatility of the Company’s common stock and implied volatility.
(3) Represents the period of time options are expected to be outstanding, based on historical experience.
(4) Based upon historical experience.

As of November 2, 2013, there was $1.5 million of unrecognized compensation expense related to non-vested time-based stock option awards that is expected to be recognized over a weighted average period of 1.3 years.

Restricted Stock Grants

Time-based restricted stock awards are comprised of time-based restricted stock units. These awards vest over three years; however, they may be accelerated to vest over one year if the Company meets pre-established performance goals in the year of grant. Time-based restricted stock units receive dividend equivalents in the form of additional time-based restricted stock units, which are subject to the same restrictions and forfeiture provisions as the original award.

 

Performance-based restricted stock awards include performance-based restricted stock units. These awards cliff vest at the end of a three year period based upon the Company’s achievement of pre-established goals throughout the term of the award. Performance-based restricted stock units receive dividend equivalents in the form of additional performance-based restricted stock units, which are subject to the same restrictions and forfeiture provisions as the original award.

The grant date fair value of all restricted stock awards is based on the closing market price of the Company’s common stock on the date of grant.

A summary of the Company’s restricted stock activity is presented in the following tables:

 

     Time-Based Restricted Stock Units      Performance-Based Restricted Stock Units  
     39 Weeks Ended      39 Weeks Ended  
     November 2, 2013      November 2, 2013  
(Shares in thousands)    Shares     Weighted-Average Grant
Date Fair Value
     Shares     Weighted-Average Grant
Date Fair Value
 

Nonvested — February 2, 2013

     1,386      $ 13.91         2,086      $ 14.91   

Granted

     942      $ 22.01         857      $ 21.80   

Vested

     (1,057   $ 14.06         (566   $ 17.39   

Cancelled

     (51   $ 18.50         (37   $ 19.89   
  

 

 

   

 

 

    

 

 

   

 

 

 

Nonvested — November 2, 2013

     1,220      $ 19.84         2,340      $ 16.75   

As of November 2, 2013, there was $17.3 million of unrecognized compensation expense related to non-vested time-based restricted stock unit awards that is expected to be recognized over a weighted-average period of 2.0 years. Additionally, there was $22.3 million of unrecognized compensation expense related to performance-based restricted stock unit awards which will be recognized as achievement of performance goals is probable over a one to three year period.

As of November 2, 2013, the Company had 17.8 million shares available for all equity grants.

Income Taxes
Income Taxes

10. Income Taxes

The provision for income taxes from continuing operations is based on the current estimate of the annual effective income tax rate and is adjusted as necessary for quarterly events. The effective income tax rate from continuing operations based on actual operating results for the 13 weeks ended November 2, 2013 was 41.2% compared to 37.2% for the 13 weeks ended October 27, 2012. The effective income tax rate from continuing operations based on actual operating results for the 39 weeks ended November 2, 2013 was 38.6% compared to 35.0% for the 39 weeks ended October 27, 2012. The increase in the effective income tax rate this year is primarily due to a change in the mix of income contribution between domestic and international operations and favorable state income tax settlements last year.

The Company records accrued interest and penalties related to unrecognized tax benefits in income tax expense.

The Company recognizes income tax liabilities related to unrecognized tax benefits in accordance with ASC 740 and adjusts these liabilities when its judgment changes as the result of the evaluation of new information not previously available. Unrecognized tax benefits did not change significantly during the 13 weeks ended November 2, 2013 and October 27, 2012. Over the next twelve months, the Company believes that it is reasonably possible that unrecognized tax benefits may decrease by approximately $8.0 million due to settlements, expiration of statute of limitations or other changes in unrecognized tax benefits.

Legal Proceedings
Legal Proceedings

11. Legal Proceedings

The Company is subject to certain legal proceedings and claims arising out of the conduct of its business. In accordance with ASC 450, Contingencies (“ASC 450”), management records a reserve for estimated losses when the loss is probable and the amount can be reasonably estimated. If a range of possible loss exists and no anticipated loss within the range is more likely than any other anticipated loss, the Company records the accrual at the low end of the range, in accordance with ASC 450. As the Company believes that it has provided adequate reserves, it anticipates that the ultimate outcome of any matter currently pending against the Company will not materially affect the consolidated financial position or results of operations of the Company.

Acquisitions and Dispositions
Acquisitions and Dispositions

12. Acquisitions and Dispositions

On May 31, 2013, the Company completed a transaction with Dickson Concepts (International) Limited (“Dickson”) to acquire six existing American Eagle Outfitters franchised stores in Hong Kong and China and the related assets operated by Dickson, for total consideration of $20.8 million USD. Included in the total consideration for the transaction was a $10.0 million USD payment to Dickson to terminate their right to open additional stores in Hong Kong, Macau, China and other designated territories in Asia.

The total purchase price was allocated to the net tangible and intangible assets acquired based on their estimated fair values as of May 31, 2013. Such estimated fair values require management to make estimates and judgments, especially with respect to intangible assets. The Company’s valuation of intangible assets, including deferred income taxes, is subject to finalization during Fiscal 2013.

The allocation of the purchase price to the fair value of assets acquired is as follows:

 

(In thousands)       

Merchandise inventory

   $ 2,456   

Other assets

     2,351   

Property and equipment

     6,460   

Intangible assets and goodwill

     9,484   
  

 

 

 

Total purchase price

   $ 20,751   
  

 

 

 

Results of operations of the six acquired stores have been included in our Consolidated Statements of Operations since the May 31, 2013 acquisition date. Pro forma results of the acquired business have not been presented as the results were not material to our Consolidated Financial Statements for all years presented and would not have been material had the acquisition occurred at the beginning of Fiscal 2013.

Discontinued Operations
Discontinued Operations

13. Discontinued Operations

During Fiscal 2012, the Company exited the 77kids business which included all 22 stores and related e-commerce operations. These Consolidated Financial Statements reflect the results of 77kids as a discontinued operation for all periods presented.

Additionally, the third party purchaser assumed certain liabilities associated with the 77kids business and paid the Company an amount equal to 65% of the cost of the acquired inventory. In connection with the exit of the 77kids business, the Company is secondarily liable for obligations under the lease agreements for 21 store leases assumed by the third party purchaser. These obligations will remain in effect until the leases expire through 2022, unless the Company otherwise is released by the applicable landlord. In the event that the third party purchaser does not fulfill its obligations under any of the leases and the Company is required to make any such payments, the Company would seek full reimbursement from the third party purchaser in accordance with the asset purchase agreement. The third party purchaser has provided a stand-by letter of credit to the Company in order to secure payment of obligations under the leases.

In accordance with ASC 460, Guarantees (“ASC 460”), as we became secondarily liable under the leases at the time that we transferred them to the third party, no amounts have been accrued in our Consolidated Financial Statements related to these guarantees.

