LEASES AND LEASE-FINANCED TRANSACTIONS

6 Months Ended

Aug. 16, 2025

LEASES AND LEASE-FINANCED TRANSACTIONS

LEASES AND LEASE-FINANCED TRANSACTIONS

7. LEASES AND LEASE-FINANCED TRANSACTIONS

On May 17, 2018, the Company entered into a Partnership Framework Agreement with Ocado International Holdings Limited and Ocado Group plc (“Ocado”), which has since been amended. Under this agreement, Ocado will partner with the Company in the U.S., enhancing the Company’s digital and robotics capabilities in its distribution networks. In accordance with GAAP, the Company determined the arrangement with Ocado contains a lease of the robotic equipment used to fulfill customer orders. The Company elected to combine the lease and non-lease elements in the contract.  As a result, the Company will account for all payments to Ocado as lease payments.  During the second quarter of 2025, Ocado drew down the entire $152 from its letter of credit under the Amended and Restated Partnership Framework Agreement.  The Company recorded finance lease assets of $23 for the portion of the payment allocated to commenced leases.  The remaining payment amount is treated as prepaid rent and is recorded in “Other assets” in the Company’s Consolidated Balance Sheet and in “Other” within “Cash Flows from Investing Activities” in the Company’s Consolidated Statement of Cash Flows. As of August 16, 2025 and February 1, 2025, the Company had $907 and $926, respectively, of net finance lease assets included within “Property, plant and equipment, net” in the Company’s Consolidated Balance Sheets related to the Company's agreement with Ocado. As of August 16, 2025 and February 1, 2025, the Company had $111 and $104, respectively, of current finance lease liabilities recorded within “Current portion of long-term debt including obligations under finance leases" and $746 and $781, respectively, of non-current finance lease liabilities recorded within “Long-term debt including obligations under finance leases” in the Company’s Consolidated Balance Sheets.

The Company is currently undertaking a comprehensive review of its eCommerce operations and reviewing all aspects of this business to drive growth by both improving the customer experience while improving profitability. The outcome of this review could have a material effect on the Company’s Consolidated Financial Statements.