RETIREMENT AND OTHER BENEFIT PLANS

12 Months Ended

Feb. 03, 2024

RETIREMENT AND OTHER BENEFIT PLANS

RETIREMENT AND OTHER BENEFIT PLANS

5.   RETIREMENT AND OTHER BENEFIT PLANS

The Company sponsors pension plans in both the United States and Canada. Under the domestic plans, salaried, management and certain hourly employees’ pension benefits are based on a two-rate formula applied to each year of service.  Participants receive the larger of the accrued benefit as of December 31, 2015 (based on service commencing at the date of hire and a 35-year service cap and an average annual salary for the five highest consecutive years during the last 10-year period) and the benefit calculated under the current plan provisions from the date of hire.  Generally, under the current plan provisions, a participant receives credit for one year of service for each 365 days of employment as an eligible employee with the Company commencing after the employee’s date of participation in the plan, up to 30 years.  Except for grandfathered employees and certain hourly associates in the Company’s retail divisions, final average compensation, taxable covered compensation and credited service for purposes of determining accrued pension benefits were frozen as of December 31, 2018.

The Company’s Canadian pension plans cover certain employees based on plan specifications.  Under the Canadian plans, employees’ pension benefits are based on the employee’s highest consecutive five years of compensation during the 10 years before retirement.  The Company’s funding policy for all plans is to make the minimum annual contributions required by applicable regulations.  The Company also maintains an unfunded Supplemental Executive Retirement Plan (“SERP”).  In addition to providing pension benefits, the Company sponsors unfunded postretirement life insurance plans that cover both salaried and hourly employees who became eligible for benefits by January 1, 1995.  The life insurance plans provide coverage of up to $20,000 for qualifying retired employees.

Benefit Obligations

The following table sets forth changes in benefit obligations, including all domestic and Canadian plans:

	Pension Benefits				Other Postretirement Benefits
($ thousands)	2023		2022		2023		2022
Benefit obligation at beginning of year	$	285,572	$	355,286	$	1,018	$	1,143
Service cost		5,020		7,143		—		—
Interest cost		14,543		11,977		48		35
Plan participants’ contribution		11		10		1		4
Plan amendments		—		407		—		—
Actuarial (gain) loss		(6,773)		(70,775)		(61)		(85)
Benefits paid		(16,149)		(15,440)		(75)		(79)
Settlements		—		(3,032)		—		—
Curtailments		—		13		—		—
Foreign exchange rate changes		(49)		(17)		—		—
Benefit obligation at end of year	$	282,175	$	285,572	$	931	$	1,018

The accumulated benefit obligation for the United States pension plans was $277.1 million and $280.5 million as of February 3, 2024 and January 28, 2023, respectively.  The accumulated benefit obligation for the Canadian pension plans was $3.2 million and $3.3 million as of February 3, 2024 and January 28, 2023, respectively.

	Pension Benefits				Other Postretirement Benefits
Weighted–average assumptions used to determine benefit obligations, end of year	2023		2022		2023		2022
Discount rate	5.40	%	5.20	%	5.40	%	5.20	%
Rate of compensation increase	1.70	%	3.00	%	N/A		N/A

As of February 3, 2024 and January 28, 2023, the Company used the PRI-2012 Bottom Quartile mortality table, projected using generational scale MP-2021, a base mortality table issued by the Society of Actuaries in 2021, to estimate the plan liabilities.

Plan Assets

Pension assets are managed in accordance with the prudent investor standards of the Employee Retirement Income Security Act (“ERISA”).  The plan’s investment objective is to earn a competitive total return on assets, while also ensuring plan assets are adequately managed to provide for future pension obligations.  This results in the protection of plan surplus and is accomplished by matching the duration of the projected benefit obligation using leveraged fixed income instruments and, while maintaining an equity commitment, managing an equity overlay strategy.  The overlay strategy is intended to protect the managed equity portfolios against adverse stock market environments.  The Company delegates investment management of the plan assets to specialists in each asset class and regularly monitors manager performance and compliance with investment guidelines.  The Company’s overall investment strategy is to achieve a mix of approximately 97% of investments for long-term growth and 3% for near-term benefit payments with a wide diversification of asset types, fund strategies and fund managers.  The target allocations for plan assets for 2023 were equities of between 65% and 75% and debt securities of between 25% and 35%.  Allocations may change periodically based upon changing market conditions.  Corporate stocks – common did not include any Company stock at February 3, 2024 or January 28, 2023.

