Leases (Notes)

9 Months Ended

Nov. 30, 2023

Leases of Lessee Disclosure [Text Block]

Leases

Our 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 November 30				Nine Months Ended November 30
(In thousands)	2023		2022		2023		2022
Operating lease cost (1)	$	22,772	$	22,450	$	66,958	$	68,381
Finance lease cost:
Depreciation of lease assets	5,266		4,178		14,708		11,701
Interest on lease liabilities	6,610		5,728		19,112		16,129
Total finance lease cost	11,876		9,906		33,820		27,830
Total lease cost	$	34,648	$	32,356	$	100,778	$	96,211

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

Supplemental balance sheet information related to leases was as follows:


		As of November 30		As of February 28
(In thousands)	Classification	2023		2023
Assets:
Operating lease assets	Operating lease assets	$	533,387	$	545,677
Finance lease assets	Property and equipment, net (1)	179,381		145,372
Total lease assets		$	712,768	$	691,049
Liabilities:
Current:
Operating leases	Current portion of operating lease liabilities	$	56,410	$	53,287
Finance leases	Accrued expenses and other current liabilities	20,452		18,788
Long-term:
Operating leases	Operating lease liabilities, excluding current portion	509,141		523,828
Finance leases	Other liabilities	202,024		165,135
Total lease liabilities		$	788,027	$	761,038

(1) Finance lease assets are recorded net of accumulated depreciation of $53.1 million as of November 30, 2023 and $46.7 million as of February 28, 2023.

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


	As of November 30		As of February 28
Lease Term and Discount Rate	2023		2023
Weighted Average Remaining Lease Term (in years)
Operating leases	16.09		16.35
Finance leases	11.56		10.84

Weighted Average Discount Rate
Operating leases	5.02	%	4.91	%
Finance leases	17.17	%	19.34	%

Supplemental cash flow information related to leases was as follows:


	Nine Months Ended November 30
(In thousands)	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	66,352	$	67,675
Operating cash flows from finance leases	$	18,387	$	12,747
Financing cash flows from finance leases	$	12,177	$	10,056

Lease assets obtained in exchange for lease obligations:
Operating leases	$	29,080	$	29,027
Finance leases	$	50,085	$	31,344

Maturities of lease liabilities were as follows:


	As of November 30, 2023
(In thousands)	Operating Leases (1)		Finance Leases (1)
Fiscal 2024, remaining	$	20,661	$	10,886
Fiscal 2025	82,816		45,606
Fiscal 2026	77,454		47,365
Fiscal 2027	71,099		43,554
Fiscal 2028	66,952		36,691
Thereafter	561,850		258,658
Total lease payments	880,832		442,760
Less: interest	(315,281)		(220,284)
Present value of lease liabilities	$	565,551	$	222,476

(1) Lease payments exclude $5.1 million of legally binding minimum lease payments for leases signed but not yet commenced.