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Leases | 9 Months Ended
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Oct. 29, 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 payments that 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. Year to date, we opened 399 Sephora shop-in-shops within our Kohl's stores and now have 599 open as of the end of the third quarter. We plan on opening seven additional shop-in-shops in 2022 and at least 250 more shops in 2023. 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 | October 29, 2022 | January 29, 2022 | October 30, 2021
Assets |  |  |  |
Operating leases | Operating leases | $2,318 | $2,248 | $2,293
Finance leases | Property and equipment, net | 2,066 | 1,442 | 1,389
Total operating and finance leases | 4,384 | 3,690 | 3,682
Liabilities |  |  |  |
Current |  |  |  |
Operating leases | Current portion of operating leases | 109 | 145 | 142
Finance leases | Current portion of finance leases and financing obligations | 78 | 87 | 86
Noncurrent |  |  |  |
Operating leases | Operating leases | 2,595 | 2,479 | 2,537
Finance leases | Finance leases and financing obligations | 2,346 | 1,688 | 1,620
Total operating and finance leases | $5,128 | $4,399 | $4,385
Consolidated Statement of Operations | Three Months Ended | Nine Months Ended
(Dollars in Millions) | Classification | October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021
Operating leases | Selling, general, and administrative | $64 | $71 | $197 | $227
Finance leases |  |  |  |  |
Amortization of leased assets | Depreciation and amortization | 33 | 27 | 94 | 70
Interest on leased assets | Interest expense, net | 36 | 29 | 104 | 81
Total operating and finance leases |  | $133 | $127 | $395 | $378
Consolidated Statement of Cash Flows | Nine Months Ended
(Dollars in Millions) | October 29, 2022 | October 30, 2021
Cash paid for amounts included in the measurement of leased liabilities |  |
Operating cash flows from operating leases | $200 | $236
Operating cash flows from finance leases | 99 | 81
Financing cash flows from finance leases | 65 | 71
The following table summarizes future lease payments by fiscal year:
| October 29, 2022
(Dollars in Millions) | Operating Leases | Finance Leases | Total
2022 | $62 | $40 | $102
2023 | 253 | 215 | 468
2024 | 243 | 207 | 450
2025 | 233 | 203 | 436
2026 | 228 | 202 | 430
After 2026 | 3,735 | 3,678 | 7,413
Total lease payments | $4,754 | $4,545 | $9,299
Amount representing interest | (2,050) | (2,121) | (4,171)
Lease liabilities | $2,704 | $2,424 | $5,128
The following table summarizes weighted-average remaining lease term and discount rate:
| October 29, 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:
| Nine Months Ended
(Dollars in Millions) | October 29, 2022 | October 30, 2021
Property and equipment acquired through exchange of: |  |
Finance lease liabilities | $714 | $755
Operating lease liabilities | 167 | 8
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 | October 29, 2022 | January 29, 2022 | October 30, 2021
Assets |  |  |  |
Financing obligations | Property and equipment, net | $50 | $55 | $57
Liabilities |  |  |  |
Current | Current portion of finance leases and financing obligations | 17 | 31 | 31
Noncurrent | Finance leases and financing obligations | 445 | 445 | 452
Total financing obligations | $462 | $476 | $483
Consolidated Statement of Operations | Three Months Ended | Nine Months Ended
(Dollars in Millions) | Classification | October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021
Amortization of financing obligation assets | Depreciation and amortization | 1 | 2 | 5 | 7
Interest on financing obligations | Interest expense, net | 16 | 11 | 43 | 30
Total financing obligations |  | $17 | $13 | $48 | $37
Consolidated Statement of Cash Flows | Nine Months Ended
(Dollars in Millions) | October 29, 2022 | October 30, 2021
Cash paid for amounts included in the measurement of financing obligations |  |
Operating cash flows from financing obligations | $42 | $30
Financing cash flows from financing obligations | 16 | 25
Proceeds from financing obligations | 9 | 8
The following table summarizes future financing obligation payments by fiscal year:
| October 29, 2022
(Dollars in Millions) | Financing Obligations
2022 | $17
2023 | 78
2024 | 77
2025 | 76
2026 | 74
After 2026 | 975
Total lease payments | $1,297
Non-cash gain on future sale of property | 166
Amount representing interest | (1,001)
Financing obligation liability | $462
The following table summarizes the weighted-average remaining term and discount rate for financing obligations:
| October 29, 2022 | January 29, 2022
Weighted-average remaining term (years) | 14 | 10
Weighted-average discount rate | 14% | 9%

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