Leases

6 Months Ended

Aug. 01, 2020

Leases

The Company leases retail stores, office space and equipment under operating leases. As of August 1, 2020, February 1, 2020 and August 3, 2019, right-of-use operating lease assets, which are recorded in operating lease assets in the condensed consolidated balance sheets, totaled $44.1 million, $47.9 million and $52.6 million, respectively, and operating lease liabilities, which are recorded in current portion of operating lease liabilities and operating lease liabilities, totaled $43.8 million, $47.3 million and $52.1 million, respectively.

In determining our operating lease assets and operating lease liabilities, we apply an incremental borrowing rate to the minimum lease payments within each lease agreement. ASU No. 2016-02 requires the use of the rate implicit in the lease whenever that rate is readily determinable; furthermore, if the implicit rate is not readily determinable, a lessee may use its incremental borrowing rate. The incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. To estimate our specific incremental borrowing rates that align with applicable lease terms, we utilize a model consistent with the credit quality of our outstanding debt instruments.

Renewal options from two to 20 years exist on the majority of leased properties. The Company has sole discretion in exercising the lease renewal options. We do not recognize operating lease assets or operating lease liabilities for renewal periods unless we are reasonably certain of renewing the lease at inception. The depreciable life of operating lease assets and related leasehold improvements is limited by the expected lease term.

Contingent rentals on certain leases are based on a percentage of annual sales in excess of specified amounts. Other contingent rentals are based entirely on a percentage of sales. The Company's operating lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The following table summarizes the Company's operating and finance leases:


(in thousands of dollars)	Classification - Condensed Consolidated Balance Sheets	August 1, 2020		February 1, 2020		August 3, 2019
Assets
Finance lease assets	Property and equipment, net ^(a)	$	459	$	670	$	881
Operating lease assets	Operating lease assets	44,091		47,924		52,608
Total leased assets		$	44,550	$	48,594	$	53,489

Liabilities
Current
Finance	Current portion of finance lease liabilities	$	986	$	1,219	$	1,082
Operating	Current portion of operating lease liabilities	13,758		14,654		15,701
Noncurrent
Finance	Finance lease liabilities	356		695		1,342
Operating	Operating lease liabilities	30,051		32,683		36,407
Total lease liabilities		$	45,151	$	49,251	$	54,532

^(a) Finance lease assets are recorded net of accumulated amortization of $14.1 million, $13.9 million and $13.7 million as of August 1, 2020, February 1, 2020 and August 3, 2019, respectively.


Lease Cost		Three Months Ended						Six Months Ended
(in thousands of dollars)	Classification - Condensed Consolidated Statements of Operations	August 1, 2020		August 3, 2019		August 1, 2020		August 3, 2019
Operating lease cost ^(a)	Rentals	$	5,639	$	6,209	$	11,189	$	12,327
Finance lease cost
Amortization of leased assets	Depreciation and amortization	105		106		211		211
Interest on lease liabilities	Interest and debt expense, net	62		123		142		258
Net lease cost		$	5,806	$	6,438	$	11,542	$	12,796

^(a)Includes short term lease costs of $0.5 million and $1.0 million for the three months ended and $1.0 million and $1.7 million for the six months ended August 1, 2020 and August 3, 2019, respectively, and variable lease costs of $0.4 million and $0.4 million for the three months ended and $0.7 million and $0.8 million for the six months ended August 1, 2020 and August 3, 2019, respectively.

Maturities of Lease Liabilities


(in thousands of dollars) Fiscal Year	Operating Leases		Finance Leases		Total
2020 (excluding the six months ended August 1, 2020)	$	7,819	$	714	$	8,533
2021	14,153		726		14,879
2022	7,811		—		7,811
2023	4,496		—		4,496
2024	3,714		—		3,714
After 2024	15,916		—		15,916
Total minimum lease payments	53,909		1,440		55,349
Less amount representing interest	(10,100)		(98)		(10,198)
Present value of lease liabilities	$	43,809	$	1,342	$	45,151

Lease Term and Discount Rate


	August 1, 2020
Weighted-average remaining lease term
Operating leases	6.2 years
Finance leases	1.3 years
Weighted-average discount rate
Operating leases	6.6	%
Finance leases	12.3	%

Other Information


	Six Months Ended
(in thousands of dollars)	August 1, 2020		August 3, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	9,387	$	10,388
Operating cash flows from finance leases	142		258
Financing cash flows from finance leases	572		456

Lease assets obtained in exchange for new operating lease liabilities	$	4,084	$	4,601