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Lease Accounting | 6 Months Ended
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Aug. 03, 2024
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 March 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 July 2029. 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 lease payments based upon the minimum annual rental amount and a percentage of annual sales volume, generally ranging from 3% to 26%, when specific sales volumes are exceeded. The Company’s retail concession leases also provide for lease payments primarily based upon a percentage of annual sales volume, which averages approximately 25%. During the three months ended August 3, 2024, the Company closed on the sale and leaseback of its U.S. distribution center. The lease payments escalate at a fixed percentage rate annually for the first ten years. After the initial lease term, the Company has the option to renew the lease for two five-year extension periods. The transaction met the criteria for sale-leaseback accounting and, as such, a net gain of $13.8 million was recognized on the sale of the assets. In addition to the amounts as disclosed below, the Company has estimated additional operating lease commitments of approximately $15.0 million for leases where the Company has not yet taken possession of the underlying asset as of August 3, 2024. 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 August 3, 2024. The components of leases are (in thousands):
|  | Aug 3, 2024 |  | Feb 3, 2024 |  |
Assets | Balance Sheet Location |  |  |  |  |
Operating | Operating lease right-of-use assets | $ | 767,463 |  |  | $ | 667,031 |  |  |
Finance | Property and equipment, net | 12,239 |  |  | 15,132 |  |  |
Total lease assets | $ | 779,702 |  |  | $ | 682,163 |  |  |
Liabilities | Balance Sheet Location |  |  |  |  |
Current: |  |  |  |  |  |
Operating | Current portion of operating lease liabilities | $ | 187,568 |  |  | $ | 166,451 |  |  |
Finance | Current portion of borrowings and finance lease obligations | 5,200 |  |  | 5,573 |  |  |
Noncurrent: |  |  |  |  |  |
Operating | Long-term operating lease liabilities | 638,228 |  |  | 542,392 |  |  |
Finance | Long-term debt and finance lease obligations | 7,527 |  |  | 9,857 |  |  |
Total lease liabilities | $ | 838,523 |  |  | $ | 724,273 |  |  |
The components of lease costs are (in thousands):
|  | Three Months Ended |  | Six Months Ended
| Income Statement Location | Aug 3, 2024 |  | Jul 29, 2023 |  | Aug 3, 2024 |  | Jul 29, 2023
Operating lease costs | Cost of product sales | $ | 49,909 |  |  | $ | 45,351 |  |  | $ | 98,359 |  |  | $ | 91,403 |
Operating lease costs | Selling, general and administrative expenses | 9,258 |  |  | 6,600 |  |  | 17,090 |  |  | 13,197 |
Operating lease costs 1 | Net gains on lease modifications | — |  |  | (2,431) |  |  | — |  |  | (2,431) |
Finance lease costs |  |  |  |  |  |  |  |
Amortization of leased assets | Cost of product sales | 8 |  |  | 29 |  |  | 12 |  |  | 52 |
Amortization of leased assets | Selling, general and administrative expenses | 1,588 |  |  | 1,583 |  |  | 3,128 |  |  | 3,112 |
Interest on lease liabilities | Interest expense | 167 |  |  | 189 |  |  | 355 |  |  | 398 |
Variable lease costs 2 | Cost of product sales | 24,962 |  |  | 23,660 |  |  | 49,533 |  |  | 48,151 |
Variable lease costs 2 | Selling, general and administrative expenses | 1,216 |  |  | 1,086 |  |  | 2,315 |  |  | 1,747 |
Short-term lease costs | Cost of product sales | 106 |  |  | 79 |  |  | 229 |  |  | 149 |
Short-term lease costs | Selling, general and administrative expenses | 2,144 |  |  | 652 |  |  | 4,204 |  |  | 2,291 |
Total lease costs | $ | 89,358 |  |  | $ | 76,798 |  |  | $ | 175,225 |  |  | $ | 158,069 |
