Lease Commitments

3 Months Ended

Apr. 30, 2022

3. Lease Commitments

The Company’s leases primarily consist of stores, distribution facilities and office space under operating and finance leases that will expire principally during the next 30 years. The leases typically include renewal options at five year intervals and escalation clauses. Lease renewals are only included in the lease liability to the extent that they are reasonably assured of being exercised. The Company’s leases typically provide for contingent rentals based on a percentage of gross sales. Contingent rentals are not included in the lease liability, and they are recognized as variable lease cost when incurred.

The following is a schedule of the Company’s future lease payments:


	(in thousands)
Fiscal Year	Operating Leases			Finance Leases
2022 (remainder)	$	383,117		$	5,644
2023		516,652			7,589
2024		474,253			7,417
2025		444,798			5,287
2026		408,513			5,324
2027		370,149			3,780
Thereafter		1,130,557			24,233
Total future minimum lease payments		3,728,039			59,274
Amount representing interest		(644,283	)		(16,469	)
Total lease liabilities		3,083,756			42,805
Less: current portion of lease liabilities		(374,740	)		(4,859	)
Total long term lease liabilities	$	2,709,016		$	37,946

Weighted average discount rate		4.8	%		6.6	%
Weighted average remaining lease term (years)		8.3			11.0

The above schedule excludes approximately $485.8 million for 85 stores that the Company has committed to open or relocate but has not yet taken possession of the space. The discount rates used in valuing the Company’s leases are not readily determinable, and are based on the Company’s incremental borrowing rate on a fully collateralized basis.

The following is a schedule of net lease costs for the periods indicated:


	(in thousands)
	Three Months Ended
	April 30, 2022			May 1, 2021
Finance lease cost:
Amortization of finance lease asset (a)	$	1,140		$	1,142
Interest on lease liabilities (b)		722			808
Operating lease cost (c)		125,688			111,159
Variable lease cost (c)		48,970			46,747
Total lease cost		176,520			159,856
Less all rental income (d)		(1,548	)		(1,275	)
Total net rent expense (e)	$	174,972		$	158,581


(a)	Included in the line item “Depreciation and amortization” in the Company’s Condensed Consolidated Statements of Income.
(b)	Included in the line item “Interest expense” in the Company’s Condensed Consolidated Statements of Income.
(c)	Includes real estate taxes, common area maintenance, insurance and percentage rent. Included in the line item “Selling, general and administrative expenses” in the Company’s Condensed Consolidated Statements of Income.
(d)	Included in the line item “Other revenue” in the Company’s Condensed Consolidated Statements of Income.
(e)	Excludes an immaterial amount of short-term lease cost.

Supplemental cash flow disclosures related to leases are as follows:


	(in thousands)
	Three Months Ended
	April 30, 2022		May 1, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Cash payments arising from operating lease liabilities (a)	$	126,091	$	128,200
Cash payments for the principal portion of finance lease liabilities (b)	$	1,140	$	1,263
Cash payments for the interest portion of finance lease liabilities (a)	$	722	$	808
Supplemental non-cash information:
Operating lease liabilities arising from obtaining right-of-use assets	$	276,559	$	114,364


(a)	Included within operating activities in the Company’s Condensed Consolidated Statements of Cash Flows.
(b)	Included within financing activities in the Company’s Condensed Consolidated Statements of Cash Flows.