Quarterly report pursuant to Section 13 or 15(d)

LEASES

v3.19.3
LEASES
9 Months Ended
Nov. 02, 2019
LEASES  
LEASES

4. LEASES

We lease our retail store locations, distribution centers, office facilities and certain equipment under non-cancelable operating leases. Substantially all store leases have initial lease terms of approximately 10 years, the majority of which provide for one or more five-year renewal options. The exercise of lease renewal options is at the Company’s sole discretion. We include the lease renewal option periods in the calculation of our operating lease assets and liabilities when it is reasonably certain that we will renew the lease.

Our operating lease assets represent our right to use an underlying asset for the lease term and our operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. In addition, operating lease assets exclude lease incentives received. As most of our leases do not contain an implicit rate of return, we use our estimated incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. For operating leases that commenced prior to the adoption date of the new lease accounting standard, we used the incremental borrowing rate as of the adoption date. Lease expense for lease payments is recognized on a straight-line basis over the lease term.  

We have lease agreements with lease and non-lease components, which are generally accounted for as a single lease component. Our short-term non-real estate leases, which have a non-cancelable lease term of less than one year, are not included in the operating lease assets or liabilities. Short-term lease expense is recognized on a straight-line basis over the lease term.  

The components of lease costs are as follows (in thousands):

13 Weeks Ended

39 Weeks Ended

November 2,

November 2,

2019

2019

Operating lease cost (1)

  

$

106,294

$

316,358

Variable lease cost (2)

 

38,319

 

110,836

Total lease cost

$

144,613

$

427,194

(1) Includes an immaterial amount related to short-term non-real estate leases.
(2) Includes taxes, insurance and common areas maintenance costs for our leased facilities which are paid based on actual cost incurred by the lessor. Also includes contingent rent which is immaterial in the periods presented.

Additional information related to our operating leases is as follows (in thousands, except weighted-average data):

39 Weeks Ended

November 2,

2019

Operating cash outflows included in the measurement of lease liabilities

$

322,701

Operating lease assets obtained in exchange for new operating lease liabilities

$

222,887

Weighted-average remaining lease term

6.0 years

Weighted-average discount rate

5.6%

Maturities of our lease liabilities are as follows as of November 2, 2019 (in thousands):

Fiscal Year

2019

$

71,036

2020

 

421,971

2021

 

373,165

2022

 

311,434

2023

 

248,741

Thereafter

 

573,554

Total lease payments

$

1,999,901

Less: Interest

(322,323)

Present value of lease liabilities

$

1,677,578

Lease payments exclude $96.1 million related to 28 leases that have been signed as of November 2, 2019 but have not yet commenced.