Leases

12 Months Ended

Jan. 30, 2021

The following table provides the components of lease cost for operating leases for 2020 and 2019:


	2020		2019
	(in millions)
Operating Lease Costs (a)	$	744	$	769
Variable Lease Costs	65		100
Short-term Lease Costs	34		30
Total Lease Cost	$	843	$	899

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(a)As discussed in Note 7, "Long-Lived Assets," the Company recognized operating lease asset impairment charges of $118 million and $65 million during 2020 and 2019, respectively, which is included as operating lease costs.

For many stores and select office locations, beginning in April, rent was not paid, or was only partially paid, due to the COVID-19 pandemic. Negotiations are complete with nearly all landlords to determine potential rent credits or payment deferrals related to COVID-19. As of January 30, 2021, the Company is fully accrued to the original contractual rent due unless an executed amendment is in place. The FASB issued guidance in April which allows certain COVID-19-related concessions to be recognized as a reduction of lease costs in the period an amendment is executed. As a result, the Company recognized a $111 million reduction to occupancy expenses in the 2020 Consolidated Statement of Income as a result of executed amendments with landlords.

The following table provides future maturities of operating lease liabilities as of January 30, 2021:


Fiscal Year	(in millions)
2021	$	750
2022	630
2023	540
2024	464
2025	404
Thereafter	965
Total Lease Payments	$	3,753
Less: Interest	(664)
Present Value of Operating Lease Liabilities	$	3,089

For leases entered into or reassessed after the adoption of the new standard, the Company has elected the practical expedient allowed by the standard to account for all fixed consideration in a lease as a single lease component. Therefore, the lease payments used to measure the lease liability for these leases include fixed minimum rentals along with fixed operating costs such as common area maintenance and utilities.

As of January 30, 2021, the Company had additional operating lease commitments that have not yet commenced of approximately $256 million.

The following table provides the weighted-average remaining lease term and discount rate for operating leases with lease liabilities as of January 30, 2021 and February 1, 2020:


	January 30, 2021		February 1, 2020
Weighted Average Remaining Lease Term (years)	6.4		7.4
Weighted Average Discount Rate	5.8	%	6.2	%

During 2020 and 2019, the Company paid $520 million and $708 million, respectively, for operating lease liabilities recorded on the balance sheet. These payments are included within the Operating Activities section of the Consolidated Statement of Cash Flows.

During 2020 and 2019, the Company obtained $172 million and $313 million, respectively, of additional lease assets as a result of new operating lease obligations.

Finance Leases

The Company leases certain fulfillment equipment under finance leases that expire at various dates through 2025. The Company records finance lease assets, net of accumulated amortization, in Property and Equipment, Net on the Consolidated Balance Sheet. Additionally, the Company records finance lease liabilities in Accrued Expenses and Other and Other Long-term Liabilities on the Consolidated Balance Sheet. Finance lease costs are comprised of the straight-line amortization of the lease asset and the accretion of interest expense under the effective interest method.

The Company recorded $33 million and $21 million of finance lease assets, net of accumulated amortization, in Property and Equipment, Net on the January 30, 2021 and February 1, 2020 Consolidated Balance Sheets, respectively. Additionally, the Company recorded finance lease liabilities of $12 million in Accrued Expenses and Other and $21 million in Other Long-term Liabilities on the January 30, 2021 Consolidated Balance Sheet, and $8 million in Accrued Expenses and Other and $13 million in Other Long-term Liabilities on the February 1, 2020 Consolidated Balance Sheet.

Victoria's Secret Hong Kong

During the second quarter of 2020, the Company closed its unprofitable Victoria's Secret flagship store in Hong Kong. As a result of the store closure, the Company recognized a non-cash pre-tax gain of $39 million, primarily due to terminating the store lease and the related write-off of the operating lease liability in excess of the operating lease asset, which was partially impaired in fiscal 2019. This gain is included in Costs of Goods Sold, Buying and Occupancy in the 2020 Consolidated Statement of Income. The Company also recorded $3 million of severance and related costs associated with the closure, which are included in General, Administrative and Store Operating Expenses in the 2020 Consolidated Statement of Income.

Asset Retirement Obligations

The Company has asset retirement obligations related to certain company-operated international stores that contractually obligate the Company to remove leasehold improvements at the end of a lease. The Company's liabilities for asset retirement obligations totaled $11 million as of January 30, 2021 and $22 million as of February 1, 2020. These liabilities are included in Other Long-term Liabilities on the Consolidated Balance Sheets.

Disclosures for 2018

The following table provides rent expense, as presented under the prior accounting standard, for 2018:



	(in millions)
Store Rent:
Fixed Minimum	$	663
Contingent	72
Total Store Rent	735
Office, Equipment and Other	98
Gross Rent Expense	833
Sublease Rental Income	(2)
Total Rent Expense	$	831