v3.26.1
Derivative Instruments and Hedging Activities
 3 Months Ended
May 02, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities

5. Derivative Instruments and Hedging Activities

The Company accounts for derivatives and hedging activities in accordance with ASC 815, “Derivatives and Hedging” (ASC 815). As required by ASC 815, the Company records all derivatives on the balance sheet at fair value and adjusts to market on a quarterly basis. In addition, to comply with the provisions of ASC 820, “Fair Value Measurements” (ASC 820), credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, are incorporated in the fair values to account for potential nonperformance risk. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered any applicable credit enhancements such as collateral postings, thresholds, mutual puts, and guarantees. In accordance with ASC 820, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. The Company classifies its derivative valuations in Level 2 of the fair value hierarchy.

On September 27, 2024, the Company terminated the previous $450.0 million interest rate swap, and entered into a new interest rate swap in the notional amount of $500.0 million with a blended interest rate of 2.83%. On this same date, the Company also entered into a new interest rate swap for $300.0 million with an interest rate of 3.37%. These interest rate swap agreements are designated as cash flow hedges.

On June 12, 2025, the Company entered into an interest rate swap agreement with a notional amount of $200.0 million and a fixed interest rate of 3.76%. On the same date, the Company also entered into an interest rate swap agreement with a notional amount of $100.0 million and a fixed interest rate of 3.73%. These interest rate swap agreements are designated as cash flow hedges.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

As of May 2, 2026, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:

 

Interest Rate Derivative

 

Number of
Instruments

 

Notional Aggregate
Principal Amount

 

Interest Swap Rate

 

Maturity Date

Interest rate swap contracts

 

Four

 

$1,100.0 million

 

2.83%-3.76%

 

September 24, 2031

 

Tabular Disclosure

The table below presents the fair value of the Company’s derivative financial instruments on a gross basis as well as their classification on the Company’s Condensed Consolidated Balance Sheets:

 

 

 

(in thousands)

 

 

 

Fair Values of Derivative Instruments

 

 

 

May 2, 2026

 

 

January 31, 2026

 

 

May 3, 2025

 

Derivatives Designated as Hedging Instruments

 

Balance
Sheet
Location

 

Fair
Value

 

 

Balance
Sheet
Location

 

Fair
Value

 

 

Balance
Sheet
Location

 

Fair
Value

 

Interest rate swap contracts

 

Other assets

$

 

26,306

 

 

Other assets

$

 

20,454

 

 

Other assets

$

 

26,079

 

Interest rate swap contracts

 

Other liabilities

$

 

564

 

 

Other liabilities

$

 

3,290

 

 

Other liabilities

$

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following table presents the unrealized gains and losses deferred to accumulated other comprehensive income resulting from the Company’s derivative financial instruments for each of the reporting periods:

 

 

 

(in thousands)

 

 

 

Three Months Ended

 

Interest Rate Derivatives:

 

May 2, 2026

 

 

May 3, 2025

 

Unrealized gains (losses), before taxes

 

$

9,800

 

 

$

(17,071

)

Income tax (expense) benefit

 

 

(2,577

)

 

 

4,539

 

Unrealized gains (losses), net of taxes

 

$

7,223

 

 

$

(12,532

)

 

 

 

The following table presents information about the reclassification of gains and losses from accumulated other comprehensive income into earnings related to the Company’s derivative instruments for each of the reporting periods:

 

 

 

(in thousands)

 

 

 

Three Months Ended

 

Component of Earnings:

 

May 2, 2026

 

 

May 3, 2025

 

Interest benefit

 

$

(2,692

)

 

$

(4,064

)

Income tax expense

 

 

715

 

 

 

1,083

 

Net reclassification into earnings

 

$

(1,977

)

 

$

(2,981

)

 

The Company estimates that approximately $10.6 million will be reclassified from accumulated other comprehensive income as a reduction to interest expense during the next twelve months.