The Company determines if a contract contains a lease at inception. The Company has operating leases for real estate (primarily retail stores, storage and office spaces) some of which have initial terms of 10 years, and in many instances can be extended for an additional term, while 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. 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.

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.

Total lease cost is included in cost of sales and SG&A expense 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 nine months ended October 29, 2022 and October 30, 2021. The Company’s lease cost is comprised of the following:


	Three Months Ended				Nine Months Ended
	October 29,		October 30,		October 29,		October 30,
(in thousands)	2022		2021		2022		2021
Operating lease cost	$	6,446	$	6,077	$	18,859	$	18,270
Variable operating lease cost		45		810		503		(59	)
Total lease cost	$	6,491	$	6,887	$	19,362	$	18,211

The operating lease cost for the three and nine months ended October 29, 2022 includes $2,152 of accelerated amortization associated with the wind-down of the Rebecca Taylor business. See Note 2 "Wind Down of Rebecca Taylor Business" for additional information. The operating lease cost above for the nine months ended October 30, 2021 included a benefit of $501 for the correction of an error recorded within SG&A expenses 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.

As of October 29, 2022, the future maturity of lease liabilities are as follows:


	October 29,
(in thousands)	2022
Fiscal 2022	$	7,212
Fiscal 2023		26,758
Fiscal 2024		24,102
Fiscal 2025		15,598
Fiscal 2026		10,951
Thereafter		34,904
Total lease payments		119,525
Less: Imputed interest		(20,322	)
Total operating lease liabilities	$	99,203

The operating lease payments do not include any renewal options as such leases are not reasonably certain of being renewed as of October 29, 2022, and do not include $11,497 of legally binding minimum lease payments for leases signed but not yet commenced.