| Fair Value Measurements | Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative guidance for fair value measurements establishes a three-level hierarchy, which encourages an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of the hierarchy are defined as follows: • Level 1 - inputs to the valuation techniques that are quoted prices in active markets for identical assets or liabilities • Level 2 - inputs to the valuation techniques that are other than quoted prices but are observable for the assets or liabilities, either directly or indirectly • Level 3 - inputs to the valuation techniques that are unobservable for the assets or liabilities Assets and Liabilities that are Measured at Fair Value on a Recurring Basis The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of May 3, 2024, May 5, 2023, and February 2, 2024: Fair Value Measurements at (In millions) Classification Measurement Level May 3, May 5, February 2, Available-for-sale debt securities: U.S. Treasury securities Short-term investments Level 1 $ 158 $ 143 $ 152 Money market funds Short-term investments Level 1 54 108 56 Certificates of deposit Short-term investments Level 1 27 62 42 Corporate debt securities Short-term investments Level 2 23 72 50 Municipal obligations Short-term investments Level 2 2 — 2 Commercial paper Short-term investments Level 2 — 38 5 U.S. Treasury securities Long-term investments Level 1 231 92 213 Corporate debt securities Long-term investments Level 2 58 9 35 Foreign government debt securities Long-term investments Level 2 17 — 4 Municipal obligations Long-term investments Level 2 — 2 — Derivative instruments: Fixed-to-floating interest rate swaps Other liabilities Level 2 $ 81 $ 69 $ 76 There were no transfers between Levels 1, 2, or 3 during any of the periods presented. When available, quoted prices were used to determine fair value. When quoted prices in active markets were available, financial assets were classified within Level 1 of the fair value hierarchy. When quoted prices in active markets were not available, fair values for financial assets and liabilities classified within Level 2 were determined using pricing models, and the inputs to those pricing models were based on observable market inputs. The inputs to the pricing models were typically benchmark yields, reported trades, broker-dealer quotes, issuer spreads and benchmark securities, among others. The Company has performance-based contingent consideration related to the fiscal 2022 sale of the Canadian retail business which is classified as a Level 3 long-term investment and such contingent consideration had an estimated fair value of zero as of May 3, 2024, May 5, 2023, and February 2, 2024. The Company’s measurements of fair value of the contingent consideration are based on an income approach, which requires certain assumptions considering operating performance of the business and a risk-adjusted discount rate. Changes in the estimated fair value of the contingent consideration are recognized within selling, general and administrative expenses (SG&A) in the consolidated statements of earnings. The rollforward of the fair value of contingent consideration for the three months ended May 3, 2024 and May 5, 2023, is as follows: Three Months Ended (In millions) May 3, 2024 May 5, 2023 Beginning balance $ — $ 21 Change in fair value — 102 Proceeds received — (123) Ending balance $ — $ — Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis During the three months ended May 3, 2024, and May 5, 2023, the Company had no material measurements of assets and liabilities at fair value on a nonrecurring basis subsequent to their initial recognition. Other Fair Value Disclosures The Company’s financial assets and liabilities not measured at fair value on a recurring basis include cash and cash equivalents, accounts receivable, short-term borrowings, accounts payable, and long-term debt and are reflected in the financial statements at cost. With the exception of long-term debt, cost approximates fair value for these items due to their short-term nature. As further described in Note 7 , certain long-term debt is associated with a fair value hedge and the changes in fair value of the hedged debt is included in the carrying value of long-term debt in the consolidated balance sheets. The fair values of the Company’s unsecured notes were estimated using quoted market prices. The fair values of the Company’s mortgage notes were estimated using discounted cash flow analyses, based on the future cash outflows associated with these arrangements and discounted using the applicable incremental borrowing rate. Carrying amounts and the related estimated fair value of the Company’s long-term debt, excluding finance lease obligations, are as follows: May 3, 2024 May 5, 2023 February 2, 2024 (In millions) Carrying Amount Fair Value Carrying Amount Fair Value Carrying Amount Fair Value Unsecured notes (Level 1) $ 35,410 $ 31,618 $ 35,898 $ 32,525 $ 35,409 $ 32,757 Mortgage notes (Level 2) 1 1 2 2 2 2 Long-term debt (excluding finance lease obligations) $ 35,411 $ 31,619 $ 35,900 $ 32,527 $ 35,411 $ 32,759 |
