Goodwill & Intangible Impairment Charges

12 Months Ended

Jan. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill & Intangible Impairment Charges

GOODWILL & INTANGIBLE IMPAIRMENT CHARGES:

Fiscal 2020 Interim Impairment Assessment    

During the first quarter of fiscal 2020, the Company experienced a significant decline in its market capitalization and disruptions to its operations as a result of the pandemic. Consequently, the Company reduced its level of forecasted earnings for fiscal 2020 and future periods across all of its brands. In light of the decline in the Company's stock price and market capitalization, the Company concluded that these factors, among other factors, represented impairment indicators which required the Company to test its goodwill and indefinite-lived intangible assets for impairment during the first quarter of fiscal 2020.

The Company performed its valuation of its goodwill and indefinite-lived intangible assets using a quantitative approach as of April 4, 2020 (the “interim test”), which was the last day in the second month of the first fiscal quarter. The valuation of the Company's goodwill and indefinite-lived intangible assets was determined with the assistance of an independent valuation firm using the income approach (discounted cash flow (“DCF”) method) and relief from royalty method, respectively. We applied a 100% weighting to the income approach as we were able to provide detailed forecasts for the foreseeable future to perform a DCF analysis. We did not utilize a market approach in the fair value assessment of the reporting units as the implied EBITDA or sales multiples from the market approach did not yield reasonable fair values given the volatile market conditions at the time of the assessment. Furthermore, the Company’s publicly traded market capitalization was reconciled to the sum of the fair values of the reporting units estimated using the income approach described above. The fair value of our trademark was determined using an approach that values the Company’s cash savings from having a royalty-free license compared to the market rate it would pay for access to use the trademark.

Changes in key assumptions and the resulting reduction in projected future cash flows included in the interim test resulted in a decrease in the fair values of our Chico's and White House Black Market (“WHBM”) reporting units such that their fair values were less than their carrying values. As a result, the Company recognized the following pre-tax goodwill impairment charges during the first quarter of fiscal 2020: a charge of $20.0 million at the Chico's reporting unit and a charge of $60.4 million at the WHBM reporting unit, reducing the carrying value of goodwill to zero for the WHBM reporting unit. In addition, the Company recognized pre-tax impairment charges to write down the carrying values of its other indefinite-lived intangible assets to their fair values as follows: $28.0 million of our WHBM trademark and $4.8 million of our Chico's franchise rights. These impairment charges are included in goodwill and intangible impairment charges in the accompanying consolidated statements of (loss) income.

Fiscal 2020 Annual Impairment Assessment    

The Company elected to bypass the qualitative assessment of its goodwill and indefinite-lived and performed a quantitative valuation of its goodwill and intangible assets during the fourth quarter of fiscal 2020 (the “annual impairment test”). The valuation of the Company's goodwill and indefinite-lived intangible assets was determined with the assistance of an independent valuation firm using the income approach (DCF method) and relief from royalty method, respectively. We applied a 100% weighting to the income approach as we were able to provide detailed forecasts for the foreseeable future to perform a DCF analysis. We did not utilize a market approach in the fair value assessment of the reporting units as the implied EBITDA or sales multiples from the market approach did not yield reasonable fair values given the volatile market conditions at the time of the assessment. Furthermore, the Company’s publicly traded market capitalization was reconciled to the sum of the fair values of the reporting units estimated using the income approach described above. The fair value of our trademark was determined using an approach that values the Company’s cash savings from having a royalty-free license compared to the market rate it would pay for access to use the trademark.

As a result of Company's annual impairment test, we determined there was no incremental impairment for goodwill and recorded the following additional impairment charges of its other indefinite-lived intangible assets as follows: $1.0 million of our WHBM trademark and $0.2 million of our Chico's franchise rights. These impairment charges are included in goodwill and intangible impairment charges in the accompanying consolidated statements of (loss) income. We did not record goodwill and intangible impairment charges during fiscal 2019 and 2018.

The following table details the changes in goodwill for each operating segment, as applicable:

	Chico's Reporting Unit		WHBM Reporting Unit		Total (1)
	(in thousands)
Balance at February 1, 2020	$	36,403	$	60,371	$	96,774
Impairment charges	(20,043)		(60,371)		(80,414)
Balance at January 30, 2021	$	16,360	$	—	$	16,360

(1) There is no goodwill associated with the Soma reporting unit and, therefore, no analysis has been performed.

The following table details the changes in other indefinite-lived intangible assets, net:

	WHBM Trademark		Chico's Franchise Rights		Total
	(in thousands)
Balance at February 1, 2020	$	34,000	$	4,930	$	38,930
Impairment charges	(29,000)		(4,930)		(33,930)
Balance at January 30, 2021	$	5,000	$	—	$	5,000