XML 95 R10.htm IDEA: XBRL DOCUMENT
v3.19.3

Lease Accounting | 9 Months Ended
--- | ---
Nov. 02, 2019
Leases [Abstract] |
Lease Accounting | Lease Accounting The Company primarily leases its showrooms, advertising, licensing, sales and merchandising offices, remote distribution and warehousing facilities and retail and factory outlet store locations under operating lease agreements expiring on various dates through January 2039. The Company also leases some of its equipment as well as computer hardware and software under operating and finance lease agreements expiring on various dates through May 2027. The Company determines whether an arrangement is a lease at inception of the agreement and reassesses that conclusion if the agreement is modified. The term of the Company’s leases represents the non-cancelable period of the lease, including any rent-free periods and any options to renew, extend or terminate the lease that the Company is reasonably certain to exercise. The Company determines the term of each lease at lease commencement and revisits that term in subsequent periods if a triggering event occurs which would require reassessment. Leases with an initial contractual term in excess of 12 months are accounted for as either an operating or finance lease based on certain criteria. Under this new guidance, leases the Company previously referred to as “capital leases” are now referred to as “finance leases.” In connection with the adoption of the new lease standard, the Company elected to apply the group of practical expedients which allows the Company to carry forward its identification of existing contracts that are or contain leases, its historical lease classification and its initial direct costs for existing leases. The Company has also elected to recognize leases with an initial term of 12 months or less on a straight-line basis without recognizing a ROU asset or operating lease liability. The Company’s lease agreements primarily provide for lease payments based on a minimum annual rental amount, a percentage of annual sales volume, periodic adjustments related to inflation or a combination of such lease payments. Certain retail store leases provide for rents based upon the minimum annual rental amount and a percentage of annual sales volume, generally ranging from 3% to 23%, when specific sales volumes are exceeded. The Company’s retail concession leases also provide for rents primarily based upon a percentage of annual sales volume which average approximately 35% of annual sales volume. Some of these leases require the Company to make periodic payments for insurance, property taxes, sales promotion and common area maintenance charges. The Company has elected the practical expedient to not separate non-lease components from lease components in the measurement of liabilities for its directly-operated real estate leases. Lease liabilities are recognized at the present value of the fixed lease payments, reduced by landlord incentives using a discount rate based on similarly secured borrowings available to the Company. Lease ROU assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the leases. Variable lease payments are expensed as incurred and do not factor into the measurement of the applicable lease liability or lease ROU asset. Lease ROU assets are amortized over the life of the lease and tested for impairment in the same manner as long-lived assets used in operations. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. In addition to the amounts as disclosed below, the Company has estimated additional operating lease commitments of approximately $8.5 million for leases where the Company has not yet taken possession of the underlying asset as of November 2, 2019. As such, the related operating lease ROU assets and operating lease liabilities have not been recognized in the Company’s condensed consolidated balance sheet as of November 2, 2019. As of November 2, 2019, the components of leases and lease costs are as follows (in thousands):
| Balance Sheet Location | Nov 2, 2019
Assets |  |
Operating | Operating lease right-of-use assets | $ | 874,945 |
Finance | Property and equipment, net | 16,780 |
Total lease assets | $ | 891,725 |
Liabilities |  |
Current: |  |
Operating | Current portion of operating lease liabilities | $ | 189,581 |
Finance | Current portion of borrowings and finance lease obligations | 2,239 |
Noncurrent: |  |
Operating | Long-term operating lease liabilities | 740,484 |
Finance | Long-term debt and finance lease obligations, net | 15,008 |
Total lease liabilities | $ | 947,312 |
| Income Statement Location | Three Months Ended Nov 2, 2019 |  | Nine Months Ended Nov 2, 2019
Operating lease costs 1 | Cost of product sales | $ | 56,370 |  |  | $ | 173,935 |
Operating lease costs 1 | Selling, general and administrative expenses | 6,746 |  |  | 17,730 |
Finance lease costs |  |  |  |
Amortization of leased assets 2 | Cost of product sales | 2,025 |  |  | 2,112 |
Amortization of leased assets 2 | Selling, general and administrative expenses | 1,681 |  |  | 2,861 |
Interest on lease liabilities | Interest expense | 165 |  |  | 738 |
Variable lease costs 1 | Cost of product sales | 24,592 |  |  | 74,500 |
Variable lease costs 1 | Selling, general and administrative expenses | 677 |  |  | 2,132 |
Short-term lease costs 1 | Selling, general and administrative expenses | 208 |  |  | 603 |
Total lease costs | $ | 92,464 |  |  | $ | 274,611 |
______________________________________________________________________ Notes:
1 | Rental expense for all property and equipment operating leases during the three and nine months ended November 3, 2018 aggregated to $81.1 million and $223.9 million, respectively, including percentage rent of $15.0 million and $46.9 million, respectively. During the three and nine months ended November 3, 2018, the Company also recognized insurance, taxes, sales promotion and common area maintenance charges totaling $7.2 million and $38.5 million, respectively, related to its operating leases.
