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Leases | 9 Months Ended
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Oct. 28, 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 56 full size Sephora at Kohl's shop-in-shops ("Sephora shops") in the third quarter of 2023 and now have 857 full size Sephora shops open as of the end of the third quarter of 2023. Due to the investments we are making in the full size 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 | October 28, 2023 | January 28, 2023 | October 29, 2022
Assets |  |  |  |
Operating leases | Operating leases | $2,492 | $2,304 | $2,318
Finance leases | Property and equipment, net | 1,923 | 2,033 | 2,066
Total operating and finance leases | $4,415 | $4,337 | $4,384
Liabilities |  |  |  |
Current |  |  |  |
Operating leases | Current portion of operating leases | 94 | 111 | 109
Finance leases | Current portion of finance leases and financing obligations | 75 | 76 | 78
Noncurrent |  |  |  |
Operating leases | Operating leases | 2,780 | 2,578 | 2,595
Finance leases | Finance leases and financing obligations | 2,270 | 2,344 | 2,346
Total operating and finance leases | $5,219 | $5,109 | $5,128
Consolidated Statement of Operations | Three Months Ended | Nine Months Ended
(Dollars in Millions) | Classification | October 28, 2023 | October 29, 2022 | October 28, 2023 | October 29, 2022
Operating leases | Selling, general, and administrative | $68 | $64 | $202 | $197
Finance leases |  |  |  |  |
Amortization of leased assets | Depreciation and amortization | 30 | 33 | 92 | 94
Interest on leased assets | Interest expense, net | 36 | 36 | 108 | 104
Total operating and finance leases |  | $134 | $133 | $402 | $395
Consolidated Statement of Cash Flows | Nine Months Ended
(Dollars in Millions) | October 28, 2023 | October 29, 2022
Cash paid for amounts included in the measurement of leased liabilities |  |
Operating cash flows from operating leases | $202 | $200
Operating cash flows from finance leases | 105 | 99
Financing cash flows from finance leases | 59 | 65
The following table summarizes future lease payments by fiscal year:
| October 28, 2023
(Dollars in Millions) | Operating Leases | Finance Leases | Total
2023 | $56 | $52 | $108
2024 | 267 | 213 | 480
2025 | 260 | 207 | 467
2026 | 254 | 206 | 460
2027 | 255 | 206 | 461
After 2027 | 4,097 | 3,530 | 7,627
Total lease payments | $5,189 | $4,414 | $9,603
Amount representing interest | (2,315) | (2,069) | (4,384)
Lease liabilities | $2,874 | $2,345 | $5,219
The following table summarizes weighted-average remaining lease term and discount rate:
| October 28, 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:
| Nine Months Ended
(Dollars in Millions) | October 28, 2023 | October 29, 2022
Property and equipment acquired (disposed) through exchange of: |  |
Finance lease liabilities | $(23) | $714
Operating lease liabilities | 247 | 167
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 | October 28, 2023 | January 28, 2023 | October 29, 2022
Assets |  |  |  |
Financing obligations | Property and equipment, net | $45 | $49 | $50
Liabilities |  |  |  |
Current | Current portion of finance leases and financing obligations | 9 | 18 | 17
Noncurrent | Finance leases and financing obligations | 444 | 442 | 445
Total financing obligations | $453 | $460 | $462
Consolidated Statement of Operations | Three Months Ended | Nine Months Ended
(Dollars in Millions) | Classification | October 28, 2023 | October 29, 2022 | October 28, 2023 | October 29, 2022
Amortization of financing obligation assets | Depreciation and amortization | 1 | 1 | 4 | 5
Interest on financing obligations | Interest expense, net | 19 | 16 | 52 | 43
Total financing obligations |  | $20 | $17 | $56 | $48
Consolidated Statement of Cash Flows | Nine Months Ended
(Dollars in Millions) | October 28, 2023 | October 29, 2022
Cash paid for and proceeds from amounts included in the measurement of financing obligations |  |
Operating cash flows from financing obligations | $51 | $42
Financing cash flows from financing obligations | 9 | 16
Proceeds from financing obligations | 19 | 9
The following table summarizes future financing obligation payments by fiscal year:
| October 28, 2023
(Dollars in Millions) | Financing Obligations
2023 | $19
2024 | 78
2025 | 79
2026 | 79
2027 | 79
After 2027 | 1,242
Total lease payments | $1,576
Non-cash gain on future sale of property | 115
Amount representing interest | (1,238)
Financing obligation liability | $453
The following table summarizes the weighted-average remaining term and discount rate for financing obligations:
| October 28, 2023 | January 28, 2023
Weighted-average remaining term (years) | 17 | 13
Weighted-average discount rate | 16% | 14%

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