The Company leases certain store real estate, warehouses, distribution centers, fulfillment centers, office space and equipment. The Company operates in leased facilities in approximately half of its store locations. Lease terms generally range from 10 to 20 years with options to renew for varying terms at the Company’s sole discretion. Certain leases also include options to purchase the leased property. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Certain leases include escalation clauses or payment of executory costs such as property taxes, utilities or insurance and maintenance. Rent expense for leases with escalation clauses or other lease concessions are accounted for on a straight-line basis over the lease term. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Certain properties or portions thereof are subleased to others for periods generally ranging from one to 20 years.

The following table provides supplemental balance sheet classification information related to leases:

(1)

Finance lease assets are recorded net of accumulated amortization of $562 and $414 as of January 28, 2023 and January 29, 2022.

The following table provides the components of lease cost:


		Year-To-Date		Year-To-Date
Lease Cost	Classification	January 28, 2023		January 29, 2022
Operating lease cost⁽¹⁾	Rent Expense	$	950	$	954
Sublease and other rental income	Rent Expense		(111)		(109)
Finance lease cost
Amortization of leased assets	Depreciation and Amortization		161		95
Interest on lease liabilities	Interest Expense		66		52

Net lease cost		$	1,066	$	992

(1)

Includes short-term leases and variable lease costs, which are immaterial.

Maturities of operating and finance lease liabilities are listed below. Amounts in the table include options to extend lease terms that are reasonably certain of being exercised.


	Operating		Finance
	Leases		Leases		Total
2023	$	930	$	228	$	1,158
2024		864		226		1,090
2025		791		222		1,013
2026		740		221		961
2027		683		223		906
Thereafter		5,688		1,492		7,180

Total lease payments		9,696		2,612	$	12,308

Less amount representing interest		2,662		526

Present value of lease liabilities⁽¹⁾	$	7,034	$	2,086

(1)

Includes the current portion of $662 for operating leases and $157 for finance leases.

Total future minimum rentals under non-cancellable subleases at January 28, 2023 were $232.

The following table provides the weighted-average lease term and discount rate for operating and finance leases:


	January 28, 2023		January 29, 2022
Weighted-average remaining lease term (years)
Operating leases	14.3		14.9
Finance leases	12.7		14.7
Weighted-average discount rate
Operating leases	4.2	%	4.1	%
Finance leases	3.5	%	3.7	%

The following table provides supplemental cash flow information related to leases:


	Year-To-Date		Year-To-Date
	January 28, 2023		January 29, 2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	903	$	897
Operating cash flows from finance leases	$	66	$	52
Financing cash flows from finance leases	$	132	$	127
Leased assets obtained in exchange for new operating lease liabilities	$	602	$	669
Leased assets obtained in exchange for new finance lease liabilities	$	656	$	753
Net gain recognized from sale and leaseback transactions⁽¹⁾	$	30	$	35
Impairment of operating lease assets	$	1	$	8
Impairment of finance lease assets	$	2	$	4

(1)

In 2022, the Company entered into sale leaseback transactions related to five properties, which resulted in total proceeds of $44. In 2021, the Company entered into sale leaseback transactions related to seven properties, which resulted in total proceeds of $79.

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 exclusively with the Company in the U.S., enhancing the Company’s digital and robotics capabilities in its distribution networks. In 2022, the Company opened four additional Kroger Delivery customer fulfillment centers in Romulus, Michigan, Dallas, Texas, Pleasant Prairie, Wisconsin, and Aurora, Colorado. The Company determined the arrangement with Ocado contains a lease of the robotic equipment used to fulfill customer orders. As a result, the Company establishes a finance lease when each facility begins fulfilling orders to customers. The base term of each lease is 10 years with options to renew at the Company’s sole discretion. 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. In 2022, the Company recorded finance lease assets of $629 and finance lease liabilities of $583 related to these location openings. In 2021, the Company recorded finance lease assets of $401 and finance lease liabilities of $372 related to openings during 2021.