UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended August 3, 2019

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _____________ to _____________

Commission File Number: 001-33764

ULTA BEAUTY, INC.

(Exact name of Registrant as specified in its charter)

incorporation or organization)

Identification No.)

Delaware

(State or other jurisdiction of
incorporation or organization)

38-4022268

(I.R.S. Employer
Identification No.)

1000 Remington Blvd., Suite 120

Bolingbrook, Illinois

(Address of principal executive offices)

60440

(Zip code)

Registrant’s telephone number, including area code: (630) 410-4800

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	ULTA	The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding as of August 26, 2019 was 58,848,950 shares.

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ULTA BEAUTY, INC.

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Part I - Financial Information

Item 1. Financial Statements
Consolidated Balance Sheets		3
Consolidated Statements of Income		4
Consolidated Statements of Cash Flows		5
Consolidated Statements of Stockholders’ Equity		6
Notes to Consolidated Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3. Quantitative and Qualitative Disclosures about Market Risk	25

Item 4. Controls and Procedures	26

Part II - Other Information	26

Item 1. Legal Proceedings	26

Item 1A. Risk Factors	26

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 3. Defaults Upon Senior Securities	27

Item 4. Mine Safety Disclosures	27

Item 5. Other Information	27

Item 6. Exhibits	28

SIGNATURES	29

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Part I - Financial Information

Item 1.Financial Statements

Ulta Beauty, Inc.

Consolidated Balance Sheets


	August 3,		February 2,		August 4,
(In thousands, except per share data)	2019		2019		2018
Assets		(Unaudited)				(Unaudited)
Current assets:
Cash and cash equivalents	$	177,398	$	409,251	$	237,107
Short-term investments		150,000		—		149,000
Receivables, net		107,263		136,168		103,666
Merchandise inventories, net		1,315,999		1,214,329		1,219,685
Prepaid expenses and other current assets		131,171		138,116		103,618
Prepaid income taxes		38,769		16,997		17,082
Total current assets		1,920,600		1,914,861		1,830,158

Property and equipment, net		1,219,948		1,226,029		1,212,978
Operating lease assets		1,499,556		—		—
Goodwill		10,870		10,870		—
Other intangible assets, net		3,854		4,317		—
Deferred compensation plan assets		24,665		20,511		19,585
Other long-term assets		30,882		14,584		10,628
Total assets	$	4,710,375	$	3,191,172	$	3,073,349

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	450,117	$	404,016	$	409,849
Accrued liabilities		224,202		220,666		202,999
Deferred revenue		182,354		199,054		145,907
Current operating lease liabilities		208,261		—		—
Total current liabilities		1,064,934		823,736		758,755

Non-current operating lease liabilities		1,683,743		—		—
Deferred rent		—		434,980		422,455
Deferred income taxes		86,598		83,864		49,700
Other long-term liabilities		35,649		28,374		29,961
Total liabilities		2,870,924		1,370,954		1,260,871

Commitments and contingencies (Note 7)

Stockholders' equity:
Common stock, $0.01 par value, 400,000 shares authorized; 58,485, 59,232, and 60,518 shares issued; 57,810, 58,584, and 59,872 share outstanding; at August 3, 2019 (unaudited), February 2, 2019, and August 4, 2018 (unaudited), respectively		585		592		605
Treasury stock-common, at cost		(34,180)		(24,908)		(24,413)
Additional paid-in capital		794,368		738,671		720,535
Retained earnings		1,078,678		1,105,863		1,115,751
Total stockholders’ equity		1,839,451		1,820,218		1,812,478
Total liabilities and stockholders’ equity	$	4,710,375	$	3,191,172	$	3,073,349

See accompanying notes to consolidated financial statements.

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Ulta Beauty, Inc.