The table below presents the significant components of 77kids’ results included in Loss from Discontinued Operations on the Consolidated Statement of Operations for the 13 and 39 weeks ended October 27, 2012. There were no losses from Discontinued Operations within the Consolidated Statement of Operations for both the 13 and 39 weeks ended November 2, 2013.

 

     13 Weeks
Ended
    39 Weeks
Ended
 
(In thousands)    October 27,
2012
    October 27,
2012
 

Total net revenue

   $ —        $ 20,117   

Loss from discontinued operations, before income taxes

   $ (6,191   $ (51,839

Income tax benefit

     2,358        19,849   
  

 

 

   

 

 

 

Loss from discontinued operations, net of tax

   $ (3,833   $ (31,990

Loss per common share from discontinued operations:

    

Basic

   $ (0.02   $ (0.16

Diluted

   $ (0.02   $ (0.16

There were no assets or liabilities included in the Consolidated Balance Sheets for 77kids as of November 2, 2013, February 2, 2013 and October 27, 2012.

Exit and Disposal Activities
Exit and Disposal Activities

14. Exit and Disposal Activities

On September 5, 2013, the Company announced plans to close its Warrendale, Pennsylvania distribution center and transfer the operations to its new Hazelton, Pennsylvania facility, as the Warrendale facility is not physically or geographically capable of supporting the Company’s long-term expansion goals. The Hazelton facility is under construction and is expected to open in the second quarter of Fiscal 2014. It will initially supplement the Ottawa, Kansas facility in fulfilling internet orders. The transition of store distribution operations from Warrendale to Hazelton is scheduled to begin in early 2015 and is anticipated to be completed by July 2015.

Including amounts recognized during the 13 weeks ended November 2, 2013, the Company continues to expect after-tax charges of $14 million to $15 million related to the closing of the Warrendale facility. These charges are comprised of the following after-tax amounts:

 

    $2 million to $3 million of severance and employee related costs

 

    $12 million of non-cash asset impairment charges

The pre-tax cash outflow for severance and employee related costs are estimated to be $4 million to $5 million to be paid in Fiscal 2015.

Costs associated with exit or disposal activities are recorded when incurred. During the 13 weeks ended November 2, 2013, $19.3 million of pre-tax non-cash asset impairments ($11.9 million after-tax) were recorded as a loss on impairment of assets within the Consolidated Statements of Operations.

There are no liabilities associated with exit and disposal activities recognized in the Consolidated Balance Sheet as of November 2, 2013.

Summary of Significant Accounting Policies (Policies)

Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. At November 2, 2013, the Company operated in one reportable segment.

In Fiscal 2012, the Company exited the 77kids business, which included all 22 stores and related e-commerce operations. These Consolidated Financial Statements reflect the results of 77kids as a discontinued operation for all periods presented. Refer to Note 13 to the Consolidated Financial Statements for additional information regarding the discontinued operations of 77kids.

Fiscal Year

The Company’s financial year is a 52/53 week year that ends on the Saturday nearest to January 31. As used herein, “Fiscal 2015,” “Fiscal 2014” “Fiscal 2013” refers to the 52 week periods ending January 31, 2016, January 31, 2015 and February 1, 2014, respectively. “Fiscal 2012” refers to the 53 week period ended February 2, 2013. “Fiscal 2011” and “Fiscal 2010” refer to the 52 week periods ended January 28, 2012 and January 29, 2011, respectively.

Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of our contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, our management reviews its estimates based on currently available information. Changes in facts and circumstances may result in revised estimates.

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”). ASU 2013-02 requires an entity to provide additional information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. The amendments are effective prospectively for reporting periods beginning after December 15, 2012. ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income. Because the standard only affects the presentation of comprehensive income and does not impact what is included in comprehensive income, ASU 2013-02 did not have a significant impact on the Company’s Consolidated Financial Statements.

Foreign Currency Translation

In accordance with Accounting Standards Codification (“ASC”) 830, Foreign Currency Matters, assets and liabilities denominated in foreign currencies were translated into United States dollars (“USD”) (the reporting currency) at the exchange rates prevailing at the balance sheet date. Revenues and expenses denominated in foreign currencies were translated into USD at the monthly average exchange rates for the period. Gains or losses resulting from foreign currency transactions are included in the results of operations, whereas, related translation adjustments are reported as an element of other comprehensive income in accordance with ASC 220, Comprehensive Income.

Revenue Recognition

Revenue is recorded for store sales upon the purchase of merchandise by customers. The Company’s e-commerce operation records revenue upon the estimated customer receipt date of the merchandise. Shipping and handling revenues are included in total net revenue. Sales tax collected from customers is excluded from revenue and is included as part of accrued income and other taxes on the Company’s Consolidated Balance Sheets.

Revenue is recorded net of estimated and actual sales returns and deductions for coupon redemptions and other promotions. The Company records the impact of adjustments to its sales return reserve quarterly within total net revenue and cost of sales. The sales return reserve reflects an estimate of sales returns based on projected merchandise returns determined through the use of historical average return percentages.

Revenue is not recorded on the purchase of gift cards. A current liability is recorded upon purchase, and revenue is recognized when the gift card is redeemed for merchandise. Additionally, the Company recognizes revenue on unredeemed gift cards based on an estimate of the amounts that will not be redeemed (“gift card breakage”), determined through historical redemption trends. Gift card breakage revenue is recognized in proportion to actual gift card redemptions as a component of total net revenue. For further information on the Company’s gift card program, refer to the Gift Cards caption below.

The Company recognizes royalty revenue generated from its franchise agreements based on a percentage of merchandise sales by the franchisee. This revenue is recorded as a component of total net revenue when earned.

Cost of Sales, Including Certain Buying, Occupancy and Warehousing Expenses

Cost of sales consists of merchandise costs, including design, sourcing, importing and inbound freight costs, as well as markdowns, shrinkage and certain promotional costs (collectively “merchandise costs”) and buying, occupancy and warehousing costs. Buying, occupancy and warehousing costs consist of compensation, employee benefit expenses and travel for our buyers and certain senior merchandising executives; rent and utilities related to our stores, corporate headquarters, distribution centers and other office space; freight from our distribution centers to the stores; compensation and supplies for our distribution centers, including purchasing, receiving and inspection costs; and shipping and handling costs related to our e-commerce operation. Gross profit is the difference between total net revenue and cost of sales.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of compensation and employee benefit expenses, including salaries, incentives and related benefits associated with our stores and corporate headquarters. Selling, general and administrative expenses also include advertising costs, supplies for our stores and home office, communication costs, travel and entertainment, leasing costs and services purchased. Selling, general and administrative expenses do not include compensation, employee benefit expenses and travel for our design, sourcing and importing teams, our buyers and our distribution centers as these amounts are recorded in cost of sales.

