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Leases | 6 Months Ended
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Jul. 30, 2022
Leases [Abstract] |
Leases | 4. Leases We lease certain property and equipment used in our operations. Some of our store leases include additional rental payments based on a percentage of sales over contractual levels or which are adjusted periodically for inflation. Our typical store lease has an initial term of 20 to 25 years and four to eight five-year renewal options. Lease assets represent our right to use an underlying asset for the lease term. Lease assets are recognized at commencement date based on the value of the lease liability and are adjusted for any lease payments made to the lessor at or before commencement date, minus any lease incentives received and any initial direct costs incurred by the lessee. Lease liabilities represent our contractual obligation to make lease payments. At the commencement date, the lease liabilities equal the present value of minimum lease payments over the lease term. As the implicit interest rate is not readily identifiable in our leases, we estimate our collateralized borrowing rate to calculate the present value of lease payments. Leases with a term of 12 months or less are excluded from the balance; we recognize lease expense for these leases on a straight-line basis over the lease term. We combine lease and non-lease components for new and modified leases. During the first half of 2022, we opened 340 Sephora shop-in-shops within our Kohl's stores and now have a total of 540 open as of the end of the second quarter. We plan to open an additional 60 shop-in-shops during the remainder of 2022, as well as at least 250 more shops in 2023. We are also working with Sephora to have a Sephora presence in the remaining approximately 300 stores. Due to the investments we are making in the shop-in-shops, we reassessed our lease term when construction began as these assets will have significant economic value to us when the lease term becomes exercisable. The impact of these assessments resulted in additional lease term, additional lease assets and liabilities, and, in some cases, changes to the classification. The following tables summarize our operating and finance leases and where they are presented in our Consolidated Financial Statements:
Consolidated Balance Sheets |  |  |
(Dollars in Millions) | Classification | July 30, 2022 | January 29, 2022 | July 31, 2021
Assets |  |  |  |
Operating leases | Operating leases | $2,296 | $2,248 | $2,301
Finance leases | Property and equipment, net | 2,114 | 1,442 | 1,226
Total operating and finance leases | 4,410 | 3,690 | 3,527
Liabilities |  |  |  |
Current |  |  |  |
Operating leases | Current portion of operating leases | 108 | 145 | 143
Finance leases | Current portion of finance leases and financing obligations | 78 | 87 | 83
Noncurrent |  |  |  |
Operating leases | Operating leases | 2,568 | 2,479 | 2,532
Finance leases | Finance leases and financing obligations | 2,381 | 1,688 | 1,457
Total operating and finance leases | $5,135 | $4,399 | $4,215
Consolidated Statement of Operations | Three Months Ended | Six Months Ended
(Dollars in Millions) | Classification | July 30, 2022 | July 31, 2021 | July 30, 2022 | July 31, 2021
Operating leases | Selling, general, and administrative | $64 | $79 | $133 | $156
Finance leases |  |  |  |  |
Amortization of leased assets | Depreciation and amortization | 32 | 23 | 61 | 43
Interest on leased assets | Interest expense, net | 36 | 27 | 68 | 52
Total operating and finance leases |  | $132 | $129 | $262 | $251
Consolidated Statement of Cash Flows | Six Months Ended
(Dollars in Millions) | July 30, 2022 | July 31, 2021
Cash paid for amounts included in the measurement of leased liabilities |  |
Operating cash flows from operating leases | $135 | $165
Operating cash flows from finance leases | 65 | 52
Financing cash flows from finance leases | 44 | 47
The following table summarizes future lease payments by fiscal year:
| July 30, 2022
(Dollars in millions) | Operating Leases | Finance Leases | Total
2022 | $124 | $94 | $218
2023 | 251 | 218 | 469
2024 | 233 | 210 | 443
2025 | 227 | 205 | 432
2026 | 223 | 205 | 428
After 2026 | 3,617 | 3,722 | 7,339
Total lease payments | $4,675 | $4,654 | $9,329
Amount representing interest | (1,999) | (2,195) | (4,194)
Lease liabilities | $2,676 | $2,459 | $5,135
The following table summarizes weighted-average remaining lease term and discount rate:
| July 30, 2022 | January 29, 2022
Weighted-average remaining term (years) |  |
Operating leases | 20 | 20
Finance leases | 21 | 20
Weighted-average discount rate |  |
Operating leases | 6% | 6%
Finance leases | 6% | 7%
Other lease information is as follows:
| Six Months Ended
(Dollars in Millions) | July 30, 2022 | July 31, 2021
Property and equipment acquired (disposed) through exchange of: |  |
Finance lease liabilities | $730 | $569
Operating lease liabilities | 114 | (29)
Financing Obligations The following tables summarize our financing obligations and where they are presented in our Consolidated Financial Statements:
Consolidated Balance Sheets |  |  |
(Dollars in millions) | Classification | July 30, 2022 | January 29, 2022 | July 31, 2021
Assets |  |  |  |
Financing obligations | Property and equipment, net | $52 | $55 | $60
Liabilities |  |  |  |
Current | Current portion of finance leases and financing obligations | 18 | 31 | 34
Noncurrent | Finance leases and financing obligations | 449 | 445 | 449
Total financing obligations | $467 | $476 | $483
Consolidated Statement of Operations | Three Months Ended | Six Months Ended
(Dollars in Millions) | Classification | July 30, 2022 | July 31, 2021 | July 30, 2022 | July 31, 2021
Amortization of financing obligation assets | Depreciation and amortization | 2 | 3 | 4 | 5
Interest on financing obligations | Interest expense, net | 15 | 10 | 27 | 19
Total financing obligations |  | $17 | $13 | $31 | $24
Consolidated Statement of Cash Flows | Six Months Ended
(Dollars in Millions) | July 30, 2022 | July 31, 2021
Cash paid for amounts included in the measurement of financing obligations |  |
Operating cash flows from financing obligations | $26 | $19
Financing cash flows from financing obligations | 11 | 18
Proceeds from financing obligations | 5 | 4
The following table summarizes future financing obligation payments by fiscal year:
| July 30, 2022
(Dollars in millions) | Financing Obligations
2022 | $37
2023 | 78
2024 | 77
2025 | 75
2026 | 74
After 2026 | 957
Total lease payments | $1,298
Non-cash gain on future sale of property | 167
Amount representing interest | (998)
Financing obligation liability | $467
The following table summarizes the weighted-average remaining term and discount rate for financing obligations:
| July 30, 2022 | January 29, 2022
Weighted-average remaining term (years) | 14 | 10
Weighted-average discount rate | 13% | 9%

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