v3.25.4
Financial Instruments
 6 Months Ended
Feb. 01, 2026
General Discussion of Derivative Instruments and Hedging Activities [Abstract]  
Financial Instruments Financial Instruments
The principal market risks to which we are exposed are changes in foreign currency exchange rates, interest rates and commodity prices. In addition, we are exposed to price changes related to certain deferred compensation obligations. In order to manage these exposures, we follow established risk management policies and procedures, including the use of derivative contracts such as swaps, rate locks, options, forwards and commodity futures. We enter into these derivative contracts for periods consistent with the related underlying exposures, and the contracts do not constitute positions independent of those exposures. We do not enter into derivative contracts for speculative purposes and do not use leveraged instruments. Our derivative programs include instruments that qualify for hedge accounting treatment and instruments that are not designated as accounting hedges.
Concentration of Credit Risk
We are exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate counterparty credit risk, we enter into contracts only with carefully selected, leading, credit-worthy financial institutions, and distribute contracts among several financial institutions to reduce the concentration of credit risk. We did not have credit risk-related contingent features in our derivative instruments as of February 1, 2026, or August 3, 2025.
We are also exposed to credit risk from our customers. During 2025, our largest customer accounted for approximately 21% of our consolidated net sales. Our five largest customers accounted for approximately 47% of our consolidated net sales in 2025.
We closely monitor credit risk associated with counterparties and customers.
Foreign Currency Exchange Risk
We are exposed to foreign currency exchange risk, primarily the Canadian dollar and Euro, related to intercompany transactions and third-party transactions. We utilize foreign exchange forward and option contracts to hedge these exposures. The contracts are either designated as cash-flow hedging instruments or are undesignated. We hedge portions of our forecasted foreign currency transaction exposure with foreign exchange forward contracts for periods typically up to 18 months. The notional amount of foreign exchange forward contracts accounted for as cash-flow hedges was $192 million as of February 1, 2026, and $183 million as of August 3, 2025. Changes in the fair value on the portion of the derivative included in the assessment of hedge effectiveness of cash-flow hedges are recorded in other comprehensive income (loss), until earnings are affected by the variability of cash flows. For derivatives that are designated and qualify as hedging instruments, the initial fair value of hedge components excluded from the assessment of effectiveness is recognized in earnings under a systematic and rational method over the life of the hedging instrument and is presented in the same statement of earnings line item as the earnings effect of the hedged item. Any difference between the change in the fair value of the hedge components excluded from the assessment of effectiveness and the amounts recognized in earnings is recorded as a component of other comprehensive income (loss). The notional amount of foreign exchange forward and option contracts that are not designated as accounting hedges was $167 million as of February 1, 2026, and $413 million as of August 3, 2025.
Interest Rate Risk
We manage our exposure to changes in interest rates by optimizing the use of variable-rate and fixed-rate debt. From time to time, we may use interest rate swaps in order to maintain our variable-to-total debt ratio within targeted guidelines.
We manage our exposure to interest volatility on future debt issuances by entering into forward starting interest rate swaps or treasury lock contracts to hedge the rate on the interest payments related to the anticipated debt issuance. The forward starting interest rate swaps or treasury lock contracts are either designated as cash-flow hedging instruments or are undesignated. Changes in the fair value on the portion of the derivative included in the assessment of hedge effectiveness of cash-flow hedges are recorded in other comprehensive income (loss), and reclassified into Interest expense over the life of the debt issued. The change in fair value on undesignated instruments is recorded in Interest expense. In conjunction with the issuance of senior unsecured notes on October 2, 2024, due on March 23, 2035, we settled forward starting interest rate swaps with a notional amount of $700 million at a gain of less than $1 million. The gain on these instruments was recorded in other comprehensive income (loss) and will be recognized in Interest expense over the life of the debt. There were no forward starting interest rate swaps or treasury lock contracts outstanding as of February 1, 2026 and August 3, 2025.