Assets of the Canadian pension plans, which totaled approximately $4.3 million on February 3, 2024, were invested 55% in equity funds, 42% in bond funds and 3% in money market funds. The Canadian pension plans did not include any Company stock as of February 3, 2024 or January 28, 2023.

A financial instrument’s level within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  Refer to further discussion on the fair value hierarchy in Note 13 to the consolidated financial

statements. Following is a description of the pension plan investments measured at fair value, including the general classification of such investments pursuant to the valuation hierarchy.

● Cash and cash equivalents include cash collateral and margin as well as money market funds.  The fair values are based on unadjusted quoted market prices in active markets with sufficient volume and frequency and therefore are classified within Level 1 of the fair value hierarchy.

● Investments in U.S. government securities, the mutual fund, exchange-traded funds, corporate stocks - common and S&P 500 Index put and call options (traded on security exchanges) are classified within Level 1 of the fair value hierarchy because the fair values are based on unadjusted quoted market prices in active markets with sufficient volume and frequency.  Interest rate swap agreements and certain U.S. government securities are not traded on an exchange but are based on observable inputs that can be corroborated.  Therefore, these investments are classified within Level 2 of the fair value hierarchy.  The preferred securities and certain corporate stocks – common were offered in a private placement.  The fair values of these investments are based on unobservable prices and therefore, they are classified within Level 3 of the fair value hierarchy.

● The alternative investment fund is an investment in a pool of long-duration domestic investment grade assets.  This investment is measured using net asset value per share, and therefore, is not classified within the fair value hierarchy.

● The unallocated insurance contract is measured at net asset value per share, and therefore, is not classified within the fair value hierarchy.

The fair values of the Company’s pension plan assets at February 3, 2024 by asset category were as follows:

			Fair Value Measurements at February 3, 2024
($ thousands)	Total		Level 1		Level 2		Level 3
Asset
Cash and cash equivalents	$	11,138	$	11,138	$	—	$	—
U.S. government securities		74,777		65,345		9,432		—
Interest rate swap agreements		3,647		—		3,647		—
Mutual fund		28,114		28,114		—		—
Exchange-traded funds		128,263		128,263		—		—
Corporate stocks - common		84,977		84,853		—		124
Preferred securities		237		—		—		237
S&P 500 Index options		(1,788)		(1,788)		—		—
Total investments in the fair value hierarchy	$	329,365	$	315,925	$	13,079	$	361
Investments measured at net asset value:
Alternative investment fund		14,654		—		—		—
Unallocated insurance contract		32		—		—		—
Total investments measured at net asset value		14,686		—		—		—
Total investments at fair value	$	344,051	$	315,925	$	13,079	$	361

The fair values of the Company’s pension plan assets at January 28, 2023 by asset category were as follows:

			Fair Value Measurements at January 28, 2023
($ thousands)	Total		Level 1		Level 2		Level 3
Asset
Cash and cash equivalents	$	12,962	$	12,962	$	—	$	—
U.S. government securities		80,522		45,872		34,650		—
Interest rate swap agreements		(2,793)		—		(2,793)
Mutual fund		29,548		29,548		—		—
Exchange-traded funds		92,338		92,338		—		—
Corporate stocks - common		132,138		132,138		—		—
Preferred securities		335		—		—		335
S&P 500 Index options		(2,634)		(2,634)		—		—
Total investments in the fair value hierarchy	$	342,416	$	310,224	$	31,857	$	335
Investments measured at net asset value:
Alternative investment fund		14,293		—		—		—
Unallocated insurance contract		36		—		—		—
Total investments measured at net asset value		14,329		—		—		—
Total investments at fair value	$	356,745	$	310,224	$	31,857	$	335

The following table sets forth changes in the fair value of plan assets, including all domestic and Canadian plans:

	Pension Benefits				Other Postretirement Benefits
($ thousands)	2023		2022		2023		2022
Fair value of plan assets at beginning of year	$	356,745	$	444,091	$	—	$	—
Actual return on plan assets		3,375		(69,361)		—		—
Employer contributions		118		494		74		75
Plan participants’ contributions		11		10		1		4
Benefits paid		(16,149)		(15,440)		(75)		(79)
Settlements		—		(3,032)		—		—
Foreign exchange rate changes		(49)		(17)		—		—
Fair value of plan assets at end of year	$	344,051	$	356,745	$	—	$	—

Funded Status

The over-funded status as of February 3, 2024 and January 28, 2023 for pension benefits was $61.9 million and $71.2 million, respectively. The under-funded status for other postretirement benefits was $0.9 million and $1.0 million as of February 3, 2024 and January 28, 2023, respectively.

