Leases

9 Months Ended

Oct. 28, 2023

The Company's lease portfolio is primarily comprised of leases for retail store locations. The Company also leases certain equipment and corporate office space. Store leases for new stores typically have an initial term of 10 years, with options to renew for an additional 1 to 5 years. The exercise of lease renewal options is at the Company's sole discretion and is included in the lease term for calculations of its right-of-use assets and liabilities when it is reasonably certain that the Company plans to renew these leases. Certain store lease agreements include rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation. Lease agreements do not contain any residual value guarantees, material restrictive covenants, or options to purchase the leased property.

The Company records its lease liabilities at the present value of the lease payments not yet paid, discounted at the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term. As the Company's leases do not provide an implicit interest rate, the Company obtains an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

The Company has elected to apply the practical expedient to account for lease components (e.g. fixed payments for rent, insurance, and real estate taxes) and non-lease components (e.g. fixed payments for common area maintenance) together as a single component for all underlying asset classes. Additionally, the Company elected as an accounting policy to exclude short-term leases from the recognition requirements.

Lease expense is included in cost of sales in the condensed consolidated statements of income. The components of total lease cost are as follows:


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022

Operating lease cost	$	24,846	$	23,649	$	73,644	$	70,287
Variable lease cost (a)	4,528		5,288		14,796		16,249
Total lease cost	$	29,374	$	28,937	$	88,440	$	86,536

(a) Includes variable payments related to both lease and non-lease components, such as contingent rent payments based on performance and payments related to taxes, insurance, and maintenance costs. Also includes payments related to short-term leases with periods of less than twelve months.

Supplemental cash flow information related to leases is as follows:


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	25,786	$	24,580	$	76,285	$	73,011

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	33,131	$	29,335	$	68,394	$	56,592

The Company uses its incremental borrowing rate as the discount rate to determine the present value of lease payments. As of October 28, 2023, the weighted-average remaining lease term was 5.3 years and the weighted-average discount rate was 5.3%.

The table below reconciles undiscounted future lease payments (e.g. fixed payments for rent, insurance, real estate taxes, and common area maintenance) for each of the next five fiscal years and the total of the remaining years to the operating lease liabilities recorded on the condensed consolidated balance sheet as of October 28, 2023:


Fiscal Year	Operating Leases (a)
2023 (remaining)	$	25,969
2024	87,633
2025	63,043
2026	48,402
2027	32,314
Thereafter	76,793
Total lease payments	334,154
Less: Imputed interest	46,753
Total operating lease liability	$	287,401

(a) Operating lease payments exclude $55,895 of legally binding minimum lease payments for leases signed, but not yet commenced.