Derivative Financial Instruments

6 Months Ended

Jul. 28, 2012

Derivative Financial Instruments

Derivative Financial Instruments

11.  Derivative Financial Instruments

We are exposed to market risk associated with foreign currency exchange rate fluctuations as a result of our direct sourcing programs and our operations in foreign countries.  In connection with our direct sourcing programs, we may enter into merchandise purchase commitments that are denominated in a currency different from the functional currency of the operating entity.  Our risk management policy is to hedge a significant portion of forecasted merchandise purchases for our direct sourcing programs that bear foreign exchange risk using foreign exchange forward contracts.  The Company has not elected to apply hedge accounting to these transactions denominated in a foreign currency.

Our derivative financial instruments are recorded in the condensed consolidated balance sheet at fair value determined by comparing the cost of the foreign currency to be purchased under the contracts using the exchange rates obtained under the contracts (adjusted for forward points) to the hypothetical cost using the spot rate at period end.

The tables below disclose the fair value of the derivative financial instruments included in the condensed consolidated balance sheets as of July 28, 2012, January 28, 2012 and July 30, 2011 (in thousands):

	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives not designated as hedging instruments:
At July 28, 2012-Foreign exchange forward contracts	Other current assets	$	43	Accrued expenses and other current liabilities	$	47
At January 28, 2012-Foreign exchange forward contracts	Other current assets	$	14	Accrued expenses and other current liabilities	$	142
At July 30, 2011-Foreign exchange forward contracts	Other current assets	$	89	Accrued expenses and other current liabilities	$	362

At July 28, 2012, we had 10 contracts to purchase euros for an aggregate notional amount of US$0.9 million maturing in various increments at various dates through December 2012, 13 contracts to purchase United States dollars (“USD”) for an aggregate notional amount of Canadian dollars (“CAD”) $7.3 million maturing in various increments at various dates through December 2012 and 18 contracts to purchase USD for an aggregate notional amount of pounds Sterling (“GBP”) £11.8 million maturing in various increments at various dates through December 2012.  For the three and six months ended July 28, 2012, we recognized a net pre-tax gain of $0.6 million and a pre-tax loss of $0.2 million, respectively, in cost of sales in the condensed consolidated statement of earnings for our derivative financial instruments not designated as cash flow hedges.

At January 28, 2012, we had 10 contracts maturing in varying increments to purchase euros for an aggregate notional amount of US$1.7 million maturing at various dates through June 2012, nine contracts maturing in varying increments to purchase USD for an aggregate notional amount of CAD $5.9 million maturing at various dates through June 2012 and 22 contracts maturing in varying increments to purchase USD for an aggregate notional amount of GBP £10.5 million maturing at various dates through May 2012.

At July 30, 2011, we had two contracts to purchase euros for an aggregate notional amount of US$1.0 million maturing in various increments at various dates through October 2011, six contracts to purchase USD for an aggregate notional amount of CAD $6.1 million maturing in various increments at various dates through December 2011 and 34 contracts to purchase USD for an aggregate notional amount of GBP £11.9 million maturing in various increments at various dates through November 2011.  For the three and six months ended July 30, 2011, we recognized a net pretax loss of $0.8 million and $1.5 million, respectively, in cost of sales in the condensed consolidated statement of earnings for our derivative financial instruments not designated as hedging instruments.

We had no derivative financial instruments with credit-risk-related contingent features underlying the agreements as of July 28, 2012, January 28, 2012 or July 30, 2011, respectively.