Leases

12 Months Ended

Jan. 29, 2022

E. LEASES

The Company leases all of its store locations and its corporate headquarters, which also includes its distribution center, under operating leases. The store leases typically have initial terms of 5 years to 10 years, with options that usually permit renewal for additional five-year periods. The initial term of the lease for the corporate headquarters was for 20 years, with the opportunity to extend for six additional successive periods of five years, beginning in fiscal 2026. The Company also leases certain equipment and other assets under operating leases, typically with initial terms of 3 to 5 years. The Company is generally obligated for the cost of property taxes, insurance and common area maintenance fees relating to its leases, which are considered variable lease costs and are expensed as incurred.

ASC 842 requires the assessment of any lease modification to determine if the modification should be treated as a separate lease and if not, modification accounting would be applied. Lease modification accounting requires the recalculation of the ROU asset, lease liability and lease expense over the respective lease term. In April 2020, the FASB issued guidance allowing entities to make a policy election to account for lease concessions related to the COVID-19 pandemic as though enforceable rights and obligations for those concessions existed. The election applies to any lessor-provided lease concession related to the impact of the COVID-19 pandemic, provided the concession does not result in a substantial increase in the rights of the lessor or in the obligations of the lessee. The Company opted not to elect this practical expedient and instead accounted for these rent concessions as lease modifications in accordance with ASC 842. As of January 29, 2022, the Company’s operating leases liabilities represent the present value of the remaining future minimum lease payments updated based on concessions and lease modifications.

Lease costs related to store locations are included in cost of goods sold including occupancy costs on the Consolidated Statements of Operations, and expenses and lease costs related to the corporate headquarters, automobile and equipment leases are included in selling, general and administrative expenses on the Consolidated Statement of Operations.

The following table is a summary of the Company’s components of lease cost for fiscal 2021, fiscal 2020 and fiscal 2019:


	Fiscal 2021		Fiscal 2020		Fiscal 2019
(in thousands)
Operating lease cost	$	43,921	$	47,076	$	53,051
Variable lease costs(1)		13,290		14,391		16,248
Total lease costs	$	57,211	$	61,467	$	69,299

(1)

Variable lease costs include the cost of property taxes, insurance and common area maintenance fees related to its leases.

Supplemental cash flow and balance sheet information related to leases for fiscal 2021, fiscal 2020 and fiscal 2019 is as follows:


(in thousands)	Fiscal 2021			Fiscal 2020			Fiscal 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases (1)	$	57,816		$	47,330		$	58,046
Non-cash operating activities:
Right-of-use assets obtained in exchange for operating lease liabilities	$	30,777		$	645		$	5,401
Net decrease in right-of-use assets due to lease modifications associated with rent concessions and lease exits	$	—		$	(6,463	)	$	—

Weighted average remaining lease term	4.3 yrs.			4.5 yrs.			5.4 yrs.
Weighted average discount rate		6.91	%		6.47	%		7.10	%

(1)

The decrease in cash payments for fiscal 2020 as compared to fiscal 2021 and fiscal 2019 was primarily due to rent abatements and deferments negotiated during fiscal 2020 in response to the COVID-19 pandemic.

The table below reconciles the undiscounted cash flows for each of the next five years and thereafter to the operating lease liabilities recorded on the Consolidated Balance Sheet as of January 29, 2022:


(in thousands)
2022	$	45,667
2023		45,828
2024		36,301
2025		27,977
2026		15,214
Thereafter		9,722
Total minimum lease payments	$	180,709
Less: amount of lease payments representing interest		25,104
Present value of future minimum lease payments	$	155,605
Less: current obligations under leases		35,191
Noncurrent lease obligations	$	120,414