Leases (Notes)

6 Months Ended

Oct. 28, 2023

Note 8. Leases

We recognize lease assets and lease liabilities on the condensed consolidated balance sheets for substantially all lease arrangements as required by FASB ASC 842, Leases (Topic 842). Our portfolio of leases consists of operating leases comprised of operations agreements which grant us the right to operate on-campus bookstores at colleges and universities; real estate leases for office and warehouse operations; and vehicle leases. We do not have finance leases or short-term leases (i.e., those with a term of twelve months or less).

We recognize a right of use ("ROU") asset and lease liability in our condensed consolidated balance sheets for leases with a term greater than twelve months. Options to extend or terminate a lease are included in the determination of the ROU asset and lease liability when it is reasonably certain that such options will be exercised. Our lease terms generally range from one year to fifteen years and a number of agreements contain minimum annual guarantees, many of which are adjusted at the start of each contract year based on the actual sales activity of the leased premises for the most recently completed contract year.

Payment terms are based on the fixed rates explicit in the lease, including minimum annual guarantees, and/or variable rates based on: i) a percentage of revenues or sales arising at the relevant premises ("variable commissions"), and/or ii) operating expenses, such as common area charges, real estate taxes and insurance. For contracts with fixed lease payments, including those with minimum annual guarantees, we recognize lease expense on a straight-line basis over the lease term or over the contract year in order to best reflect the pattern of usage of the underlying leased asset and our minimum obligations arising from these types of leases. Our lease agreements do not contain any material residual value guarantees, material restrictions or covenants.

We used our incremental borrowing rates to determine the present value of fixed lease payments based on the information available at the lease commencement date, as the rate implicit in the lease is not readily determinable. We utilized an estimated collateralized incremental borrowing rate as of the effective date or the commencement date of the lease, whichever is later.

The following table summarizes lease expense:


	13 weeks ended				26 weeks ended
	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
Variable lease expense	$	25,436	$	25,281	$	37,665	$	40,465
Operating lease expense	46,902		52,998		69,291		75,860
Net lease expense	$	72,338	$	78,279	$	106,956	$	116,325

The decrease in lease expense during the 26 weeks ended October 28, 2023 is primarily due to lower commission rates related to the shift from physical to digital course materials, closed stores, and the impact of the timing due to contract renewals, partially offset by higher sales for contracts based on a percentage of sales.

The following table summarizes our minimum fixed lease obligations, excluding variable commissions:


	As of October 28, 2023
Remainder of Fiscal 2024	$	106,034
Fiscal 2025	57,282
Fiscal 2026	39,180
Fiscal 2027	31,414
Fiscal 2028	24,944
Thereafter	59,293
Total lease payments	318,147
Less: imputed interest	(31,536)
Operating lease liabilities at period end	$	286,611

Future lease payment obligations related to leases that were entered into, but did not commence as of October 28, 2023, were not material. The following summarizes additional information related to our operating leases:


	As of
	October 28, 2023			October 29, 2022
Weighted average remaining lease term (in years)	4.6 years			5.3 years
Weighted average discount rate	4.3		%	4.4		%

Supplemental cash flow information:
Cash payments for lease liabilities within operating activities	$	68,580		$	75,876
Right-of-use assets obtained in exchange for lease liabilities from initial recognition	$	69,959		$	86,045