Leases

9 Months Ended

Oct. 29, 2023

We currently lease most of the buildings or sites for our stores, store support center, and warehouse space under facility operating leases. These leases typically have initial terms ranging from ten to twenty years and include one or more options to renew. When determining the lease term, we include option periods for which renewal is reasonably certain. Most of the leases require us to pay property taxes, insurance, and maintenance of the leased assets. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Operating leases also include certain equipment leases that have a term in excess of one year. Certain facility leases also have provisions for additional contingent rentals based on revenues.

Operating lease cost, variable lease cost and short-term lease cost related primarily to our facilities is included in “Other store operating expenses” for our operating stores, “Pre-opening costs” for our stores not yet operating, or “General and administrative expenses” for our store support center and warehouse, in the consolidated statement of comprehensive income (loss).

The components of lease expense, including variable lease costs primarily consisting of common area maintenance charges and property taxes, are as follows:


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	October 29, 2023		October 30, 2022		October 29, 2023		October 30, 2022
Operating lease cost	$	49.4	$	46.1	$	146.6	$	119.7
Variable lease cost	9.7		9.3		29.3		28.2
Short-term lease cost	0.8		0.4		2.4		0.8
Total	$	59.9	$	55.8	$	178.3	$	148.7

Operating lease payments in the table above includes minimum lease payments for future sites for which the leases have commenced. As of October 29, 2023, the Company had signed lease agreements with total lease payments of approximately $179.2 related to ten facility leases which had not yet commenced. Fixed minimum lease payments related to these facilities are not included in the right-of-use assets and lease liabilities on the consolidated balance sheet as of October 29, 2023.

Sale-Leaseback Transaction

In October 2023, the Company entered into a sale and master lease agreement (a "sale-leaseback") with an unrelated third party. Under these agreements, the Company sold four of its store properties, including land, buildings and certain improvements, at a sale price of $85.8 and then leased the assets back through the sale-leaseback transaction.

Based on certain criteria and in accordance with U.S. GAAP, the transaction was accounted for as a failed sale-leaseback. As a result, the store property assets remain on the consolidated balance sheet at their historical net book value and are depreciated over the remaining term of the master lease. A financing obligation liability was recognized in the amount of the net proceeds received in the amount of $84.2. The Company will not recognize rent expense related to the leased assets. Instead, monthly rent payments under the master lease agreement (initially, $6.4 per year) will be recorded as interest expense and a reduction of the outstanding liability.

As of October 29, 2023 the current outstanding liability of $0.2 was recorded in accrued liabilities and the long term outstanding liability of $84.0 was recorded in other liabilities on the consolidated balance sheet related to the financing liability.