Leases

9 Months Ended

Nov. 05, 2024

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.

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


	Three Months Ended				Nine Months Ended
	November 5, 2024		October 29, 2023		November 5, 2024		October 29, 2023
Operating lease cost	$	50.3	$	49.4	$	151.3	$	146.6
Variable lease cost	10.1		9.7		31.6		29.3
Short-term lease cost	0.8		0.8		1.6		2.4
Total	$	61.2	$	59.9	$	184.5	$	178.3

Operating lease payments in the table above includes minimum lease payments for future sites for which the leases have commenced. As of November 5, 2024, the Company had signed lease agreements with total lease payments of $139.6 related to seven 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 sheets as of November 5, 2024.

Sale-leaseback transactions

In July 2024, the Company entered into a sale and master lease agreement (a "sale-leaseback") with an unrelated third party. Under this agreement, the Company sold two of its store properties, including land, buildings and certain improvements, at a sale price of $44.8 and then leased the assets back through the sale-leaseback transaction.

In September 2024, the Company entered into a sale-leaseback with an unrelated third party. Under this agreement, the Company sold one of its store properties, including land, buildings and certain improvements, at a sale price of $28.5 and then leased the assets back through the sale-leaseback transaction.

These transactions were accounted for as failed sale-leasebacks based on GAAP under ASC 842, Leases. 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 applicable master lease. Financing liabilities were recognized in the amount of the proceeds received, net of certain transactions costs, in the amount of $44.3 and $28.0 related to the July 2024 and September 2024 transactions, respectively. The Company will not recognize rent expense related to the leased assets. Instead, monthly rent payments under the applicable master lease agreement (initially, $3.6 and $2.1 per year related to the July 2024 and September 2024 transactions, respectively) will be recorded as interest expense and a reduction of the outstanding liability.

As of November 5, 2024, including the transactions noted above, the Company had financing liabilities related to seven properties. The current outstanding liability of $0.3 is included in accrued liabilities and the long-term outstanding liability of $155.0 is included in other long-term liabilities on the consolidated balance sheet.