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Leases | 6 Months Ended
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Jul. 29, 2023
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. We opened 194 full size Sephora at Kohl's shop-in-shops ("Sephora shops") in the second quarter of 2023 and now have 801 Sephora shops open as of the end of the second quarter of 2023. Due to the investments we are making in the Sephora 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, which are predominately store related, and where they are presented in our Consolidated Financial Statements:
Consolidated Balance Sheets |  |  |
(Dollars in Millions) | Classification | July 29, 2023 | January 28, 2023 | July 30, 2022
Assets |  |  |  |
Operating leases | Operating leases | $2,493 | $2,304 | $2,296
Finance leases | Property and equipment, net | 1,950 | 2,033 | 2,114
Total operating and finance leases | $4,443 | $4,337 | $4,410
Liabilities |  |  |  |
Current |  |  |  |
Operating leases | Current portion of operating leases | 93 | 111 | 108
Finance leases | Current portion of finance leases and financing obligations | 75 | 76 | 78
Noncurrent |  |  |  |
Operating leases | Operating leases | 2,777 | 2,578 | 2,568
Finance leases | Finance leases and financing obligations | 2,284 | 2,344 | 2,381
Total operating and finance leases | $5,229 | $5,109 | $5,135
Consolidated Statement of Operations | Three Months Ended | Six Months Ended
(Dollars in Millions) | Classification | July 29, 2023 | July 30, 2022 | July 29, 2023 | July 30, 2022
Operating leases | Selling, general, and administrative | $67 | $64 | $134 | $133
Finance leases |  |  |  |  |
Amortization of leased assets | Depreciation and amortization | 30 | 32 | 62 | 61
Interest on leased assets | Interest expense, net | 36 | 36 | 72 | 68
Total operating and finance leases |  | $133 | $132 | $268 | $262
Consolidated Statement of Cash Flows | Six Months Ended
(Dollars in Millions) | July 29, 2023 | July 30, 2022
Cash paid for amounts included in the measurement of leased liabilities |  |
Operating cash flows from operating leases | $136 | $135
Operating cash flows from finance leases | 70 | 65
Financing cash flows from finance leases | 40 | 44
The following table summarizes future lease payments by fiscal year:
| July 29, 2023
(Dollars in Millions) | Operating Leases | Finance Leases | Total
2023 | $124 | $106 | $230
2024 | 263 | 212 | 475
2025 | 257 | 206 | 463
2026 | 251 | 204 | 455
2027 | 252 | 205 | 457
After 2027 | 4,055 | 3,517 | 7,572
Total lease payments | $5,202 | $4,450 | $9,652
Amount representing interest | (2,332) | (2,091) | (4,423)
Lease liabilities | $2,870 | $2,359 | $5,229
The following table summarizes weighted-average remaining lease term and discount rate:
| July 29, 2023 | January 28, 2023
Weighted-average remaining term (years) |  |
Operating leases | 20 | 20
Finance leases | 20 | 20
Weighted-average discount rate |  |
Operating leases | 6% | 6%
Finance leases | 6% | 6%
Other lease information is as follows:
| Six Months Ended
(Dollars in Millions) | July 29, 2023 | July 30, 2022
Property and equipment acquired (disposed) through exchange of: |  |
Finance lease liabilities | $(26) | $730
Operating lease liabilities | 222 | 114
Financing Obligations The following tables summarize our financing obligations, which are all store related, and where they are presented in our Consolidated Financial Statements:
Consolidated Balance Sheets |  |  |
(Dollars in Millions) | Classification | July 29, 2023 | January 28, 2023 | July 30, 2022
Assets |  |  |  |
Financing obligations | Property and equipment, net | $46 | $49 | $52
Liabilities |  |  |  |
Current | Current portion of finance leases and financing obligations | 9 | 18 | 18
Noncurrent | Finance leases and financing obligations | 446 | 442 | 449
Total financing obligations | $455 | $460 | $467
Consolidated Statement of Operations | Three Months Ended | Six Months Ended
(Dollars in Millions) | Classification | July 29, 2023 | July 30, 2022 | July 29, 2023 | July 30, 2022
Amortization of financing obligation assets | Depreciation and amortization | 1 | 2 | 3 | 4
Interest on financing obligations | Interest expense, net | 17 | 15 | 33 | 27
Total financing obligations |  | $18 | $17 | $36 | $31
Consolidated Statement of Cash Flows | Six Months Ended
(Dollars in Millions) | July 29, 2023 | July 30, 2022
Cash paid for and proceeds from amounts included in the measurement of financing obligations |  |
Operating cash flows from financing obligations | $32 | $26
Financing cash flows from financing obligations | 7 | 11
Proceeds from financing obligations | 17 | 5
The following table summarizes future financing obligation payments by fiscal year:
| July 29, 2023
(Dollars in Millions) | Financing Obligations
2023 | $39
2024 | 79
2025 | 79
2026 | 79
2027 | 79
After 2027 | 1,253
Total lease payments | $1,608
Non-cash gain on future sale of property | 115
Amount representing interest | (1,268)
Financing obligation liability | $455
The following table summarizes the weighted-average remaining term and discount rate for financing obligations:
| July 29, 2023 | January 28, 2023
Weighted-average remaining term (years) | 17 | 13
Weighted-average discount rate | 16% | 14%

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