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Leases

6 Months Ended

Jul. 30, 2023

9. Leases

We have operating leases for warehouses, showrooms, manufacturing facilities, offices and equipment. We recognized sub-lease income of $45,000 and $74,000 for the second quarter and first half of fiscal 2024, respectively. We recognized sub-lease income of $34,000 and $381,000 for the second quarter and first half of fiscal 2023, respectively.

The components of lease cost and supplemental cash flow information for leases for the three-months and six-months ended July 30, 2023 and July 31, 2022 were:

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	July 30, 2023		July 31, 2022		July 30, 2023		July 31, 2022
Operating lease cost	$	2,862	$	2,270	$	5,700	$	4,797
Variable lease cost		70		56		152		111
Short-term lease cost		92		78		170		164
Total operating lease cost	$	3,024	$	2,404	$	6,022	$	5,072


Operating cash outflows	$	2,679	$	2,389	$	5,371	$	5,224

During fiscal 2024 second quarter, we reduced our footprint by 200,000 square feet in the Georgia warehouse. This modification resulted in an approximate $8 million decrease in the lease right-of-use assets and liabilities. The right-of-use assets and lease liabilities recorded on our condensed consolidated balance sheets as of July 30, 2023 and January 29, 2023 were as follows:

	July 30, 2023		January 29, 2023
Real estate	$	57,946	$	68,212
Property and equipment		643		737
Total operating leases right-of-use assets	$	58,589	$	68,949


Current portion of operating lease liabilities	$	6,926	$	7,316
Long term operating lease liabilities		54,157		63,762
Total operating lease liabilities	$	61,083	$	71,078

For leases that commenced before July 2022, we used our incremental borrowing rate which was LIBOR plus 1.5%. When we entered into the new loan agreement (described in Note 10 below), our incremental borrowing rate for unsecured term loan became the current BSBY rate plus 1.40%. We use this rate as discount rate for leases commenced in July 2022 and thereafter. The weighted-average discount rate is 5.04%. The weighted-average remaining lease term is 7.3 years.

The following table reconciles the undiscounted future lease payments for operating leases to the operating lease liabilities recorded in the condensed consolidated balance sheets on July 30, 2023:

	Undiscounted Future Operating Lease Payments
Remainder of fiscal 2024	$	4,864
2025		9,980
2026		10,059
2027		9,888
2028		8,342
2029 and thereafter		31,691
Total lease payments	$	74,824
Less: impact of discounting		(13,741	)
Present value of lease payments	$	61,083

During the fiscal 2024 second quarter, we entered into an agreement to further reduce our footprint in the Georgia warehouse in the fourth quarter of fiscal 2024. This amendment will result in an approximate $3 million decrease in rental payments over the remaining lease term. Since the agreement has not yet commenced, the modification is not reflected in the table above.