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Lease Accounting
 9 Months Ended
Nov. 02, 2024
Leases [Abstract]  
Lease Accounting Lease Accounting
The Company primarily leases its showrooms, advertising, licensing, sales and merchandising offices, remote distribution and warehousing facilities and retail and factory outlet store locations under operating lease agreements expiring on various dates through August 2044. The Company also leases some of its equipment, as well as computer hardware and software, under operating and finance lease agreements expiring on various dates through July 2029.
The Company’s lease agreements primarily provide for lease payments based on a minimum annual rental amount, a percentage of annual sales volume, periodic adjustments related to inflation or a combination of such lease payments. Certain retail store leases provide for lease payments based upon the minimum annual rental amount and a percentage of annual sales volume, generally ranging from 3% to 26%, when specific sales volumes are exceeded. The Company’s retail concession leases also provide for lease payments primarily based upon a percentage of annual sales volume, which averages approximately 26%.
During the nine months ended November 2, 2024, the Company closed on the sale and leaseback of its U.S. distribution center. The lease payments escalate at a fixed percentage rate annually for the first ten years. After the initial lease term, the Company has the option to renew the lease for two five-year extension periods. The transaction met the criteria for sale-leaseback accounting and, as such, a net gain of $13.8 million was recognized on the sale of the assets during the nine months ended November 2, 2024.
In addition to the amounts as disclosed below, the Company has estimated additional operating lease commitments of approximately $8.3 million for leases where the Company has not yet taken possession of the underlying asset as of November 2, 2024. As such, the related operating lease ROU assets and operating lease liabilities have not been recognized in the Company’s condensed consolidated balance sheet as of November 2, 2024.
The components of leases are (in thousands):
Nov 2, 2024Feb 3, 2024
AssetsBalance Sheet Location
OperatingOperating lease right-of-use assets$794,066 $667,031 
FinanceProperty and equipment, net8,010 15,132 
Total lease assets$802,076 $682,163 
LiabilitiesBalance Sheet Location
Current:
OperatingCurrent portion of operating lease liabilities$180,835 $166,451 
FinanceCurrent portion of borrowings and finance lease obligations5,603 5,573 
Noncurrent:
OperatingLong-term operating lease liabilities670,430 542,392 
FinanceLong-term debt and finance lease obligations5,154 9,857 
Total lease liabilities$862,022 $724,273 
The components of lease costs are (in thousands):
Three Months EndedNine Months Ended
Income Statement LocationNov 2, 2024Oct 28, 2023Nov 2, 2024Oct 28, 2023
Operating lease costsCost of product sales$53,293 $44,964 $151,652 $136,367 
Operating lease costsSelling, general and administrative expenses7,730 6,744 24,820 19,941 
Operating lease costs1
Net (gains) losses on lease modifications(718)537 (718)(1,894)
Finance lease costs
Amortization of leased assetsCost of product sales8 9 20 61 
Amortization of leased assetsSelling, general and administrative expenses753 1,635 3,881 4,747 
Interest on lease liabilitiesInterest expense120 179 475 577 
Variable lease costs2
Cost of product sales25,361 23,400 74,894 71,551 
Variable lease costs2
Selling, general and administrative expenses932 804 3,247 2,551 
Short-term lease costsCost of product sales129 92 358 241 
Short-term lease costsSelling, general and administrative expenses2,071 2,015 6,275 4,306 
Total lease costs$89,679 $80,379 $264,904 $238,448 
______________________________________________________________________
Notes:
1During each of the three and nine months ended November 2, 2024 and October 28, 2023, net (gains) losses on lease modifications related primarily to the early termination of certain lease agreements. Operating lease costs for these locations prior to the early termination were included in cost of product sales.
2During the three and nine months ended November 2, 2024, variable lease costs included certain rent concessions of approximately $0.2 million and $0.5 million, respectively, received by the Company, primarily in Europe. During the three and nine months ended October 28, 2023, variable lease costs included certain rent concessions of approximately $0.4 million and $1.4 million, respectively, received by the Company, primarily in Europe.
Maturities of the Company’s operating and finance lease liabilities as of November 2, 2024 are (in thousands):
Operating Leases
Maturity of Lease Liabilities Non-Related PartiesRelated PartiesFinance LeasesTotal
Fiscal 2025$67,282 $1,934 $816 $70,032 
Fiscal 2026177,476 7,218 5,696 190,390 
Fiscal 2027161,172 7,780 3,184 172,136 
Fiscal 2028132,696 7,703 1,353 141,752 
Fiscal 2029117,440 8,468 294 126,202 
After fiscal 2029300,818 12,329 3 313,150 
Total lease payments956,884 45,432 11,346 1,013,662 
Less: Interest142,591 8,460 589 151,640 
Present value of lease liabilities$814,293 $36,972 $10,757 $862,022 
Other supplemental information is (in thousands):
Lease Term and Discount RateNov 2, 2024
Weighted-average remaining lease term
Operating leases6.4 years
Finance leases2.6 years
Weighted-average discount rate
Operating leases5.2%
Finance leases4.1%
Nine Months Ended
Supplemental Cash Flow InformationNov 2, 2024Oct 28, 2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$163,728 $155,379 
New operating ROU assets obtained in exchange for lease liabilities$192,543 $128,756 
Lease Accounting Lease Accounting
The Company primarily leases its showrooms, advertising, licensing, sales and merchandising offices, remote distribution and warehousing facilities and retail and factory outlet store locations under operating lease agreements expiring on various dates through August 2044. The Company also leases some of its equipment, as well as computer hardware and software, under operating and finance lease agreements expiring on various dates through July 2029.