Consolidated Statements of Income

(Unaudited)


	13 Weeks Ended				26 Weeks Ended
	August 3,		August 4,		August 3,		August 4,
(In thousands, except per share data)	2019		2018		2019		2018
Net sales	$	1,666,607	$	1,488,221	$	3,409,636	$	3,031,888
Cost of sales		1,060,708		952,760		2,158,890		1,935,714
Gross profit		605,899		535,461		1,250,746		1,096,174

Selling, general and administrative expenses		392,843		337,142		795,976		682,766
Pre-opening expenses		5,038		4,504		9,212		9,751
Operating income		208,018		193,815		445,558		403,657
Interest income, net		(1,671)		(1,143)		(3,717)		(2,468)
Income before income taxes		209,689		194,958		449,275		406,125
Income tax expense		48,431		46,635		95,796		93,406
Net income	$	161,258	$	148,323	$	353,479	$	312,719

Net income per common share:
Basic	$	2.77	$	2.47	$	6.05	$	5.18
Diluted	$	2.76	$	2.46	$	6.02	$	5.16

Weighted average common shares outstanding:
Basic		58,171		60,070		58,401		60,340
Diluted		58,446		60,375		58,718		60,630

See accompanying notes to consolidated financial statements.

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Ulta Beauty, Inc.

Consolidated Statements of Cash Flows

(Unaudited)


	26 Weeks Ended
	August 3,		August 4,
(In thousands)	2019		2018
Operating activities
Net income	$	353,479	$	312,719
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		144,951		137,815
Non-cash lease expense		152,134		—
Deferred income taxes		2,734		612
Stock-based compensation expense		12,766		13,172
Loss on disposal of property and equipment		3,215		499
Change in operating assets and liabilities:
Receivables		11,437		(3,947)
Merchandise inventories		(101,670)		(123,261)
Prepaid expenses and other current assets		(18,315)		(4,952)
Income taxes		(21,772)		(29,694)
Accounts payable		46,101		84,091
Accrued liabilities		(2,629)		(6,572)
Deferred revenue		(16,700)		(6,577)
Operating lease liabilities		(138,557)		—
Deferred rent		—		14,539
Other assets and liabilities		20,162		(441)
Net cash provided by operating activities		447,336		388,003

Investing activities
Purchases of short-term investments		(245,000)		(558,163)
Proceeds from short-term investments		95,000		529,163
Purchases of property and equipment		(151,213)		(141,691)
Purchases of equity investments		(33,339)		—
Net cash used in investing activities		(334,552)		(170,691)

Financing activities
Repurchase of common shares		(378,300)		(260,452)
Stock options exercised		42,935		8,448
Purchase of treasury shares		(9,272)		(5,646)
Net cash used in financing activities		(344,637)		(257,650)

Net decrease in cash and cash equivalents		(231,853)		(40,338)
Cash and cash equivalents at beginning of period		409,251		277,445
Cash and cash equivalents at end of period	$	177,398	$	237,107

Supplemental cash flow information
Cash paid for income taxes (net of refunds)	$	97,024	$	121,914
Non-cash investing activities:
Change in property and equipment included in accrued liabilities	$	7,625	$	19,453

See accompanying notes to consolidated financial statements.

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Ulta Beauty, Inc.

Consolidated Statements of Stockholders’ Equity

(Unaudited)


				Treasury -
	Common Stock			Common Stock			Additional				Total
	Issued			Treasury			Paid-In		Retained		Stockholders'
(In thousands)	Shares	Amount		Shares	Amount		Capital		Earnings		Equity
Balance – February 3, 2018	61,441	$	614	(619)	$	(18,767)	$	698,917	$	1,093,453	$	1,774,217
Net income	—		—	—		—		—		164,396		164,396
Stock-based compensation	—		—	—		—		6,170		—		6,170
Adoption of accounting standards - ASC 606	—		—	—		—		—		(29,980)		(29,980)
Stock options exercised and other awards	176		2	—		—		6,510		—		6,512
Purchase of treasury shares	—		—	(23)		(4,831)		—		—		(4,831)
Repurchase of common shares	(619)		(6)	—		—		—		(133,045)		(133,051)
Balance – May 5, 2018	60,998	$	610	(642)	$	(23,598)	$	711,597	$	1,094,824	$	1,783,433
Net income	—		—	—		—		—		148,323		148,323
Stock-based compensation	—		—	—		—		7,002		—		7,002
Stock options exercised and other awards	32		—	—		—		1,936		—		1,936
Purchase of treasury shares	—		—	(4)		(815)		—		—		(815)
Repurchase of common shares	(512)		(5)	—		—		—		(127,396)		(127,401)
Balance – August 4, 2018	60,518	$	605	(646)	$	(24,413)	$	720,535	$	1,115,751	$	1,812,478


