Leases

We lease certain retail stores, warehouses, distribution centers, office space, land, and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.

Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to 50 years or more. The exercise of lease renewal options is at our sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Certain of our lease agreements include rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

We rent or sublease certain real estate to third parties. Our sublease portfolio consists mainly of operating leases with CVS Pharmacy Inc. for space within our stores.



Leases (millions)	Classification	November 3, 2018		February 3, 2018		October 28, 2017
Assets
Operating lease assets	Operating Lease Assets	$	1,997	$	1,884	$	1,861
Finance lease assets	Buildings and Improvements, net of Accumulated Depreciation ^(a)	781		836		811
Total leased assets		$	2,778	$	2,720	$	2,672
Liabilities
Current
Operating	Accrued and Other Current Liabilities	$	162	$	147	$	140
Finance	Current Portion of Long-term Debt and Other Borrowings	50		80		79
Noncurrent
Operating	Noncurrent Operating Lease Liabilities	2,046		1,924		1,901
Finance	Long-term Debt and Other Borrowings	867		885		854
Total lease liabilities		$	3,125	$	3,036	$	2,974


^(a)	Finance lease assets are recorded net of accumulated amortization of $352 million, $317 million, and $300 million as of November 3, 2018, February 3, 2018, and October 28, 2017, respectively.



Lease Cost		Three Months Ended						Nine Months Ended
(millions)	Classification	November 3, 2018			October 28, 2017			November 3, 2018			October 28, 2017
Operating lease cost ^(a)	SG&A Expenses	$	63		$	55		$	186		$	162
Finance lease cost
Amortization of leased assets	Depreciation and Amortization ^(b)	16			16			49			46
Interest on lease liabilities	Net Interest Expense	10			10			32			31
Sublease income ^(c)	Other Revenue	(3		)	(2		)	(8		)	(6		)
Net lease cost		$	86		$	79		$	259		$	233


^(a)	Includes short-term leases and variable lease costs, which are immaterial.


^(b)	Supply chain-related amounts are included in Cost of Sales.


^(c)	Sublease income excludes rental income from owned properties of $12 million and $36 million for the three and nine months ended November 3, 2018, respectively, and $12 million and $35 million for the three and nine months ended October 28, 2017, respectively, which is included in Other Revenue.



Maturity of Lease Liabilities (millions)	Operating Leases ^(a)		Finance Leases ^(b)		Total
2018	$	59	$	22	$	81
2019	246		91		337
2020	237		88		325
2021	230		88		318
2022	224		90		314
After 2022	1,970		940		2,910
Total lease payments	$	2,966	$	1,319	$	4,285
Less: Interest	758		402
Present value of lease liabilities	$	2,208	$	917


^(a)	Operating lease payments include $813 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $363 million of legally binding minimum lease payments for leases signed but not yet commenced.


^(b)	Finance lease payments include $122 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $257 million of legally binding minimum lease payments for leases signed but not yet commenced.



Lease Term and Discount Rate	November 3, 2018		February 3, 2018		October 28, 2017
Weighted-average remaining lease term (years)
Operating leases	14.4		15.2		15.5
Finance leases	15.4		15.4		15.0
Weighted-average discount rate
Operating leases	3.89	%	3.88	%	3.89	%
Finance leases	4.70	%	4.64	%	4.61	%



Other Information	Nine Months Ended
(millions)	November 3, 2018		October 28, 2017
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	160	$	146
Operating cash flows from finance leases	32		31
Financing cash flows from finance leases	67		30
Leased assets obtained in exchange for new finance lease liabilities	29		97
Leased assets obtained in exchange for new operating lease liabilities	228		153