Leases (Notes)

12 Months Ended

Feb. 03, 2024

The Company determines if an arrangement contains a lease at the inception of a contract. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease assets and operating lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments. As the rate implicit in the lease is not readily determinable for the Company's leases, the Company utilizes its incremental borrowing rate to determine the present value of future lease payments. The incremental borrowing rate represents a significant judgment and is determined based on an analysis of the Company's synthetic credit rating, prevailing financial market conditions, corporate bond yields, treasury bond yields, and the effect of collateralization. The operating lease assets also include lease payments made before commencement and exclude lease incentives.

The Company’s real estate leases typically contain options that permit renewals for additional periods of up to five years. For real estate leases, except for renewals that generally take the lease to a ten-year term, the options to renew are not considered reasonably certain at lease commencement because the Company reevaluates each lease on a regular basis to consider the economic and strategic benefits of exercising the renewal options, and regularly opens, relocates or closes stores to align with its operating strategy. Therefore, generally, except for renewals that take the lease to a ten-year term, the renewal option periods are not included within the lease term and the associated payments are not included in the measurement of the operating lease asset and operating lease liability as the exercise of such options is not reasonably certain. The Company’s operating lease agreements, including assumed renewals, which are generally those that take the lease to a ten-year term, expire through fiscal 2037. Similarly, renewal options are not included in the lease term for non-real estate leases because they are not considered reasonably certain of being exercised at lease commencement. Leases with an initial term of 12 months or less are not recorded on the balance sheets and lease expense is recognized on a straight-line basis over the term of the short-term lease.

For certain real estate leases, the Company accounts for lease components and non-lease components as a single lease component. Certain real estate leases require additional payments for reimbursement of real estate taxes, common area maintenance and insurance as well as payments based on sales volume, all of which are expensed as incurred as variable lease costs. Other real estate leases contain one fixed lease payment that includes real estate taxes, common area maintenance and insurance. These fixed payments are considered part of the lease payment and included in the operating lease assets and operating lease liabilities.

All of the Company's leases are classified as operating leases and the associated assets and liabilities are presented as separate captions in the consolidated balance sheets. As of February 3, 2024 and January 28, 2023, the weighted average remaining lease term for the Company's operating leases was 7.5 years and 7.6 years, respectively, and the weighted average discount rate was 5.3% and 5.2%, respectively.

The following table is a summary of the Company's components for net lease costs as of February 3, 2024 and January 28, 2023 (in thousands):


	Fiscal Year Ended
Lease Cost	February 3, 2024		January 28, 2023
Operating lease cost	$	268,096	$	231,958
Variable lease cost	76,505		63,739
Net lease cost*	$	344,601	$	295,697

* Excludes short-term lease cost, which is immaterial

The following table summarizes the maturity of lease liabilities under operating leases as of February 3, 2024 (in thousands):


Maturity of Lease Liabilities	Operating Leases
2024	$	305,635
2025	304,822
2026	286,595
2027	266,464
2028	240,866
After 2028	694,789
Total lease payments	2,099,171
Less: imputed interest	360,621
Present value of lease liabilities	$	1,738,550

The following table summarizes the supplemental cash flow disclosures related to leases as of February 3, 2024 and January 28, 2023 (in thousands):


	Fiscal Year Ended
	February 3, 2024		January 28, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Cash payments arising from operating lease liabilities (1)	$	229,491	$	210,096
Supplemental non-cash information:
Operating lease liabilities arising from obtaining right-of-use assets	$	358,383	$	321,905

(1) Included within operating activities in the Company's Consolidated Statements of Cash Flows.

As of February 3, 2024, the Company has entered into commitments for new stores for which the leases have not yet commenced that have future minimum lease payments of approximately $283.5 million.

During the fifty-three weeks ended February 3, 2024, the Company committed to 291 new store leases with average terms of approximately ten years that have future minimum lease payments of approximately $543.1 million.

From February 4. 2024 to March 21, 2024, the Company committed to 25 new leases with terms of ten years that have future minimum lease payments of approximately $52.2 million.