Goodwill and Other Intangible Assets

12 Months Ended

Feb. 03, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

6. Goodwill and Other Intangible Assets

The balance of goodwill was $59.7 million at February 3, 2024 and January 28, 2023, respectively. The Company did not recognize any impairment losses for Fiscal Years 2023, 2022, and 2021. During Fiscal Year 2023, we performed quantitative assessments which resulted in no goodwill impairment. The accumulated goodwill impairment losses as of February 3, 2024 are $137.3 million.

A summary of other intangible assets as of February 3, 2024 and January 28, 2023 is as follows (in thousands):

		February 3, 2024
	Weighted Average Useful Life (Years)	Gross		Accumulated Amortization		Accumulated Impairment		Carrying Amount
Indefinite-lived:
Trade name	N/A	$	58,100	$	—	$	24,100	$	34,000
Definite-lived:
Customer relationships	13.2		134,200		99,334		2,620		32,246
Total intangible assets		$	192,300	$	99,334	$	26,720	$	66,246

		January 28, 2023
	Weighted Average Useful Life (Years)	Gross		Accumulated Amortization		Accumulated Impairment		Carrying Amount
Indefinite-lived:
Trade name	N/A	$	58,100	$	—	$	24,100	$	34,000
Definite-lived:
Customer relationships	13.2		134,200		92,392		2,620		39,188
Total intangible assets		$	192,300	$	92,392	$	26,720	$	73,188

Impairment Tests

General

Goodwill and indefinite-lived intangible assets are not amortized but are reviewed for impairment at least annually, or more frequently when events or changes in circumstances indicate that the carrying value may not be recoverable. Definite-lived intangible assets are reviewed for impairment when events or circumstances indicate that the carrying value may not be recoverable. Judgments regarding indicators of potential impairment are based on market conditions and operational performance of the business.

The Company’s policy is to perform a quantitative analysis of goodwill and indefinite-lived intangible assets every three years. During those years when a quantitative assessment is not performed initially, the Company will assess these assets for impairment initially using a qualitative approach to determine whether conditions exist to indicate that it is more

likely than not that the fair value of a reporting unit is less than its carrying value. If management concludes, based on its assessment of relevant events, facts and circumstances, that it is more likely than not that an impairment exists, then a quantitative analysis is performed to determine if there is any impairment.

For goodwill, the quantitative assessment requires comparing the fair value of a reporting unit to its carrying value, including goodwill. The Company estimates fair value using the income approach. The income approach uses a discounted cash flow model, which involves significant estimates and assumptions, including preparation of revenue and profitability growth forecasts, selection of a discount rate, and selection of a terminal year multiple. These assumptions are classified as Level 3 inputs. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and no further testing is required. If the carrying amount exceeds the reporting unit’s fair value, a goodwill impairment charge is recognized for the amount in excess, not to exceed the total amount of goodwill allocated to that reporting unit. An impairment charge is recorded within the Company’s consolidated statements of operations and comprehensive income.

For other intangible assets, impairment losses are recorded to the extent that the carrying value of the intangible asset exceeds its fair value. The Company measures the fair value of its trade name using the relief from royalty method and the fair value of customer relationships using a recoverability approach. The most significant estimates and assumptions inherent in these approaches are the preparation of revenue forecasts, selection of royalty and discount rates and a terminal year multiple. These assumptions are classified as Level 3 inputs.

2023 Impairment Tests

During the fourth quarter of Fiscal Year 2023, the Company performed its annual assessment by electing to perform a quantitative assessment (the “2023 Impairment Test”). The 2023 Impairment Test was performed using the income approach (or discounted cash flows method) for goodwill, the relief-from-royalty method for indefinite-lived intangible assets and a recoverability analysis for definite-lived intangible assets. The estimated fair values of the reporting units, indefinite-lived and definite-lived intangible assets were above their carrying values resulting in no impairment of goodwill, the Company’s trade name (indefinite-lived intangible asset) and the Company’s customer list (definite-lived intangible asset). The most significant estimates and assumptions inherent in this approach are the preparation of revenue forecasts, selection of royalty and discount rates and a terminal year multiple. These assumptions are classified as Level 3 inputs. The key assumptions used under the income approach and relief-from-royalty method for the Fiscal Year 2023 Impairment Tests included the following:

•Future cash flow assumptions - The Company’s projections for its two reporting units, Direct and Retail sales channels, were from historical experience and assumptions regarding future revenue growth and profitability trends. The Company’s analyses incorporated an assumed period of cash flows of 5 years with a terminal value.

•Discount rate - The discount rate was based on an estimated weighted average cost of capital (“WACC”) for each reporting unit. The components of WACC are the cost of equity and the cost of debt, each of which requires judgment by management to estimate. The Company developed its cost of equity estimate based on perceived risks and predictability of future cash flows. The WACC used to estimate the fair values of the Company’s reporting units was 20.0%. A 1% change in this discount rate would not result in a goodwill impairment charge.

•Royalty rate - The royalty rates utilized consider external market evidence and internal financial metrics including a review of available returns after the consideration of property, plant and equipment, working capital and other intangible assets. The royalty rate used to estimate the available returns for the Company’s trade name was 2.0%.

For goodwill and other intangible assets, the Company performed the required impairment tests applying the quantitative approach and no impairments were indicated.

2022 and 2021 Impairments

For goodwill and other intangible assets, the Company performed the required impairment tests applying the qualitative approach and no impairments were indicated.

Definite-Lived Intangible Assets

The definite-lived intangible assets are amortized over the period the Company expects to receive the related economic benefit, which for customer lists is based upon estimated future net cash inflows. The estimated useful lives of intangible assets are as follows:

Asset	Amortization Method	Estimated Useful Life
Customer lists	Pattern of economic benefit	9 - 16 years

Total amortization expense for these amortizable intangible assets was $6.9 million, $7.5 million, and $8.3 million for the Fiscal Years 2023, 2022 and 2021, respectively.

The estimated amortization expense for each of the next five years and thereafter is as follows (in thousands):

Fiscal Year	Estimated Amortization Expense
2024		5,231
2025		4,693
2026		4,556
2027		4,418
2028		4,246
Thereafter		9,102
Total	$	32,246