Leases

12 Months Ended

Dec. 31, 2022

Leases [Abstract]

Lessee, Operating Leases

Leases:

The Company leases the majority of its retail store locations, two distribution sites, its Merchandise Innovation Center, and certain equipment under various non-cancellable operating leases. The leases have varying terms and expire at various dates through 2043.  Store leases typically have initial terms of between 10 years and 20 years, with two to four optional renewal periods of five years each.  The exercise of lease renewal options is at our sole discretion. The Company has included lease renewal options 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. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company accounts for lease components (e.g., fixed payments including rent, real estate taxes, and insurance costs) together with non-lease components (e.g., fixed payment common-area maintenance) as a single component for all classes of underlying assets. Certain lease agreements require variable payments based upon actual costs of common-area maintenance, real estate taxes, and insurance. Further, certain lease agreements require variable payments based upon store sales above agreed-upon sales levels for the year and others require payments adjusted periodically for inflation. As substantially all of our leases do not provide an implicit rate, we estimate our collateralized incremental borrowing rate based upon a Company specific credit rating and yield curve analysis at commencement or modification date in determining the present value of lease payments.

The Company has elected not to recognize leases with an original term of one year or less on the balance sheet. Short-term lease cost during the periods presented was immaterial.

In addition to the operating lease right-of-use assets presented on the Consolidated Balance Sheets, assets, net of accumulated amortization, under finance leases of $32.1 million and $32.0 million are recorded within the Property and equipment, net line on the Consolidated Balance Sheets as of December 31, 2022 and December 25, 2021, respectively.

The following table summarizes the Company’s classification of lease cost (in thousands):

		Fiscal Year Ended
	Statement of Income Location	December 31, 2022		December 25, 2021
Finance lease cost:
Amortization of lease assets	Depreciation and amortization	$	3,351	$	5,085
Interest on lease liabilities	Interest expense, net	1,787		1,740
Operating lease cost	Selling, general and administrative expenses	434,313		400,908
Variable lease cost	Selling, general and administrative expenses	89,026		79,479
Net lease cost		$	528,477	$	487,212

The following table summarizes the future maturities of the Company’s lease liabilities (in thousands):

	Operating Leases (a)		Finance Leases		Total
2023	$	453,562	$	4,808	$	458,370
2024	436,059		4,823		440,882
2025	412,422		4,750		417,172
2026	379,691		4,720		384,411
2027	342,620		4,802		347,422
After 2027	1,675,592		22,816		1,698,408
Total lease payments	3,699,946		46,719		3,746,665
Less: Interest	(632,534)		(8,889)		(641,423)
Present value of lease liabilities	$	3,067,412	$	37,830	$	3,105,242

(a) Operating lease payments exclude $289.1 million of legally binding minimum lease payments for leases signed, but not yet commenced.

The following table summarizes the Company’s lease term and discount rate:

	December 31, 2022		December 25, 2021
Weighted-average remaining lease term (years):
Finance leases	10.1		10.5
Operating leases	10.1		10.0
Weighted-average discount rate:
Finance leases	4.6	%	4.8	%
Operating leases	3.8	%	3.6	%

The following table summarizes the other information related to the Company’s lease liabilities (in thousands):

	Fiscal Year Ended
	December 31, 2022		December 25, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash flows used for finance leases	$	4,057	$	4,580
Operating cash flows used for finance leases	1,787		1,740
Operating cash flows for operating leases	430,396		404,864

Lessee, Finance Leases

Leases:

The Company leases the majority of its retail store locations, two distribution sites, its Merchandise Innovation Center, and certain equipment under various non-cancellable operating leases. The leases have varying terms and expire at various dates through 2043.  Store leases typically have initial terms of between 10 years and 20 years, with two to four optional renewal periods of five years each.  The exercise of lease renewal options is at our sole discretion. The Company has included lease renewal options 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. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company accounts for lease components (e.g., fixed payments including rent, real estate taxes, and insurance costs) together with non-lease components (e.g., fixed payment common-area maintenance) as a single component for all classes of underlying assets. Certain lease agreements require variable payments based upon actual costs of common-area maintenance, real estate taxes, and insurance. Further, certain lease agreements require variable payments based upon store sales above agreed-upon sales levels for the year and others require payments adjusted periodically for inflation. As substantially all of our leases do not provide an implicit rate, we estimate our collateralized incremental borrowing rate based upon a Company specific credit rating and yield curve analysis at commencement or modification date in determining the present value of lease payments.

The Company has elected not to recognize leases with an original term of one year or less on the balance sheet. Short-term lease cost during the periods presented was immaterial.

In addition to the operating lease right-of-use assets presented on the Consolidated Balance Sheets, assets, net of accumulated amortization, under finance leases of $32.1 million and $32.0 million are recorded within the Property and equipment, net line on the Consolidated Balance Sheets as of December 31, 2022 and December 25, 2021, respectively.

The following table summarizes the Company’s classification of lease cost (in thousands):

		Fiscal Year Ended
	Statement of Income Location	December 31, 2022		December 25, 2021
Finance lease cost:
Amortization of lease assets	Depreciation and amortization	$	3,351	$	5,085
Interest on lease liabilities	Interest expense, net	1,787		1,740
Operating lease cost	Selling, general and administrative expenses	434,313		400,908
Variable lease cost	Selling, general and administrative expenses	89,026		79,479
Net lease cost		$	528,477	$	487,212

The following table summarizes the future maturities of the Company’s lease liabilities (in thousands):

	Operating Leases (a)		Finance Leases		Total
2023	$	453,562	$	4,808	$	458,370
2024	436,059		4,823		440,882
2025	412,422		4,750		417,172
2026	379,691		4,720		384,411
2027	342,620		4,802		347,422
After 2027	1,675,592		22,816		1,698,408
Total lease payments	3,699,946		46,719		3,746,665
Less: Interest	(632,534)		(8,889)		(641,423)
Present value of lease liabilities	$	3,067,412	$	37,830	$	3,105,242

(a) Operating lease payments exclude $289.1 million of legally binding minimum lease payments for leases signed, but not yet commenced.

The following table summarizes the Company’s lease term and discount rate:

	December 31, 2022		December 25, 2021
Weighted-average remaining lease term (years):
Finance leases	10.1		10.5
Operating leases	10.1		10.0
Weighted-average discount rate:
Finance leases	4.6	%	4.8	%
Operating leases	3.8	%	3.6	%

The following table summarizes the other information related to the Company’s lease liabilities (in thousands):

	Fiscal Year Ended
	December 31, 2022		December 25, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash flows used for finance leases	$	4,057	$	4,580
Operating cash flows used for finance leases	1,787		1,740
Operating cash flows for operating leases	430,396		404,864