Leases

3 Months Ended

May 01, 2021

The Company's lease portfolio is primarily comprised of leases for retail store locations. The Company also leases certain equipment and corporate office space. Store leases for new stores typically have an initial term of 10 years, with options to renew for an additional 1 to 5 years. The exercise of lease renewal options is at the Company's sole discretion and is included in the lease term for calculations of its right-of-use assets and liabilities when it is reasonably certain that the Company plans to renew these leases. Certain store lease agreements include rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation. Lease agreements do not contain any residual value guarantees, material restrictive covenants, or options to purchase the leased property.

The Company has elected to apply the practical expedient to account for lease components (e.g. fixed payments for rent, insurance, and real estate taxes) and non-lease components (e.g. fixed payments for common area maintenance) together as a single component for all underlying asset classes. Additionally, the Company elected as an accounting policy to exclude short-term leases from the recognition requirements.

During the period of store closures in fiscal 2020 in response to the COVID-19 pandemic, the Company paid essentially full rent for the month of April but was then able to negotiate substantial rent deferrals for May and June. Consistent with guidance in the FASB Staff Q&A regarding lease concessions related to the effects of the COVID-19 pandemic, the Company made the election to treat all lease concessions as though the enforceable rights and obligations existed in each contract and, therefore, did not apply the lease modification guidance in ASC 842. As such, these deferrals had no impact to rent expense. Amounts deferred and payable in future periods have been included in "accounts payable" on the Company's condensed consolidated balance sheets.

Lease expense is included in cost of sales in the condensed consolidated statements of income. The components of total lease cost are as follows:


	Thirteen Weeks Ended
	May 1, 2021		May 2, 2020

Operating lease cost	$	23,697	$	24,590
Variable lease cost (a)	4,464		4,489
Total lease cost	$	28,161	$	29,079

(a) Includes variable payments related to both lease and non-lease components, such as contingent rent payments based on performance and payments related to taxes, insurance, and maintenance costs. Also includes payments related to short-term leases with periods of less than twelve months.

Supplemental cash flow information related to leases is as follows:


	Thirteen Weeks Ended
	May 1, 2021		May 2, 2020

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	24,865	$	25,035

Right-of-use assets obtained in exchange for new lease obligations:
Operating leases	$	27,091	$	3,380

The Company uses its incremental borrowing rate as the discount rate to determine the present value of lease payments. As of May 1, 2021, the weighted-average remaining lease term was 4.4 years and the weighted-average discount rate was 3.7%.

The table below reconciles undiscounted future lease payments (e.g. fixed payments for rent, insurance, real estate taxes, and common area maintenance) for each of the next five fiscal years and the total of the remaining years to the operating lease liabilities recorded on the condensed consolidated balance sheet as of May 1, 2021:


Fiscal Year	Operating Leases (a)
2021 (remaining)	$	73,278
2022	84,457
2023	66,991
2024	47,811
2025	29,191
Thereafter	32,646
Total lease payments	334,374
Less: Imputed interest	26,765
Total operating lease liability	$	307,609

(a) Operating lease payments exclude $12,156 of legally binding minimum lease payments for leases signed, but not yet commenced.