Properties and Leases

12 Months Ended

Feb. 03, 2024

Property Plant and Equipment and Leases of Lessee [Abstract]

Property and Equipment, net

The major classes of property and equipment, net as of February 3, 2024 and January 28, 2023 are as follows:


	February 3, 2024		January 28, 2023
	(millions)
Land	$	1,262	$	1,334
Buildings on owned land	3,205		3,691
Buildings on leased land and leasehold improvements	1,332		1,368
Fixtures and equipment	3,785		4,153
	9,584		10,546
Less accumulated depreciation and amortization	4,276		4,633
	$	5,308	$	5,913

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	February 3, 2024		January 28, 2023
		(millions)
Assets
Finance lease assets (a)	Right of Use Assets	$	8	$	9
Operating lease assets (b)	Right of Use Assets	2,297		2,674
Total lease assets		$	2,305	$	2,683
Liabilities
Current
Finance (a)	Accounts payable and accrued liabilities	$	2	$	2
Operating (b)	Accounts payable and accrued liabilities	356		333
Noncurrent
Finance (a)	Long-Term Lease Liabilities	12		15
Operating (b)	Long-Term Lease Liabilities	2,974		2,948
Total lease liabilities		$	3,344	$	3,298


(a)			Finance lease assets are recorded net of accumulated amortization of $14 million as of February 3, 2024 and January 28, 2023. As of both February 3, 2024 and January 28, 2023, finance lease assets included $1 million, and noncurrent lease liabilities included $1 million of non-lease components.


(b)			As of February 3, 2024, operating lease assets included $322 million of non-lease components and current and noncurrent lease liabilities included $36 million and $356 million, respectively, of non-lease components. 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.

The components of net lease expense, recognized primarily within selling, general and administrative expenses are disclosed below. For 2023, 2022 and 2021, lease expense included $84 million, $79 million and $80 million, respectively, related to non-lease components.


	2023		2022		2021
	(millions)
Real estate
Operating leases (c) –
Minimum rents	$	372	$	361	$	359
Variable rents	55		54		48
	427		415		407
Less income from subleases –
Operating leases (d)	(46)		(39)		(1)
	$	381	$	376	$	406

Personal property – Operating leases	$	6	$	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 February 3, 2024, the maturity of lease liabilities is as follows:


	Finance Leases		Operating Leases (e and f)		Total
	(millions)
Fiscal year
2024	$	3	$	357	$	360
2025	3		385		388
2026	2		368		370
2027	2		350		352
2028	1		328		329
After 2027	10		4,737		4,747
Total undiscounted lease payments	21		6,525		6,546
Less amount representing interest	7		3,195		3,202
Total lease liabilities	$	14	$	3,330	$	3,344


(e)			Operating lease payments include $2,750 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $77 million of legally binding minimum lease payments for leases signed but not yet commenced.


(f)			Operating lease payments include $978 million related to non-lease component payments, with $740 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	February 3, 2024		January 28, 2023
Weighted-average remaining lease term (years)
Finance leases	11.2		11.5
Operating leases	20.4		21.3
Weighted-average discount rate
Finance leases	6.75	%	6.74	%
Operating leases	6.71	%	6.58	%


Other Information	53 Weeks Ended February 3, 2024		52 Weeks Ended January 28, 2023
	(millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used from operating leases	$	370	$	364
Financing cash flows used from financing leases	3		3
Leased assets obtained in exchange for new operating lease liabilities	214		79

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 $169 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.