______________________________________________________________________ Notes: 1 During the three and six months ended July 29, 2023, net gains on lease modifications related primarily to the early termination of certain lease agreements. Operating lease costs for these locations prior to the early termination were included in cost of product sales. 2 During the three and six months ended August 3, 2024, variable lease costs included certain rent concessions of approximately $0.2 million and $0.4 million, respectively, received by the Company, primarily in Europe. During the three and six months ended July 29, 2023, variable lease costs included certain rent concessions of approximately $0.6 million and $1.0 million, respectively, received by the Company, primarily in Europe. Maturities of the Company’s operating and finance lease liabilities as of August 3, 2024 are (in thousands):
| Operating Leases |  |  |  |  |  |
Maturity of Lease Liabilities | Non-Related Parties |  | Related Parties |  | Finance Leases |  | Total |  |
Fiscal 2025 | $ | 121,071 |  |  | $ | 3,860 |  |  | $ | 3,054 |  |  | $ | 127,985 |  |  |
Fiscal 2026 | 170,997 |  |  | 7,226 |  |  | 5,730 |  |  | 183,953 |  |  |
Fiscal 2027 | 154,399 |  |  | 7,787 |  |  | 3,202 |  |  | 165,388 |  |  |
Fiscal 2028 | 121,547 |  |  | 7,709 |  |  | 1,359 |  |  | 130,615 |  |  |
Fiscal 2029 | 103,125 |  |  | 8,474 |  |  | 295 |  |  | 111,894 |  |  |
After fiscal 2029 | 248,449 |  |  | 12,335 |  |  | 3 |  |  | 260,787 |  |  |
Total lease payments | 919,588 |  |  | 47,391 |  |  | 13,643 |  |  | 980,622 |  |  |
Less: Interest | 132,048 |  |  | 9,135 |  |  | 916 |  |  | 142,099 |  |  |
Present value of lease liabilities | $ | 787,540 |  |  | $ | 38,256 |  |  | $ | 12,727 |  |  | $ | 838,523 |  |  |
Other supplemental information is (in thousands):
Lease Term and Discount Rate | Aug 3, 2024 |  |  |  |  |  |
Weighted-average remaining lease term |  |  |  |  |  |  |
Operating leases | 6.2 years |  |  |  |  |  |
Finance leases | 2.8 years |  |  |  |  |  |
Weighted-average discount rate |  |  |  |  |  |  |
Operating leases | 5.2% |  |  |  |  |  |
Finance leases | 5.0% |  |  |  |  |  |
| Six Months Ended
Supplemental Cash Flow Information | Aug 3, 2024 |  | Jul 29, 2023
Cash paid for amounts included in the measurement of lease liabilities |  |  |
Operating cash flows from operating leases | $ | 108,179 |  |  | $ | 99,294 |
New operating ROU assets obtained in exchange for lease liabilities | $ | 121,705 |  |  | $ | 64,636 |
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 March 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 July 2029. 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 lease payments based upon the minimum annual rental amount and a percentage of annual sales volume, generally ranging from 3% to 26%, when specific sales volumes are exceeded. The Company’s retail concession leases also provide for lease payments primarily based upon a percentage of annual sales volume, which averages approximately 25%. During the three months ended August 3, 2024, the Company closed on the sale and leaseback of its U.S. distribution center. The lease payments escalate at a fixed percentage rate annually for the first ten years. After the initial lease term, the Company has the option to renew the lease for two five-year extension periods. The transaction met the criteria for sale-leaseback accounting and, as such, a net gain of $13.8 million was recognized on the sale of the assets. In addition to the amounts as disclosed below, the Company has estimated additional operating lease commitments of approximately $15.0 million for leases where the Company has not yet taken possession of the underlying asset as of August 3, 2024. 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 August 3, 2024. The components of leases are (in thousands):
|  | Aug 3, 2024 |  | Feb 3, 2024 |  |
Assets | Balance Sheet Location |  |  |  |  |
Operating | Operating lease right-of-use assets | $ | 767,463 |  |  | $ | 667,031 |  |  |
Finance | Property and equipment, net | 12,239 |  |  | 15,132 |  |  |
Total lease assets | $ | 779,702 |  |  | $ | 682,163 |  |  |
Liabilities | Balance Sheet Location |  |  |  |  |
Current: |  |  |  |  |  |
Operating | Current portion of operating lease liabilities | $ | 187,568 |  |  | $ | 166,451 |  |  |
Finance | Current portion of borrowings and finance lease obligations | 5,200 |  |  | 5,573 |  |  |
Noncurrent: |  |  |  |  |  |
Operating | Long-term operating lease liabilities | 638,228 |  |  | 542,392 |  |  |