				Treasury -
	Common Stock			Common Stock			Additional				Total
	Issued			Treasury			Paid-In		Retained		Stockholders'
(In thousands)	Shares	Amount		Shares	Amount		Capital		Earnings		Equity
Balance – February 2, 2019	59,232	$	592	(648)	$	(24,908)	$	738,671	$	1,105,863	$	1,820,218
Net income	—		—	—		—		—		192,221		192,221
Stock-based compensation	—		—	—		—		6,030		—		6,030
Adoption of accounting standards - ASC 842	—		—	—		—		—		(2,375)		(2,375)
Stock options exercised and other awards	348		4	—		—		42,052		—		42,056
Purchase of treasury shares	—		—	(27)		(9,183)		—		—		(9,183)
Repurchase of common shares	(318)		(3)	—		—		—		(107,396)		(107,399)
Balance – May 4, 2019	59,262	$	593	(675)	$	(34,091)	$	786,753	$	1,188,313	$	1,941,568
Net income	—		—	—		—		—		161,258		161,258
Stock-based compensation	—		—	—		—		6,736		—		6,736
Stock options exercised and other awards	15		—	—		—		879		—		879
Purchase of treasury shares	—		—	—		(89)		—		—		(89)
Repurchase of common shares	(792)		(8)	—		—		—		(270,893)		(270,901)
Balance – August 3, 2019	58,485	$	585	(675)	$	(34,180)	$	794,368	$	1,078,678	$	1,839,451

See accompanying notes to consolidated financial statements.

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Ulta Beauty, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share and store count data) (Unaudited)

1.Business and basis of presentation

On January 29, 2017, Ulta Salon, Cosmetics & Fragrance, Inc. implemented a holding company reorganization. Pursuant to the reorganization, Ulta Beauty, Inc., which was incorporated as a Delaware corporation in December 2016, became the successor to Ulta Salon, Cosmetics & Fragrance, Inc., the former publicly-traded company and now a wholly owned subsidiary of Ulta Beauty, Inc. As used in these notes and throughout this Quarterly Report on Form 10-Q, all references to “we,” “us,” “our,” “Ulta Beauty,” or the “Company” refer to Ulta Beauty, Inc. and its consolidated subsidiaries.

The Company was originally founded in 1990 to operate specialty retail stores selling cosmetics, fragrance, haircare and skincare products, and related accessories and services. The stores also feature full-service salons. As of August 3, 2019, the Company operated 1,213 stores across 50 states, as shown in the table below.


	Number of		Number of
Location	stores	Location	stores
Alabama	21	Montana	6
Alaska	3	Nebraska	5
Arizona	27	Nevada	15
Arkansas	10	New Hampshire	7
California	157	New Jersey	36
Colorado	26	New Mexico	6
Connecticut	16	New York	48
Delaware	3	North Carolina	32
Florida	83	North Dakota	3
Georgia	36	Ohio	42
Hawaii	4	Oklahoma	20
Idaho	9	Oregon	14
Illinois	55	Pennsylvania	43
Indiana	23	Rhode Island	3
Iowa	10	South Carolina	20
Kansas	12	South Dakota	2
Kentucky	14	Tennessee	25
Louisiana	18	Texas	110
Maine	3	Utah	14
Maryland	24	Vermont	1
Massachusetts	19	Virginia	29
Michigan	47	Washington	34
Minnesota	17	West Virginia	7
Mississippi	9	Wisconsin	20
Missouri	23	Wyoming	2
		Total	1,213

The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and the U.S. Securities and Exchange Commission’s Article 10, Regulation S-X. These financial statements were prepared on a consolidated basis to include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts, transactions, and unrealized profit were eliminated in consolidation. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments, which are of a normal

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recurring nature, necessary to fairly state the financial position and results of operations and cash flows for the interim periods presented.

