Lease Commitments

9 Months Ended

Sep. 29, 2024

(6)

Lease Commitments

The Company has operating and finance leases for the Company’s retail store facilities, distribution center, corporate offices, IT systems hardware, and distribution center delivery tractors and equipment, and accounts for these leases in accordance with ASC 842.

Certain of the leases for the Company’s retail store facilities provide for variable payments for property taxes, insurance, common area maintenance payments related to triple net leases, rental payments based on future sales volumes at the leased location, as well as certain equipment sales taxes, licenses, fees and repairs, which are not measurable at the inception of the lease, or rental payments that are adjusted periodically for inflation. The Company recognizes variable lease expense for these leases in the period incurred which, for contingent rent, begins in the period in which it becomes probable that the specified target that triggers the variable lease payments will be achieved. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The components of lease expense were as follows:


	13 Weeks Ended				39 Weeks Ended
	September 29, 2024		October 1, 2023		September 29, 2024		October 1, 2023
	(In thousands)
Lease expense:
Operating lease expense	$	21,015	$	21,236	$	63,264	$	63,350
Variable lease expense		4,741		4,656		14,460		14,133
Operating lease expense		25,756		25,892		77,724		77,483

Amortization of right-of-use assets		1,213		904		3,514		2,803
Interest on lease liabilities		204		74		652		232
Finance lease expense		1,417		978		4,166		3,035
Total lease expense	$	27,173	$	26,870	$	81,890	$	80,518

Other information related to leases was as follows:


	39 Weeks Ended
	September 29, 2024			October 1, 2023
	(In thousands)
Operating cash flows from operating leases	$	59,857		$	64,904
Financing cash flows from finance leases		3,001			2,722
Operating cash flows from finance leases		671			239
Cash paid for amounts included in the measurement of lease liabilities	$	63,529		$	67,865

Right-of-use assets obtained in exchange for new finance lease liabilities	$	1,338		$	2,986
Right-of-use assets obtained in exchange for new operating lease liabilities	$	58,795		$	45,927
Weighted-average remaining lease term—finance leases	3.8 years			3.9 years
Weighted-average remaining lease term—operating leases	5.0 years			4.9 years
Weighted-average discount rate—finance leases		6.3	%		5.3	%
Weighted-average discount rate—operating leases		5.7	%		5.4	%

Maturities of finance and operating lease liabilities as of September 29, 2024 were as follows:


Fiscal Year Ending:	Finance Leases			Operating Leases
	(In thousands)
2024 (remaining three months)	$	1,273		$	22,125
2025		4,373			80,466
2026		4,057			66,435
2027		2,824			47,615
2028		1,796			34,994
Thereafter		594			62,388
Undiscounted cash flows	$	14,917		$	314,023
Reconciliation of lease liabilities:
Weighted-average remaining lease term	3.8 years			5.0 years
Weighted-average discount rate		6.3	%		5.7	%
Present values	$	13,220		$	271,988
Lease liabilities - current		3,758			69,939
Lease liabilities - long-term		9,462			202,049
Lease liabilities - total	$	13,220		$	271,988
Difference between undiscounted and discounted cash flows	$	1,697		$	42,035