Leases (Notes)

6 Months Ended

Aug. 31, 2024

Leases of Lessee Disclosure [Text Block]

Leases

Our leases primarily consist of operating and finance leases related to retail stores, office space, land and equipment. We also have stores subject to sale-leaseback transactions that do not qualify for sale accounting and are accounted for as financing obligations. For more information on these financing obligations see Note 9.

The initial term for real property leases is typically 5 to 20 years. For equipment leases, the initial term generally ranges from 3 to 8 years. Most leases include one or more options to renew, with renewal terms that can extend the lease term from 1 to 20 years or more. We include options to renew (or terminate) in our lease term, and as part of our right-of-use (“ROU”) assets and lease liabilities, when it is reasonably certain that we will exercise that option.

ROU assets and the related lease liabilities are initially measured at the present value of future lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our collateralized incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. We include variable lease payments in the initial measurement of ROU assets and lease liabilities only to the extent they depend on an index or rate. Changes in such indices or rates are accounted for in the period the change occurs, and do not result in the remeasurement of the ROU asset or liability. We are also responsible for payment of certain real estate taxes, insurance and other expenses on our leases. These amounts are generally considered to be variable and are not included in the measurement of the ROU asset and lease liability. We generally account for non-lease components, such as maintenance, separately from lease components. For certain equipment leases, we apply a portfolio approach to account for the lease assets and liabilities.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Leases with a term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.

The components of lease expense were as follows:


	Three Months Ended August 31				Six Months Ended August 31
(In thousands)	2024		2023		2024		2023
Operating lease cost (1)	$	22,873	$	22,239	$	46,101	$	44,186
Finance lease cost:
Depreciation of lease assets	2,976		4,907		6,798		9,442
Interest on lease liabilities	6,920		6,407		13,591		12,502
Total finance lease cost	9,896		11,314		20,389		21,944
Total lease cost	$	32,769	$	33,553	$	66,490	$	66,130

(1) Includes short-term leases and variable lease costs, which are immaterial.

Supplemental balance sheet information related to leases was as follows:


		As of August 31		As of February 29
(In thousands)	Classification	2024		2024
Assets:
Operating lease assets	Operating lease assets	$	495,783	$	520,717
Finance lease assets	Property and equipment, net (1)	191,774		174,998
Total lease assets		$	687,557	$	695,715
Liabilities:
Current:
Operating leases	Current portion of operating lease liabilities	$	57,959	$	57,161
Finance leases	Accrued expenses and other current liabilities	23,608		20,877
Long-term:
Operating leases	Operating lease liabilities, excluding current portion	473,158		496,210
Finance leases	Other liabilities	211,590		198,759
Total lease liabilities		$	766,315	$	773,007

(1) Finance lease assets are recorded net of accumulated depreciation of $62.3 million as of August 31, 2024 and $55.5 million as of February 29, 2024.

Lease term and discount rate information related to leases was as follows:


	As of August 31		As of February 29
Lease Term and Discount Rate	2024		2024
Weighted Average Remaining Lease Term (in years)
Operating leases	16.01		16.07
Finance leases	13.17		11.43

Weighted Average Discount Rate
Operating leases	5.10	%	5.05	%
Finance leases	15.79	%	17.16	%

Supplemental cash flow information related to leases was as follows:


	Six Months Ended August 31
(In thousands)	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	47,610	$	44,182
Operating cash flows from finance leases	$	12,642	$	12,076
Financing cash flows from finance leases	$	9,056	$	7,810

Lease assets obtained in exchange for lease obligations:
Operating leases	$	4,189	$	22,277
Finance leases	$	24,497	$	43,684

Maturities of lease liabilities were as follows:


	As of August 31, 2024
(In thousands)	Operating Leases (1)		Finance Leases (1)
Fiscal 2025, remaining	$	42,579	$	21,194
Fiscal 2026	78,928		48,763
Fiscal 2027	72,607		45,167
Fiscal 2028	68,493		38,332
Fiscal 2029	46,682		31,118
Thereafter	518,131		288,506
Total lease payments	827,420		473,080
Less: interest	(296,303)		(237,882)
Present value of lease liabilities	$	531,117	$	235,198

(1) Lease payments exclude $4.7 million of legally binding minimum lease payments for leases signed but not yet commenced.