Leases

9 Months Ended

Oct. 27, 2024

2. LEASES

Based on the criteria set forth in ASC Topic 842, Leases (“ASC 842”), the Company recognizes right-of-use (ROU) assets and lease liabilities related to leases on the Company’s consolidated balance sheets. The Company determines if an arrangement is, or contains, a lease at inception. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities reflect the obligation to make lease payments arising from the lease. At any given time during the lease term, the lease liability represents the present value of the remaining lease payments and the ROU asset is measured at the amount of the lease liability, adjusted for pre-paid rent, unamortized initial direct costs and the remaining balance of lease incentives received. Both the lease ROU asset and liability are reduced to zero at the end of the lease.

The Company leases retail space under non-cancelable lease agreements, which expire on various dates through 2036. Substantially all of these arrangements are store leases. Store leases generally have initial lease terms ranging from five years to fifteen years with renewal options and rent escalation provisions. At the commencement of a lease, the Company includes only the initial lease term as the option to extend is not reasonably certain. The Company does not record leases with a lease term of 12 months or less on the Company’s consolidated balance sheets.

When calculating the lease liability on a discounted basis, the Company applies its estimated discount. The Company bases this discount on a collateralized interest rate as well as publicly available data for instruments with similar characteristics.

In addition to rent payments, leases for retail space contain payments for real estate taxes, insurance costs, common area maintenance, and utilities that are not fixed. The Company accounts for these costs as variable payments and does not include such costs as a lease component.

The expense components of the Company’s leases reflected on the Company’s consolidated statement of operations were as follows:


	Consolidated Statement	Three Months Ended				Nine Months Ended
	of Operations	October 27, 2024		October 29, 2023		October 27, 2024		October 29, 2023
(in thousands)
Finance lease expenses
Amortization of right-of-use ‎assets	Selling, general and ‎administrative expenses	$	722	$	840	$	2,374	$	2,520
Interest on lease liabilities	Interest expense		382		423		1,189		1,292
Total finance lease expense		$	1,104	$	1,263	$	3,563	$	3,812
Operating lease expense	Selling, general and ‎administrative expenses	$	6,921	$	5,074	$	17,516	$	15,175
Amortization of build-to-suit ‎leases capital contribution	Selling, general and ‎administrative expenses		321		321		963		963
Variable lease expense	Selling, general and ‎administrative expenses		3,091		2,685		9,052		8,158
Total lease expense		$	11,437	$	9,343	$	31,094	$	28,108

‎

Other information related to leases were as follows:


	Nine Months Ended
	October 27, 2024		October 29, 2023
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash flows from finance leases	$	2,109	$	2,116
Operating cash flows from finance leases	$	1,189	$	1,293
Operating cash flows from operating leases	$	16,092	$	15,562

Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	-	$	5,174

Weighted-average remaining lease term (in years):
Finance leases		10		11
Operating leases		7		8

Weighted-average discount rate:
Finance leases		4.5%		4.4%
Operating leases		4.2%		4.2%

Future minimum lease payments under the non-cancellable leases are as follows as of October 27, 2024:


Fiscal year	Finance		Operating
(in thousands)
2024 (remainder of fiscal year)	$	987		4,938
2025		3,972		19,183
2026		3,993		18,465
2027		3,993		17,193
2028		4,017		15,391
Thereafter		25,215		44,696
Total future minimum lease payments	$	42,177	$	119,866
Less – Discount		(8,403)		(15,986)
Lease liability	$	33,774	$	103,880