Leases

12 Months Ended

Feb. 01, 2020

We lease our office space and all of our retail store locations, transportation equipment and other equipment under various noncancelable operating leases. The leases have varying terms and expire at various dates through 2034. The store leases in the United States, Puerto Rico and Canada typically have initial terms of approximately 10 years. The store leases in the United Kingdom and the Republic of Ireland typically have initial terms of between 10 and 15 years. Our lease portfolio includes leases with fixed base rental payments, rental payments based on a percentage of retail sales over contractual amounts and others with predetermined fixed escalations of the minimum rentals based on a defined consumer price index or percentage. Generally, most of the leases require us to pay taxes, insurance, maintenance costs and contingent rentals based on sales. We evaluate renewal options and break options at lease inception and on an ongoing basis, and include renewal options and break options that we are reasonably certain to exercise in our expected lease terms for calculations of our right-of-use assets and liabilities. Approximately 2% of our leases contain renewal options. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The lease on our Nashville office expires in April 2022. On February 10, 2020, we announced plans for our new corporate headquarters in Nashville, Tennessee. We entered into a lease agreement for approximately 199,000 square feet of office space which will replace our current corporate headquarters office lease. The term of the lease is 15 years, with two options to extend for an additional period of five years each.

Under ASC 842, for store, office and equipment leases beginning in Fiscal 2020 and later, we have elected to not separate fixed lease components and non-lease components. Accordingly, we include fixed rental payments, common area maintenance costs, promotional advertising costs and other fixed costs in our measurement of lease liabilities.

Our leases do not provide an implicit rate, so the incremental borrowing rate, based on the information available at commencement or modification date, is used in determining the present value of lease payments. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment. For operating leases that commenced prior to the date of adoption of the new lease accounting guidance, we used the incremental borrowing rate that corresponded to the initial lease term as of the date of adoption.

Net lease costs are included within selling and administrative expenses on the Consolidated Statements of Operations. The table below presents the components of lease cost for operating leases for the year ended February 1, 2020.




(In thousands)	Fiscal 2020

Operating lease cost	$184,428
Variable lease cost	12,176
Less: Sublease income	(307	)
Net Lease Cost	$196,297

Note 8

Leases, Continued

The following table reconciles the maturities of undiscounted cash flows to our operating lease liabilities recorded on the Consolidated Balance Sheets at February 1, 2020:



Fiscal Years	(In thousands)
2021	$180,314
2022	171,483
2023	151,141
2024	127,544
2025	103,668
Thereafter	192,246
Total undiscounted future minimum lease payments	926,396
Less: Amounts representing interest	(135,752)
Total Present Value of Operating Lease Liabilities	$790,644

Our weighted-average remaining lease term and weighted-average discount rate for operating leases as of February 1, 2020 are:



	February 1, 2020
Weighted-average remaining lease term (years)	6.2 years

Weighted-average discount rate	5.2%

Prior Period Comparative Disclosures

Under the optional transition method, for leases that existed prior to and at the adoption of the new standard, we continue to present comparative prior period lease amounts in accordance with ASC 840, "Leases". As of February 2, 2019 future minimum rental commitments were:



Fiscal Years	(In thousands)
2020	$183,432
2021	171,584
2022	159,155
2023	140,889
2024	119,023
Thereafter	323,638
Total Minimum Rental Commitments	$1,097,721

Leasehold improvements are recorded at their gross costs including items reimbursed by landlords. The reimbursements are recorded as deferred rent and amortized as a reduction of rent expense over the initial lease term. Tenant allowances of $22.5 million and deferred rent of $48.6 million at February 2, 2019 are included in other long-term liabilities on the Consolidated Balance Sheets.

Total rent expense was $202.6 million and $203.1 million for Fiscal 2019 and 2018, respectively. Total contingent rent was not material for Fiscal 2019 and 2018.