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Note 3 - Leases

6 Months Ended

Jul. 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 and twenty-six weeks ended July 29, 2023 and July 30, 2022 (in thousands).

	*Thirteen weeks ended*				*Twenty-six weeks ended*
	*July 29, 2023*		*July 30, 2022*		*July 29, 2023*		*July 30, 2022*

Operating lease costs		9,113		8,625		18,095		16,969
Variable lease costs ⁽¹⁾		2,115		2,060		4,241		4,190
Short term lease costs		25		8		40		27
Total Operating Lease costs	$	11,253	$	10,693	$	22,376	$	21,186

(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 and twenty-six weeks ended July 29, 2023 and July 30, 2022 (in thousands).

Thirteen weeks ended

Twenty-six weeks ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

Operating cash flows for operating leases

10,097

9,534

19,781

18,275

As of July 29, 2023 and July 30, 2022, the weighted-average remaining operating lease term was 3.9 years and 4.3 years, respectively, and the weighted-average discount rate was 6.4% and 5.7%, respectively, for operating leases recognized on the Company's condensed consolidated balance sheets.

For the thirteen and twenty-six weeks ended July 29, 2023 and the thirteen and twenty-six weeks ended July 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		15,179
2024		29,723
2025		19,767
2026		11,791
2027		7,075
Thereafter		10,495
Total minimum lease payments		94,030
Less: amount of lease payments representing interest		(11,468	)
Present value of future minimum lease payments		82,562
Less: current obligations under leases		(27,194	)
Long-term lease obligations	$	55,368

As of July 29, 2023, the Company had additional executed leases that had not yet commenced with operating lease liabilities of $2.3 million. These leases are expected to commence in the third quarter of fiscal 2023 with lease terms of two to ten years.