The Company’s business is subject to seasonal fluctuation. Significant portions of the Company’s net sales and net income are realized during the fourth quarter of the fiscal year due to the holiday selling season. The results for the 13 and 26 weeks ended August 3, 2019 are not necessarily indicative of the results to be expected for the fiscal year ending February 1, 2020, or for any other future interim period or for any future year.

These interim consolidated financial statements and the related notes should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended February 2, 2019. All amounts are stated in thousands, with the exception of per share amounts and number of stores.

2.Summary of significant accounting policies

Information regarding the Company’s significant accounting policies is contained in Note 2, “Summary of significant accounting policies,” to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended February 2, 2019. Presented below and in the following notes is supplemental information that should be read in conjunction with “Notes to Consolidated Financial Statements” in the Annual Report.

Fiscal quarter

The Company’s quarterly periods are the 13 weeks ending on the Saturday closest to April 30, July 31, October 31, and January 31. The Company’s second quarter in fiscal 2019 and 2018 ended on August 3, 2019 and August 4, 2018, respectively.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

Recent accounting pronouncements not yet adopted

Intangibles – Goodwill and Other-Internal-Use Software

In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-15, Intangibles – Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which clarifies and aligns the accounting for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019 and should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted. The adoption of ASU 2018-15 is not expected to have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.

Recently adopted accounting pronouncements

Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in ASU 2016-02 and subsequently issued amendments requires lessees to capitalize virtually all leases with terms of more than twelve months on the balance sheet as a right-of-use asset and recognize an associated lease liability. The right-of-use asset represents the lessee’s right to use, or control the use of, a specified asset for the specified lease term. The lease liability represents the lessee’s obligation to make lease payments arising from the lease, measured on a discounted basis. Based on certain characteristics, leases are classified as financing or operating leases and their classification impacts the recognition of expense in the income statement. Entities are allowed to apply the modified retrospective approach (1) retrospectively to

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each comparative period presented or (2) retrospectively at the beginning of the period of adoption through a cumulative-effect adjustment.

The Company adopted the new standard on February 3, 2019 using the modified retrospective approach by recognizing and measuring leases without revising comparative period information or disclosures. The Company elected the transition package of three practical expedients permitted within the standard, which among other things, allows for the carryforward of historical lease classifications. In addition, the Company elected to apply the practical expedient that allows for the combination of lease and non-lease components for all asset classes. The Company made an accounting policy election to keep leases with terms of twelve months or less off the balance sheet and recognize those lease payments on a straight-line basis over the lease term.

The adoption of ASU 2016-02, resulted in the recording of operating lease assets and liabilities of $1,460,866 and $1,839,970 within the consolidated balance sheet, respectively, as of February 3, 2019. As part of the adoption, the Company recorded an adjustment to retained earnings of $2,375. The standard did not materially impact the Company’s consolidated results of operations and had no impact on cash flows. See Note 6, “Leases,” for further details.

The impact to the Company’s opening consolidated balance sheet as of February 3, 2019 was as follows:


	As Reported		Effect of Adopting		Balance at
(In thousands)	February 2, 2019		ASC 842		February 3, 2019
Assets					(Unaudited)
Receivables, net	$	136,168	$	(17,468)	$	118,700
Prepaid expenses and other current assets		138,116		(25,260)		112,856
Property and equipment, net		1,226,029		(16,983)		1,209,046
Operating lease assets		—		1,460,866		1,460,866
Liabilities and stockholders’ equity
Accrued liabilities		220,666		(1,460)		219,206
Current operating lease liabilities		—		210,721		210,721
Deferred rent		434,980		(434,980)		—
Non-current operating lease liabilities		—		1,629,249		1,629,249
Retained earnings		1,105,863		(2,375)		1,103,488

3.Acquisitions

The Company continues to make investments to evolve the customer experience, with a strong emphasis on integrating technology across the business. To support these efforts, the Company paid $13,606 to acquire two technology companies in fiscal 2018.

On September 10, 2018, the Company acquired QM Scientific, an artificial intelligence technology company. The acquisition is not material to the Company’s consolidated financial statements.

