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LEASES
12 Months Ended
Feb. 03, 2024
LEASES  
LEASES

NOTE 10—LEASES

Lease costs—net consist of the following:

YEAR ENDED

FEBRUARY 3,

JANUARY 28,

JANUARY 29, 

    

2024

    

2023

    

2022 

(in thousands)

Operating lease cost(1)

$

116,553

$

100,646

$

99,985

Finance lease costs

Amortization of leased assets(1)

54,596

52,346

43,964

Interest on lease liabilities(2)

33,822

32,051

26,412

Variable lease costs(3)

23,517

27,848

36,914

Sublease income(4)

(5,544)

(4,455)

(4,184)

Total lease costs—net

$

222,944

$

208,436

$

203,091

(1)Operating lease costs and amortization of finance lease right-of-use assets are included in cost of goods sold or selling, general and administrative expenses on the consolidated statements of income based on our accounting policy. Refer to Note 3—Significant Accounting Policies.
(2)Included in interest expense—net on the consolidated statements of income.
(3)Represents variable lease payments under operating and finance lease agreements, primarily associated with contingent rent based on a percentage of retail sales over contractual levels of $14 million, $19 million and $28 million in fiscal 2023, fiscal 2022 and fiscal 2021, respectively, as well as charges associated with common area maintenance of $9.1 million, $9.3 million and $8.8 million in fiscal 2023, fiscal 2022 and fiscal 2021, respectively. Other variable costs, which include single lease cost related to variable lease payments based on an index or rate that were not included in the measurement of the initial lease liability and right-of-use asset, were not material in any period presented.
(4)Included in selling, general and administrative expenses on the consolidated statements of income.

Lease right-of-use assets and lease liabilities consist of the following:

FEBRUARY 3,

JANUARY 28,

   

2024

   

2023 

(in thousands)

Balance Sheet Classification

Assets

Operating leases

Operating lease right-of-use assets

$

625,801

$

527,246

Finance leases(1)(2)(3)(4)

Property and equipment—net

836,814

1,078,979

Total lease right-of-use assets

$

1,462,615

$

1,606,225

Liabilities

Current(5)

Operating leases

Operating lease liabilities

$

85,523

$

80,384

Finance leases(4)

Other current liabilities

14,668

17,007

Total lease liabilities—current

100,191

97,391

Non-current

Operating leases

Non-current operating lease liabilities

576,166

505,809

Finance leases(4)

Non-current finance lease liabilities

566,829

653,050

Total lease liabilities—non-current

1,142,995

1,158,859

Total lease liabilities

$

1,243,186

$

1,256,250

(1)Includes capitalized amounts related to our completed construction activities to design and build leased assets, which are reclassified from other non-current assets upon lease commencement.
(2)Recorded net of accumulated amortization of $268 million and $224 million as of February 3, 2024 and January 28, 2023, respectively.
(3)Includes $37 million and $39 million as of February 3, 2024 and January 28, 2023, respectively, related to an RH Design Gallery lease with a landlord that is an affiliate of the managing member of the Aspen LLCs. Refer to Note 7—Variable Interest Entities.
(4)During fiscal 2023, we purchased the building and land of our RH Guesthouse New York location and terminated the lease associated with the property. As a result, the right-of-use asset and lease liability was reclassified to property and equipment—net on the consolidated balance sheets as of the purchase date. Refer to Note 5—Property and Equipment.
(5)Current portion of lease liabilities represents the reduction of the related lease liability over the next 12 months.

The maturities of lease liabilities were as follows as of February 3, 2024:

OPERATING

FINANCE

FISCAL YEAR

   

LEASES

   

LEASES

   

TOTAL

(in thousands)

2024

$

117,806

$

42,887

$

160,693

2025

117,916

47,942

165,858

2026

110,067

48,709

158,776

2027

102,787

49,516

152,303

2028

69,215

48,551

117,766

Thereafter

330,183

728,022

1,058,205

Total lease payments(1)(2)

847,974

965,627

1,813,601

Less—imputed interest(3)

(186,285)

(384,130)

(570,415)

Present value of lease liabilities

$

661,689

$

581,497

$

1,243,186

(1)Total lease payments include future obligations for renewal options that are reasonably certain to be exercised and are included in the measurement of the lease liability. Total lease payments exclude $686 million of legally binding payments under the non-cancellable term for leases signed but not yet commenced under our accounting policy as of February 3, 2024, of which $26 million, $41 million, $38 million, $40 million and $41 million will be paid in fiscal 2024, fiscal 2025, fiscal 2026, fiscal 2027 and fiscal 2028, respectively, and $500 million will be paid subsequent to fiscal 2028.
(2)Excludes an immaterial amount of future commitments under short-term lease agreements as of February 3, 2024.
(3)Calculated using the discount rate for each lease at lease commencement.

Supplemental information related to leases consists of the following:

YEAR ENDED

FEBRUARY 3,

    

JANUARY 28, 

2024

    

2023

Weighted-average remaining lease term (years)

Operating leases

8.7

8.3

Finance leases

19.7

21.9

Weighted-average discount rate

Operating leases

5.17%

4.08%

Finance leases

5.07%

5.32%

Other information related to leases consists of the following:

YEAR ENDED

FEBRUARY 3,

JANUARY 28,

JANUARY 29, 

2024

    

2023

    

2022 

(in thousands)

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases

$

(122,220)

$

(101,513)

$

(102,097)

Operating cash flows from finance leases

(37,819)

(32,090)

(26,775)

Financing cash flows from finance leases—net(1)

(13,972)

(10,146)

(14,158)

Total cash outflows from leases

$

(174,011)

$

(143,749)

$

(143,030)

Non-cash transactions:

Lease right-of-use assets obtained in exchange for lease obligations—net of lease terminations

Operating leases

$

170,542

$

49,702

$

172,393

Finance leases

1,648

109,015

89,617

Reclassification of finance lease right-of-use asset to property and equipment(2)

188,515

Reclassification of finance lease liability to property and equipment(2)

(71,612)

(1)Represents the principal portion of finance lease payments offset by tenant allowances received under finance leases subsequent to lease commencement of $2.4 million and $4.7 million in fiscal 2023 and fiscal 2022, respectively. No such tenant allowances were received in fiscal 2021.
(2)Represents the reclassification of the right-of-use asset and lease liability upon the purchase of the building and land of our RH Guesthouse New York location and termination of the associated lease agreement. Refer to Note 5—Property and Equipment.