Goodwill and intangibles

3 Months Ended

May 01, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and other indefinite-lived intangible assets, such as indefinite-lived trade names, are evaluated for impairment annually. Additionally, if events or conditions indicate the carrying value of a reporting unit or an indefinite-lived intangible asset may be greater than its fair value, the Company would evaluate the asset for impairment at that time. Impairment testing compares the carrying amount of the reporting unit or other intangible assets with its fair value. When the carrying amount of the reporting unit or other intangible assets exceeds its fair value, an impairment charge is recorded.

Fiscal 2021

Due to various impacts of COVID-19 to the Company’s business during the 13 weeks ended May 2, 2020, the Company determined a triggering event had occurred that required an interim impairment assessment for all of its reporting units and indefinite-lived intangible assets. As part of the assessment, it was determined that an increase in the discount rates were required to reflect the prevailing uncertainty inherent in the forecasts due to current market conditions and potential COVID-19 impacts. This higher discount rate, in conjunction with revised long-term projections associated with certain aspects of the Company’s forecast, resulted in lower than previously projected long-term future cash flows for the reporting units and indefinite-lived intangible assets which negatively affected the valuation compared to previous valuations. As a result of the interim impairment assessment, during the first quarter of Fiscal 2021 the Company recognized pre-tax impairment charges related to goodwill of $10.7 million in the condensed consolidated statements of operations within its North America segment related to R2Net and Zales Canada goodwill.

In conjunction with the interim goodwill impairment tests noted above, during the first quarter of Fiscal 2021 the Company determined that the fair values of indefinite-lived intangible assets related to certain Zales trade names were less than their carrying value. Accordingly, in the first quarter of Fiscal 2021, the Company recognized pre-tax impairment charges within asset impairments, net on the condensed consolidated statements of operations of $83.3 million within its North America segment.

Fiscal 2022

During the 13 weeks ended May 1, 2021, the Company did not identify any events or conditions that would indicate that it was more likely than not that the carrying values of the reporting units and indefinite-lived trade names exceed their fair values.

In connection with the acquisition of Rocksbox on March 29, 2021, the Company recognized $11.5 million of definite-lived intangible assets and $6.9 million of goodwill, which are reported in the North America segment. The weighted-average amortization period of the definite-lived intangibles assets acquired is eight years.

Goodwill

The following table summarizes the Company’s goodwill by reportable segment:


(in millions)	North America




Balance at January 30, 2021	$	238.0
Acquisitions	6.9


Balance at May 1, 2021	$	244.9

Intangibles

Definite-lived intangible assets include trade names, technology and customer relationship assets. Indefinite-lived intangible assets consist of trade names. Both definite and indefinite-lived assets are recorded within intangible assets, net, on the condensed consolidated balance sheets. Intangible liabilities, net, consists of unfavorable contracts and is recorded within accrued expenses and other current liabilities and other liabilities on the condensed consolidated balance sheets.

The following table provides additional detail regarding the composition of intangible assets and liabilities:


	May 1, 2021						January 30, 2021						May 2, 2020
(in millions)	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Intangible assets, net:
Definite-lived intangible assets	$	17.1	$	(4.6)	$	12.5	$	5.6	$	(4.2)	$	1.4	$	5.6	$	(3.6)	$	2.0
Indefinite-lived intangible assets (1)	178.1		—		178.1		177.6		—		177.6		176.7		—		176.7
Total intangible assets, net	$	195.2	$	(4.6)	$	190.6	$	183.2	$	(4.2)	$	179.0	$	182.3	$	(3.6)	$	178.7

Intangible liabilities, net	$	(38.0)	$	29.0	$	(9.0)	$	(38.0)	$	27.5	$	(10.5)	$	(38.0)	$	23.5	$	(14.5)

(1) The gross carrying amount is presented net of accumulated impairment losses of $297.5 million as of May 1, 2021, January 30, 2021 and May 2, 2020