Leases

12 Months Ended

Jan. 29, 2022

LeasesIn July of 2020, we sold, in separate unrelated transactions, to unaffiliated third parties: i) our corporate headquarters and ancillary office space in Grapevine, Texas for $28.5 million, net of costs to sell and ii) a nearby refurbishment center for $15.2 million, net of costs to sell. In connection with each of the sales, we leased-back from the applicable purchasers our corporate headquarters for an initial term of ten years and refurbishment center for an initial term of two years. The leaseback agreement for the corporate headquarters contains three renewal periods of five years each; we recognized only the initial term of the lease as part of our right-of-use asset and lease liability for the corporate headquarters. The annual rent for the corporate headquarters will start at $1.7 million, plus taxes, utilities, management fees and other operating and maintenance expenses and will increase by 2.25% per year. In July 2021, we extended the term of the lease for our refurbishment center by three years through July 2025, with a five year renewal period. These leaseback agreements are accounted for as operating leases.

With respect to the leaseback of the corporate headquarters, we agreed to provide a letter of credit to the buyer-lessor within 18 months from the closing date to secure our lease obligation. Given that the purchase price of the corporate headquarters was reduced by $2.8 million to account for the deferred issuance of this letter of credit, we recognized a contract asset for the same amount in prepaid expenses and other current assets on our Consolidated Balance Sheets, which represents the variable consideration on the purchase price. In 2021, we issued a letter of credit of $2.8 million and derecognized the contract asset. Upon delivering the letter of credit, we were entitled to a rent credit of an equivalent amount. This variable consideration was recognized in the total gain on sale of assets in our Consolidated Statements of Operations during the second quarter of 2020. The net proceeds from the sale of these assets were used for general corporate purposes.

In August 2020, we sold our Australian headquarters in Eagle Farm, Queensland to an unrelated party for approximately $27.0 million, net of costs to sell, and immediately leased back the facility for a term of ten years on market rate terms at an average annual base rent of $1.7 million, plus taxes, utilities, management fees and other operating and maintenance expenses. Additionally, in September 2020, we sold our Canadian headquarters in Brampton, Ontario for approximately $16.7 million, net of costs to sell, and leased back the facility for a term of five years on market rate terms at an average annual base rent of $0.9 million, plus taxes, utilities, management fees and other operating and maintenance expenses. We recognized only the initial term of the lease as part of our right-of-use asset and lease liability for both the Australian and Canadian headquarters. The net proceeds from the sale of these assets were used for general corporate purposes.

As a result of these transactions, we recognized total gain on sale of assets of $32.4 million in our Consolidated Statements of Operations in fiscal 2020.

The following table presents rent expenses under operating leases:


	Fiscal Year		Fiscal Year
	2021		2020
Operating lease cost	$	296.3	$	311.5
Variable lease cost (1)	64.1		79.2
Total rent expense	$	360.4	$	390.7

(1) Variable lease cost includes percentage rentals and variable executory costs.

We had cash outflows of $262.3 million and $251.4 million in fiscal 2021 and 2020, respectively, associated with operating leases included in the measurement of our lease liabilities and we recognized $205.4 million and $132.5 million of ROU assets in fiscal 2021 and 2020, respectively, that were obtained in exchange for operating lease obligations. In fiscal 2021, we recognized $1.3 million of store-level ROU asset impairment charges compared to $2.9 million of store-level ROU asset impairment charges in fiscal 2020.

The following table presents the weighted-average remaining lease term, which includes reasonably certain renewal options, and the weighted-average discount rate for operating leases included in the measurement of our lease liabilities:


	January 29, 2022		January 30, 2021
Weighted-average remaining lease term (years) (1)	4.2		4.5
Weighted-average discount rate	4.3	%	5.2	%

(1) The weighted-average remaining lease term is weighted based on the lease liability balance for each lease as of January 29, 2022 and January 30, 2021. This weighted average calculation differs from our simple average remaining lease term due to the inclusion of reasonably certain renewal options and the effect of the lease liability value of longer term leases.

The following table presents expected lease payments associated with our operating lease liabilities, excluding percentage rentals:


Period	Operating Leases(1)
Fiscal Year 2022	$	244.0
Fiscal Year 2023	145.3
Fiscal Year 2024	98.0
Fiscal Year 2025	65.3
Fiscal Year 2026	42.5
Thereafter	69.4
Total remaining lease payments	664.5
Less: Interest	(60.0)
Present value of lease liabilities(2)	$	604.5

(1) Operating lease payments exclude legally binding lease payments for leases signed but not yet commenced.

(2) The present value of lease liabilities consist of $210.7 million classified as current portion of operating lease liabilities and $393.7 million classified as long-term operating lease liabilities on our Consolidated Balance Sheets.