Other Income, Net

Other income, net consists primarily of interest income/expense, foreign currency transaction gain/loss and realized investment gains/losses.

Other-than-Temporary Impairment

The Company evaluates its investments for impairment in accordance with ASC 320, InvestmentsDebt and Equity Securities (“ASC 320”). ASC 320 provides guidance for determining when an investment is considered impaired, whether impairment is other-than-temporary, and measurement of an impairment loss. An investment is considered impaired if the fair value of the investment is less than its cost. If, after consideration of all available evidence to evaluate the realizable value of its investment, impairment is determined to be other-than-temporary, then an impairment loss is recognized in the Consolidated Statement of Operations equal to the difference between the investment’s cost and its fair value. Additionally, ASC 320 requires additional disclosures relating to debt and equity securities both in the interim and annual periods as well as requires the Company to present total other-than-temporary impairment (“OTTI”) with an offsetting reduction for any non-credit loss impairment amount recognized in other comprehensive income (“OCI”). There was no net impairment loss for investment securities recognized in earnings during the 13 and 39 weeks ended November 2, 2013 or October 27, 2012.

Cash and Cash Equivalents, Short-term Investments and Long-term Investments

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

As of November 2, 2013, short-term investments include treasury bills with a maturity of greater than three months, but less than one year.

As of November 2, 2013, long-term investments include term deposits with an original maturity of greater than one year. Long-term investments are recorded within other assets on the Company’s Consolidated Balance Sheets.

Unrealized gains and losses on the Company’s available-for-sale securities are excluded from earnings and are reported as a separate component of stockholders’ equity, within accumulated other comprehensive income, until realized. When available-for-sale securities are sold, the cost of the securities is specifically identified and is used to determine any realized gain or loss.

Refer to Note 3 to the Consolidated Financial Statements for information regarding cash and cash equivalents and investments.

Merchandise Inventory

Merchandise inventory is valued at the lower of average cost or market, utilizing the retail method. Average cost includes merchandise design and sourcing costs and related expenses. The Company records merchandise receipts at the time at which both title and risk of loss for the merchandise transfers to the Company.

The Company reviews its inventory levels to identify slow-moving merchandise and generally uses markdowns to clear merchandise. Additionally, the Company estimates a markdown reserve for future planned permanent markdowns related to current inventory. Markdowns may occur when inventory exceeds customer demand for reasons of style, seasonal adaptation, changes in customer preference, lack of consumer acceptance of fashion items, competition, or if it is determined that the inventory in stock will not sell at its currently ticketed price. Such markdowns may have a material adverse impact on earnings, depending on the extent and amount of inventory affected. The Company also estimates a shrinkage reserve for the period between the last physical count and the balance sheet date. The estimate for the shrinkage reserve, based on historical results, can be affected by changes in merchandise mix and changes in actual shrinkage trends.

Income Taxes

The Company calculates income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires the use of the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on the difference between the Consolidated Financial Statement carrying amounts of existing assets and liabilities and their respective tax bases as computed pursuant to ASC 740. Deferred tax assets and liabilities are measured using the tax rates, based on certain judgments regarding enacted tax laws and published guidance, in effect in the years when those temporary differences are expected to reverse. A valuation allowance is established against the deferred tax assets when it is more likely than not that some portion or all of the deferred taxes may not be realized. Changes in the Company’s level and composition of earnings, tax laws or the deferred tax valuation allowance, as well as the results of tax audits may materially impact the Company’s effective income tax rate.

The Company evaluates its income tax positions in accordance with ASC 740, which prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements tax positions taken or expected to be taken on a tax return, including a decision whether to file or not to file in a particular jurisdiction. Under ASC 740, a tax benefit from an uncertain position may be recognized only if it is “more likely than not” that the position is sustainable based on its technical merits.

The calculation of the deferred tax assets and liabilities, as well as the decision to recognize a tax benefit from an uncertain position and to establish a valuation allowance require management to make estimates and assumptions. The Company believes that its assumptions and estimates are reasonable, although actual results may have a positive or negative material impact on the balances of deferred tax assets and liabilities, valuation allowances or net income.

Refer to Note 10 to the Consolidated Financial Statements for additional information regarding income taxes.

Property and Equipment

Property and equipment is recorded on the basis of cost, including costs to prepare the asset for use, with depreciation computed utilizing the straight-line method over the assets’ estimated useful lives. The useful lives of our major classes of assets are as follows:

 

Buildings    25 years
Leasehold improvements    Lesser of 10 years or the term of the lease
Fixtures and equipment    5 years

In accordance with ASC 360, Property, Plant, and Equipment (“ASC 360”), the Company evaluates long-lived assets for impairment at the individual store level, which is the lowest level at which individual cash flows can be identified, for stores that have been open for a period of time sufficient to reach maturity. Impairment losses are recorded on long-lived assets used in operations when events and circumstances indicate that the assets are impaired and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. When events such as these occur, the impaired assets are adjusted to their estimated fair value and an impairment loss is recorded.

On September 5, 2013, the Company announced plans to close its Warrendale, Pennsylvania distribution center and transfer the operations to its new Hazelton, Pennsylvania facility, as the Warrendale facility is not physically or geographically capable of supporting the Company’s long-term expansion goals. This announcement resulted in $19.3 million of pre-tax asset impairments during the 13 weeks ended November 2, 2013. Refer to Note 14 to the Consolidated Financial Statements for additional information regarding exits and disposal costs.

The Company had $4.7 million, $9.5 million and $9.7 million of long-lived assets held-for-sale as of November 2, 2013, February 2, 2013 and October 27, 2012, respectively. These long-lived corporate assets, which the Company believes will be sold within one year, are recorded at their estimated net realizable value, less disposal costs, which resulted in a $5.0 million reduction in carrying value during the 13 weeks ended May 4, 2013, recorded in depreciation and amortization expense within the Company’s Consolidated Financial Statements.

Refer to Note 6 to the Consolidated Financial Statements for additional information regarding property, plant and equipment.

Goodwill

The Company’s goodwill is primarily related to the acquisition of its importing operations, Canadian business and recently acquired operations in Hong Kong and China. In accordance with ASC 350, Intangibles – Goodwill and Other (“ASC 350”), the Company evaluates goodwill for possible impairment on at least an annual basis and last performed an annual impairment test as of February 2, 2013. As a result of the Company’s annual goodwill impairment test, the Company concluded that its goodwill was not impaired.

Refer to Note 12 to the Consolidated Financial Statements for additional information on the Company’s acquisition of its Hong Kong and China operations.

Intangible Assets

Intangible assets are recorded on the basis of cost with amortization computed utilizing the straight-line method over the assets’ estimated useful lives. The Company’s intangible assets, which primarily include trademark assets, are generally amortized over 15 to 25 years.

