Asset Impairment

6 Months Ended

Aug. 01, 2020

The following table summarizes the Company's asset impairment activity for the periods presented:


	13 weeks ended						26 weeks ended
(in millions)	August 1, 2020		August 3, 2019		August 1, 2020		August 3, 2019
Goodwill impairment ⁽¹⁾	$	—	$	47.7	$	10.7	$	47.7
Indefinite-lived intangible asset impairment ⁽¹⁾	—		—		83.3		—
Property, plant and equipment impairment	11.9		—		25.7		—
Operating lease ROU asset impairment	8.4		—		36.9		—
Total impairment	$	20.3	$	47.7	$	156.6	$	47.7

(1) Refer to Note 15 for additional information.

Long-lived assets of the Company consist primarily of property, plant and equipment, definite lived intangible assets and operating lease right-of-use (ROU) assets. Long-lived assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Potentially impaired assets or asset groups are identified by reviewing the undiscounted cash flows of individual stores. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the store asset group, based on the Company’s internal business plans. If the undiscounted cash flow for the store asset group is less than its carrying amount, the long lived assets are measured for potential impairment by estimating the fair value of the assets in the group, and recording an impairment loss for the amount that the carrying value exceeds the estimated fair value. The Company utilizes primarily the replacement cost method to estimate the fair value of its property and equipment, and the income capitalization method to estimate the fair value of its ROU assets, which incorporates historical store level sales, internal business plans, real estate market capitalization and rental rates, and discount rates.

Due to the various impacts of COVID-19 to the Company’s business during the 13 weeks ended May 2, 2020, including the temporary closure of all the Company’s stores beginning in late March 2020 (see additional information in Note 1), the Company determined triggering events had occurred for certain of the Company’s long-lived asset groups at the individual stores that required an interim impairment assessment during the first quarter of Fiscal 2021. This impacted both property, plant and equipment and ROU assets at the store level. The Company identified certain stores in the initial recoverability test which had carrying values in excess of the estimated undiscounted cash flows. For these stores failing the recoverability test, a fair value assessment for these long-lived assets

was performed, and as a result of the estimated fair values, the Company recorded an impairment charge for property, plant and equipment of $13.8 million and ROU assets of $28.5 million for the 13 weeks ended May 2, 2020.

During the 13 weeks ended August 1, 2020, the Company completed its quarterly trigger event assessment and determined that a triggering event had occurred for certain additional long-lived asset groups at the individual stores based on real estate assessments (including store closure decisions) and the continued uncertainty related to COVID-19 on forecasted cash flows for the remaining lease period for certain stores. These events required an interim impairment assessment during the second quarter of Fiscal 2021 for the identified store assets. This impacted both property, plant and equipment and ROU assets at the store level. The Company identified certain stores in the initial recoverability test which had carrying values in excess of the estimated undiscounted cash flows. For these stores failing the recoverability test, a fair value assessment for these long-lived assets was performed, and as a result of the estimated fair values, the Company recorded impairment charges for property, plant and equipment of $11.9 million and ROU assets of $8.4 million for the 13 weeks ended August 1, 2020.

The uncertainty of the COVID-19 impact to the Company’s business could continue to further negatively affect the operating performance and cash flows of the above identified stores or additional stores, including a slower than anticipated re-opening of the stores, lower than anticipated consumer traffic, changes in the Company’s real estate strategy under the Path-to-Brilliance plan (see Note 5), or the inability to achieve cost savings initiatives included in the business plans. In addition, key assumptions used to estimate fair value, such as sales trends, market capitalization and rental rates, and discount rates could impact the fair value estimates of the store assets in future periods.