Leases

3 Months Ended

May 04, 2019

9. Leases

The Company leases all store premises, some of its office space and certain information technology and office equipment. These leases are generally classified as operating leases.

Store leases generally provide for a combination of base rentals and contingent rent based on store sales. Additionally, most leases include landlord incentives such as construction allowances and rent holidays. The Company is typically responsible for tenant occupancy costs including maintenance costs, common area charges, real estate taxes, and certain other expenses.

Most leases include one or more options to renew. The exercise of lease renewal options is at the Company’s discretion and is not reasonably certain at lease commencement. When measuring right-of-use assets and lease liabilities after the date of adoption of ASC 842, the Company only includes cash flows related to options to extend or terminate leases once those options are executed.

Some leases have variable payments. However, because they are not based on an index or rate, they are not included in the measurement of right-of-use assets and lease liabilities.

The Company uses its incremental borrowing rate as a basis for the discount rates used in the measurement of right-of-use assets and lease liabilities.

For leases that qualify for the short-term lease exemption, the Company does not record a lease liability or right-of-use asset. Short-term lease payments are recognized on a straight-line basis over the lease term of 12 months or less.

The table below summaries lease activity for the period.

	13 Weeks Ended
	May 4, 2019
(In thousands, except year and rate data)
Lease costs
Operating lease costs		82,562
Variable lease costs		23,556
Short-term leases and other lease costs		12,844
Total lease costs	$	118,962

Other information
Operating cash flows for operating leases		(73,006	)
New right-of-use asset for operating leases entered into during the period		56,097
Weighted-average remaining lease term - operating leases	6.5 years
Weighted-average discount rate - operating leases		5.0	%

The table below is a maturity analysis of the operating leases in effect as of the end of the period. Undiscounted cash flows for finance leases and short-term leases are not material for the periods reported and are excluded from the below:

	Undiscounted Cash Flows
(In thousands)
Fiscal years:
2019 (remaining 39 weeks)	$	226,604
2020		341,426
2021		300,910
2022		250,665
2023		230,074
Thereafter		557,955
Total undiscounted cash flows	$	1,907,634
Less: discount on lease liability		(312,152	)
Total lease liability	$	1,595,482