Leases (Tables)

3 Months Ended

May 04, 2019

Lease costs consist of the following (in thousands):


	Three Months Ended
	May 4,			May 5,
	2019			2018
Operating lease cost (1)(2)	$	19,117	$	21,346

Finance lease costs
Amortization of leased assets (1)		8,852		5,899
Interest on lease liabilities (3)		5,514		3,092

Sublease income (4)		(3,282)		(1,010)
Total lease costs—net	$	30,201	$	29,327

(1)

Operating lease costs and amortization of finance lease right-of-use assets are included in cost of goods sold or selling, general and administrative expenses on the condensed consolidated statements of income based on the Company’s policy. Refer to Note 3—Significant Accounting Policies in the 2018 Form 10-K.

(2)

Includes short-term leases and variable lease costs.

(3)

Included in interest expense—net on the condensed consolidated statements of income.

(4)

Included in selling, general and administrative expenses on the condensed consolidated statements of income.

Summary of lease right-of-use assets and lease liabilities

Lease right-of-use assets and lease liabilities consist of the following (in thousands):


		May 4,		February 2,
		2019		2019
	Balance Sheet Classification
Assets
Operating leases	Operating lease right-of-use assets	$	432,212	$	440,504
Finance leases (1)(2)	Property and equipment—net		658,077		646,875
Total lease right-of-use assets			1,090,289		1,087,379

Liabilities
Current
Operating leases	Operating lease liabilities	$	56,601	$	66,249
Finance leases	Other current liabilities		7,716		9,184
Total lease liabilities—current			64,317		75,433

Non-current
Operating leases	Non-current operating lease liabilities	$	427,961	$	437,557
Finance leases	Non-current finance lease liabilities		436,228		421,245
Total lease liabilities—non-current			864,189		858,802
Total lease liabilities		$	928,506	$	934,235

(1)

Finance lease right-of-use assets include capitalized amounts related to the Company’s construction activities to design and build leased assets, as well as rent payments made to landlords for which the respective Galleries are not yet opened.

(2)

Finance lease right-of-use assets are recorded net of accumulated amortization of $64.1 million and $55.5 million as of May 4, 2019 and February 2, 2019, respectively.

Summary of maturities of operating lease liabilities

The maturities of lease liabilities are as follows as of May 4, 2019 (in thousands):


Fiscal year	Operating Leases		Finance Leases		Total
Remainder of fiscal 2019	$	54,016	$	22,058	$	76,074
2020		76,683		33,426		110,109
2021		63,728		33,880		97,608
2022		56,804		34,388		91,192
2023		53,453		35,138		88,591
2024		49,688		35,680		85,368
Thereafter		228,008		548,155		776,163
Total lease payments (1)		582,380		742,725		1,325,105
Less—imputed interest (2)		(97,818)		(298,781)		(396,599)
Present value of lease liabilities (3)	$	484,562	$	443,944	$	928,506

(1)

Total lease payments exclude $211.3 million of legally binding payments for leases signed but not yet commenced as of May 4, 2019.

(2)

Calculated using the incremental borrowing rate for each lease at lease commencement.

(3)

Excludes future commitments under short-term lease agreements of $6.4 million as of May 4, 2019.

Summary of maturities of finance lease liabilities


Fiscal year	Operating Leases		Finance Leases		Total
Remainder of fiscal 2019	$	54,016	$	22,058	$	76,074
2020		76,683		33,426		110,109
2021		63,728		33,880		97,608
2022		56,804		34,388		91,192
2023		53,453		35,138		88,591
2024		49,688		35,680		85,368
Thereafter		228,008		548,155		776,163
Total lease payments (1)		582,380		742,725		1,325,105
Less—imputed interest (2)		(97,818)		(298,781)		(396,599)
Present value of lease liabilities (3)	$	484,562	$	443,944	$	928,506

(1)

Total lease payments exclude $211.3 million of legally binding payments for leases signed but not yet commenced as of May 4, 2019.

(2)

Calculated using the incremental borrowing rate for each lease at lease commencement.

(3)

Excludes future commitments under short-term lease agreements of $6.4 million as of May 4, 2019.

Summary of supplemental information related to leases

Supplemental information related to leases consists of the following:


	Three Months Ended
	May 4,		May 5,
	2019		2018
Weighted-average remaining lease term (years)
Operating leases		9.1	9.7
Finance leases		19.1	18.2

Weighted-average discount rate
Operating leases		3.80%	3.71%
Finance leases		5.26%	4.82%

Summary of other information related to leases

Other information related to leases consists of the following (in thousands):


	Three Months Ended
	May 4,			May 5,
	2019			2018
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	(31,780)	$	(23,026)
Operating cash flows from finance leases		(5,514)		(3,092)
Financing cash flows from finance leases		(2,129)		(1,776)
Total cash outflows from leases	$	(39,423)	$	(27,894)

Lease right-of-use assets obtained in exchange for lease obligations (non-cash)
Finance leases	$	17,984	$	5,023
Operating leases		8,173		4,666