Leases (Notes)

12 Months Ended

Feb. 01, 2020

Lessee, Lease, Description [Line Items]

Leases

We adopted the requirements of ASU No. 2016-02 as of February 3, 2019, utilizing the optional effective date transition method allowing the application of the new standard at the adoption date with comparative periods presented in accordance with ASC 840, Leases. At adoption, we made the following practical expedient policy elections:


•	We applied the new standard using the package of practical expedients permitted under the transition guidance, which allowed us to not reassess:

◦Whether any expired or existing contracts are or contain leases;


◦	Lease classification for any expired or existing leases, which allowed us to carry forward the historical lease classifications; and

◦Indirect costs for any existing leases.


•	We elected the practical expedient that allowed us to use hindsight in determining the lease term.


•	We elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements on existing agreements.


•	We elected the accounting policy to not recognize a right-of-use asset and operating lease liability for leases with an initial term of twelve months or less. The Company records lease expense for short term leases on a straight-line basis over the lease term in rentals on the consolidated statements of income.


•	We elected the accounting policy to account for lease components (e.g. fixed rent payments) separately from non-lease components (e.g. common area maintenance costs).

The Company leases retail stores, office space and equipment under operating leases. The majority of these operating leases were impacted by the adoption of the new standard. At adoption, we recorded right-of-use operating lease assets and operating lease liabilities totaling $57.0 million and $56.2 million, respectively. As of February 1, 2020, right-of-use operating lease assets, which are recorded in operating lease assets in the consolidated balance sheets, totaled $47.9 million, and operating lease liabilities, which are recorded in current portion of operating lease liabilities and operating lease liabilities, totaled $47.3 million. The impact of the adoption of the new standard was immaterial to our consolidated statements of income, consolidated statements of cash flows and consolidated statements of stockholders' equity.

In determining our operating lease assets and operating lease liabilities, we applied an incremental borrowing rate to the minimum lease payments within each lease agreement. ASU No. 2016-02 requires the use of the rate implicit in the lease whenever that rate is readily determinable; furthermore, if the implicit rate is not readily determinable, a lessee may use its incremental borrowing rate. The incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. To estimate our specific incremental borrowing rates that align with applicable lease terms, we utilized a model consistent with the credit quality of our outstanding debt instruments.

Renewal options from two to 20 years exist on the majority of leased properties. The Company has sole discretion in exercising the lease renewal options. We do not recognize operating lease assets or operating lease liabilities for renewal periods unless it has been determined that we are reasonably certain of renewing the lease at inception. The depreciable life of operating lease assets and related leasehold improvements is limited by the expected lease term.

Contingent rentals on certain leases are based on a percentage of annual sales in excess of specified amounts. Other contingent rentals are based entirely on a percentage of sales. The Company's operating lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The following table summarizes the Company's operating and finance leases:



(in thousands of dollars)	Classification - Consolidated Balance Sheets	February 1, 2020		February 2, 2019^(a)
Assets
Finance lease assets	Property and equipment, net ^(b)	$	670	$	1,093
Operating lease assets	Operating lease assets	47,924		—
Total leased assets		$	48,594	$	1,093

Liabilities
Current
Finance	Current portion of finance lease liabilities	$	1,219	$	1,214
Operating	Current portion of operating lease liabilities	14,654		—
Noncurrent
Finance	Finance lease liabilities	695		1,666
Operating	Operating lease liabilities	32,683		—
Total lease liabilities		$	49,251	$	2,880

^(a) The Company adopted and applied ASU No. 2016-02, Leases (Topic 842): Amendments to the FASB Accounting Standards Codification and related amendments on February 3, 2019. The prior period is presented under ASC 840, Leases.

^(b) Finance lease assets are recorded net of accumulated amortization of $13.9 million, and $13.5 million as of February 1, 2020 and February 2, 2019, respectively.



Lease Cost
(in thousands of dollars)	Classification - Consolidated Statements of Income	Fiscal 2019		Fiscal 2018		Fiscal 2017
Operating lease cost ^(a)	Rentals	$	26,375	$	28,646	$	28,012
Finance lease cost
Amortization of leased assets	Depreciation and amortization	423		481		3,512
Interest on lease liabilities	Interest and debt expense, net	462		320		418
Net lease cost		$	27,260	$	29,447	$	31,942

^(a)Includes short term lease costs of $3.2 million and variable lease costs, including contingent rent, of $3.7 million for fiscal 2019. Includes contingent rentals of $3.0 million for fiscal 2019 and $3.4 million for each of fiscal years 2018 and 2017.

Maturities of Lease Liabilities



(in thousands of dollars) Fiscal Year	Operating Leases			Finance Leases			Total
2020	$	16,251		$	1,428		$	17,679
2021	12,991			726			13,717
2022	6,650			—			6,650
2023	3,778			—			3,778
2024	3,022			—			3,022
After 2024	15,690			—			15,690
Total minimum lease payments	58,382			2,154			60,536
Less amount representing interest	(11,045		)	(240		)	(11,285		)
Present value of lease liabilities	$	47,337		$	1,914		$	49,251

Lease Term and Discount Rate



	February 1, 2020
Weighted-average remaining lease term
Operating leases	6.2 years
Finance leases	1.7 years
Weighted-average discount rate
Operating leases	6.6	%
Finance leases	15.4	%

Other Information



(in thousands of dollars)	February 1, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	20,032
Operating cash flows from finance leases	462
Financing cash flows from finance leases	966

Lease assets obtained in exchange for new operating lease liabilities	$	7,974