Leases

6 Months Ended

Jul. 31, 2020

Leases [Abstract]

Leases

Note 6 – Leases

The Company leases retail stores, warehouses, distribution centers, office space and certain equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.

Most leases are for a term of one to ten years.  Some leases include one or more options to renew, with renewal terms that can extend the lease term from one to ten years.  Several of the Company’s retail store leases include an option to terminate the lease based on failure to achieve a specified sales volume. The exercise of lease renewal options is generally at the Company’s sole discretion. The exercise of lease termination options is generally by mutual agreement between the Company and the lessor.

Certain of the Company’s lease agreements include rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation. The Company’s leases do not contain any material residual value guarantees or material restrictive covenants.

The Company’s lease assets and liabilities as of July 31, 2020, July 31, 2019 and January 31, 2020 consist of the following:

Leases	Classification	July 31, 2020		July 31, 2019		January 31, 2020
		(In thousands)
Assets
Operating	Operating lease assets	$	168,071	$	309,421	$	270,032
Total lease assets		$	168,071	$	309,421	$	270,032
Liabilities
Current operating	Current operating lease liabilities	$	91,700	$	74,297	$	63,166
Noncurrent operating	Noncurrent operating lease liabilities		140,283		272,632		249,040
Total lease liabilities		$	231,983	$	346,929	$	312,206

The Company’s operating lease assets and operating lease liabilities significantly declined during the second quarter of fiscal 2021 due to the restructuring of the retail operations segment. As a result of this restructuring, the Company expects to close all of its Wilsons Leather, G.H. Bass and Calvin Klein Performance stores by the end of fiscal 2021. In addition, primarily due to the restructuring, in the second quarter of fiscal 2021 the Company recorded a $19.4 million impairment charge related to the operating lease assets at certain Wilsons Leather, G.H. Bass, DKNY and Vilebrequin stores as a result of the performance at these stores.

The Company recorded lease costs of $36.0 million and $58.4 million during the three and six months ended July 31, 2020, respectively. The Company recorded lease costs of $24.9 million and $49.9 million during the three and six months ended July 31, 2019, respectively. Lease costs are recorded within selling, general and administrative expenses in the Company’s condensed consolidated statements of operations and comprehensive income (loss). The Company recorded negative variable lease costs and short-term lease costs of ($4.3) million and ($0.9) million for the three and six months ended July 31, 2020, respectively. The negative variable lease costs were primarily due to rent forgiveness received by the Company’s retail operations segment that was recorded as negative variable lease costs in accordance with the Staff Q&A issued by the FASB on April 10, 2020. The Company recorded variable leases costs and short-term lease costs of $2.7 million and $5.0 million for the three and six months ended July 31, 2019, respectively. Short-term lease costs are immaterial.

As of July 31, 2020, the Company’s maturity of operating lease liabilities in the years ending up to January 31, 2025 and thereafter are as follows:

Year Ending January 31,	Amount
	(In thousands)
2021	$	79,178
2022		50,509
2023		43,058
2024		31,339
2025		24,239
After 2025		46,971
Total lease payments	$	275,294
Less: Interest		43,311
Present value of lease liabilities	$	231,983

As of July 31, 2020, there are no material leases that are legally binding but have not yet commenced.

As of July 31, 2020, the weighted average remaining lease term related to operating leases is 4.1 years. The weighted average discount rate related to operating leases is 8.1%.

Cash paid for amounts included in the measurement of operating lease liabilities is $51.0 million and $51.9 million during the six months ended July 31, 2020 and July 31, 2019, respectively. Right-of-use assets obtained in exchange for lease obligations were $10.8 million and $15.6 million as of July 31, 2020 and July 31, 2019, respectively.