Amounts recognized in the consolidated balance sheets consist of:

	Pension Benefits				Other Postretirement Benefits
($ thousands)	2023		2022		2023		2022
Prepaid pension costs (noncurrent assets)	$	74,951	$	83,396	$	—	$	—
Accrued benefit liabilities (current liability)		(5,327)		(5,189)		(176)		(182)
Accrued benefit liabilities (noncurrent liability)		(7,748)		(7,034)		(755)		(836)
Net amount recognized at end of year	$	61,876	$	71,173	$	(931)	$	(1,018)

The projected benefit obligation, the accumulated benefit obligation and the fair value of plan assets for pension plans with a projected benefit obligation in excess of plan assets and for pension plans with an accumulated benefit obligation in excess of plan assets, which includes only the Company’s SERP, were as follows:

		Projected Benefit Obligation Exceeds the				Accumulated Benefit Obligation
		Fair Value of Plan Assets				Exceeds the Fair Value of Plan Assets
($ thousands)		2023		2022		2023		2022
End of Year
Projected benefit obligation	$	13,075	$	12,223	$	13,075	$	12,223
Accumulated benefit obligation		12,144		11,392		12,144		11,392
Fair value of plan assets		—		—		—		—

The accumulated postretirement benefit obligation exceeds assets for all of the Company’s other postretirement benefit plans.

The amounts in accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit income at February 3, 2024 and January 28, 2023 are as follows:

	Pension Benefits				Other Postretirement Benefits
($ thousands)	2023		2022		2023		2022
Components of accumulated other comprehensive loss, net of tax:
Net actuarial loss (gain)	$	33,709	$	25,967	$	(374)	$	(410)
Net prior service credit		71		(20)		—		—
Accumulated other comprehensive loss, net of tax	$	33,780	$	25,947	$	(374)	$	(410)

Net Periodic Benefit Income

Net periodic benefit income for 2023, 2022 and 2021 for all domestic and Canadian plans included the following components:

	Pension Benefits						Other Postretirement Benefits
($ thousands)	2023		2022		2021		2023		2022		2021
Service cost	$	5,020	$	7,143	$	7,494	$	—	$	—	$	—
Interest cost		14,543		11,977		11,236		48		35		35
Expected return on assets		(24,353)		(27,987)		(28,437)		—		—		—
Amortization of:
Actuarial loss (gain)		3,785		3,088		2,410		(110)		(103)		(108)
Prior service credit		(123)		(314)		(514)		—		—		—
Settlement cost		—		320		—		—		—		—
Curtailments		—		13		—		—		—		—
Total net periodic benefit income	$	(1,128)	$	(5,760)	$	(7,811)	$	(62)	$	(68)	$	(73)

The non-service cost components of net periodic benefit income are included in other income, net in the consolidated statements of earnings.  Service cost is included in selling and administrative expenses.

	Pension Benefits						Other Postretirement Benefits
Weighted–average assumptions used to determine net periodic benefit income	2023		2022		2021		2023		2022		2021
Discount rate	5.20	%	3.40	%	3.10	%	5.20	%	3.40	%	3.10	%
Rate of compensation increase	3.00	%	3.00	%	3.00	%	N/A		N/A		N/A
Expected return on plan assets	7.50	%	7.20	%	7.25	%	N/A		N/A		N/A

The net actuarial loss (gain) subject to amortization is amortized on a straight-line basis over the average future service of active plan participants as of the measurement date. The prior service credit is amortized on a straight-line basis over the average future service of active plan participants benefiting under the plan at the time of each plan amendment.

The expected long-term rate of return on plan assets is based on historical and projected rates of return for current and planned asset classes in the plan’s investment portfolio.  Assumed projected rates of return for each asset class were selected after analyzing experience and future expectations of the returns.  The overall expected rate of return for the portfolio was developed based on the target allocation for each asset class.

Expected Cash Flows

Information about expected cash flows for all pension and postretirement benefit plans follows:

	Pension Benefits
							Other
							Postretirement
($ thousands)	Funded Plan		SERP		Total		Benefits
Employer Contributions
2024 expected contributions to plan trusts	$	73	$	—	$	73	$	—
2024 expected contributions to plan participants		—		5,469		5,469		181
2024 refund of assets (e.g. surplus) to employer		133		—		133		—
Expected Benefit Payments
2024	$	15,327	$	5,469	$	20,796	$	181
2025		15,980		4,913		20,893		145
2026		16,702		926		17,628		116
2027		17,251		1,183		18,434		92
2028		17,865		813		18,678		73
2029-2033		93,809		1,479		95,288		187

