Share-Based Compensation

12 Months Ended

Feb. 01, 2020

Share-based Payment Arrangement [Abstract]

Share-Based Compensation

Share-Based Compensation

Share-based compensation expense is as follows:

	Fiscal Year
($ in millions)	2019			2018			2017
Stock units	$	52		$	71		$	69
Stock options	12			16			14
Employee stock purchase plan	4			4			4
Share-based compensation expense	68			91			87
Less: Income tax benefit	(23		)	(22		)	(35		)
Share-based compensation expense, net of tax	$	45		$	69		$	52

No material share-based compensation expense was capitalized in fiscal 2019, 2018, or 2017.

There were no material modifications made to our outstanding stock options and other stock awards in fiscal 2019, 2018, or 2017.

General Description of Stock Option and Other Stock Award Plans

The 2016 Long-Term Incentive Plan (the "2016 Plan") was amended and restated as of February 22, 2017 and further amended and restated in May 2019. Under the 2016 Plan, nonqualified stock options and other stock awards are granted to officers, directors, eligible employees, and consultants at exercise prices or initial values equal to the fair market value of the Company’s common stock at the date of grant or as determined by the Compensation and Management Development Committee of the Board of Directors.

As of February 1, 2020, there were 251,586,781 shares that have been authorized for issuance under the 2016 Plan.

Stock Units

Under the 2016 Plan, Stock Units are granted to employees and members of the Board of Directors. Vesting generally occurs over a period of three to four years of continued service by the employee in equal annual installments. Vesting is immediate in the case of members of the Board of Directors.

In some cases, Stock Unit vesting is also subject to the attainment of pre-determined performance metrics ("Performance Shares"). At the end of each reporting period, we evaluate the probability that the Performance Shares will vest. We record share-based compensation expense on an accelerated basis over a period of two to three years once granted, based on the grant-date fair value and the probability that the pre-determined performance metrics will be achieved.

A summary of Stock Unit activity under the 2016 Plan for fiscal 2019 is as follows:

	Shares		Weighted-Average Grant-Date Fair Value Per Share
Balance as of February 2, 2019	8,085,259		$	29.97
Granted	5,295,007		$	21.93
Vested	(2,527,515	)	$	26.25
Forfeited	(3,890,342	)	$	25.30
Balance as of February 1, 2020	6,962,409		$	24.33

A summary of additional information about Stock Units is as follows:

	Fiscal Year
($ in millions except per share amounts)	2019		2018		2017
Weighted-average fair value per share of Stock Units granted	$	21.93	$	29.33	$	21.81
Fair value of Stock Units vested	$	66	$	58	$	64

The aggregate intrinsic value of unvested Stock Units as of February 1, 2020 was $121 million.

As of February 1, 2020, there was $102 million (before any related tax benefit) of unrecognized share-based compensation expense related to unvested Stock Units, which is expected to be recognized over a weighted-average period of 2.1 years. Total unrecognized share-based compensation expense may be adjusted for future forfeitures as they occur.

Stock Units Granted Based on Performance Metrics

Under the 2016 Plan, some Stock Units are granted to employees only after the achievement of pre-determined performance metrics.

At the end of each reporting period, we evaluate the probability that Stock Units will be granted. We record share-based compensation expense based on the probability that the performance metrics will be achieved, with an offsetting increase to current liabilities. We revalue the liability at the end of each reporting period and record an adjustment to share-based compensation expense as required based on the probability that the performance metrics will be achieved. A Stock Unit is granted upon certification of the performance metrics. At that time, the associated liability is reclassified to stockholders’ equity.

Out of 5,295,007 Stock Units granted in fiscal 2019, 1,787,189 Stock Units were granted based on satisfaction of performance metrics.

There was no material liability related to potential Stock Units to be granted based on performance metrics as of February 1, 2020. As of February 2, 2019, there was a $2 million liability related to potential Stock Units to be granted based on performance metrics, which was recorded in accrued expenses and other current liabilities on the Consolidated Balance Sheet.

Stock Options

We have stock options outstanding under the 2016 Plan. Stock options generally expire the earlier of 10 years from the grant date, three months after employee termination, or one year after the date of an employee’s retirement or death. Vesting generally occurs over a period of four years of continued service by the employee, with 25 percent vesting on each of the four anniversary dates.

The fair value of stock options issued during fiscal 2019, 2018, and 2017 was estimated on the date of grant using the following assumptions:

	Fiscal Year
	2019		2018		2017
Expected term (in years)	4.2		3.9		3.9
Expected volatility	37.5	%	36.3	%	38.2	%
Dividend yield	4.1	%	3.1	%	3.8	%
Risk-free interest rate	2.2	%	2.5	%	1.7	%

A summary of stock option activity under the 2016 Plan for fiscal 2019 is as follows:

	Shares		Weighted- Average Exercise Price Per Share
Balance as of February 2, 2019	10,685,422		$	29.80
Granted	3,811,644		$	24.09
Exercised	(159,750	)	$	23.33
Forfeited/Expired	(2,901,294	)	$	28.72
Balance as of February 1, 2020	11,436,022		$	28.26

A summary of additional information about stock options is as follows: 

	Fiscal Year
($ in millions except per share amounts)	2019		2018		2017
Weighted-average fair value per share of stock options granted	$	5.43	$	7.75	$	5.47
Aggregate intrinsic value of stock options exercised	$	1	$	5	$	1
Fair value of stock options vested	$	16	$	14	$	12

Information about stock options outstanding and exercisable as of February 1, 2020 is as follows:

	Intrinsic Value as of February 1, 2020 (in millions)		Number of Shares as of February 1, 2020	Weighted- Average Remaining Contractual Life (in years)	Weighted- Average Exercise Price Per Share
Options Outstanding	$	—	11,436,022	6.0	$	28.26
Options Exercisable	$	—	5,905,582	3.7	$	30.12

Employee Stock Purchase Plan

Under our Employee Stock Purchase Plan (“ESPP”), eligible U.S. and Canadian employees are able to purchase our common stock at 85 percent of the closing price on the New York Stock Exchange on the last day of the three-month purchase periods. Accordingly, compensation expense is recognized for an amount equal to the 15 percent discount. Employees pay for their stock purchases through payroll deductions at a rate equal to any whole percentage from 1 percent to 15 percent. There were 1,381,391, 1,008,100, and 1,113,640 shares issued under the ESPP in fiscal 2019, 2018, and 2017, respectively. As of February 1, 2020, there were 5,754,699 shares reserved for future issuances under the ESPP.