Goodwill and Nonamortizing Intangible Assets

12 Months Ended

Feb. 03, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Nonamortizing Intangible Assets

Impairments

In connection with our annual impairment testing of goodwill and nonamortizing intangible assets during the fourth quarter, and as a result of the anticipated store closures described in Note 16, we determined it was more likely than not that an impairment loss had been incurred with respect to the Family Dollar goodwill and trade name, and proceeded to perform a quantitative impairment test of both assets. We estimated, with the assistance of a third party specialist, the fair value of the Family Dollar trade name based on an income approach using the relief-from-royalty method. The significant estimates used in the relief-from-royalty method, which are level 3 inputs, include a company-specific royalty rate, our weighted average cost of capital adjusted by a company-specific risk premium and trade name premium. The valuation date for the Family Dollar trade name was November 25, 2023. The results of the impairment test showed that the carrying value of the Family Dollar trade name exceeded its estimated fair value resulting in the recognition of a $950.0 million impairment charge in the fourth quarter of fiscal 2023, which is recorded as a component of “Selling, general and administrative expenses” in the accompanying Consolidated Statements of Operations.

Subsequent to the Family Dollar trade name and long-lived asset impairment tests, we estimated, with the assistance of a third party specialist, the fair value of the Family Dollar reporting unit using a combination of a market multiple method and a discounted cash flow method. The significant estimates used in the discounted cash flow method, which are level 3 inputs, include our weighted average cost of capital adjusted by a company-specific risk premium, long-term rates of growth and profitability for the Family Dollar reporting unit, working capital effects, and changes in market conditions, consumer trends and strategy. The market multiple method utilized comparable public company revenue and profitability multiples to estimate the fair value of the Family Dollar reporting unit. The valuation date for the Family Dollar reporting unit was November 25, 2023. The annual goodwill impairment evaluation in 2023 showed that the fair value of the Family Dollar reporting unit was lower than its carrying value resulting in the recognition of a $1,069.0 million impairment charge in the fourth quarter of fiscal 2023.

The annual goodwill and nonamortizing intangible asset impairment evaluations in fiscal 2022 and fiscal 2021 did not result in impairment.

We have recorded cumulative goodwill impairment charges totaling $4,109.0 million, all of which relate to the Family Dollar reporting unit and recorded during the fourth quarters of fiscal 2023 ($1,069.0 million), fiscal 2019 ($313.0 million), and fiscal 2018 ($2,727.0 million).

Goodwill

Goodwill allocated to our reportable segments and changes in the net carrying amount of goodwill for the years ended February 3, 2024 and January 28, 2023 are as follows:


(in millions)	Dollar Tree		Family Dollar		Total
Balance at January 29, 2022	$	424.9	$	1,559.5	$	1,984.4
Foreign currency translation adjustments	(1.3)		—		(1.3)


Balance at January 28, 2023	423.6		1,559.5		1,983.1
Foreign currency translation adjustments	(0.3)		—		(0.3)

Goodwill impairment	—		(1,069.0)		(1,069.0)
Balance at February 3, 2024	$	423.3	$	490.5	$	913.8