The Company evaluates intangible assets for impairment in accordance with ASC 350 when events or circumstances indicate that the carrying value of the asset may not be recoverable. Such an evaluation includes the estimation of undiscounted future cash flows to be generated by those assets. If the sum of the estimated future undiscounted cash flows are less than the carrying amounts of the assets, then the assets are impaired and are adjusted to their estimated fair value. No intangible asset impairment charges were recorded in the 13 and 39 weeks ended November 2, 2013 and October 27, 2012.

Refer to Note 7 to the Consolidated Financial Statements for additional information regarding intangible assets.

Gift Cards

The value of a gift card is recorded as a current liability upon purchase, and revenue is recognized when the gift card is redeemed for merchandise. The Company estimates gift card breakage and recognizes revenue in proportion to actual gift card redemptions as a component of total net revenue. The Company determines an estimated gift card breakage rate by continuously evaluating historical redemption data and the time when there is a remote likelihood that a gift card will be redeemed. The Company recorded $1.1 million and $1.0 million of revenue related to gift card breakage during the 13 weeks ended November 2, 2013 and October 27, 2012, respectively. During both the 39 weeks ended November 2, 2013 and October 27, 2012, the Company recorded $4.3 million of revenue related to gift card breakage.

Deferred Lease Credits

Deferred lease credits represent the unamortized portion of construction allowances received from landlords related to the Company’s retail stores. Construction allowances are generally comprised of cash amounts received by the Company from its landlords as part of the negotiated lease terms. The Company records a receivable and a deferred lease credit liability at the lease commencement date (date of initial possession of the store). The deferred lease credit is amortized on a straight-line basis as a reduction of rent expense over the term of the original lease (including the pre-opening build-out period) and any subsequent renewal terms. The receivable is reduced as amounts are received from the landlord.

Co-branded Credit Card and Customer Loyalty Program

The Company offers a co-branded credit card (the “AEO Visa Card”) and a private label credit card (the “AEO Credit Card”). These credit cards are issued by a third-party bank (the “Bank”), and the Company has no liability to the Bank for bad debt expense, provided that purchases are made in accordance with the Bank’s procedures. Once a customer is approved to receive the AEO Visa Card or the AEO Credit Card and the card is activated, the customer is eligible to participate in the credit card rewards program. Customers who make purchases earn discounts in the form of savings certificates when certain purchase levels are reached. Also, AEO Visa Card customers who make purchases at other retailers where the card is accepted earn additional discounts. Savings certificates are valid for 90 days from issuance.

Points earned under the credit card rewards program on purchases are accounted for by analogy to ASC 605-25, Revenue Recognition, Multiple Element Arrangements (“ASC 605-25”). The Company believes that points earned under its point and loyalty programs represent deliverables in a multiple element arrangement rather than a rebate or refund of cash. Accordingly, the portion of the sales revenue attributed to the award points is deferred and recognized when the award is redeemed or when the points expire. Additionally, credit card reward points earned on non-AE or aerie purchases are accounted for in accordance with ASC 605-25. As the points are earned, a current liability is recorded for the estimated cost of the award, and the impact of adjustments is recorded in cost of sales.

The Company offers its customers the AEREWARD$sm loyalty program (the “Program”). Under the Program, customers accumulate points based on purchase activity and earn rewards by reaching certain point thresholds during three-month earning periods. Rewards earned during these periods are valid through the stated expiration date, which is approximately one month from the mailing date of the reward. These rewards can be redeemed for a discount on a purchase of merchandise. Rewards not redeemed during the one-month redemption period are forfeited. The Company determined that rewards earned using the Program should be accounted for in accordance with ASC 605-25. Accordingly, the portion of the sales revenue attributed to the award credits is deferred and recognized when the awards are redeemed or expire.

Segment Information

In accordance with ASC 280, Segment Reporting (“ASC 280”), the Company has identified three operating segments (American Eagle Brand retail stores, aerie retail stores and AEO Direct) that reflect the basis used internally to review performance and allocate resources. All of the operating segments have been aggregated and are presented as one reportable segment, as permitted by ASC 280.

Reclassification

Certain reclassifications have been made to the Consolidated Financial Statements for prior periods in order to conform to the current period presentation.

Summary of Significant Accounting Policies (Tables)
Useful Lives of Major Classes of Assets

The useful lives of our major classes of assets are as follows:

 

Buildings    25 years
Leasehold improvements    Lesser of 10 years or the term of the lease
Fixtures and equipment    5 years
Cash and Cash Equivalents, Short-term Investments and Long-term Investments (Tables)
Fair Market Values for Cash and Marketable Securities

The following table summarizes the fair market values for the Company’s cash and marketable securities, which are recorded on the Consolidated Balance Sheets:

 

(In thousands)    November 2,
2013
     February 2,
2013
     October 27,
2012
 

Cash and cash equivalents:

        

Cash

   $ 306,572       $ 257,191       $ 389,664   

Treasury bills

     25,863         —           19,129   

Money-market

     21,849         221,929         107,821   

Commercial paper

     —           29,999         28,069   
  

 

 

    

 

 

    

 

 

 

Total cash and cash equivalents

   $ 354,284       $ 509,119       $ 544,683   

Short-term investments:

        

Treasury bills

   $ 2,930       $ 109,305       $ —     

Term-deposits

     —           12,568         —     
  

 

 

    

 

 

    

 

 

 

Total short-term investments

   $ 2,930       $ 121,873       $ —     

Long-term investments:

        

Term-deposits

   $ 9,588       $ —         $ —     
  

 

 

    

 

 

    

 

 

 

Total long-term investments

   $ 9,588       $ —         $ —     
  

 

 

    

 

 

    

 

 

 

Total

   $ 366,802       $ 630,992       $ 544,683   
  

 

 

    

 

 

    

 

 

 
Fair Value Measurements (Tables)
Fair Value Hierarchy for Financial Assets (Cash Equivalents and Investments) Measured at Fair Value on Recurring Basis

In accordance with ASC 820, the following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of November 2, 2013 and October 27, 2012:

 

     Fair Value Measurements at November 2, 2013  
(In thousands)    Carrying
Amount
     Quoted Market
Prices in Active
Markets for
Identical Assets
(Level 1)
     Significant Other
Observable
Inputs (Level 2)
     Significant
Unobservable
Inputs
(Level 3)
 

Cash and cash equivalents:

           

Cash

   $ 306,572       $ 306,572       $ —         $ —     

Treasury bills

     25,863         25,863         —           —     

Money-market

     21,849         21,849         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash and cash equivalents

   $ 354,284       $ 354,284       $ —         $ —     

Short-term investments:

           

Treasury bills

   $ 2,930       $ 2,930       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total short-term investments

   $ 2,930       $ 2,930       $ —         $ —     

Long-term investments:

           

Term-deposits

   $ 9,588       $ 9,588       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total long-term investments