The Company’s lease agreements primarily provide for lease payments based on a minimum annual rental amount, a percentage of annual sales volume, periodic adjustments related to inflation or a combination of such lease payments. Certain retail store leases provide for lease payments based upon the minimum annual rental amount and a percentage of annual sales volume, generally ranging from 3% to 26%, when specific sales volumes are exceeded. The Company’s retail concession leases also provide for lease payments primarily based upon a percentage of annual sales volume, which averages approximately 26%.
During the nine months ended November 2, 2024, the Company closed on the sale and leaseback of its U.S. distribution center. The lease payments escalate at a fixed percentage rate annually for the first ten years. After the initial lease term, the Company has the option to renew the lease for two five-year extension periods. The transaction met the criteria for sale-leaseback accounting and, as such, a net gain of $13.8 million was recognized on the sale of the assets during the nine months ended November 2, 2024.
In addition to the amounts as disclosed below, the Company has estimated additional operating lease commitments of approximately $8.3 million for leases where the Company has not yet taken possession of the underlying asset as of November 2, 2024. As such, the related operating lease ROU assets and operating lease liabilities have not been recognized in the Company’s condensed consolidated balance sheet as of November 2, 2024.
The components of leases are (in thousands):
Nov 2, 2024Feb 3, 2024
AssetsBalance Sheet Location
OperatingOperating lease right-of-use assets$794,066 $667,031 
FinanceProperty and equipment, net8,010 15,132 
Total lease assets$802,076 $682,163 
LiabilitiesBalance Sheet Location
Current:
OperatingCurrent portion of operating lease liabilities$180,835 $166,451 
FinanceCurrent portion of borrowings and finance lease obligations5,603 5,573 
Noncurrent:
OperatingLong-term operating lease liabilities670,430 542,392 
FinanceLong-term debt and finance lease obligations5,154 9,857 
Total lease liabilities$862,022 $724,273 
The components of lease costs are (in thousands):
Three Months EndedNine Months Ended
Income Statement LocationNov 2, 2024Oct 28, 2023Nov 2, 2024Oct 28, 2023
Operating lease costsCost of product sales$53,293 $44,964 $151,652 $136,367 
Operating lease costsSelling, general and administrative expenses7,730 6,744 24,820 19,941 
Operating lease costs1
Net (gains) losses on lease modifications(718)537 (718)(1,894)
Finance lease costs
Amortization of leased assetsCost of product sales8 9 20 61 
Amortization of leased assetsSelling, general and administrative expenses753 1,635 3,881 4,747 
Interest on lease liabilitiesInterest expense120 179 475 577 
Variable lease costs2
Cost of product sales25,361 23,400 74,894 71,551 
Variable lease costs2
Selling, general and administrative expenses932 804 3,247 2,551 
Short-term lease costsCost of product sales129 92 358 241 
Short-term lease costsSelling, general and administrative expenses2,071 2,015 6,275 4,306 
Total lease costs$89,679 $80,379 $264,904 $238,448 
______________________________________________________________________
Notes:
1During each of the three and nine months ended November 2, 2024 and October 28, 2023, net (gains) losses on lease modifications related primarily to the early termination of certain lease agreements. Operating lease costs for these locations prior to the early termination were included in cost of product sales.
2During the three and nine months ended November 2, 2024, variable lease costs included certain rent concessions of approximately $0.2 million and $0.5 million, respectively, received by the Company, primarily in Europe. During the three and nine months ended October 28, 2023, variable lease costs included certain rent concessions of approximately $0.4 million and $1.4 million, respectively, received by the Company, primarily in Europe.
Maturities of the Company’s operating and finance lease liabilities as of November 2, 2024 are (in thousands):
Operating Leases
Maturity of Lease Liabilities Non-Related PartiesRelated PartiesFinance LeasesTotal
Fiscal 2025$67,282 $1,934 $816 $70,032 
Fiscal 2026177,476 7,218 5,696 190,390 
Fiscal 2027161,172 7,780 3,184 172,136 
Fiscal 2028132,696 7,703 1,353 141,752 
Fiscal 2029117,440 8,468 294 126,202 
After fiscal 2029300,818 12,329 3 313,150 
Total lease payments956,884 45,432 11,346 1,013,662 
Less: Interest142,591 8,460 589 151,640 
Present value of lease liabilities$814,293 $36,972 $10,757 $862,022 
Other supplemental information is (in thousands):
Lease Term and Discount RateNov 2, 2024
Weighted-average remaining lease term
Operating leases6.4 years
Finance leases2.6 years
Weighted-average discount rate
Operating leases5.2%
Finance leases4.1%
Nine Months Ended
Supplemental Cash Flow InformationNov 2, 2024Oct 28, 2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$163,728 $155,379 
New operating ROU assets obtained in exchange for lease liabilities$192,543 $128,756