Leases

12 Months Ended

Nov. 28, 2021

The Company primarily leases retail store space, certain distribution and warehouse facilities, office space, equipment and other non-real estate assets. The Company determines if an arrangement is a lease at inception and begins recording lease activity at the commencement date, which is generally the date on which the Company takes possession of or controls the physical use of the asset. Right-of-use ("ROU") assets and lease liabilities are recognized based on the present value of lease payments over the lease term with lease expense recognized on a straight-line basis. The Company's incremental borrowing rates, which are based on the information available at commencement date, are used to determine the present value of future lease payments unless the implicit rate is readily determinable. Lease agreements may contain rent escalation clauses, renewal or termination options, rent holidays or certain landlord incentives, including tenant improvement allowances. ROU assets are reduced by the amount of any lease incentives. The lease term includes the non-cancelable period of the lease and may include options to extend or terminate the lease when it is reasonably certain the Company will exercise the option. Certain lease agreements include variable lease payments, which are based on a percent of retail sales over specified levels or adjust periodically for inflation.

Lease expense is recognized in SG&A within the Company's consolidated statements of operations, based on the underlying nature of the leased asset. For the years ended November 28, 2021 and November 29, 2020, lease expense primarily consisted of operating lease costs of $345.4 million and $317.4 million, respectively, including $65.3 million and $47.3 million primarily related to variable lease costs and $9.6 million and $4.2 million of short-term lease costs. As of and for the year ended November 28, 2021, finance leases were not a material component of the Company's lease portfolio.

The Company reviews its ROU assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may be impaired. Impairment losses are measured and recorded for the excess of carrying value over its fair value, estimated based on expected future cash flows and other quantitative and qualitative factors. Due to the anticipated COVID-19 related impact on foot traffic and consumer spending trends, expected future cash flows decreased. As a result, the Company recorded $11.3 million and $44.3 million, respectively, related to the impairment of certain store ROU assets during the years ended November 28, 2021 and November 29, 2020. The impairment charges are included in SG&A in the Company's accompanying consolidated statements of operations.

Amounts of future undiscounted cash flows related to operating lease payments over the lease term are as follows and are reconciled to the present value of the operating lease liabilities as recorded in the Company's consolidated balance sheets.


	November 28, 2021

	(Dollars in thousands)
2022	$	262,688
2023	233,169
2024	194,119
2025	154,999
2026	120,861
Thereafter	326,225
Total undiscounted future cash flows related to lease payments	1,292,061
Less: Interest	77,210
Present value of lease liabilities	$	1,214,851

The following table includes the weighted average remaining lease terms, in years, and the weighted average discount rate used to calculate the present value of operating lease liabilities:


	November 28, 2021		November 29, 2020
Weighted-average remaining lease term (years)	6.5		5.8
Weighted-average discount rate	2.00	%	2.16	%

The table below includes supplemental cash and non-cash information related to operating leases:


	November 28, 2021		November 29, 2020

	(Dollars in thousands)		(Dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	262,908	$	237,265
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities (1)	$	415,832	$	151,345

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(1) November 29, 2020 amount excludes the amount initially capitalized in conjunction with the adoption of Topic 842.