Leases (Notes)

6 Months Ended

Aug. 31, 2023

Leases of Lessee Disclosure [Text Block]

LeasesOur leases primarily consist of operating and finance leases related to retail stores, office space, land and equipment. We also have stores subject to sale-leaseback transactions that do not qualify for sale accounting and are accounted for as financing obligations. For more information on these financing obligations see Note 9.

The initial term for real property leases is typically 5 to 20 years. For equipment leases, the initial term generally ranges from 3 to 8 years. Most leases include one or more options to renew, with renewal terms that can extend the lease term from 1 to 20 years or more. We include options to renew (or terminate) in our lease term, and as part of our right-of-use (“ROU”) assets and lease liabilities, when it is reasonably certain that we will exercise that option.

ROU assets and the related lease liabilities are initially measured at the present value of future lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our collateralized incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. We include variable lease payments in the initial measurement of ROU assets and lease liabilities only to the extent they depend on an index or rate. Changes in such indices or rates are accounted for in the period the change occurs, and do not result in the remeasurement of the ROU asset or liability. We are also responsible for payment of certain real estate taxes, insurance and other expenses on our leases. These amounts are generally considered to be variable and are not included in the measurement of the ROU asset and lease liability. We generally account for non-lease components, such as maintenance, separately from lease components. For certain equipment leases, we apply a portfolio approach to account for the lease assets and liabilities.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Leases with a term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.

The components of lease expense were as follows:


	Three Months Ended August 31				Six Months Ended August 31
(In thousands)	2023		2022		2023		2022
Operating lease cost (1)	$	22,239	$	22,911	$	44,186	$	45,931
Finance lease cost:
Depreciation of lease assets	4,907		4,017		9,442		7,523
Interest on lease liabilities	6,407		5,467		12,502		10,401
Total finance lease cost	11,314		9,484		21,944		17,924
Total lease cost	$	33,553	$	32,395	$	66,130	$	63,855

(1) Includes short-term leases and variable lease costs, which are immaterial.

Supplemental balance sheet information related to leases was as follows:


		As of August 31		As of February 28
(In thousands)	Classification	2023		2023
Assets:
Operating lease assets	Operating lease assets	$	540,718	$	545,677
Finance lease assets	Property and equipment, net (1)	178,962		145,372
Total lease assets		$	719,680	$	691,049
Liabilities:
Current:
Operating leases	Current portion of operating lease liabilities	$	55,441	$	53,287
Finance leases	Accrued expenses and other current liabilities	19,697		18,788
Long-term:
Operating leases	Operating lease liabilities, excluding current portion	516,839		523,828
Finance leases	Other liabilities	200,425		165,135
Total lease liabilities		$	792,402	$	761,038

(1) Finance lease assets are recorded net of accumulated depreciation of $56.2 million as of August 31, 2023 and $46.7 million as of February 28, 2023.

Lease term and discount rate information related to leases was as follows:


	As of August 31		As of February 28
Lease Term and Discount Rate	2023		2023
Weighted Average Remaining Lease Term (in years)
Operating leases	16.06		16.35
Finance leases	11.80		10.84

Weighted Average Discount Rate
Operating leases	4.98	%	4.91	%
Finance leases	17.31	%	19.34	%

Supplemental cash flow information related to leases was as follows:


	Six Months Ended August 31
(In thousands)	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	44,182	$	44,725
Operating cash flows from finance leases	$	12,076	$	4,508
Financing cash flows from finance leases	$	7,810	$	9,883

Lease assets obtained in exchange for lease obligations:
Operating leases	$	22,277	$	16,837
Finance leases	$	43,684	$	22,572

Maturities of lease liabilities were as follows:


	As of August 31, 2023
(In thousands)	Operating Leases (1)		Finance Leases (1)
Fiscal 2024, remaining	$	40,818	$	21,263
Fiscal 2025	82,069		44,630
Fiscal 2026	76,698		46,234
Fiscal 2027	70,330		42,405
Fiscal 2028	66,162		35,522
Thereafter	552,032		254,680
Total lease payments	888,109		444,734
Less: interest	(315,829)		(224,612)
Present value of lease liabilities	$	572,280	$	220,122

(1) Lease payments exclude $3.1 million of legally binding minimum lease payments for leases signed but not yet commenced.