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Note 13 - Leases

12 Months Ended

Feb. 01, 2020

Leases of Lessee Disclosure [Text Block]

13. LEASES

The Company leases all of its retail locations, a manufacturing facility, and certain office locations, distribution centers and equipment. At contract inception, leases are evaluated and classified as either operating or finance leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company's leases that are classified as operating leases have lease terms and renewal options as follows:

	*Lease Term (years)*		*Renewal Options*
Retail stores		5 - 10	Approximately 42% have options of varying periods
Manufacturing facility		8	None
Office facilities and distribution centers		10 - 15	5 - 20 years
Equipment		1 - 6	None

As further discussed in Note 1 to the consolidated financial statements, during the first quarter of 2019, the Company adopted ASC 842 using the modified retrospective transition method. Prior period financial information in the consolidated financial statements has not been adjusted and is presented in compliance with ASC 840. The Company elected the package of practical expedients and the expedient to account for lease and non-lease components as a single component for the entire population of operating lease assets. The Company did not elect the hindsight practical expedient to reevaluate the lease term of existing contracts.

Lease right-of-use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. The majority of the Company's leases do not provide an implicit rate and therefore, the Company uses an incremental borrowing rate based on the information available at the commencement date to determine the present value of future payments. Lease expense for the minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are expensed as incurred.

The following is a summary of lease assets and liabilities on the consolidated balance sheet at February 1, 2020:

($ thousands)	*February 1, 2020*
Lease Classification
Lease right-of-use assets	$	695,594
Current lease obligations		(127,869	)
Noncurrent lease obligations		(629,032	)
Net balance sheet impact	$	(61,307	)

The weighted-average lease term and discount rate as of February 1, 2020 were as follows:

	*February 1, 2020*
Weighted-average remaining lease term (in years)		7.2
Weighted-average discount rate		4.3	%

During 2019, the Company entered into new or amended leases that resulted in the recognition of right-of-use assets and lease obligations of $164.0 million on the consolidated balance sheets. As of February 1, 2020, the Company has entered into lease commitments for eight retail locations for which the leases have not yet commenced. The Company anticipates that the leases for seven of the new retail locations will begin in the next fiscal year and one will begin in fiscal year 2021. Upon commencement, right-of-use assets and lease liabilities of approximately $9.6 million will be recorded on the consolidated balance sheets.

The components of lease expense for 2019 were as follows:

($ thousands)	*2019*
Operating lease expense	$	186,185
Variable lease expense		45,455
Short-term lease expense		3,339
Sublease income		(269	)
Total lease expense	$	234,710

The aggregate future annual lease obligations at February 1, 2020 were as follows:

($ thousands)
2020	$	156,877
2021		151,257
2022		124,369
2023		104,582
2024		85,249
Thereafter		270,434
Total minimum operating lease payments ⁽¹⁾	$	892,768
Less imputed interest		(135,867	)
Present value of lease obligations	$	756,901

⁽¹⁾Minimum operating lease payments have not been reduced by minimum sublease rental income of $0.2 million due in the future under sublease agreements.

Supplemental cash flow information related to leases is as follows:

($ thousands)	*2019*
Cash paid for lease liabilities	$	196,033
Cash received from sublease income		269

As previously reported in the Company's Annual Report on Form 10-K for the year ended February 2, 2019, and in accordance with the guidance in ASC 840, a summary of rent expense for operating leases for 2018 and 2017 is as follows:

($ thousands)	2018			2017
Minimum rent	$	171,410		$	171,980
Contingent rent		671			513
Sublease income		(428	)		(1,705	)
Total	$	171,653		$	170,788

Also as previously reported in the Company's Annual Report on Form 10-K for the year ended February 2, 2019, in accordance with the guidance in ASC 840, future minimum lease payments under noncancelable operating leases with an initial term of one year or more at February 2, 2019 were as follows:

($ thousands)
2019	$	173,891
2020		151,157
2021		125,629
2022		102,488
2023		84,036
Thereafter		212,774
Total minimum operating lease payments ⁽¹⁾	$	849,975

⁽¹⁾Minimum operating lease payments have not been reduced by minimum sublease rental income of $0.5 million due in the future under sublease agreements.