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Note 3 - Leases

3 Months Ended

Apr. 29, 2023

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 new 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. The extension periods are typically much shorter than the original lease term given the Company's strategic decision to maintain a high level of 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 weeks ended April 29, 2023 and April 30, 2022 (in thousands).

	*Thirteen weeks ended*
	*April 29, 2023*		*April 30, 2022*

Operating lease costs		8,982		8,344
Variable lease costs (1)		2,126		2,130
Short term lease costs		15		18
Total Operating Lease costs	$	11,123	$	10,492

(1)

Variable lease costs consist of leases with variable rent structures, which are intended to increase flexibility in an environment with expected high sales volatility and provide a natural hedge against potential sales declines.

Other information

The table below presents supplemental cash flow information related to leases for the thirteen weeks ended April 29, 2023 and April 30, 2022 (in thousands).

	*Thirteen weeks ended*
	*April 29, 2023*		*April 30, 2022*
Operating cash flows for operating leases		9,684		8,741

As of April 29, 2023 and April 30, 2022, the weighted-average remaining operating lease term was 4.0 years and 4.5 years, respectively, and the weighted-average discount rate was 6.3% and 6.0%, respectively, for operating leases recognized on the Company's Condensed Consolidated Balance Sheets.

For the thirteen weeks ended April 29, 2023 and April 30, 2022 the Company did not incur impairment charges against its right-of-use operating lease assets.

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
2023		24,580
2024		27,976
2025		18,437
2026		11,291
2027		6,650
Thereafter		9,817
Total minimum lease payments		98,751
Less: amount of lease payments representing interest		11,878
Present value of future minimum lease payments		86,873
Less: current obligations under leases		(27,843	)
Long-term lease obligations	$	59,030

As of April 29, 2023, the Company had additional executed leases that had not yet commenced with operating lease liabilities of $0.4 million. These leases are expected to commence in the second quarter of fiscal 2023 with lease terms of two to five years.