Leases

3 Months Ended

May 02, 2020

Leases

The Company leases retail stores, office space and equipment under operating leases. As of May 2, 2020 and May 4, 2019 right-of-use operating lease assets, which are recorded in operating lease assets in the condensed consolidated balance sheets, totaled $47.9 million and $52.8 million, respectively, and operating lease liabilities, which are recorded in current portion of operating lease liabilities and operating lease liabilities, totaled $48.2 million and $52.0 million, respectively.

In determining our operating lease assets and operating lease liabilities, we apply an incremental borrowing rate to the minimum lease payments within each lease agreement. ASU No. 2016-02 requires the use of the rate implicit in the lease whenever that rate is readily determinable; furthermore, if the implicit rate is not readily determinable, a lessee may use its incremental borrowing rate. The incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. To estimate our specific incremental borrowing rates that align with applicable lease terms, we utilize a model consistent with the credit quality of our outstanding debt instruments.

Renewal options from two to 20 years exist on the majority of leased properties. The Company has sole discretion in exercising the lease renewal options. We do not recognize operating lease assets or operating lease liabilities for renewal periods unless it has been determined that we are reasonably certain of renewing the lease at inception. The depreciable life of operating lease assets and related leasehold improvements is limited by the expected lease term.

Contingent rentals on certain leases are based on a percentage of annual sales in excess of specified amounts. Other contingent rentals are based entirely on a percentage of sales. The Company's operating lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The following table summarizes the Company's operating and finance leases:



(in thousands of dollars)	Classification - Condensed Consolidated Balance Sheets	May 2, 2020		February 1, 2020		May 4, 2019
Assets
Finance lease assets	Property and equipment, net ^(a)	$	564	$	670	$	987
Operating lease assets	Operating lease assets	47,852		47,924		52,782
Total leased assets		$	48,416	$	48,594	$	53,769

Liabilities
Current
Finance	Current portion of finance lease liabilities	$	1,109	$	1,219	$	1,022
Operating	Current portion of operating lease liabilities	14,880		14,654		15,105
Noncurrent
Finance	Finance lease liabilities	528		695		1,636
Operating	Operating lease liabilities	33,353		32,683		36,934
Total lease liabilities		$	49,870	$	49,251	$	54,697

^(a) Finance lease assets are recorded net of accumulated amortization of $14.0 million, $13.9 million and $13.6 million as of May 2, 2020, February 1, 2020 and May 4, 2019, respectively.



Lease Cost		Three Months Ended
(in thousands of dollars)	Classification - Condensed Consolidated Statements of Operations	May 2, 2020		May 4, 2019
Operating lease cost ^(a)	Rentals	$	5,550	$	6,118
Finance lease cost
Amortization of leased assets	Depreciation and amortization	106		106
Interest on lease liabilities	Interest and debt expense, net	79		135
Net lease cost		$	5,735	$	6,359

^(a)Includes short term lease costs of $0.5 million and $0.7 million for the three months ended May 2, 2020 and May 4, 2019, respectively, and variable lease costs of $0.3 million and $0.4 million for the three months ended May 2, 2020 and May 4, 2019, respectively.

Maturities of Lease Liabilities



(in thousands of dollars) Fiscal Year	Operating Leases			Finance Leases			Total
2020 (excluding the three months ended May 2, 2020)	$	13,275		$	1,071		$	14,346
2021	14,048			726			14,774
2022	7,696			—			7,696
2023	4,406			—			4,406
2024	3,649			—			3,649
After 2024	15,916			—			15,916
Total minimum lease payments	58,990			1,797			60,787
Less amount representing interest	(10,757		)	(160		)	(10,917		)
Present value of lease liabilities	$	48,233		$	1,637		$	49,870

Lease Term and Discount Rate



	May 2, 2020
Weighted-average remaining lease term
Operating leases	6.2 years
Finance leases	1.5 years
Weighted-average discount rate
Operating leases	6.6	%
Finance leases	14	%

Other Information



	Three Months Ended
(in thousands of dollars)	May 2, 2020		May 4, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	4,720	$	5,046
Operating cash flows from finance leases	79		135
Financing cash flows from finance leases	277		222

Lease assets obtained in exchange for new operating lease liabilities	$	3,972	$	—