The Company determines if a contract contains a lease at inception. The Company leases various office spaces, showrooms and retail stores. Although the Company’s more recent leases are subject to shorter terms as a result of the implementation of the strategy to pursue shorter lease terms, many of the Company’s leases have initial terms of 10 years, and in many instances can be extended for an additional term. The Company will not include renewal options in the underlying lease term unless the Company is reasonably certain to exercise the renewal option. Substantially all of the Company’s leases require a fixed annual rent, and most require the payment of additional rent if store sales exceed a negotiated amount. These percentage rent expenses are considered as variable lease costs and are recognized in the consolidated financial statements when incurred. In addition, the Company’s real estate leases may also require additional payments for real estate taxes and other occupancy-related costs which it considers as non-lease components.

Operating lease ROU assets and operating lease liabilities are recognized based upon the present value of the future lease payments over the lease term. As the Company’s leases do not provide an implicit borrowing rate, the Company uses an estimated incremental borrowing rate based upon a combination of market-based factors, such as market quoted forward yield curves and company specific factors, such as the Company’s credit rating, lease size and duration to calculate the present value.

As a result of COVID-19, the Company did not initially make certain rent payments in fiscal 2020. The Company has recognized any rent payments not made within accounts payable in the accompanying condensed consolidated balance sheet and has continued to recognize rent expense in the condensed consolidated statements of operations and comprehensive income (loss). As a result of discussions with landlords and amendments to existing lease terms, the Company has since made rent payments for the majority of its leases. The Company considered the FASB’s recent guidance regarding lease modifications as a result of the effects of COVID-19 and elected to apply the temporary practical expedient to account for lease changes as variable rent unless an amendment results in a substantial change in the Company's lease obligations, which in those circumstances the Company accounted for such lease change as a lease modification.

Total lease cost is included in cost of sales and SG&A in the accompanying condensed consolidated statements of operations and comprehensive income (loss) and is recorded net of immaterial sublease income. Some leases have a non-cancelable lease term of less than one year and therefore, the Company has elected to exclude these short-term leases from our ROU asset and lease liabilities. Short term lease costs were immaterial for the six months ended July 31, 2021 and August 1, 2020. The Company’s lease cost is comprised of the following:

	Three Months Ended						Six Months Ended
	July 31,			August 1,			July 31,			August 1,
(in thousands)	2021			2020			2021			2020
Operating lease cost	$	5,919		$	6,381		$	12,193		$	12,869
Variable operating lease cost		(1,011	)		(2	)		(869	)		31
Total lease cost	$	4,908		$	6,379		$	11,324		$	12,900

The operating lease cost above included a correction of an error of $501 benefit recorded within SG&A expenses in the current period related to a lease amendment for a retail store location signed in April 2020. The amendment lowered the base rent for fiscal 2021 through fiscal 2023 which was not accounted for upon the signing of the agreement leading to an overstatement of the ROU asset related expenses and lease liability in the first quarter of fiscal 2020.

During the six months ended August 1, 2020, the Company recorded right-of-use assets impairment of approximately $8,556. There was no such impairment for the three and six months ended July 31, 2021.

	July 31,
(in thousands)	2021
Fiscal 2021	$	15,711
Fiscal 2022		29,311
Fiscal 2023		27,216
Fiscal 2024		24,650
Fiscal 2025		15,322
Thereafter		23,014
Total lease payments		135,224
Less: Imputed interest		(20,338	)
Total operating lease liabilities	$	114,886

The operating lease payments do not include any renewal options as such leases are not reasonably certain of being renewed as of July 31, 2021 and does not include $3,116 of legally binding minimum lease payments of leases signed but not yet commenced.