   $ 9,588       $ 9,588       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 366,802       $ 366,802       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Fair Value Measurements at October 27, 2012  
(In thousands)    Carrying
Amount
     Quoted Market
Prices in Active
Markets for
Identical Assets
(Level 1)
     Significant Other
Observable
Inputs (Level 2)
     Significant
Unobservable
Inputs
(Level 3)
 

Cash and cash equivalents:

           

Cash

   $ 389,664       $ 389,664       $ —         $ —     

Money-market

     107,821         107,821         —           —     

Treasury bills

     19,129         19,129         —           —     

Commercial paper

     28,069         28,069         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash and cash equivalents

   $ 544,683       $ 544,683       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 
Earnings per Share (Tables)
Reconciliation Between Basic and Diluted Weighted Average Shares Outstanding

The following is a reconciliation between basic and diluted weighted average shares outstanding:

 

     13 Weeks Ended      39 Weeks Ended  
(In thousands)    November 2,
2013
     October 27,
2012
     November 2,
2013
     October 27,
2012
 

Weighted average common shares outstanding:

           

Basic number of common shares outstanding

     192,818         197,173         192,753         196,177   

Dilutive effect of stock options and non-vested restricted stock

     1,794         4,794         2,268         3,864   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted number of common shares outstanding

     194,612         201,967         195,021         200,041   
  

 

 

    

 

 

    

 

 

    

 

 

 
Property and Equipment (Tables)
Property and Equipment

Property and equipment consists of the following:

 

(In thousands)    November 2,
2013
    February 2,
2013
    October 27,
2012
 

Property and equipment, at cost

   $ 1,594,326      $ 1,417,933      $ 1,453,625   

Less: Accumulated depreciation

     (964,120     (917,799     (926,249
  

 

 

   

 

 

   

 

 

 

Property and equipment, net

   $ 630,206      $ 500,134      $ 527,376   
  

 

 

   

 

 

   

 

 

 
Intangible Assets (Tables)
Intangible Assets

Intangible assets consist of the following:

 

(In thousands)    November 2,
2013
    February 2,
2013
    October 27,
2012
 

Trademarks and other intangibles, at cost

   $ 52,484      $ 44,272      $ 44,106   

Less: Accumulated amortization

     (8,057     (6,136     (5,647
  

 

 

   

 

 

   

 

 

 

Intangible assets, net

   $ 44,427      $ 38,136      $ 38,459   
  

 

 

   

 

 

   

 

 

 
Share-Based Compensation (Tables)

A summary of the Company’s stock option activity for the 39 weeks ended November 2, 2013 follows:

 

     Options     Weighted-
Average
Exercise Price
     Weighted-
Average
Remaining
Contractual
Term
     Aggregate
Intrinsic Value
 
     (In thousands)            (In years)      (In thousands)  

Outstanding — February 2, 2013

     4,629      $ 16.29         

Granted

     376      $ 22.55         

Exercised (1)

     (250   $ 13.36         

Cancelled

     (76   $ 23.44         
  

 

 

   

 

 

    

 

 

    

 

 

 

Outstanding — November 2, 2013

     4,679      $ 16.83         3.0       $ 6,064   
  

 

 

   

 

 

    

 

 

    

 

 

 

Vested and expected to vest — November 2, 2013

     4,604      $ 16.83         2.9       $ 5,978   
  

 

 

   

 

 

    

 

 

    

 

 

 

Exercisable — November 2, 2013 (2)

     1,291      $ 11.20         3.6       $ 5,079   

 

(1) Options exercised during the 39 weeks ended November 2, 2013 had exercise prices ranging from $4.24 to $19.28.
(2) Options exercisable represent “in-the-money” vested options based upon the weighted-average exercise price of vested options compared to the Company’s stock price at November 2, 2013.

The fair value of stock options was estimated based on the closing market price of the Company’s common stock on the date of the grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

 

     39 Weeks Ended  

Black-Scholes Option Valuation Assumptions

   November 2,
2013
    October 27,
2012
 

Risk-free interest rate (1)

     0.3     0.6

Dividend yield

     2.0     2.8

Volatility factor (2)

     34.4     41.2

Weighted-average expected term (3)

     2.5 years        4.0 years   

Expected forfeiture rate (4)

     8.0     8.0

 

(1) Based on the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected life of our stock options.
(2) Based on a combination of historical volatility of the Company’s common stock and implied volatility.
(3) Represents the period of time options are expected to be outstanding, based on historical experience.
(4) Based upon historical experience.

A summary of the Company’s restricted stock activity is presented in the following tables:

 

     Time-Based Restricted Stock Units      Performance-Based Restricted Stock Units  
     39 Weeks Ended      39 Weeks Ended  
     November 2, 2013      November 2, 2013  
(Shares in thousands)    Shares     Weighted-Average Grant
Date Fair Value
     Shares     Weighted-Average Grant
Date Fair Value
 

Nonvested — February 2, 2013

     1,386      $ 13.91         2,086      $ 14.91   

Granted

     942      $ 22.01         857      $ 21.80   

Vested

     (1,057   $ 14.06         (566   $ 17.39   

Cancelled

     (51   $ 18.50         (37   $ 19.89   
  

 

 

   

 

 

    

 

 

   

 

 

 

Nonvested — November 2, 2013

     1,220      $ 19.84         2,340      $ 16.75   
Acquisitions and Dispositions (Tables)
Allocation of Purchase Price to Fair Value of Assets Acquired

The allocation of the purchase price to the fair value of assets acquired is as follows:

 

(In thousands)       

Merchandise inventory

   $ 2,456   

Other assets

     2,351   

Property and equipment

     6,460   

Intangible assets and goodwill

     9,484   
  

 

 

 

Total purchase price

   $ 20,751   
  

 

 

 
Discontinued Operations (Tables)
Significant Components Included in Loss from Discontinued Operation on Consolidated Statement of Operation

The table below presents the significant components of 77kids’ results included in Loss from Discontinued Operations on the Consolidated Statement of Operations for the 13 and 39 weeks ended October 27, 2012. There were no losses from Discontinued Operations within the Consolidated Statement of Operations for both the 13 and 39 weeks ended November 2, 2013.