In the second quarter of 2026, we entered into fixed-to-floating interest rate swaps to hedge changes in the fair value of a portion of our previously issued senior unsecured notes attributable to the change in the benchmark interest rate. The notional amount of fixed-to-floating interest rate swaps was $600 million as of February 1, 2026. The instruments effectively convert a portion of our $800 million 4.75% Notes due March 23, 2035 from fixed-rate to variable-rate debt with interest based on SOFR plus a margin. The fixed-to-floating interest rate swaps are designated as fair-value hedges. Changes in the fair value of these instruments are recorded in Interest expense along with the offsetting changes in the fair value of the related hedged portion of long-term debt. There were no fixed-to-floating interest rate swaps outstanding as of August 3, 2025.
Commodity Price Risk
We principally use a combination of purchase orders and various short- and long-term supply arrangements in connection with the purchase of raw materials, including certain commodities and agricultural products. We also enter into commodity futures, options and swap contracts to reduce the volatility of price fluctuations of wheat, diesel fuel, natural gas, soybean oil, cocoa, aluminum, soybean meal and corn. Commodity futures, options and swap contracts are either designated as cash-flow hedging instruments or are undesignated. We hedge a portion of commodity requirements for periods typically up to 18 months. There were no commodity contracts designated as cash-flow hedges as of February 1, 2026, or August 3, 2025. The notional amount of commodity contracts not designated as accounting hedges was $156 million as of February 1, 2026, and $184 million as of August 3, 2025. The change in fair value on undesignated instruments is recorded in Cost of products sold.
We have a supply contract under which prices for certain raw materials are established based on anticipated volume requirements over a twelve-month period. Certain prices under the contract are based in part on certain component parts of the raw materials that are in excess of our needs or not required for our operations, thereby creating an embedded derivative requiring bifurcation. We net settle amounts due under the contract with our counterparty. The notional amount was $79 million as of February 1, 2026, and $49 million as of August 3, 2025. The change in fair value on the embedded derivative is recorded in Cost of products sold.
Deferred Compensation Obligation Price Risk
We enter into swap contracts which hedge a portion of exposures relating to the total return of certain deferred compensation obligations. These contracts are not designated as hedges for accounting purposes. Unrealized gains (losses) and settlements are included in Administrative expenses in the Consolidated Statements of Earnings. We enter into these contracts for periods typically not exceeding 12 months. The notional amounts of the contracts were $76 million as of February 1, 2026, and August 3, 2025.
The following tables summarize the fair value of derivative instruments on a gross basis as recorded in the Consolidated Balance Sheets:
(Millions)Balance Sheet ClassificationFebruary 1, 2026August 3,
2025
Asset Derivatives
Derivatives not designated as hedges:
Commodity contractsOther current assets$23 $12 
Deferred compensation contractsOther current assets3 1 
Foreign exchange contractsOther current assets2 2 
Total derivatives not designated as hedges$28 $15 
Total asset derivatives$28 $15 
(Millions)Balance Sheet ClassificationFebruary 1, 2026August 3,
2025
Liability Derivatives
Derivatives designated as hedges:
Foreign exchange contractsAccrued liabilities$2 $3 
Fixed-to-floating interest rate swapsOther liabilities6 — 
Total derivatives designated as hedges$8 $3 
Derivatives not designated as hedges:
Commodity contractsAccrued liabilities$8 $11 
Foreign exchange contractsAccrued liabilities1 — 
Total derivatives not designated as hedges$9 $11 
Total liability derivatives$17 $14 
We do not offset the fair values of derivative assets and liabilities executed with the same counterparty that are generally subject to enforceable netting agreements. However, if we were to offset and record the asset and liability balances of derivatives on a net basis, the amounts presented in the Consolidated Balance Sheets as of February 1, 2026, and August 3, 2025, would be adjusted as detailed in the following table:
February 1, 2026August 3, 2025
(Millions)Gross Amounts Presented in the Consolidated Balance SheetGross Amounts Not Offset in the Consolidated Balance Sheet Subject to Netting AgreementsNet AmountGross Amounts Presented in the Consolidated Balance SheetGross Amounts Not Offset in the Consolidated Balance Sheet Subject to Netting AgreementsNet Amount
Total asset derivatives$28 $(9)$19 $15 $(5)$10 
Total liability derivatives$17 $(9)$8 $14 $(5)$9 
We are required to maintain cash margin accounts in connection with funding the settlement of open positions for exchange-traded commodity derivative instruments. A cash margin asset balance of $3 million at February 1, 2026, and a
liability balance of less than $1 million at August 3, 2025, were included in Other current assets and Accrued liabilities, respectively, in the Consolidated Balance Sheets.
