Leases

12 Months Ended

Jan. 30, 2021

LEASES:

We lease retail stores, a limited amount of office space and certain equipment under operating leases expiring in various years through the fiscal year ending 2030. All of our leases have been classified as operating leases and are recognized and measured as such.

Certain operating leases provide for renewal options that are at a pre-determined period and rental value. Furthermore, certain leases provide that we may cancel the lease if our retail sales at that location fall below an established level. Within the first few years of the initial lease term, a majority of our store operating leases contain cancellation clauses that allow the leases to be terminated at our discretion, if certain minimum sales levels are not met. In the normal course of business, operating leases are typically renewed or replaced by other leases.

Escalation of operating lease payments of certain leases depend on an existing index or rate, such as the consumer price index or the market interest rate. These are considered variable lease payments and are included in lease payments when the escalation is known.

The Company deferred substantially all rent payments due in the months of April, May and June 2020 and made reduced rent payments beginning in July 2020 where and when applicable. 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 a 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 the pandemic. Instead, the entity may account for pandemic-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. During fiscal 2020, we received

concessions from certain landlords in the form of rent deferrals, rent abatements and other lease or rent modifications. In accordance with the practical expedient allowed by the FASB, the Company has elected to treat all rent concessions and related amendments, including pandemic-related concessions and lease amendments that extended the lease term, as lease modifications under ASC 842, Leases. In addition, the Company has continued recording lease expense during the deferral period in accordance with its existing policies.

Operating lease expense was as follows:


	Fiscal 2020 (1)		Fiscal 2019 (1)		Fiscal 2018

	(in thousands)
Operating lease cost	$	235,301	$	250,767	$	261,285

(1) Includes approximately $30.4 million and $22.6 million in variable lease costs for fiscal 2020 and 2019, respectively.

Supplemental balance sheet information related to operating leases was as follows:


	Fiscal 2020			Fiscal 2019

	(in thousands)
Right of Use Assets	$	586,061		$	648,397

Current lease liabilities	$	194,551		$	157,043
Long-term lease liabilities	515,797			555,922
Total operating lease liabilities	$	710,348		$	712,965

Weighted Average Remaining Lease Term (years)	4.5			4.8

Weighted Average Discount Rate (1)	4.9		%	5.6		%

(1) The incremental borrowing rate used by the Company is based on the rate at which the Company could borrow funds using its credit rating for a collateralized loan of similar term to the lease. The weighted average discount rate represents a weighted average of the incremental borrowing rate for each lease, weighted based on the remaining fixed lease obligations.

Supplemental cash flow information related to operating leases was as follows:


	Fiscal 2020			Fiscal 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows	$	175,329	(1)	$	228,121
Right of use assets obtained in exchange for lease obligations, non-cash	140,833			51,204

(1) During the fourth quarter of fiscal 2020, the Company substantially completed its settlement agreements with its landlords, the result of which is reflected herein.

Minimum future rental payments under non-cancelable operating leases (including leases with certain minimum sales cancellation clauses described below and exclusive of variable common area maintenance charges and/or contingent rental payments based on sales) as of January 30, 2021, are approximately as follows:


FISCAL YEAR ENDING:
(in thousands)
January 30, 2021	$	227,669
January 29, 2022	189,317
January 28, 2023	143,594
February 3, 2024	100,726
February 1, 2025	63,766
Thereafter	68,592
Total future minimum lease payments	$	793,664
Less imputed interest	(83,316)
Total	$	710,348

Certain leases provide that we may cancel the lease if our retail sales at that location fall below an established level. A majority of our store operating leases contain cancellation clauses that allow the leases to be terminated at our discretion, if certain minimum sales levels are not met within the first few years of the lease term. We have not historically met or exercised a significant number of these cancellation clauses and, therefore, have included commitments for the full lease terms of such leases in the above table. For fiscal 2020, 2019 and 2018, total rent expense under operating leases was approximately $235.3 million, $250.8 million and $261.3 million, respectively, including common area maintenance charges of approximately $32.8 million, $45.7 million and $48.0 million, respectively, other rental charges of approximately $49.8 million, $38.4 million and $40.9 million, respectively, and contingent rental expense, based on sales, of approximately $2.4 million, $4.9 million and $3.6 million, respectively.