Fair Value Measurement
Assets and liabilities measured at fair value on a recurring basis
As of February 1, 2026 and February 2, 2025, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis:
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| | February 1, 2026 | | Level 1 | | Level 2 | | Level 3 | | Balance Sheet Classification |
| | (In thousands) | | |
| Money market funds | | $ | 354,731 | | | $ | 354,731 | | | $ | — | | | $ | — | | | Cash and cash equivalents |
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| Forward currency contract assets | | 30,996 | | | — | | | 30,996 | | | — | | | Prepaid expenses and other current assets |
| Forward currency contract liabilities | | 36,476 | | | — | | | 36,476 | | | — | | | Other current liabilities |
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| | February 2, 2025 | | Level 1 | | Level 2 | | Level 3 | | Balance Sheet Classification |
| | (In thousands) | | |
| Money market funds | | $ | 240,918 | | | $ | 240,918 | | | $ | — | | | $ | — | | | Cash and cash equivalents |
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| Term deposits | | 8 | | | — | | | 8 | | | — | | | Cash and cash equivalents |
| Forward currency contract assets | | 76,848 | | | — | | | 76,848 | | | — | | | Prepaid expenses and other current assets |
| Forward currency contract liabilities | | 74,638 | | | — | | | 74,638 | | | — | | | Other current liabilities |
The Company has short-term, highly liquid investments classified as cash equivalents, which are invested in money market funds and short-term deposits with original maturities of three months or less.
Assets and liabilities measured at fair value on a non-recurring basis
The Company has also recorded lease termination liabilities at fair value on a non-recurring basis, determined using Level 3 inputs based on remaining lease rentals and reduced by estimated sublease income.
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.