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Leases

3 Months Ended

Jul. 01, 2023

7. Leases

The Company does not own any real estate. Instead, most of its retail store locations are occupied under operating leases. The store leases generally have a base lease term of five or 10 years, with one or more renewal periods of five years, on average, exercisable at the Company’s option. The Company is generally responsible for the payment of property taxes and insurance, utilities and common area maintenance fees. Some leases also require additional payments based on percentage of sales. Lease terms include the non-cancellable portion of the underlying leases along with any reasonably certain lease periods associated with available renewal periods, termination options and purchase options.

ROU assets are tested for impairment in the same manner as long-lived assets. During the thirteen weeks ended July 1, 2023 and June 25, 2022, the Company did not record ROU asset impairment charges related to its stores.

ROU assets and lease liabilities as of July 1, 2023 and April 1, 2023 consist of the following:


	Balance Sheet Classification	July 1, 2023 (in thousands)		April 1, 2023 (in thousands)
Assets
Finance lease assets	Right-of-use assets, net	$	9,150	$	9,357
Operating lease assets	Right-of-use assets, net		325,253		317,266
Total lease assets		$	334,403	$	326,623

Liabilities
Current
Finance	Short-term lease liabilities	$	860	$	863
Operating	Short-term lease liabilities		53,810		50,732
Total short-term lease liabilities		$	54,670	$	51,595

Non-Current
Finance	Long-term lease liabilities	$	15,091	$	15,301
Operating	Long-term lease liabilities		327,365		314,780
Total long-term lease liabilities		$	342,456	$	330,081
Total lease liabilities		$	397,126	$	381,676

Total lease costs for the thirteen weeks ended July 1, 2023 and June 25, 2022 were:


	Thirteen Weeks Ended
(in thousands)	July 1, 2023		June 25, 2022
Finance lease cost
Amortization of right-of-use assets	$	207	$	255
Interest on lease liabilities		172		182
Total finance lease cost	$	379	$	437

Operating lease cost	$	17,302	$	14,023
Short-term lease cost		806		897
Variable lease cost		5,941		5,469
Total lease cost	$	24,428	$	20,826

The following table summarizes future lease payments as of July 1, 2023:


	Operating Leases		Finance Leases
Fiscal Year	(in thousands)		(in thousands)
2024	$	46,198	$	1,159
2025		69,889		1,515
2026		63,183		1,552
2027		54,426		1,590
2028		48,327		1,629
Thereafter		183,950		12,896
Total		465,973		20,341
Less: Imputed interest		(84,798)		(4,390)
Present value of net lease payments	$	381,175	$	15,951

The following table includes supplemental lease information:


	Thirteen Weeks Ended			Thirteen Weeks Ended
Supplemental Cash Flow Information (dollars in thousands)	July 1, 2023			June 25, 2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows used for operating leases	$	17,848		$	13,881
Operating cash flows used for finance leases		170			—
Financing cash flows used for finance leases		215			403
	$	18,233		$	14,284
Lease liabilities arising from new right-of-use assets
Operating leases	$	20,897		$	34,540
Finance leases	$	—		$	—

Weighted average remaining lease term (in years)
Operating leases		8.1			6.8
Finance leases		12.1			13.1

Weighted average discount rate
Operating leases		4.7	%		4.5	%
Finance leases		10.9	%		10.9	%