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Leases | 6 Months Ended
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Aug. 01, 2020
Leases [Abstract] |
Leases | Leases Signet occupies certain properties and holds machinery and vehicles under operating leases. Signet determines if an arrangement is a lease at the agreement’s inception. Certain operating leases include predetermined rent increases, which are charged to store occupancy costs within cost of sales on a straight-line basis over the lease term, including any construction period or other rental holiday. Other variable amounts paid under operating leases, such as taxes and common area maintenance, are charged to selling, general and administrative expenses as incurred. Premiums paid to acquire short-term leasehold properties and inducements to enter into a lease are recognized on a straight-line basis over the lease term. In addition, certain leases provide for contingent rent based on a percentage of sales in excess of a predetermined level. Further, certain leases provide for variable rent increases based on indexes specified within the lease agreement. As the contingent rent and variable increases are not measurable at inception, the amounts are excluded from minimum rent and the calculation of the operating lease liability. These amounts are included in variable lease cost and included in the determination of total lease cost when it is probable that the expense has been incurred and the amount is reasonably estimable. Operating leases are included in operating lease right-of-use (“ROU”) assets and current and non-current operating lease liabilities in the Company’s condensed consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate available at the lease commencement date, based primarily on the underlying lease term, in measuring the present value of lease payments. Lease terms, which include the period of the lease that cannot be canceled, may also include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The operating lease ROU asset may also include initial direct costs, prepaid and/or accrued lease payments and the unamortized balance of lease incentives received. ROU assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount of the assets may not be recoverable in accordance with the Company’s long-lived asset impairment assessment policy. Payments arising from operating lease activity, as well as variable and short-term lease payments not included within the operating lease liability, are included as operating activities on the Company’s consolidated statement of cash flows. Operating lease payments representing costs to ready an asset for its intended use (i.e. leasehold improvements) are represented within investing activities within the Company’s consolidated statements of cash flows. The Company deferred substantially all of its rent payments due in the months of April 2020 and May 2020. The Company began paying certain rents in June 2020 and all rents in July 2020. In total, the Company had approximately $78.0 million of rent payments originally due in Fiscal 2021 that have been deferred to beyond Fiscal 2021 (expected to paid by the end of the second quarter of Fiscal 2022). The Company has not recorded any provision for interest or penalties which may arise as a result of these deferrals, as management does not believe payment for any potential amounts to be probable. In April 2020, the FASB granted guidance (hereinafter, the practical expedient) permitting an entity to choose to forgo the evaluation of the enforceable rights and obligations of the original lease contract, specifically in situations where rent concessions have been agreed to with landlords as a result of COVID-19. Instead, the entity may account for COVID-19 related rent concessions, whatever their form (e.g. rent deferral, abatement or other) either: a) as if they were part of the enforceable rights and obligations of the parties under the existing lease contract; or b) as lease modifications. In accordance with this practical expedient, the Company has elected not to account for any concessions granted by landlords as a result of COVID-19 as lease modifications. Rent abatements under the practical expedient would be recorded as a negative variable lease cost. The Company is currently negotiating with nearly all of its landlords, and to date, has received certain concessions in the form of rent deferrals and other lease or rent modifications. In addition, the Company continued recording lease expense during the deferral period in accordance with its existing policies. The weighted average lease term and discount rate for the Company’s outstanding operating leases were as follows:
|  |  |  |  | August 1, 2020 |  |
Weighted average remaining lease term (in years) |  |  |  |  | 6.5 |  |
Weighted average discount rate |  |  |  |  | 5.6 | % |  |
Total lease costs are as follows:
| 13 weeks ended |  |  |  | 26 weeks ended |  |
(in millions) | August 1, 2020 |  | August 3, 2019 |  | August 1, 2020 |  | August 3, 2019
Operating lease cost | $ | 105.5 |  |  | $ | 112.7 |  |  | $ | 216.9 |  |  | $ | 227.1 |
Short-term lease cost | 5.8 |  |  | 3.4 |  |  | 10.7 |  |  | 11.2 |
Variable lease cost | 26.3 |  |  | 27.4 |  |  | 51.9 |  |  | 54.0 |
Sublease income | (0.3) |  |  | (0.2) |  |  | (0.8) |  |  | (0.9) |
Total lease cost | $ | 137.3 |  |  | $ | 143.3 |  |  | $ | 278.7 |  |  | $ | 291.4 |
Payments arising from operating lease activity, as well as variable and short-term lease payments not included within the operating lease liability, are included as operating activities on the Company’s condensed consolidated statement of cash flows. Payments representing costs to ready a ROU asset for its intended use are represented within investing activities within the Company’s condensed consolidated statements of cash flows. Supplemental cash flow information related to leases was as follows:
| 13 weeks ended |  |  |  | 26 weeks ended |  |
(in millions) | August 1, 2020 |  | August 3, 2019 |  | August 1, 2020 |  | August 3, 2019
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |  |  |
Operating cash flows from operating leases | $ | 103.1 |  |  | $ | 111.9 |  |  | $ | 152.4 |  |  | $ | 229.9 |
Operating lease right-of-use assets obtained in exchange for lease obligations | 12.8 |  |  | 34.3 |  |  | 27.0 |  |  | 40.8 |
Reduction in the carrying amount of right-of-use assets (1) | 84.2 |  |  | 87.9 |  |  | 172.1 |  |  | 175.2 |
(1) Amount excludes impairment of right-of-use assets of $8.4 million and $36.9 million during the 13 and 26 weeks ended August 1, 2020, respectively, as further described in Note 13. The future minimum operating lease payments for operating leases having initial or non-cancelable terms in excess of one year are as follows:
(in millions) |  | August 1, 2020
Remainder of Fiscal 2021 |  | $ | 230.6 |
Fiscal 2022 |  | 470.2 |
Fiscal 2023 |  | 332.0 |
Fiscal 2024 |  | 263.3 |
Fiscal 2025 |  | 207.5 |
Thereafter |  | 550.1 |
Total minimum lease payments |  | 2,053.7 |
Less: Imputed interest |  | (399.4) |
Present value of lease liabilities |  | $ | 1,654.3 |

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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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