2 | Amortization of leased assets related to finance leases are included in depreciation expense within cost of product sales or selling, general and administrative expenses depending on the nature of the asset in the Company’s condensed consolidated statements of income (loss).
Maturities of the Company’s operating and finance lease liabilities as of November 2, 2019 are as follows (in thousands):
Maturity of Lease Liabilities | Operating Leases |  | Finance Leases |  | Total
2020 1 | $ | 67,971 |  |  | $ | 931 |  |  | $ | 68,902 |
2021 | 205,261 |  |  | 3,362 |  |  | 208,623 |
2022 | 193,428 |  |  | 3,666 |  |  | 197,094 |
2023 | 161,815 |  |  | 3,263 |  |  | 165,078 |
2024 | 135,574 |  |  | 3,108 |  |  | 138,682 |
After 2024 | 266,568 |  |  | 7,279 |  |  | 273,847 |
Total lease payments | 1,030,617 |  |  | 21,609 |  |  | 1,052,226 |
Less: Interest | 100,552 |  |  | 4,362 |  |  | 104,914 |
Present value of lease liabilities | $ | 930,065 |  |  | $ | 17,247 |  |  | $ | 947,312 |
______________________________________________________________________ Notes:
1 | Represents the maturity of lease liabilities for the remainder of fiscal 2020 and does not include payments made during the nine months ended November 2, 2019.
Other supplemental information as of November 2, 2019 is as follows (dollars in thousands):
Lease Term and Discount Rate | Nov 2, 2019
Weighted-average remaining lease term (years) |
Operating leases | 5.9 years
Finance leases | 6.6 years
Weighted-average discount rate |
Operating leases | 3.5%
Finance leases | 7.1%
Supplemental Cash Flow Information | Nine Months Ended Nov 2, 2019
Cash paid for amounts included in the measurement of lease liabilities |
Operating cash flows from operating leases | $ | 187,523 |
New operating ROU assets obtained in exchange for lease liabilities | $ | 118,486 |
Lease Accounting | Lease Accounting The Company primarily leases its showrooms, advertising, licensing, sales and merchandising offices, remote distribution and warehousing facilities and retail and factory outlet store locations under operating lease agreements expiring on various dates through January 2039. The Company also leases some of its equipment as well as computer hardware and software under operating and finance lease agreements expiring on various dates through May 2027. The Company determines whether an arrangement is a lease at inception of the agreement and reassesses that conclusion if the agreement is modified. The term of the Company’s leases represents the non-cancelable period of the lease, including any rent-free periods and any options to renew, extend or terminate the lease that the Company is reasonably certain to exercise. The Company determines the term of each lease at lease commencement and revisits that term in subsequent periods if a triggering event occurs which would require reassessment. Leases with an initial contractual term in excess of 12 months are accounted for as either an operating or finance lease based on certain criteria. Under this new guidance, leases the Company previously referred to as “capital leases” are now referred to as “finance leases.” In connection with the adoption of the new lease standard, the Company elected to apply the group of practical expedients which allows the Company to carry forward its identification of existing contracts that are or contain leases, its historical lease classification and its initial direct costs for existing leases. The Company has also elected to recognize leases with an initial term of 12 months or less on a straight-line basis without recognizing a ROU asset or operating lease liability. The Company’s lease agreements primarily provide for lease payments based on a minimum annual rental amount, a percentage of annual sales volume, periodic adjustments related to inflation or a combination of such lease payments. Certain retail store leases provide for rents based upon the minimum annual rental amount and a percentage of annual sales volume, generally ranging from 3% to 23%, when specific sales volumes are exceeded. The Company’s retail concession leases also provide for rents primarily based upon a percentage of annual sales volume which average approximately 35% of annual sales volume. Some of these leases require the Company to make periodic payments for insurance, property taxes, sales promotion and common area maintenance charges. The Company has elected the practical expedient to not separate non-lease components from lease components in the measurement of liabilities for its directly-operated real estate leases. Lease liabilities are recognized at the present value of the fixed lease payments, reduced by landlord incentives using a discount rate based on similarly secured borrowings available to the Company. Lease ROU assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the leases. Variable lease payments are expensed as incurred and do not factor into the measurement of the applicable lease liability or lease ROU asset. Lease ROU assets are amortized over the life of the lease and tested for impairment in the same manner as long-lived assets used in operations. