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Note 3 - Leases

9 Months Ended

Oct. 31, 2020

3. Leases

The majority of the Company's leases relate to retail stores and corporate offices. For leases with terms greater than 12 months, the Company records the related asset and obligation at the present value of lease payments over the term. Most retail store leases have an original term of a five to ten-year base period and may include renewal options to extend the lease term beyond the initial base period and are typically much shorter than the original lease term giving the Company lease optionality. Some leases also include early termination options, which can be exercised under specific conditions. Additionally, the Company may operate stores for a period of time on a month-to-month basis after the expiration of the lease term. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. Additionally, certain leases contain incentives, such as construction allowances from landlords and/or rent abatements subsequent to taking possession of the leased property.

The table below presents certain information related to the lease costs for operating leases for the thirteen and thirty-nine weeks ended October 31, 2020 and November 2, 2019 (in thousands).

	*Thirteen weeks ended*				*Thirty-nine weeks ended*
	*October 31, 2020*		*November 2, 2019*		*October 31, 2020*		*November 2, 2019*

Operating lease costs		8,880		10,260		28,464		31,030
Variable lease costs		1,000		514		1,422		1,828
Short term lease costs		17		255		111		940
Total Operating Lease costs	$	9,897	$	11,029	$	29,997	$	33,798

Other information

The table below presents supplemental cash flow information related to leases for the thirteen and thirty-nine weeks ended October 31, 2020 and November 2, 2019 (in thousands).

Thirteen weeks ended

Thirty-nine weeks ended

October 31, 2020

November 2, 2019

October 31, 2020

November 2, 2019

Operating cash flows for operating leases

9,949

10,872

25,878

33,061

As of October 31, 2020 and November 2, 2019, the weighted-average remaining operating lease term was 5.0 years and 5.8 years, respectively, and the weighted-average discount rate was 6.0% and 5.9%, respectively, for operating leases recognized on the Company's Condensed Consolidated Balance Sheets.

As discussed above, the Company incurred impairment charges during the thirteen and thirty-nine weeks ended October 31, 2020, of $0.1 million and $3.6 million, respectively, against right-of-use operating lease assets.

During the second and third quarters, the Company renegotiated a large portion of its store lease portfolio resulting in a combination of rent reductions, deferments, and abatements in North America and the United Kingdom and Ireland. These negotiations have increased the percentage of leases with variable rent structures resulting in the increase in variable rent expense for the thirteen weeks ended October 31, 2020 compared to thirteen weeks ended November 2, 2019. For these renegotiated leases, under ASC 842 Leases, the Company assessed if the renegotiated leases represented a new, separate contract or a modification of the existing lease. The Company concluded all renegotiated leases represented a modification of terms of each existing agreement. As such, the Company remeasured the lease liability and decreased the carrying amount of the right-of-use asset in proportion to the modification of the existing lease and recognized in profit or loss any difference between the reduction in the lease liability and the reduction in the right-of-us asset, which had an immaterial impact on the second quarter results. The Company remains in negotiations with certain landlords for those stores not already renegotiated and expects further rent reductions, deferments or abatements to be recognized in the fourth quarter of the current fiscal year.

Undiscounted cash flows

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded on the balance sheet (in thousands).

Operating Leases
2020		11,890
2021		40,496
2022		30,635
2023		25,716
2024		21,532
Thereafter		35,861
Total minimum lease payments		166,130
Less: amount of lease payments representing interest		(22,988	)
Present value of future minimum lease payments		143,142
Less: current obligations under leases		(35,489	)
Long-term lease obligations	$	107,653

As of October 31, 2020, the Company had an additional executed lease that had not yet commenced with operating lease liabilities of $1.3 million. This lease is expected to commence in 2021 with a lease term of ten years.