Leases

3 Months Ended

Jun. 25, 2022

Leases

Leases

7. Leases

The Company does not own any real estate. Instead, most of its retail store locations are occupied under operating leases. The store leases generally have a base lease term of five or 10 years, with one or more renewal periods of five years, on average, exercisable at the Company’s option. The Company is generally responsible for the payment of property taxes and insurance, utilities and common area maintenance fees. Some leases also require additional payments based on percentage of sales. Lease terms include the non-cancellable portion of the underlying leases along with any reasonably certain lease periods associated with available renewal periods, termination options and purchase options.

Operating and finance lease liabilities are recognized at the lease commencement date based on the present value of the fixed lease payments using the Company's incremental borrowing rates for its population of leases. Related operating and finance lease ROU assets are recognized based on the initial present value of the fixed lease payments, reduced by cash payments received from landlords as lease incentives, plus any prepaid rent and other direct costs from executing the leases. Amortization of both operating and finance lease ROU assets is performed on a straight-line basis and recorded as part of rent expense. The majority of total lease costs is recorded as part of cost of goods sold, with the balance recorded in selling, general and administrative expenses on the condensed consolidated statements of operations. The interest expense amortization component of the finance lease liabilities is recorded within interest expense on the condensed consolidated statements of operations. ROU assets are tested for impairment in the same manner as long-lived assets. During both the thirteen weeks ended June 25, 2022 and June 26, 2021, the Company did not record ROU asset impairment charges related to its stores.

ROU assets and lease liabilities as of June 25, 2022 and March 26, 2022 consist of the following:

	Balance Sheet Classification	June 25, 2022 (in thousands)		March 26, 2022 (in thousands)
Assets
Finance lease assets	Right-of-use assets, net	$	10,000	$	10,254
Operating lease assets	Right-of-use assets, net		254,569		230,893
Total lease assets		$	264,569	$	241,147
Liabilities
Current
Finance	Short-term lease liabilities	$	830	$	838
Operating	Short-term lease liabilities		44,286		42,279
Total short-term lease liabilities		$	45,116	$	43,117
Non-Current
Finance	Long-term lease liabilities	$	15,951	$	16,164
Operating	Long-term lease liabilities		244,025		218,420
Total long-term lease liabilities		$	259,976	$	234,584
Total lease liabilities		$	305,092	$	277,701

Total lease costs for the thirteen weeks ended June 25, 2022 and June 26, 2021 were:

	Thirteen Weeks Ended
(in thousands)	June 25, 2022		June 26, 2021
Finance lease cost
Amortization of right-of-use assets	$	255	$	200
Interest on lease liabilities		182		202
Total finance lease cost	$	437	$	402
Operating lease cost	$	14,023	$	11,934
Short-term lease cost		897		581
Variable lease cost		5,469		4,407	*
Sublease income		—		—
Total lease cost	$	20,826	$	17,324

*Amount previously disclosed above for variable lease cost in the thirteen weeks ended June 26, 2021 has been corrected from the amount previously reported of $1.0 million.

The following table summarizes future lease payments as of June 25, 2022:

	Operating Leases		Finance Leases
Fiscal Year	(in thousands)		(in thousands)
2023	$	33,773	$	1,157
2024		58,798		1,544
2025		52,467		1,515
2026		45,301		1,552
2027		36,573		1,590
Thereafter		109,332		14,525
Total		336,244		21,883
Less: Imputed interest		(47,933)		(5,102)
Present value of net lease payments	$	288,311	$	16,781

The following table includes supplemental lease information:

	Thirteen Weeks Ended			Thirteen Weeks Ended
Supplemental Cash Flow Information (dollars in thousands)	June 25, 2022			June 26, 2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	13,881		$	11,997
Operating cash flows from finance leases		—			—
Financing cash flows from finance leases		403			385
	$	14,284		$	12,382
Lease liabilities arising from new right-of-use assets
Operating leases	$	34,540		$	20,519
Finance leases	$	—		$	14
Weighted average remaining lease term (in years)
Operating leases		6.8			6.4
Finance leases		13.1			13.9
Weighted average discount rate
Operating leases		4.5	%		5.3	%
Finance leases		10.9	%		12.1	%