LEASES

12 Months Ended

Jul. 29, 2023

Leases [Abstract]

LEASES

NOTE 11—LEASES

The Company leases certain of its distribution centers, retail stores, office facilities, transportation equipment and other operating equipment from third parties. Many of these leases include renewal options. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Lease assets and liabilities, net, are as follows (in millions):

Lease Type	Consolidated Balance Sheets Location	July 29, 2023		July 30, 2022
Operating lease assets	Operating lease assets	$	1,228	$	1,176
Finance lease assets	Property and equipment, net	14		22
Total lease assets		$	1,242	$	1,198
Operating liabilities	Current portion of operating lease liabilities	$	180	$	156
Finance liabilities	Current portion of long-term debt and finance lease liabilities	11		13
Operating liabilities	Long-term operating lease liabilities	1,099		1,067
Finance liabilities	Long-term finance lease liabilities	12		23
Total lease liabilities		$	1,302	$	1,259

Lease assets and liabilities presented in the table above include lease contracts related to our discontinued operations, as the Company expects to remain primarily obligated under these leases.

The Company’s lease cost under ASC 842 is as follows (in millions):

Lease Expense Type	Consolidated Statements of Operations Location	2023		2022		2021
Operating lease cost	Operating expenses	$	261	$	241	$	229
Short-term lease cost	Operating expenses	17		19		29
Variable lease cost	Operating expenses	73		73		64
Sublease income	Operating expenses	(8)		(8)		(8)
Sublease income	Net sales	(14)		(17)		(20)
Other sublease income, net	Restructuring, acquisition and integration related expenses(2)	(1)		(2)		(3)
Net operating lease cost(1)		328		306		291
Amortization of leased assets	Operating expenses	7		10		13
Interest on lease liabilities	Interest expense, net	3		11		19
Finance lease cost		10		21		32
Total net lease cost		$	338	$	327	$	323

(1)Rent expense as presented here includes $0 million, $0 million and $2 million in fiscal 2023, 2022 and 2021, respectively, of operating lease rent expense related to stores within discontinued operations, but for which GAAP requires the expense to be included within continuing operations, as the Company expects to remain primarily obligated under these leases. Rent expense as presented here also includes immaterial amounts of variable lease expense of discontinued operations.

(2)Includes $27 million, $29 million and $31 million of lease expense in fiscal 2023, 2022 and 2021, respectively, and $(28) million, $(31) million, and $(33) million of lease income in fiscal 2023, 2022 and 2021, respectively, that is recorded within Restructuring, acquisition and integration related expenses for assigned leases related to previously sold locations and surplus, non-operating properties for which the Company is restructuring its obligations.

During fiscal 2022, the Company acquired the real property of a previously leased distribution center, which was classified as a finance lease, for approximately $153 million. Immediately following this acquisition, the Company monetized this property through a sale-leaseback transaction, pursuant to which the Company received $225 million in aggregate proceeds for the sale of the property, which reflected the fair value of the property. Under the terms of the sale-leaseback agreement, the Company entered into a lease for the distribution center for a term of 15 years, which was classified as an operating lease. The Company recorded a pre-tax gain on sale of approximately $87 million in fiscal 2022 as a result of the transactions, which primarily represented the pre-tax net proceeds.

The Company leases certain property to third parties and receives lease and subtenant rental payments under operating leases, including assigned leases for which the Company has future minimum lease payment obligations. Future minimum lease payments (“Lease Liabilities”) include payments to be made by the Company or certain third parties in the case of assigned noncancellable operating leases and finance leases. Future minimum lease and subtenant rentals (“Lease Receipts”) include expected cash receipts from operating subleases, and in the case of assigned noncancellable leases receipts for stores sold to third parties, which they operate. As of July 29, 2023, these Lease Liabilities and Lease Receipts consisted of the following (in millions):

	Lease Liabilities				Lease Receipts				Net Lease Obligations
Fiscal Year	Operating Leases(1)		Finance Leases (2)		Operating Leases		Finance Leases		Operating Leases		Finance Leases
2024	$	281	$	13	$	(41)	$	—	$	240	$	13
2025	242		8		(31)		—		211		8
2026	206		4		(23)		—		183		4
2027	166		1		(15)		—		151		1
2028	151		—		(12)		—		139		—
Thereafter	937		—		(24)		—		913		—
Total undiscounted lease liabilities and receipts	$	1,983	$	26	$	(146)	$	—	$	1,837	$	26
Less interest(3)	(704)		(3)
Present value of lease liabilities	1,279		23
Less current lease liabilities	(180)		(11)
Long-term lease liabilities	$	1,099	$	12

(1)Operating lease payments include $2 million related to extension options that are reasonably certain of being exercised and exclude $787 million of legally binding undiscounted minimum lease payments for leases signed but not yet commenced.

