Leases (Notes)

9 Months Ended

Oct. 31, 2020

Leases of Lessee Disclosure [Text Block]

The Company is a party to leases related to its Company-operated retail stores as well as for certain of its distribution centers, office space, information technology and equipment.

During thirty-nine weeks ended October 31, 2020, the Company suspended rent payments for a significant number of stores that were closed as a result of COVID-19, and continues to engage with its landlords to find a mutually beneficial and agreeable path forward. The Company has elected to account for all qualifying lease concessions, those that are a direct consequence of COVID-19 and that result in revised lease consideration that is substantially the same or less than the original consideration, as if the enforceable rights and obligations associated with the concession existed in the original lease agreement. Rent abatements associated with such concessions are recognized in variable lease cost. Lease concessions granted as part of an agreement that substantially increases the total consideration as a result of the inclusion of additional terms, such as rent payments associated with a lease term extension, are treated as lease modifications. For stores where the Company suspended payments, the Company reclassified related amounts from operating lease liability to accrued expenses in the period during which rent was due, while continuing to recognize operating lease cost in the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).

In addition, during the thirteen weeks ended October 31, 2020, the Company entered into a sublease agreement with a third party for the remaining lease term of one of its European Abercrombie & Fitch flagship store locations upon its expected closure during the thirteen weeks ending January 30, 2021. As of October 31, 2020, the Company's subleased property had a remaining lease term of 7.1 years with the sublease term from February 1, 2021 through November 30, 2027. The sublease arrangement provides for rent and occupancy related costs such as taxes, utilities and maintenance costs. Initial sublease terms provide for rent escalations based on the index under the lease, which were estimated upon initial measurement of the operating lease right-of-use asset and liability. The sublease agreement does not include residual value guarantees. Consistent with the Company's real estate leases, the sublease contains usage restrictions, but does not contain financial covenants and restrictions. Future minimum tenant operating lease payments remaining under this sublease as of October 31, 2020 were $29.0 million.

The following table provides a summary of the Company’s operating lease costs for the thirteen and thirty-nine weeks ended October 31, 2020 and November 2, 2019:


	Thirteen Weeks Ended				Thirty-nine Weeks Ended
(in thousands)	October 31, 2020		November 2, 2019		October 31, 2020		November 2, 2019
Single lease cost (1)	$	83,743	$	104,726	$	264,932	$	318,270
Variable lease cost (2)	14,428		25,990		61,763		129,073
Operating lease right-of-use asset impairment (3)	3,979		9,047		44,397		12,636
Total operating lease cost	$	102,150	$	139,763	$	371,092	$	459,979

(1)Includes amortization and interest expense associated with operating lease right-of-use assets and the impact from remeasurement of operating lease liabilities.

(2)Includes variable payments related to both lease and nonlease components, such as contingent rent payments made by the Company based on performance, and payments related to taxes, insurance, and maintenance costs, as well as rent abatements related to the effects of the COVID-19 pandemic that resulted in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract.

(3)Refer to Note 9, “ASSET IMPAIRMENT,” for details related to operating lease right-of-use asset impairment charges.

During the thirty-nine weeks ended October 31, 2020 and November 2, 2019, the Company paid $224.8 million and $311.3 million, respectively, for amounts included in the measurement of operating lease liabilities, net of rent abatements agreed upon during the period. These payments are included within operating activities on the Condensed Consolidated Statements of Cash Flows.

As of October 31, 2020, the Company had minimum commitments related to additional operating lease contracts the terms of which have not yet commenced, primarily for its Company-operated retail stores, of approximately $3.3 million.