Properties and Leases

12 Months Ended

Jan. 28, 2023

Property Plant and Equipment and Leases of Lessee [Abstract]

Property and Equipment, net

The major classes of property and equipment, net as of January 28, 2023 and January 29, 2022 are as follows:


	January 28, 2023		January 29, 2022
	(millions)
Land	$	1,334	$	1,353
Buildings on owned land	3,691		3,635
Buildings on leased land and leasehold improvements	1,368		1,303
Fixtures and equipment	4,153		3,922
	10,546		10,213
Less accumulated depreciation and amortization	4,633		4,548
	$	5,913	$	5,665

In connection with various shopping center agreements, the Company is obligated to operate certain stores within the centers for periods of up to fifteen years. Some of these agreements require that the stores be operated under a particular name.

Leases

The Company leases a portion of the real estate and personal property used in its operations. Most leases require the Company to pay real estate taxes, maintenance, insurance, and other similar costs; some also require additional payments based on percentages of sales and some contain purchase options. Certain of the Company's leases contain covenants that restrict the ability of the tenant (typically a subsidiary of the Company) to take specified actions (including the payment of dividends or other amounts on account of its capital stock) unless the tenant satisfies certain financial tests.

ROU assets and lease liabilities consist of:


	Classification	January 28, 2023		January 29, 2022
		(millions)
Assets
Finance lease assets (a)	Right of Use Assets	$	9	$	10
Operating lease assets (b)	Right of Use Assets	2,674		2,798
Total lease assets		$	2,683	$	2,808
Liabilities
Current
Finance (a)	Accounts payable and accrued liabilities	$	2	$	2
Operating (b)	Accounts payable and accrued liabilities	333		328
Noncurrent
Finance (a)	Long-Term Lease Liabilities	15		17
Operating (b)	Long-Term Lease Liabilities	2,948		3,081
Total lease liabilities		$	3,298	$	3,428


(a)			Finance lease assets are recorded net of accumulated amortization of $13 million as of January 28, 2023 and January 29, 2022. As of both January 28, 2023 and January 29, 2022, finance lease assets included $1 million, and noncurrent lease liabilities included $2 million of non-lease components.


(b)			As of January 28, 2023, operating lease assets included $370 million of non-lease components and current and noncurrent lease liabilities included $36 million and $384 million, respectively, of non-lease components. As of January 29, 2022, operating lease assets included $377 million of non-lease components and current and noncurrent lease liabilities included $36 million and $386 million, respectively, of non-lease components.

The components of net lease expense, recognized primarily within selling, general and administrative expenses are disclosed below. For 2022, 2021 and 2020, lease expense included $79 million, $80 million and $87 million, respectively, related to non-lease components.


	2022		2021		2020
	(millions)
Real estate
Operating leases (c) –
Minimum rents	$	361	$	359	$	376
Variable rents	54		48		45
	415		407		421
Less income from subleases –
Operating leases (d)	(39)		(1)		(1)
	$	376	$	406	$	420

Personal property – Operating leases	$	7	$	7	$	7


(c)			Certain supply chain operating lease expense amounts are included in cost of sales.

(d)			Represents sublease income from certain corporate office locations.

As of January 28, 2023, the maturity of lease liabilities is as follows:


	Finance Leases		Operating Leases (e and f)		Total
	(millions)
Fiscal year
2023	$	3	$	340	$	343
2024	3		375		378
2025	3		371		374
2026	2		355		357
2027	2		340		342
After 2027	11		5,051		5,062
Total undiscounted lease payments	24		6,832		6,856
Less amount representing interest	7		3,551		3,558
Total lease liabilities	$	17	$	3,281	$	3,298


(e)			Operating lease payments include $2,872 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $292 million of legally binding minimum lease payments for leases signed but not yet commenced.


(f)			Operating lease payments include $1,090 million related to non-lease component payments, with $827 million of such payments related to options to extend lease terms that are reasonably certain of being exercised.

Additional supplemental information regarding assumptions and cash flows for operating and finance leases is as follows:


Lease Term and Discount Rate	January 28, 2023		January 29, 2022
Weighted-average remaining lease term (years)
Finance leases	11.5		11.9
Operating leases	21.3		21.7
Weighted-average discount rate
Finance leases	6.74	%	6.73	%
Operating leases	6.58	%	6.54	%


Other Information	52 Weeks Ended January 28, 2023		52 Weeks Ended January 29, 2022
	(millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used from operating leases	$	364	$	322
Financing cash flows used from financing leases	3		3
Leased assets obtained in exchange for new operating lease liabilities	79		15

The Company is a guarantor with respect to certain lease obligations associated with The May Department Stores Company and previously disposed subsidiaries or businesses. The leases have future minimum lease payments aggregating approximately $181 million and are offset by payments from existing tenants and subtenants. In addition, the Company is contingently liable for other expenses related to the above leases, such as property taxes and common area maintenance, which are also payable by existing tenants and subtenants. Potential liabilities related to these guarantees are subject to certain defenses by the Company. The Company believes that the risk of significant loss from the guarantees of these lease obligations is remote.