 

     13 Weeks
Ended
    39 Weeks
Ended
 
(In thousands)    October 27,
2012
    October 27,
2012
 

Total net revenue

   $ —        $ 20,117   

Loss from discontinued operations, before income taxes

   $ (6,191   $ (51,839

Income tax benefit

     2,358        19,849   
  

 

 

   

 

 

 

Loss from discontinued operations, net of tax

   $ (3,833   $ (31,990

Loss per common share from discontinued operations:

    

Basic

   $ (0.02   $ (0.16

Diluted

   $ (0.02   $ (0.16
Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)
3 Months Ended 9 Months Ended
Nov. 2, 2013
May 4, 2013
Oct. 27, 2012
Nov. 2, 2013
Segment
Oct. 27, 2012
Feb. 2, 2013
Significant Accounting Policies [Line Items]
 
 
 
 
 
 
Number of reportable segments
 
 
 
 
 
Net impairment loss recognized in earnings
$ 0 
 
 
 
$ 0 
 
Loss on impairment of assets
19,316,000 
 
 
19,316,000 
442,000 
 
Assets held-for-sale, long lived
4,700,000 
 
9,700,000 
4,700,000 
9,700,000 
9,500,000 
Depreciation and amortization expense
31,998,000 
5,000,000 
31,421,000 
97,271,000 
96,130,000 
 
Revenue related to gift card breakage
$ 1,100,000 
 
$ 1,000,000 
$ 4,300,000 
$ 4,300,000 
 
Minimum
 
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
 
Finite lived intangibles, useful life
 
 
 
15 years 
 
 
Maximum
 
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
 
Finite lived intangibles, useful life
 
 
 
25 years 
 
 
Useful Lives of Major Classes of Assets (Detail)
9 Months Ended
Nov. 2, 2013
Buildings
 
Property, Plant and Equipment, Estimated Useful Lives, Lease Terms [Line Items]
 
Useful lives in asset class
25 years 
Leasehold Improvements
 
Property, Plant and Equipment, Estimated Useful Lives, Lease Terms [Line Items]
 
Useful lives in asset class
Lesser of 10 years or the term of the lease 
Fixtures and equipment
 
Property, Plant and Equipment, Estimated Useful Lives, Lease Terms [Line Items]
 
Useful lives in asset class
5 years 
Useful Lives of Major Classes of Assets (Parenthetical) (Detail) (Maximum, Leasehold Improvements)
9 Months Ended
Nov. 2, 2013
Maximum |
Leasehold Improvements
 
Property, Plant and Equipment, Estimated Useful Lives, Lease Terms [Line Items]
 
Useful lives in asset class
10 years 
Fair Market Values for Cash and Marketable Securities (Detail) (USD $)
In Thousands, unless otherwise specified
Nov. 2, 2013
Feb. 2, 2013
Oct. 27, 2012
Jan. 28, 2012
Cash and cash equivalents:
 
 
 
 
Cash and cash equivalents
$ 354,284 
$ 509,119 
$ 544,683 
$ 719,545 
Short-term investments:
 
 
 
 
Short-term investments
2,930 
121,873 
 
 
Fair Value, Measurements, Recurring
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash and cash equivalents
354,284 
509,119 
544,683 
 
Short-term investments:
 
 
 
 
Short-term investments
2,930 
121,873 
 
 
Long-term investments:
 
 
 
 
Long-term investments
9,588 
 
 
 
Total
366,802 
630,992 
544,683 
 
Fair Value, Measurements, Recurring |
Cash
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash and cash equivalents
306,572 
257,191 
389,664 
 
Fair Value, Measurements, Recurring |
Money-market
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash and cash equivalents
21,849 
221,929 
107,821 
 
Fair Value, Measurements, Recurring |
Treasury bills
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash and cash equivalents
25,863 
 
19,129 
 
Short-term investments:
 
 
 
 
Short-term investments
2,930 
109,305 
 
 
Fair Value, Measurements, Recurring |
Commercial paper
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash and cash equivalents
 
29,999 
28,069 
 
Fair Value, Measurements, Recurring |
Term-deposits
 
 
 
 
Short-term investments:
 
 
 
 
Short-term investments
 
12,568 
 
 
Long-term investments:
 
 
 
 
Long-term investments
$ 9,588 
 
 
 
Cash and Cash Equivalents Short-term Investments and Long-term Investments - Additional Information (Detail) (USD $)
9 Months Ended
Nov. 2, 2013
Oct. 27, 2012
Schedule of Available-for-sale Securities [Line Items]
 
 
Proceeds from sale of available-for-sale securities
$ 125,982,000 
$ 36,415,000 
Purchase of available-for-sale securities
(17,373,000)
(10,069,000)
Unrecognized gains(losses) for available -for-sale securities
$ 0 
$ 0 
Fair Value Hierarchy for Financial Assets (Cash Equivalents and Investments) Measured at Fair Value on Recurring Basis (Detail) (USD $)
In Thousands, unless otherwise specified
Nov. 2, 2013
Feb. 2, 2013
Oct. 27, 2012
Jan. 28, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
Cash and cash equivalents
$ 354,284 
$ 509,119 
$ 544,683 
$ 719,545 
Short-term investments
2,930 
121,873 
 
 
Fair Value, Measurements, Recurring
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
Cash and cash equivalents
354,284 
509,119 
544,683 
 
Long-term investments
9,588 
 
 
 
Short-term investments
2,930 
121,873 
 
 
Total
366,802 
630,992 
544,683 
 
Fair Value, Measurements, Recurring |
Cash
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
Cash and cash equivalents
306,572 
257,191 
389,664 
 
Fair Value, Measurements, Recurring |
Money-market
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
Cash and cash equivalents
21,849 
221,929 
107,821 
 
Fair Value, Measurements, Recurring |
Commercial paper
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
Cash and cash equivalents
 
29,999 
28,069 
 
Fair Value, Measurements, Recurring |
Treasury bills
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
Cash and cash equivalents
25,863 
 
19,129 
 
Short-term investments
2,930 
109,305 
 
 
Fair Value, Measurements, Recurring |
Term-deposits
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
Long-term investments
9,588 
 
 
 
Fair Value, Measurements, Recurring |
Quoted Market Prices in Active Markets for Identical Assets (Level 1)
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
Cash and cash equivalents
354,284 
 
544,683 
 
Long-term investments
9,588 
 
 
 
Short-term investments
2,930 
 
 
 
Total
366,802 
 
 
 
Fair Value, Measurements, Recurring |
Quoted Market Prices in Active Markets for Identical Assets (Level 1) |
Cash
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
Cash and cash equivalents
306,572 
 
389,664 
 
Fair Value, Measurements, Recurring |
Quoted Market Prices in Active Markets for Identical Assets (Level 1) |
Money-market
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
Cash and cash equivalents
21,849 
 
107,821 
 
Fair Value, Measurements, Recurring |
Quoted Market Prices in Active Markets for Identical Assets (Level 1) |
Commercial paper
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
Cash and cash equivalents
 
 
28,069 
 
Fair Value, Measurements, Recurring |
Quoted Market Prices in Active Markets for Identical Assets (Level 1) |
Treasury bills
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
Cash and cash equivalents
25,863 
 
19,129 
 
Short-term investments
2,930 
 
 
 
Fair Value, Measurements, Recurring |
Quoted Market Prices in Active Markets for Identical Assets (Level 1) |
Term-deposits
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
Long-term investments
$ 9,588 
 
 
 
