Leases

12 Months Ended

Jan. 29, 2022

Signet occupies certain properties and holds machinery and vehicles under operating leases. Signet determines if an arrangement is a lease at the agreement’s inception. Certain operating leases include predetermined rent increases, which are charged to store occupancy costs within cost of sales on a straight-line basis over the lease term, including any construction period or other rental holiday. Other variable amounts paid under operating leases, such as taxes and common area maintenance, are charged to selling, general and administrative expenses as incurred. Premiums paid to acquire short-term leasehold properties and inducements to enter into a lease are recognized on a straight-line basis over the lease term. In addition, certain leases provide for contingent rent based on a percentage of sales in excess of a predetermined level. Further, certain leases provide for variable rent increases based on indexes specified within the lease agreement. The variable increases based on an index are initially measured as part of the operating lease liability using the index at the commencement date. Contingent rent and subsequent changes to variable increases based on indexes will be recognized in the variable lease cost and included in the determination of total lease cost when it is probable that the expense has been incurred and the amount is reasonably estimable. Operating leases are included in operating lease ROU assets and current and non-current operating lease liabilities in the Company’s consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental secured borrowing rate based on the information available at the lease commencement date, including the underlying term and currency of the lease, in measuring the present value of lease payments. Lease terms, which include the period of the lease that cannot be canceled, may also include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The operating lease ROU asset may also include initial direct costs, prepaid and/or accrued lease payments and the unamortized balance of lease incentives received. ROU assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount of the assets may not be recoverable in accordance with the Company’s long-lived asset impairment assessment policy.

Payments arising from operating lease activity, as well as variable and short-term lease payments not included within the operating lease liability, are included as operating activities on the Company’s consolidated statement of cash flows. Operating lease payments representing costs to ready an asset for its intended use (i.e. leasehold improvements) are represented within investing activities within the Company’s consolidated statements of cash flows.

The Company deferred substantially all of its rent payments due in the months of April 2020 and May 2020. As of January 29, 2022, the Company had approximately $16 million of deferred rent payments remaining primarily in the UK. This remaining deferred rent is expected to be substantially repaid in the first half of Fiscal 2023. The Company has not recorded any provision for interest or penalties which may arise as a result of these deferrals, as management does not believe payment for any potential amounts to be probable. In April 2020, the FASB granted guidance (hereinafter, the practical expedient) permitting an entity to choose to forgo the evaluation of the enforceable rights and obligations of the original lease contract, specifically in situations where rent concessions have been agreed to with landlords as a result of COVID-19. Instead, the entity may account for COVID-19 related rent concessions, whatever their form (e.g. rent deferral, abatement or other) either: a) as if they were part of the enforceable rights and obligations of

the parties under the existing lease contract; or b) as lease modifications. In accordance with this practical expedient, the Company has elected not to account for any concessions granted by landlords as a result of COVID-19 as lease modifications. Rent abatements under the practical expedient have been recorded as a negative variable lease cost. The Company negotiated with substantially all of its landlords and has received certain concessions in the form of rent deferrals and other lease or rent modifications. In addition, the Company recorded lease expense during the deferral periods in accordance with its existing policies.

The weighted average lease term and discount rate for the Company’s outstanding operating leases were as follows:


	January 29, 2022		January 30, 2021
Weighted average remaining lease term	7.1 years		6.2 years
Weighted average discount rate	5.5	%	5.5	%

Total lease costs are as follows:


(in millions)	Fiscal 2022		Fiscal 2021		Fiscal 2020
Operating lease cost	$	431.8	$	436.3	$	460.3
Short-term lease cost	11.5		16.3		19.4
Variable lease cost	127.0		110.3		107.1
Sublease income	(1.9)		(1.8)		(2.0)
Total lease cost	$	568.4	$	561.1	$	584.8

Supplemental cash flow information related to leases was as follows:


(in millions)	Fiscal 2022		Fiscal 2021		Fiscal 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	479.6	$	400.4	$	467.7
Operating lease right-of-use assets obtained in exchange for lease obligations (1)	168.8		70.8		149.9
Reduction in the carrying amount of ROU assets (2)	351.7		348.3		360.1

(1) Includes $56.9 million of ROU assets acquired from Diamonds Direct in Fiscal 2022, per Note 4.

(2) Excludes net gain related to ROU asset impairment of $0.1 million and ROU asset impairment charges of $36.9 million during Fiscal 2022 and Fiscal 2021, respectively, as further described in Note 17.

The future minimum operating lease commitments for operating leases having initial or non-cancelable terms in excess of one year are as follows:


(in millions)	January 29, 2022
Fiscal 2023	$	400.3
Fiscal 2024	304.4
Fiscal 2025	238.5
Fiscal 2026	174.3
Fiscal 2027	124.1
Thereafter	446.9
Total minimum lease payments	$	1,688.5
Less: Imputed interest	(383.4)
Present value of lease liabilities	$	1,305.1