Lease Commitments

6 Months Ended

Jul. 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)	$	249,797		$	3,762
2023		525,787			7,589
2024		493,263			7,417
2025		459,812			5,287
2026		422,883			5,324
2027		384,701			3,780
Thereafter		1,202,589			24,234
Total future minimum lease payments		3,738,832			57,393
Amount representing interest		(639,485	)		(15,764	)
Total lease liabilities		3,099,347			41,629
Less: current portion of lease liabilities		(375,294	)		(4,973	)
Total long term lease liabilities	$	2,724,053		$	36,656

Weighted average discount rate		4.8	%		6.6	%
Weighted average remaining lease term (years)		8.2			10.9

The above schedule excludes approximately $569.3 million for 102 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						Six Months Ended
	July 30, 2022			July 31, 2021			July 30, 2022			July 31, 2021
Finance lease cost:
Amortization of finance lease asset (a)	$	1,140		$	1,132		$	2,281		$	2,274
Interest on lease liabilities (b)		697			790			1,419			1,598
Operating lease cost (c)		128,646			115,771			254,334			226,930
Variable lease cost (c)		51,578			46,165			100,549			92,912
Total lease cost		182,061			163,858			358,583			323,714
Less all rental income (d)		(1,140	)		(1,354	)		(2,688	)		(2,629	)
Total net rent expense (e)	$	180,921		$	162,504		$	355,895		$	321,085


(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)
	Six Months Ended
	July 30, 2022		July 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Cash payments arising from operating lease liabilities (a)	$	255,235	$	242,905
Cash payments for the principal portion of finance lease liabilities (b)	$	2,316	$	1,908
Cash payments for the interest portion of finance lease liabilities (a)	$	1,419	$	1,598
Supplemental non-cash information:
Operating lease liabilities arising from obtaining right-of-use assets	$	392,612	$	203,396


(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.