We lease retail stores, a limited amount of office space and certain equipment under operating leases expiring in various years through the fiscal year ending 2030. All of our leases have been classified as operating leases and are recognized and measured as such.

Certain operating leases provide for renewal options that are at a pre-determined period and rental value. Furthermore, certain leases provide that we may cancel the lease if our retail sales at that location fall below an established level. Within the first few years of the initial lease term, a majority of our store operating leases contain cancellation clauses that allow the leases to be terminated at our discretion, if certain minimum sales levels are not met. In the normal course of business, operating leases are typically renewed or replaced by other leases.

Escalation of operating lease payments of certain leases depend on an existing index or rate, such as the consumer price index or the market interest rate. These are considered variable lease payments and are included in lease payments when the escalation is known.

⁽¹⁾Includes approximately $8.6 million and $8.0 million in variable lease costs for the thirteen weeks ended May 2, 2020 and May 4, 2019, respectively.



	May 2, 2020			February 1, 2020			May 4, 2019
Right of use assets ⁽¹⁾	$	612,161		$	648,397		$	729,950

Current lease liabilities	$	190,811		$	157,043		$	160,731
Long-term lease liabilities	520,323			555,922			645,796
Total operating lease liabilities	$	711,134		$	712,965		$	806,527

Weighted Average Remaining Lease Term (years)	4.7			4.8			5.2

Weighted Average Discount Rate ⁽²⁾	5.5		%	5.6		%	5.8		%

⁽¹⁾ During the first quarter of fiscal 2020, we completed an evaluation of our operating lease assets for indicators of impairment as a result of the impact of the COVID-19 pandemic, and consequently, recorded pre-tax impairment charges of approximately $2.4 million, which is included in cost of goods sold, pre-tax, in the accompanying unaudited condensed consolidated statements of (loss) income.

⁽²⁾ The incremental borrowing rate used by the Company is based on the rate at which the Company could borrow funds using its credit rating for a collateralized loan of similar term to the lease. The weighted average discount rate represents a weighted average of the incremental borrowing rate for each lease weighted based on the remaining fixed lease obligations.



	Thirteen Weeks Ended
	May 2, 2020			May 4, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows	$	19,119	⁽¹⁾	$	56,876
Right of use assets obtained in exchange for lease obligations, non-cash	7,885			6,028

⁽¹⁾The Company suspended rent payments commencing April 2020 and is in active discussions with landlords to find a mutually beneficial and agreeable path forward.



Fiscal Year Ending:
January 30, 2021	$	176,931
January 29, 2022	190,997
January 28, 2023	152,871
February 4, 2024	105,651
February 1, 2025	76,600
Thereafter	106,011
Total future minimum lease payments	$	809,061
Less imputed interest	(97,927		)
Total	$	711,134

Beginning on February 3, 2019, the Company accounts for leases pursuant to ASC 842, Leases, as established by ASU 2016-02, Leases. We determine if an arrangement is a lease at inception. Operating leases are included in ROU assets, current lease liabilities and long-term lease liabilities in our unaudited condensed consolidated balance sheets. The Company does not have finance leases in the periods presented.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of fixed lease payments over the lease term. The operating lease ROU asset represents the net present value of fixed payments required under the lease, discounted at the Company's incremental borrowing rate, offset by impairments and lease incentives such as tenant improvements and deferred rent balances.

Our leases do not provide an implicit rate. Accordingly, we use the Company's incremental borrowing rate at commencement date in determining the present value of lease payments over the lease term. Furthermore, we elected to apply a portfolio approach, using the same discount rate applied to a portfolio of leases for similar asset types with a similar lease term.

Our lease terms may include options to extend or terminate the lease. When it is reasonably certain that we will exercise an option to extend or terminate a lease, the Company will adjust its ROU asset and lease liability. For leases with no impairment of the ROU asset, lease expense is recognized on a straight-line basis over the lease term. For stores with impairment of the ROU asset, lease expense consists of straight-line amortization of the ROU asset and the implicit interest expense on the lease liability.

We have lease agreements with lease and non-lease components. We have made a policy election to treat both lease and non-lease components as a single component and account for the full consideration as a single lease component. This policy election is applied to all asset classes for which the Company is a lessee.

We lease retail stores and a limited amount of office space under operating leases. The majority of our lease agreements provide for tenant improvement allowances, rent escalation clauses and/or contingent rent provisions. Tenant improvement allowances, fixed rent escalation clauses and impairments are included in the ROU asset computation.

Certain leases provide for contingent rents based on defined criteria, such as gross sales in excess of a specified level. We record a contingent rent liability in accrued liabilities on the consolidated balance sheets and the corresponding rent expense when the criteria has been achieved or is probable.