The following tables show the effect of our derivative instruments designated as cash-flow hedges in other comprehensive income (loss) (OCI) and the Consolidated Statements of Earnings:
 Total Cash-flow Hedge
OCI Activity
(Millions) February 1, 2026January 26, 2025
Three Months Ended
OCI derivative gain (loss) at beginning of quarter$(10)$(10)
Effective portion of changes in fair value recognized in OCI:
Foreign exchange contracts(4)3 
Amount of loss (gain) reclassified from OCI to earnings:Location in Earnings
Foreign exchange contractsCost of products sold1 (1)
Forward starting interest rate swapsInterest expense1 — 
OCI derivative gain (loss) at end of quarter$(12)$(8)
Six Months Ended
OCI derivative gain (loss) at beginning of year$(14)$(11)
Effective portion of changes in fair value recognized in OCI:
Foreign exchange contracts(1)3 
Amount of loss (gain) reclassified from OCI to earnings:Location in Earnings
Foreign exchange contractsCost of products sold2 (1)
Forward starting interest rate swapsInterest expense1 1 
OCI derivative gain (loss) at end of quarter$(12)$(8)
Based on current valuations, the amount expected to be reclassified from OCI into earnings within the next 12 months is a loss of $6 million.
The following tables show the total amounts of line items presented in the Consolidated Statements of Earnings in which the effects of derivative instruments designated as cash-flow and fair-value hedges are recorded and the total effect of hedge activity on these line items:
Three Months Ended
February 1, 2026January 26, 2025
(Millions)Cost of products soldInterest
expense		Cost of products soldInterest
expense
Consolidated Statements of Earnings$1,847 $82 $1,866 $88 
Loss (gain) on cash-flow hedges:
Amount of loss (gain) reclassified from OCI to earnings$1 $1 $(1)$— 
Loss (gain) on fair-value hedges:
Amount of loss (gain) recognized on hedged item in earnings$— $(6)$— $— 
Amount of loss (gain) on derivative recognized in earnings$— $6 $— $— 
Six Months Ended
February 1, 2026January 26, 2025
(Millions)Cost of products soldInterest
expense		Cost of products soldInterest
expense
Consolidated Statements of Earnings$3,732 $163 $3,771 $175 
Loss (gain) on cash-flow hedges:
Amount of loss (gain) reclassified from OCI to earnings$2 $1 $(1)$1 
Loss (gain) on fair-value hedges:
Amount of loss (gain) recognized on hedged item in earnings$— $(6)$— $— 
Amount of loss (gain) on derivative recognized in earnings$— $6 $— $— 
The amount excluded from effectiveness testing recognized in each line item of earnings using an amortization approach was not material in all periods presented.
The following table shows the location of the amounts recorded in the Consolidated Balance Sheets related to the cumulative fair value basis adjustments for fair-value hedges:
Carrying Amount of Hedged LiabilitiesCumulative Amount of Fair-value Hedging Loss (Gain) Included in the Carrying Amount
(Millions)February 1, 2026August 3,
2025		February 1, 2026August 3,
2025
Balance Sheet Classification:
Long-term debt$587 $— $(6)$— 
The following table shows the effects of our derivative instruments not designated as hedges in the Consolidated Statements of Earnings:
Location of Loss (Gain) Recognized in EarningsThree Months EndedSix Months Ended
(Millions)February 1, 2026January 26, 2025February 1, 2026January 26, 2025
Foreign exchange contractsCost of products sold$2 $(1)$2 $(1)
Commodity contractsCost of products sold(16)(14)(12)(18)
Deferred compensation contractsAdministrative expenses(2)(3)(8)(6)
Total$(16)$(18)$(18)$(25)