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. In addition to the amounts as disclosed below, the Company has estimated additional operating lease commitments of approximately $8.5 million for leases where the Company has not yet taken possession of the underlying asset as of November 2, 2019. As such, the related operating lease ROU assets and operating lease liabilities have not been recognized in the Company’s condensed consolidated balance sheet as of November 2, 2019. As of November 2, 2019, the components of leases and lease costs are as follows (in thousands):
| Balance Sheet Location | Nov 2, 2019
Assets |  |
Operating | Operating lease right-of-use assets | $ | 874,945 |
Finance | Property and equipment, net | 16,780 |
Total lease assets | $ | 891,725 |
Liabilities |  |
Current: |  |
Operating | Current portion of operating lease liabilities | $ | 189,581 |
Finance | Current portion of borrowings and finance lease obligations | 2,239 |
Noncurrent: |  |
Operating | Long-term operating lease liabilities | 740,484 |
Finance | Long-term debt and finance lease obligations, net | 15,008 |
Total lease liabilities | $ | 947,312 |
| Income Statement Location | Three Months Ended Nov 2, 2019 |  | Nine Months Ended Nov 2, 2019
Operating lease costs 1 | Cost of product sales | $ | 56,370 |  |  | $ | 173,935 |
Operating lease costs 1 | Selling, general and administrative expenses | 6,746 |  |  | 17,730 |
Finance lease costs |  |  |  |
Amortization of leased assets 2 | Cost of product sales | 2,025 |  |  | 2,112 |
Amortization of leased assets 2 | Selling, general and administrative expenses | 1,681 |  |  | 2,861 |
Interest on lease liabilities | Interest expense | 165 |  |  | 738 |
Variable lease costs 1 | Cost of product sales | 24,592 |  |  | 74,500 |
Variable lease costs 1 | Selling, general and administrative expenses | 677 |  |  | 2,132 |
Short-term lease costs 1 | Selling, general and administrative expenses | 208 |  |  | 603 |
Total lease costs | $ | 92,464 |  |  | $ | 274,611 |
______________________________________________________________________ Notes:
1 | Rental expense for all property and equipment operating leases during the three and nine months ended November 3, 2018 aggregated to $81.1 million and $223.9 million, respectively, including percentage rent of $15.0 million and $46.9 million, respectively. During the three and nine months ended November 3, 2018, the Company also recognized insurance, taxes, sales promotion and common area maintenance charges totaling $7.2 million and $38.5 million, respectively, related to its operating leases.
2 | Amortization of leased assets related to finance leases are included in depreciation expense within cost of product sales or selling, general and administrative expenses depending on the nature of the asset in the Company’s condensed consolidated statements of income (loss).
Maturities of the Company’s operating and finance lease liabilities as of November 2, 2019 are as follows (in thousands):
Maturity of Lease Liabilities | Operating Leases |  | Finance Leases |  | Total
2020 1 | $ | 67,971 |  |  | $ | 931 |  |  | $ | 68,902 |
2021 | 205,261 |  |  | 3,362 |  |  | 208,623 |
2022 | 193,428 |  |  | 3,666 |  |  | 197,094 |
2023 | 161,815 |  |  | 3,263 |  |  | 165,078 |
2024 | 135,574 |  |  | 3,108 |  |  | 138,682 |
After 2024 | 266,568 |  |  | 7,279 |  |  | 273,847 |
Total lease payments | 1,030,617 |  |  | 21,609 |  |  | 1,052,226 |
Less: Interest | 100,552 |  |  | 4,362 |  |  | 104,914 |
Present value of lease liabilities | $ | 930,065 |  |  | $ | 17,247 |  |  | $ | 947,312 |
______________________________________________________________________ Notes:
1 | Represents the maturity of lease liabilities for the remainder of fiscal 2020 and does not include payments made during the nine months ended November 2, 2019.
Other supplemental information as of November 2, 2019 is as follows (dollars in thousands):
Lease Term and Discount Rate | Nov 2, 2019
Weighted-average remaining lease term (years) |
Operating leases | 5.9 years
Finance leases | 6.6 years
Weighted-average discount rate |
Operating leases | 3.5%
Finance leases | 7.1%
Supplemental Cash Flow Information | Nine Months Ended Nov 2, 2019
Cash paid for amounts included in the measurement of lease liabilities |
Operating cash flows from operating leases | $ | 187,523 |
New operating ROU assets obtained in exchange for lease liabilities | $ | 118,486 |

X
- References No definition available. + Details
Name: | us-gaap_LeasesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
Name: | us-gaap_LesseeFinanceLeasesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
Name: | us-gaap_LesseeOperatingLeasesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration