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Leases | 12 Months Ended
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Feb. 03, 2024
Leases [Abstract] |
Leases | 3. Lea ses 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 incremental 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 254 full size Sephora shops within our Kohl's stores during 2023 and now have 860 full size Sephora shops open as of the end of the fiscal year. Due to the investments we made 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 | February 3, 2024 | January 28, 2023
Assets |  |  |
Operating leases | Operating leases | $2,499 | $2,304
Finance leases | Property and equipment, net | 1,883 | 2,033
Total operating and finance leases | 4,382 | 4,337
Liabilities |  |  |
Current |  |  |
Operating leases | Current portion of operating leases | 102 | 111
Finance leases | Current portion of finance leases and financing obligations | 74 | 76
Noncurrent |  |  |
Operating leases | Operating leases | 2,781 | 2,578
Finance leases | Finance leases and financing obligations | 2,242 | 2,344
Total operating and finance leases | $5,199 | $5,109
Consolidated Statement of Operations |  |  |
(Dollars in Millions) | Classification | 2023 | 2022 | 2021
Operating leases | Selling, general, and administrative | $271 | $264 | $298
Finance Leases |  |  |  |
Amortization of leased assets | Depreciation and amortization | 121 | 126 | 98
Interest on leased assets | Interest expense, net | 144 | 140 | 111
Total operating and finance leases |  | $536 | $530 | $507
Consolidated Statement of Cash Flows |  |  |
(Dollars in Millions) | 2023 | 2022 | 2021
Cash paid for amounts included in measurement of leased liabilities |  |  |
Operating cash flows from operating leases | $272 | $266 | $311
Operating cash flows from finance leases | 140 | 133 | 105
Financing cash flows from finance leases | 78 | 86 | 93
The following table summarizes future lease payments by fiscal year:
| February 3, 2024
(Dollars in millions) | Operating Leases | Finance Leases | Total
2024 | $268 | $213 | $481
2025 | 263 | 208 | 471
2026 | 256 | 206 | 462
2027 | 256 | 205 | 461
2028 | 254 | 202 | 456
After 2028 | 3,902 | 3,303 | 7,205
Total lease payments | $5,199 | $4,337 | $9,536
Amount representing interest | (2,316) | (2,021) | (4,337)
Lease liabilities | $2,883 | $2,316 | $5,199
Total lease payments include $3.9 billion related to options to extend operating lease terms that are reasonably certain of being exercised and $3.2 billion related to options to extend finance lease terms that are reasonably certain of being exercised. Additionally, total lease payments exclude $13 million of legally binding lease payments for leases signed but not yet commenced. The following table summarizes weighted-average remaining lease term and discount rate:
| February 3, 2024 | 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:
(Dollars in Millions) | 2023 | 2022 | 2021
Property and equipment acquired (disposed) through exchange of: |  |  |
Finance lease liabilities | (36) | 714 | 841
Operating lease liabilities | 278 | 179 | 2
Financing Obligations Historical failed sale-leasebacks that did not qualify for sale-leaseback accounting upon adoption of ASC 842 continue to be accounted for as 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 | February 3, 2024 | January 28, 2023
Assets |  |  |
Financing obligations | Property and equipment, net | $44 | $49
Liabilities |  |  |
Current | Current portion of finance leases and financing obligations | 9 | 18
Noncurrent | Finance leases and financing obligations | 438 | 442
Total financing obligations |  | $447 | $460
Consolidated Statement of Operations |  |  |
(Dollars in millions) | Classification | 2023 | 2022 | 2021
Amortization of financing obligation assets | Depreciation and amortization | $5 | $7 | $10
Interest on financing obligations | Interest expense, net | 70 | 58 | 41
Total financing obligations |  | $75 | $65 | $51
Consolidated Statement of Cash Flows |  |  |
(Dollars in millions) | 2023 | 2022 | 2021
Cash paid for amounts included in measurement of financing obligations |  |  |
Operating cash flows from financing obligations | $68 | $56 | $40
Financing cash flows from financing obligations | 15 | 20 | 32
Proceeds from financing obligations | 21 | 11 | 15
The following table summarizes future financing obligation payments by fiscal year:
| February 3, 2024
(Dollars in millions) | Financing Obligations
2024 | $73
2025 | 79
2026 | 79
2027 | 79
2028 | 76
After 2028 | 1,163
Total lease payments | $1,549
Non-cash gain on future sale of property | 115
Amount representing interest | (1,217)
Financing obligation liability | $447
Total payments exclude $21 million of legally binding payments for contracts signed, but not yet commenced. The following table summarizes the weighted-average remaining term and discount rate for financing obligations:
| February 3, 2024 | January 28, 2023
Weighted-average remaining term (years) | 16 | 13
Weighted-average discount rate | 16% | 14%
The following table shows the cash rent out flows for the operating leases, finance leases, and financing obligations:
Consolidated Statement of Cash Flows |  |  |
(Dollars in millions) | 2023 | 2022 | 2021
Operating cash flows from operating leases | $272 | $266 | $311
Operating cash flows from finance leases | 140 | 133 | 105
Financing cash flows from finance leases | 78 | 86 | 93
Operating cash flows from financing obligations | 68 | 56 | 40
Financing cash flows from financing obligations | 15 | 20 | 32
Total cash rent | $573 | $561 | $581

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