Defined Contribution Plans

The Company’s domestic defined contribution 401(k) plan covers certain salaried employees.  For eligible salaried employees, the Company makes a core contribution of 1.5% and a matching contribution of up to 50% of the first 6% of the employees’ contributions.  The Company’s expense for this plan was $5.0 million in 2023, $4.6 million in 2022, and $5.5 million in 2021.  In addition to the core and matching contributions, the Company has the discretion to contribute up to an additional 2% profit-sharing benefit based on the Company’s performance.  The Company’s expense for the profit-sharing contribution was zero for 2023 and $2.6 million for 2022.  Beginning in January 2024, the Company also offers a 401(k) plan to certain hourly employees, providing the option to contribute from 2% to 30% of pre-tax wages to the 401(k) plan.  The hourly 401(k) plan does not offer matching contributions and therefore, the Company incurred no expense during 2023.

Non-Qualified Deferred Compensation Plan

The Company has a non-qualified deferred compensation plan (the “Deferred Compensation Plan”) for the benefit of certain management employees.  The investment funds offered to the participants generally correspond to the funds offered in the Company’s 401(k) plan and the account balance fluctuates with the investment returns on those funds. The Deferred Compensation Plan permits the deferral of up to 50% of base salary and 100% of compensation received under the Company’s annual incentive plan.  The deferrals are held in a separate trust, which has been established by the Company to administer the Deferred Compensation Plan.  The assets of the trust are subject to the claims of the Company’s creditors in the event that the Company becomes insolvent.  Consequently, the trust qualifies as a grantor trust for income tax purposes (i.e., a “Rabbi Trust”).  The liabilities of the Deferred Compensation Plan of $9.5 million and $7.9 million as of February 3, 2024 and January 28, 2023, respectively, are presented in employee compensation and benefits in the accompanying consolidated balance sheets.  The assets held by the trust of $9.5 million and $7.9 million as of February 3, 2024 and January 28, 2023, respectively, are presented within prepaid expenses and other current assets in the accompanying consolidated balance sheets, with changes in the deferred compensation charged to selling and administrative expenses in the accompanying consolidated statements of earnings.

Non-Qualified Deferred Compensation Restoration Plan

In 2023, the Company adopted a non-qualified restoration deferred compensation restoration plan (the “Restoration Plan”) for the benefit of certain members of executive management.  The Restoration Plan provides an incremental retirement benefit to key executives whose contributions to qualified retirement plans are limited by Internal Revenue Service annual compensation maximums.  The investment funds offered to the participants generally correspond to the funds offered in the Company’s 401(k) plan.  The initial contribution to the Restoration Plan was funded in January 2024 and will occur annually thereafter. The plan assets and liabilities will fluctuate with the returns on the investment funds.  The deferrals are held in a separate trust, which has been established by the Company to administer the Restoration Plan. The assets of the trust are subject to the claims of the Company’s creditors in the event that the Company becomes insolvent.  Consequently, the trust qualifies as a grantor trust for income tax purposes (i.e., a “Rabbi Trust”).  The liabilities of the Restoration Plan of $0.3 million are presented in employee compensation and benefits and the assets held by the trust of $0.3 million are classified within prepaid and other current assets in the accompanying consolidated balance sheet as of February 3, 2024.  Changes in deferred compensation plan assets and liabilities are charged to selling and administrative expense in the accompanying consolidated statement of earnings for 2023.  

Deferred Compensation Plan for Non-Employee Directors

Non-employee directors are eligible to participate in a deferred compensation plan, whereby deferred compensation amounts are valued as if invested in the Company’s common stock through the use of phantom stock units (“PSUs”). Under the plan, each participating director’s account is credited with the number of PSUs equal to the number of shares of the Company’s common stock that the participant could purchase or receive with the amount of the deferred compensation, based upon the fair value (as determined based on the average of the high and low prices) of the Company’s common stock on the last trading day of the fiscal quarter when the cash compensation was earned.  Dividend equivalents are paid on PSUs at the same rate as dividends on the Company’s common stock and are re-invested in additional PSUs at the next fiscal quarter-end. The PSUs are payable in cash based on the number of PSUs credited to the participating director’s account, valued on the basis of the fair value at fiscal quarter-end on or following termination of the director’s service. The liabilities of the plan of $2.0 million and $1.8 million as of February 3, 2024 and January 28, 2023, respectively, are based on 55,516 and 60,067 outstanding PSUs, respectively, and are presented in other liabilities in the accompanying consolidated balance sheets.  Gains and losses resulting from changes in the fair value of the PSUs are charged to selling and administrative expenses in the accompanying consolidated statements of earnings.