Leases (Tables)

3 Months Ended

Apr. 29, 2023

Lease costs—net consist of the following:


	THREE MONTHS ENDED
	APRIL 29,		APRIL 30,
	2023		2022

	(in thousands)
Operating lease cost⁽¹⁾	$	26,300	$	25,133
Finance lease costs
Amortization of leased assets⁽¹⁾		13,704		11,498
Interest on lease liabilities⁽²⁾		8,486		7,071
Variable lease costs⁽³⁾		6,168		9,087
Sublease income⁽⁴⁾		(1,546)		(1,128)
Total lease costs—net	$	53,112	$	51,661

(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 our accounting policy. Refer to Note 3—Significant Accounting Policies in the 2022 Form 10-K.

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

(3)

Represents variable lease payments under operating and finance lease agreements, primarily associated with contingent rent based on a percentage of retail sales over contractual levels of $3.9 million and $6.7 million for the three months ended April 29, 2023 and April 30, 2022, respectively, and charges associated with common area maintenance of $2.3 million and $2.4 million for the three months ended April 29, 2023 and April 30, 2022, respectively. Other variable costs, which include single lease cost related to variable lease payments based on an index or rate that were not included in the measurement of the initial lease liability and right-of-use asset, were not material in either period.

(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


		APRIL 29,		JANUARY 28,
		2023		2023

		(in thousands)
	Balance Sheet Classification
Assets
Operating leases	Operating lease right-of-use assets	$	528,010	$	527,246
Finance leases^(1)(2)(3)	Property and equipment—net		1,064,852		1,078,979
Total lease right-of-use assets		$	1,592,862	$	1,606,225
Liabilities
Current⁽⁴⁾
Operating leases	Operating lease liabilities	$	81,262	$	80,384
Finance leases	Other current liabilities		17,349		17,007
Total lease liabilities—current			98,611		97,391
Non-current
Operating leases	Non-current operating lease liabilities		504,479		505,809
Finance leases	Non-current finance lease liabilities		648,792		653,050
Total lease liabilities—non-current			1,153,271		1,158,859
Total lease liabilities		$	1,251,882	$	1,256,250

(1)	Includes capitalized amounts related to our completed construction activities to design and build leased assets, which are reclassified from other non-current assets upon lease commencement.

(2)	Recorded net of accumulated amortization of $237 million and $224 million as of April 29, 2023 and January 28, 2023, respectively.

(3)	Includes $39 million as of both April 29, 2023 and January 28, 2023 related to an RH Design Gallery lease with a landlord that is an affiliate of the managing member of the Aspen LLCs (refer to Note 5—Variable Interest Entities).

(4)	Current portion of lease liabilities represents the reduction of the related lease liability over the next 12 months.

Summary of Maturities of Lease Liabilities

The maturities of lease liabilities are as follows as of April 29, 2023:


	OPERATING		FINANCE
FISCAL YEAR	LEASES		LEASES		TOTAL

	(in thousands)
Remainder of fiscal 2023	$	78,224	$	37,283	$	115,507
2024		98,711		49,941		148,652
2025		94,228		51,356		145,584
2026		89,951		52,124		142,075
2027		84,687		53,264		137,951
2028		55,407		52,484		107,891
Thereafter		197,403		910,714		1,108,117
Total lease payments⁽¹⁾⁽²⁾		698,611		1,207,166		1,905,777
Less—imputed interest⁽³⁾		(112,870)		(541,025)		(653,895)
Present value of lease liabilities	$	585,741	$	666,141	$	1,251,882

(1)

Total lease payments include future obligations for renewal options that are reasonably certain to be exercised and are included in the measurement of the lease liability. Total lease payments exclude $663 million of legally binding payments under the non-cancellable term for leases signed but not yet commenced under our accounting policy as of April 29, 2023, of which $22 million, $37 million, $43 million, $43 million, $41 million and $38 million will be paid in the remainder of fiscal 2023, fiscal 2024, fiscal 2025, fiscal 2026, fiscal 2027 and fiscal 2028, respectively, and $439 million will be paid subsequent to fiscal 2028.

(2)	Excludes an immaterial amount of future commitments under short-term lease agreements.

(3)	Calculated using the discount rate for each lease at lease commencement.

Summary of Supplemental Information Related to Leases


	THREE MONTHS ENDED
	APRIL 29,		APRIL 30,
	2023		2022
Weighted-average remaining lease term (years)
Operating leases		8.2		8.9
Finance leases		21.7		21.1
Weighted-average discount rate
Operating leases		4.19%		3.95%
Finance leases		5.32%		5.06%

Summary of Other Information Related to Leases


	THREE MONTHS ENDED
	APRIL 29,		APRIL 30,
	2023		2022

	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	(27,612)	$	(25,199)
Operating cash flows from finance leases		(8,615)		(7,071)
Financing cash flows from finance leases		(3,877)		(3,559)
Total cash outflows from leases	$	(40,104)	$	(35,829)
Lease right-of-use assets obtained in exchange for lease obligations—net of lease terminations (non-cash)
Operating leases	$	20,861	$	12,459
Finance leases		—		38,252