Leases

12 Months Ended

Feb. 01, 2020

Leases [Abstract]

Leases

15. Leases

On February 3, 2019, we adopted the new lease accounting standard. We applied the modified retrospective method of adoption and therefore, results for the current year are presented under the new guidance, while prior periods have not been adjusted. The majority of our leases are operating leases for our company-operated retail store locations. We also lease, among other things, distribution and warehouse facilities, and office space for corporate administrative purposes.

Operating lease periods generally range from 5 to 10 years and generally contain rent escalation provisions. Some of the store leases contain renewal options with varying terms and conditions.

As February 1, 2020, amounts recognized in the Consolidated Balance Sheet related to operating leases were as follows:

	($ in millions)
Assets
Operating lease right-of-use assets	$	2,899
Liabilities
Current
Operating lease liabilities		518
Noncurrent
Operating lease liabilities		2,678
Total lease liabilities	$	3,196

Other information related to operating leases as of February 1, 2020 consisted of the following:

Weighted average remaining lease term (years)	7.3
Weighted average discount rate	5.4	%

Total lease costs include fixed operating lease costs, variable lease costs, and short-term lease costs. Most of our real estate leases require we pay certain expenses, such as CAM costs, real estate taxes, and other executory costs, of which the fixed portion is included in operating lease costs. Variable lease costs include non-lease components which are not fixed and are not included in determining the present value of our lease liability. Variable lease costs also include amounts based on a percentage of gross sales in excess of specified levels that are recognized when probable. Lease costs which relate to retail stores and distribution centers are classified within cost of sales, while non-store lease costs are included in SG&A. The components of lease cost as of February 1, 2020 were as follows:

	($ in millions)
Operating lease costs	$	668
Variable lease costs		332
Short-term lease costs		23
Sublease income		(1)
Net lease cost	$	1,022

Rent expense for the prior year period is accounted for under previous lease guidance. Rent expense for operating leases for 2018 and 2017 amounted to $750 million and $735 million, respectively, and consisted of minimum and contingent rentals of $728 million and $27 million, respectively, for 2018 and $714 million and $26 million, respectively, for 2017, less sublease income of $5 million in both years. Other costs related to our leases, including the amortization of lease rights, totaled $147 million and $146 million for the years ended February 2, 2019 and February 3, 2018, respectively.

Supplemental cash flow information related to leases for the year ended February 1, 2020 was as follows:

	($ in millions)
Cash paid for amounts included in measurement of operating lease liabilities:	$	679
Right-of-use assets obtained in exchange for lease obligations:		322

Maturities of lease liabilities as of February 1, 2020 are as follows:

	($ in millions)
2020	$	673
2021		622
2022		563
2023		491
2024		411
Thereafter		1,129
Total lease payments		3,889
Less: Interest		693
Total lease liabilities	$	3,196

As of February 1, 2020, we signed operating leases primarily for retail stores that have not yet commenced; the total future undiscounted lease payments under these leases are $35 million.

As of February 2, 2019, the estimated future minimum non-cancellable lease commitments were as follows:

	($ in millions)
2019	$	672
2020		631
2021		583
2022		527
2023		456
Thereafter		1,408
Total operating lease commitments	$	4,277