Finance | Long-term debt and finance lease obligations | 7,527 |  |  | 9,857 |  |  |
Total lease liabilities | $ | 838,523 |  |  | $ | 724,273 |  |  |
The components of lease costs are (in thousands):
|  | Three Months Ended |  | Six Months Ended
| Income Statement Location | Aug 3, 2024 |  | Jul 29, 2023 |  | Aug 3, 2024 |  | Jul 29, 2023
Operating lease costs | Cost of product sales | $ | 49,909 |  |  | $ | 45,351 |  |  | $ | 98,359 |  |  | $ | 91,403 |
Operating lease costs | Selling, general and administrative expenses | 9,258 |  |  | 6,600 |  |  | 17,090 |  |  | 13,197 |
Operating lease costs 1 | Net gains on lease modifications | — |  |  | (2,431) |  |  | — |  |  | (2,431) |
Finance lease costs |  |  |  |  |  |  |  |
Amortization of leased assets | Cost of product sales | 8 |  |  | 29 |  |  | 12 |  |  | 52 |
Amortization of leased assets | Selling, general and administrative expenses | 1,588 |  |  | 1,583 |  |  | 3,128 |  |  | 3,112 |
Interest on lease liabilities | Interest expense | 167 |  |  | 189 |  |  | 355 |  |  | 398 |
Variable lease costs 2 | Cost of product sales | 24,962 |  |  | 23,660 |  |  | 49,533 |  |  | 48,151 |
Variable lease costs 2 | Selling, general and administrative expenses | 1,216 |  |  | 1,086 |  |  | 2,315 |  |  | 1,747 |
Short-term lease costs | Cost of product sales | 106 |  |  | 79 |  |  | 229 |  |  | 149 |
Short-term lease costs | Selling, general and administrative expenses | 2,144 |  |  | 652 |  |  | 4,204 |  |  | 2,291 |
Total lease costs | $ | 89,358 |  |  | $ | 76,798 |  |  | $ | 175,225 |  |  | $ | 158,069 |
______________________________________________________________________ Notes: 1 During the three and six months ended July 29, 2023, net gains on lease modifications related primarily to the early termination of certain lease agreements. Operating lease costs for these locations prior to the early termination were included in cost of product sales. 2 During the three and six months ended August 3, 2024, variable lease costs included certain rent concessions of approximately $0.2 million and $0.4 million, respectively, received by the Company, primarily in Europe. During the three and six months ended July 29, 2023, variable lease costs included certain rent concessions of approximately $0.6 million and $1.0 million, respectively, received by the Company, primarily in Europe. Maturities of the Company’s operating and finance lease liabilities as of August 3, 2024 are (in thousands):
| Operating Leases |  |  |  |  |  |
Maturity of Lease Liabilities | Non-Related Parties |  | Related Parties |  | Finance Leases |  | Total |  |
Fiscal 2025 | $ | 121,071 |  |  | $ | 3,860 |  |  | $ | 3,054 |  |  | $ | 127,985 |  |  |
Fiscal 2026 | 170,997 |  |  | 7,226 |  |  | 5,730 |  |  | 183,953 |  |  |
Fiscal 2027 | 154,399 |  |  | 7,787 |  |  | 3,202 |  |  | 165,388 |  |  |
Fiscal 2028 | 121,547 |  |  | 7,709 |  |  | 1,359 |  |  | 130,615 |  |  |
Fiscal 2029 | 103,125 |  |  | 8,474 |  |  | 295 |  |  | 111,894 |  |  |
After fiscal 2029 | 248,449 |  |  | 12,335 |  |  | 3 |  |  | 260,787 |  |  |
Total lease payments | 919,588 |  |  | 47,391 |  |  | 13,643 |  |  | 980,622 |  |  |
Less: Interest | 132,048 |  |  | 9,135 |  |  | 916 |  |  | 142,099 |  |  |
Present value of lease liabilities | $ | 787,540 |  |  | $ | 38,256 |  |  | $ | 12,727 |  |  | $ | 838,523 |  |  |
Other supplemental information is (in thousands):
Lease Term and Discount Rate | Aug 3, 2024 |  |  |  |  |  |
Weighted-average remaining lease term |  |  |  |  |  |  |
Operating leases | 6.2 years |  |  |  |  |  |
Finance leases | 2.8 years |  |  |  |  |  |
Weighted-average discount rate |  |  |  |  |  |  |
Operating leases | 5.2% |  |  |  |  |  |
Finance leases | 5.0% |  |  |  |  |  |
| Six Months Ended
Supplemental Cash Flow Information | Aug 3, 2024 |  | Jul 29, 2023
Cash paid for amounts included in the measurement of lease liabilities |  |  |
Operating cash flows from operating leases | $ | 108,179 |  |  | $ | 99,294 |
New operating ROU assets obtained in exchange for lease liabilities | $ | 121,705 |  |  | $ | 64,636 |

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