(2)There were no finance leases for which the extension options are reasonably certain of being exercised and excluded from legally binding minimum lease payments for leases signed but not yet commenced.

(3)Calculated using the interest rate for each lease.

The following tables provide other information required by ASC 842:

Lease Term and Discount Rate	July 29, 2023		July 30, 2022
Weighted-average remaining lease term (years)
Operating leases	9.7 years		10.4 years
Finance leases	2.9 years		3.3 years
Weighted-average discount rate
Operating leases	8.9	%	9.0	%
Finance leases	9.8	%	9.3	%

Other Information
(in millions)	2023		2022		2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	249	$	224	$	220
Operating cash flows from finance leases	$	2	$	7	$	12
Financing cash flows from finance leases	$	10	$	160	$	9
Leased assets obtained in exchange for new finance lease liabilities	$	—	$	1	$	—
Leased assets obtained in exchange for new operating lease liabilities	$	237	$	292	$	263

LEASES

NOTE 11—LEASES

The Company leases certain of its distribution centers, retail stores, office facilities, transportation equipment and other operating equipment from third parties. Many of these leases include renewal options. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Lease assets and liabilities, net, are as follows (in millions):

Lease Type	Consolidated Balance Sheets Location	July 29, 2023		July 30, 2022
Operating lease assets	Operating lease assets	$	1,228	$	1,176
Finance lease assets	Property and equipment, net	14		22
Total lease assets		$	1,242	$	1,198
Operating liabilities	Current portion of operating lease liabilities	$	180	$	156
Finance liabilities	Current portion of long-term debt and finance lease liabilities	11		13
Operating liabilities	Long-term operating lease liabilities	1,099		1,067
Finance liabilities	Long-term finance lease liabilities	12		23
Total lease liabilities		$	1,302	$	1,259

Lease assets and liabilities presented in the table above include lease contracts related to our discontinued operations, as the Company expects to remain primarily obligated under these leases.

The Company’s lease cost under ASC 842 is as follows (in millions):

Lease Expense Type	Consolidated Statements of Operations Location	2023		2022		2021
Operating lease cost	Operating expenses	$	261	$	241	$	229
Short-term lease cost	Operating expenses	17		19		29
Variable lease cost	Operating expenses	73		73		64
Sublease income	Operating expenses	(8)		(8)		(8)
Sublease income	Net sales	(14)		(17)		(20)
Other sublease income, net	Restructuring, acquisition and integration related expenses(2)	(1)		(2)		(3)
Net operating lease cost(1)		328		306		291
Amortization of leased assets	Operating expenses	7		10		13
Interest on lease liabilities	Interest expense, net	3		11		19
Finance lease cost		10		21		32
Total net lease cost		$	338	$	327	$	323

(1)Rent expense as presented here includes $0 million, $0 million and $2 million in fiscal 2023, 2022 and 2021, respectively, of operating lease rent expense related to stores within discontinued operations, but for which GAAP requires the expense to be included within continuing operations, as the Company expects to remain primarily obligated under these leases. Rent expense as presented here also includes immaterial amounts of variable lease expense of discontinued operations.

(2)Includes $27 million, $29 million and $31 million of lease expense in fiscal 2023, 2022 and 2021, respectively, and $(28) million, $(31) million, and $(33) million of lease income in fiscal 2023, 2022 and 2021, respectively, that is recorded within Restructuring, acquisition and integration related expenses for assigned leases related to previously sold locations and surplus, non-operating properties for which the Company is restructuring its obligations.

During fiscal 2022, the Company acquired the real property of a previously leased distribution center, which was classified as a finance lease, for approximately $153 million. Immediately following this acquisition, the Company monetized this property through a sale-leaseback transaction, pursuant to which the Company received $225 million in aggregate proceeds for the sale of the property, which reflected the fair value of the property. Under the terms of the sale-leaseback agreement, the Company entered into a lease for the distribution center for a term of 15 years, which was classified as an operating lease. The Company recorded a pre-tax gain on sale of approximately $87 million in fiscal 2022 as a result of the transactions, which primarily represented the pre-tax net proceeds.

The Company leases certain property to third parties and receives lease and subtenant rental payments under operating leases, including assigned leases for which the Company has future minimum lease payment obligations. Future minimum lease payments (“Lease Liabilities”) include payments to be made by the Company or certain third parties in the case of assigned noncancellable operating leases and finance leases. Future minimum lease and subtenant rentals (“Lease Receipts”) include expected cash receipts from operating subleases, and in the case of assigned noncancellable leases receipts for stores sold to third parties, which they operate. As of July 29, 2023, these Lease Liabilities and Lease Receipts consisted of the following (in millions):

	Lease Liabilities				Lease Receipts				Net Lease Obligations
Fiscal Year	Operating Leases(1)		Finance Leases (2)		Operating Leases		Finance Leases		Operating Leases		Finance Leases
2024	$	281	$	13	$	(41)	$	—	$	240	$	13
2025	242		8		(31)		—		211		8
2026	206		4		(23)		—		183		4
2027	166		1		(15)		—		151		1
2028	151		—		(12)		—		139		—
Thereafter	937		—		(24)		—		913		—
Total undiscounted lease liabilities and receipts	$	1,983	$	26	$	(146)	$	—	$	1,837	$	26
Less interest(3)	(704)		(3)
Present value of lease liabilities	1,279		23
Less current lease liabilities	(180)		(11)
Long-term lease liabilities	$	1,099	$	12

(1)Operating lease payments include $2 million related to extension options that are reasonably certain of being exercised and exclude $787 million of legally binding undiscounted minimum lease payments for leases signed but not yet commenced.

(2)There were no finance leases for which the extension options are reasonably certain of being exercised and excluded from legally binding minimum lease payments for leases signed but not yet commenced.

(3)Calculated using the interest rate for each lease.

The following tables provide other information required by ASC 842:

Lease Term and Discount Rate	July 29, 2023		July 30, 2022
Weighted-average remaining lease term (years)
Operating leases	9.7 years		10.4 years
Finance leases	2.9 years		3.3 years
Weighted-average discount rate
Operating leases	8.9	%	9.0	%
Finance leases	9.8	%	9.3	%

Other Information
(in millions)	2023		2022		2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	249	$	224	$	220
Operating cash flows from finance leases	$	2	$	7	$	12
Financing cash flows from finance leases	$	10	$	160	$	9
Leased assets obtained in exchange for new finance lease liabilities	$	—	$	1	$	—
Leased assets obtained in exchange for new operating lease liabilities	$	237	$	292	$	263

LEASES

NOTE 11—LEASES

The Company leases certain of its distribution centers, retail stores, office facilities, transportation equipment and other operating equipment from third parties. Many of these leases include renewal options. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Lease assets and liabilities, net, are as follows (in millions):

Lease Type	Consolidated Balance Sheets Location	July 29, 2023		July 30, 2022
Operating lease assets	Operating lease assets	$	1,228	$	1,176
Finance lease assets	Property and equipment, net	14		22
Total lease assets		$	1,242	$	1,198
Operating liabilities	Current portion of operating lease liabilities	$	180	$	156
Finance liabilities	Current portion of long-term debt and finance lease liabilities	11		13
Operating liabilities	Long-term operating lease liabilities	1,099		1,067
Finance liabilities	Long-term finance lease liabilities	12		23
Total lease liabilities		$	1,302	$	1,259

Lease assets and liabilities presented in the table above include lease contracts related to our discontinued operations, as the Company expects to remain primarily obligated under these leases.

The Company’s lease cost under ASC 842 is as follows (in millions):

Lease Expense Type	Consolidated Statements of Operations Location	2023		2022		2021
Operating lease cost	Operating expenses	$	261	$	241	$	229
Short-term lease cost	Operating expenses	17		19		29
Variable lease cost	Operating expenses	73		73		64
Sublease income	Operating expenses	(8)		(8)		(8)
Sublease income	Net sales	(14)		(17)		(20)
Other sublease income, net	Restructuring, acquisition and integration related expenses(2)	(1)		(2)		(3)
Net operating lease cost(1)		328		306		291
Amortization of leased assets	Operating expenses	7		10		13
Interest on lease liabilities	Interest expense, net	3		11		19
Finance lease cost		10		21		32
Total net lease cost		$	338	$	327	$	323

(1)Rent expense as presented here includes $0 million, $0 million and $2 million in fiscal 2023, 2022 and 2021, respectively, of operating lease rent expense related to stores within discontinued operations, but for which GAAP requires the expense to be included within continuing operations, as the Company expects to remain primarily obligated under these leases. Rent expense as presented here also includes immaterial amounts of variable lease expense of discontinued operations.

(2)Includes $27 million, $29 million and $31 million of lease expense in fiscal 2023, 2022 and 2021, respectively, and $(28) million, $(31) million, and $(33) million of lease income in fiscal 2023, 2022 and 2021, respectively, that is recorded within Restructuring, acquisition and integration related expenses for assigned leases related to previously sold locations and surplus, non-operating properties for which the Company is restructuring its obligations.

During fiscal 2022, the Company acquired the real property of a previously leased distribution center, which was classified as a finance lease, for approximately $153 million. Immediately following this acquisition, the Company monetized this property through a sale-leaseback transaction, pursuant to which the Company received $225 million in aggregate proceeds for the sale of the property, which reflected the fair value of the property. Under the terms of the sale-leaseback agreement, the Company entered into a lease for the distribution center for a term of 15 years, which was classified as an operating lease. The Company recorded a pre-tax gain on sale of approximately $87 million in fiscal 2022 as a result of the transactions, which primarily represented the pre-tax net proceeds.

The Company leases certain property to third parties and receives lease and subtenant rental payments under operating leases, including assigned leases for which the Company has future minimum lease payment obligations. Future minimum lease payments (“Lease Liabilities”) include payments to be made by the Company or certain third parties in the case of assigned noncancellable operating leases and finance leases. Future minimum lease and subtenant rentals (“Lease Receipts”) include expected cash receipts from operating subleases, and in the case of assigned noncancellable leases receipts for stores sold to third parties, which they operate. As of July 29, 2023, these Lease Liabilities and Lease Receipts consisted of the following (in millions):

	Lease Liabilities				Lease Receipts				Net Lease Obligations
Fiscal Year	Operating Leases(1)		Finance Leases (2)		Operating Leases		Finance Leases		Operating Leases		Finance Leases
2024	$	281	$	13	$	(41)	$	—	$	240	$	13
2025	242		8		(31)		—		211		8
2026	206		4		(23)		—		183		4
2027	166		1		(15)		—		151		1
2028	151		—		(12)		—		139		—
Thereafter	937		—		(24)		—		913		—
Total undiscounted lease liabilities and receipts	$	1,983	$	26	$	(146)	$	—	$	1,837	$	26
Less interest(3)	(704)		(3)
Present value of lease liabilities	1,279		23
Less current lease liabilities	(180)		(11)
Long-term lease liabilities	$	1,099	$	12

(1)Operating lease payments include $2 million related to extension options that are reasonably certain of being exercised and exclude $787 million of legally binding undiscounted minimum lease payments for leases signed but not yet commenced.

(2)There were no finance leases for which the extension options are reasonably certain of being exercised and excluded from legally binding minimum lease payments for leases signed but not yet commenced.

(3)Calculated using the interest rate for each lease.

The following tables provide other information required by ASC 842:

Lease Term and Discount Rate	July 29, 2023		July 30, 2022
Weighted-average remaining lease term (years)
Operating leases	9.7 years		10.4 years
Finance leases	2.9 years		3.3 years
Weighted-average discount rate
Operating leases	8.9	%	9.0	%
Finance leases	9.8	%	9.3	%

Other Information
(in millions)	2023		2022		2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	249	$	224	$	220
Operating cash flows from finance leases	$	2	$	7	$	12
Financing cash flows from finance leases	$	10	$	160	$	9
Leased assets obtained in exchange for new finance lease liabilities	$	—	$	1	$	—
Leased assets obtained in exchange for new operating lease liabilities	$	237	$	292	$	263