Fair Value Measurements - Additional Information (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Nov. 2, 2013
Nov. 2, 2013
Oct. 27, 2012
Fair Value Measurements Disclosure [Line Items]
 
 
 
Loss on impairment of assets
$ 19,316 
$ 19,316 
$ 442 
Reconciliation Between Basic and Diluted Weighted Average Shares Outstanding (Detail)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Nov. 2, 2013
Oct. 27, 2012
Nov. 2, 2013
Oct. 27, 2012
Weighted average common shares outstanding:
 
 
 
 
Basic number of common shares outstanding
192,818 
197,173 
192,753 
196,177 
Dilutive effect of stock options and non-vested restricted stock
1,794 
4,794 
2,268 
3,864 
Diluted number of common shares outstanding
194,612 
201,967 
195,021 
200,041 
Earnings per Share - Additional Information (Detail)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Nov. 2, 2013
Oct. 27, 2012
Nov. 2, 2013
Oct. 27, 2012
Outstanding Stock Awards
 
 
 
 
Earnings Per Share Disclosure [Line Items]
 
 
 
 
Shares that were not included in the computation of weighted average diluted common share amounts as the effect of doing so would have been anti-dilutive
2.9 
1.5 
1.8 
2.8 
Restricted Stock Units (RSUs)
 
 
 
 
Earnings Per Share Disclosure [Line Items]
 
 
 
 
Shares that were not included in the computation of weighted average diluted common share amounts as the effect of doing so would have been anti-dilutive
0.9 
0.8 
Shares of restricted stock units not included in the computation of weighted average diluted common share amounts because the number of shares ultimately issued is contingent on performance
1.0 
 
1.0 
 
Property and Equipment (Detail) (USD $)
In Thousands, unless otherwise specified
Nov. 2, 2013
Feb. 2, 2013
Oct. 27, 2012
Property, Plant and Equipment [Line Items]
 
 
 
Property and equipment, at cost
$ 1,594,326 
$ 1,417,933 
$ 1,453,625 
Less: Accumulated depreciation
(964,120)
(917,799)
(926,249)
Property and equipment, net
$ 630,206 
$ 500,134 
$ 527,376 
Intangible Assets (Detail) (USD $)
In Thousands, unless otherwise specified
Nov. 2, 2013
Feb. 2, 2013
Oct. 27, 2012
Finite-Lived Intangible Assets [Line Items]
 
 
 
Trademarks and other intangibles, at cost
$ 52,484 
$ 44,272 
$ 44,106 
Less: Accumulated amortization
(8,057)
(6,136)
(5,647)
Intangible assets, net
$ 44,427 
$ 38,136 
$ 38,459 
Other Credit Arrangements - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Feb. 2, 2013
Nov. 2, 2013
Debt Disclosure [Line Items]
 
 
Borrowing agreements, number of financial institutions
 
Demand letter of credit facilities
 
 
Debt Disclosure [Line Items]
 
 
Borrowing agreements with financial institutions
 
$ 135.0 
Trade Letter of Credit
 
 
Debt Disclosure [Line Items]
 
 
Outstanding borrowings
 
69.2 
Unsecured Revolving Credit Facility
 
 
Debt Disclosure [Line Items]
 
 
Line of credit facility, expiration period
5 years 
 
Borrowing agreements with financial institutions
150.0 
 
Credit facility interest rate description
The Credit Agreement has various borrowing options, including rates of interest that are based on (i) an Adjusted London Interbank Offered Rate ("LIBOR" as defined in the Credit Agreement) plus a margin ranging from 1.00% to 1.75% based on a defined leverage ratio, payable at the end of the applicable interest period; and (ii) a Base Rate (as defined in the Credit Agreement), plus a margin ranging from 0.00% to 0.75% based on a defined leverage ratio, payable quarterly. 
 
Frequency of payments for interest on borrowing
Quarterly 
 
Letters of credit outstanding amount
 
8.3 
Borrowings
 
$ 0 
Unsecured Revolving Credit Facility |
LIBOR |
Minimum
 
 
Debt Disclosure [Line Items]
 
 
Interest rate margin
1.00% 
 
Unsecured Revolving Credit Facility |
LIBOR |
Maximum
 
 
Debt Disclosure [Line Items]
 
 
Interest rate margin
1.75% 
 
Unsecured Revolving Credit Facility |
Base Rate |
Minimum
 
 
Debt Disclosure [Line Items]
 
 
Interest rate margin
0.00% 
 
Commitment fee payable on the unused portion of total lender commitments
0.175% 
 
Unsecured Revolving Credit Facility |
Base Rate |
Maximum
 
 
Debt Disclosure [Line Items]
 
 
Interest rate margin
0.75% 
 
Commitment fee payable on the unused portion of total lender commitments
0.30% 
 
Share-Based Compensation - Additional Information (Detail) (USD $)
Share data in Millions, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Nov. 2, 2013
Oct. 27, 2012
Nov. 2, 2013
Oct. 27, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Share-based compensation (expense) benefit
$ (11,500,000)
$ 17,700,000 
$ (1,800,000)
$ 45,400,000 
Share-based compensation (expense) benefit, net of tax
(7,100,000)
10,900,000 
(1,100,000)
28,000,000 
Weighted-average grant date fair value of stock options granted
 
 
$ 4.17 
$ 3.72 
Aggregate intrinsic value of options exercised
 
 
1,300,000 
24,900,000 
Cash received from the exercise of stock options
 
 
3,323,000 
43,914,000 
Tax benefit realized from stock option exercises
 
 
8,200,000 
5,100,000 
Shares available for all equity grants
17.8 
 
17.8 
 
Employee Stock Option
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Unrecognized compensation expense
1,500,000 
 
1,500,000 
 
Unrecognized compensation expense, weighted average period
 
 
1 year 3 months 18 days 
 
Time Based Restricted Stock Units
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Unrecognized compensation expense, weighted average period
 
 
2 years 
 
Vesting period
 
 
3 years 
 
Unrecognized compensation expense
17,300,000 
 
17,300,000 
 
Performance-Based Restricted Stock Units
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Vesting period
 
 
3 years 
 
Unrecognized compensation expense
$ 22,300,000 
 
$ 22,300,000 
 
Performance-Based Restricted Stock Units |
Minimum
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Unrecognized compensation expense, weighted average period
 
 
1 year 
 
Performance-Based Restricted Stock Units |
Maximum
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Unrecognized compensation expense, weighted average period
 
 
3 years 
 
Summary of Stock Option Activity (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified
9 Months Ended
Nov. 2, 2013
Options
 
Outstanding - beginning of period
4,629 
Granted
376 
Exercised
(250)1
Cancelled
(76)
Outstanding- end of period
4,679 
Vested and expected to vest-end of period
4,604 
Exercisable-end of period
1,291 2
Weighted-Average Exercise Price
 
Outstanding-beginning of period
$ 16.29 
Granted
$ 22.55 
Exercised
$ 13.36 1
Cancelled
$ 23.44 
Outstanding-end of period
$ 16.83 
Vested and expected to vest-end of period
$ 16.83 
Exercisable-end of period
$ 11.20 2
Weighted-Average Remaining Contractual Term (In years)
 
Outstanding-end of period
3 years 
Vested and expected to vest-end of period
2 years 10 months 24 days 
Exercisable-end of period
3 years 7 months 6 days 2
Aggregate Intrinsic Value
 
Outstanding-end of period
$ 6,064 
Vested and expected to vest-end of period
5,978 
Exercisable-end of period
$ 5,079 2
Summary of Stock Option Activity (Parenthetical) (Detail)
9 Months Ended
Nov. 2, 2013
Schedule of Share based Compensation Arrangements by Share based Payment Award, Performance Options [Line Items]
 
Options exercised, exercise price range, lower limit
$ 4.24 
Options exercised, exercise price range, upper limit
$ 19.28 
Black-Scholes Option Valuation Assumptions (Detail)
9 Months Ended
Nov. 2, 2013
Oct. 27, 2012
Share based Compensation Arrangement by Share based Payment Award, Fair Value Assumptions, Method Used [Line Items]
 
 
Risk-free interest rate
0.30% 1
0.60% 1
Dividend yield
2.00% 
2.80% 
Volatility factor
34.40% 2
41.20% 2
Weighted-average expected term
2 years 6 months 3
4 years 3
Expected forfeiture rate
8.00% 4
8.00% 4
Summary of Restricted Stock Activity (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified
9 Months Ended
Nov. 2, 2013
Time Based Restricted Stock Units
 
Shares
 
Nonvested - beginning of period
1,386 
Granted
942 
Vested
(1,057)
Cancelled/Forfeited
(51)
Nonvested - End of period
1,220 
Weighted-Average Grant Date Fair Value
 
Nonvested - beginning of period
$ 13.91 
Granted
$ 22.01 
Vested
$ 14.06 
Canceled/Forfeited
$ 18.50 
Nonvested - end of period
$ 19.84 
Performance-Based Restricted Stock Units
 
Shares
 
Nonvested - beginning of period
2,086 
Granted
857 
Vested
(566)
Cancelled/Forfeited
(37)
Nonvested - End of period
2,340 
Weighted-Average Grant Date Fair Value
 
Nonvested - beginning of period
$ 14.91 
Granted
$ 21.80 
Vested
$ 17.39 
Canceled/Forfeited
$ 19.89 
Nonvested - end of period
$ 16.75 
Income Taxes - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Nov. 2, 2013
Oct. 27, 2012
Nov. 2, 2013
Oct. 27, 2012
Income Taxes [Line Items]
 
 
 
 
Effective income tax rate from continuing operations
41.20% 
37.20% 
38.60% 
35.00% 
Decrease in unrecognized tax benefit
 
 
$ 8.0 
 
Acquisitions and Dispositions - Additional Information (Detail) (Contract Termination, USD $)
In Millions, unless otherwise specified
1 Months Ended
May 31, 2013
Store
Contract Termination
 
Significant Acquisitions and Disposals [Line Items]
 
Number of stores acquired
Payment to acquire assets operated by Dickson on termination of agreement
$ 20.8 
Payment to terminate Dickson Right
$ 10.0 
Allocation of Purchase Price to Fair Value of Assets Acquired (Detail) (USD $)
In Thousands, unless otherwise specified
May 31, 2013
Business Combination Allocation of Purchase Price [Line Items]
 
Merchandise inventory
$ 2,456 
Other assets
2,351 
Property and equipment
6,460 
Intangible assets and goodwill
9,484 
Total purchase price
$ 20,751 
Discontinued Operations - Additional Information (Detail) (USD $)
3 Months Ended 9 Months Ended 12 Months Ended
Nov. 2, 2013
Nov. 2, 2013
Feb. 2, 2013
Discontinued Operations
Store
Feb. 2, 2013
Discontinued Operations
77 kids stores
Store
Feb. 2, 2013
Segment, Discontinued Operations
77 kids stores
Restructuring Cost and Reserve [Line Items]
 
 
 
 
 
Number of stores impaired
 
 
 
22 
 
Percentage of cost paid for acquired inventory
 
 
 
 
65.00% 
Number of stores leases
 
 
21 
 
 
Loss from Discontinued Operations
$ 0 
$ 0 
 
 
 
Significant Components of 77kid's Results Included in Loss from Discontinued Operations on Consolidated Statement of Operations (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Nov. 2, 2013
Oct. 27, 2012
Nov. 2, 2013
Oct. 27, 2012
Discontinued Operations [Line Items]
 
 
 
 
Total net revenue
$ 857,305 
$ 910,374 
$ 2,264,095 
$ 2,358,749 
Loss from discontinued operations, net of tax
 
(3,833)
 
(31,990)
Loss per common share from discontinued operations:
 
 
 
 
Basic
 
$ (0.02)
 
$ (0.16)
Diluted
 
$ (0.02)
 
$ (0.16)
77 kids stores
 
 
 
 
Discontinued Operations [Line Items]
 
 
 
 
Total net revenue
 
 
 
20,117 
Loss from discontinued operations, before income taxes
 
(6,191)
 
(51,839)
Income tax benefit
 
2,358 
 
19,849 
Loss from discontinued operations, net of tax
 
$ (3,833)
 
$ (31,990)
Loss per common share from discontinued operations:
 
 
 
 
Basic
 
$ (0.02)
 
$ (0.16)
Diluted
 
$ (0.02)
 
$ (0.16)
Exit and Disposal Activities - Additional Information (Detail) (USD $)
3 Months Ended 9 Months Ended
Nov. 2, 2013
Nov. 2, 2013
Oct. 27, 2012
Restructuring Cost and Reserve [Line Items]
 
 
 
Impairment charges
$ 19,316,000 
$ 19,316,000 
$ 442,000 
Liabilities associated with exit and disposal
 
Income Statement [Member]
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
Asset impairment charges, Net of tax
11,900,000 
 
 
Scenario, Forecast |
Minimum
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
Severance and employee related costs
4,000,000 
 
 
Scenario, Forecast |
Maximum
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
Severance and employee related costs
5,000,000 
 
 
Warrendale, Pennsylvania distribution center
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
Asset impairment charges, Net of tax
12,000,000 
 
 
Warrendale, Pennsylvania distribution center |
Minimum
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
Restructuring charges
14,000,000 
 
 
Severance and employee related costs, Net of tax
2,000,000 
 
 
Warrendale, Pennsylvania distribution center |
Maximum
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
Restructuring charges
15,000,000 
 
 
Severance and employee related costs, Net of tax
$ 3,000,000