On October 29, 2018, the Company acquired GlamST, an augmented reality technology company. The acquisition is not material to the Company’s consolidated financial statements.

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4.Revenue

The Company’s net sales include retail stores and e-commerce merchandise sales as well as salon services and other revenue. Other revenue sources include the private label credit card and co-branded credit card programs, as well as deferred revenue related to the loyalty program and gift card breakage.

Disaggregated revenue

The following table sets forth the approximate percentage of net sales by primary category:


	13 Weeks Ended			26 Weeks Ended
(Percentage of net sales)	August 3, 2019	August 4, 2018	August 3, 2019		August 4, 2018
Cosmetics	47%	49%		50%	51%
Skincare, Bath & Fragrance	22%	20%		21%	20%
Haircare Products & Styling Tools	21%	21%		19%	19%
Services	6%	6%		6%	6%
Other (nail products, accessories, and other)	4%	4%		4%	4%
	100%	100%		100%	100%

Deferred revenue

Deferred revenue primarily represents contract liabilities for the Company’s obligation to transfer additional goods or services to a guest for which the Company has received consideration, such as unredeemed Ultamate Rewards loyalty points and unredeemed Ulta Beauty gift cards. In addition, the Company recognizes breakage on gift cards proportionately as redemption occurs.

The following table provides a summary of the changes included in deferred revenue:


	13 Weeks Ended				26 Weeks Ended
	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018
Beginning balance	$	173,921	$	130,591	$	193,585	$	110,103
Adoption of ASC 606		—		—		—		38,773
Additions to contract liabilities (1)		64,863		89,001		135,167		174,835
Deductions to contract liabilities (2)		(66,831)		(88,976)		(156,799)		(193,095)
Ending balance	$	171,953	$	130,616	$	171,953	$	130,616

(1)	Loyalty points and gift cards issued in the current period but not redeemed or expired.

(2)	Revenue recognized in the current period related to the beginning liability.

5.Goodwill and other intangible assets

Goodwill, which represents the excess of cost over the fair value of net assets acquired, amounted to $10,870 at August 3, 2019 and February 2, 2019, respectively. The Company did not have any goodwill as of August 4, 2018. No additional goodwill was recognized during the 13 and 26 weeks ended August 3, 2019, respectively. The Company reviews the recoverability of goodwill annually during the fourth quarter or more frequently if an event occurs or circumstances change that would indicate that impairment may exist.

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Other intangible assets with finite useful lives are amortized over their useful lives. The Company reviews the recoverability of long-lived assets whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable.

6.Leases

The Company determines whether an arrangement is or contains a lease at contract inception. The Company leases retail stores, distribution centers, and corporate offices under non-cancellable operating leases with various expiration dates through 2032. Leases generally have an initial lease term of 10 years and include renewal options under substantially the same terms and conditions as the original leases. Leases do not contain any material residual value guarantees or material restrictive covenants.

The lease classification evaluation begins at the lease commencement date. The lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option would result in an economic penalty. All retail store, distribution center, and corporate office leases are classified as operating leases. The Company does not have any finance leases.

Total rent payable is recorded during the lease term, including rent escalations in which the amount of future rent is fixed on the straight-line basis over the term of the lease (including the rent holiday period beginning upon control of the premises, and any fixed payments stated in the lease). For leases with an initial term greater than 12 months, a related lease liability is recorded on the balance sheet at the present value of future payments discounted at the estimated fully collateralized incremental borrowing rate (discount rate) corresponding with the lease term. In addition, a right-of-use asset is recorded as the initial amount of the lease liability, plus any lease payments made to the lessor before or at the lease commencement date and any initial direct costs incurred, less any tenant improvement allowance incentives received. Tenant incentives are amortized through the right-of-use asset as reduction of rent expense over the lease term. The difference between the minimum rents paid and the straight-line rent (deferred rent) is reflected within the associated right-of-use asset. Operating lease expense is recognized on a straight-line basis over the lease term.

Certain leases contain provisions that require additional rent payments based upon sales volume (“variable lease cost”). Contingent rent is accrued each period as the liabilities are incurred, in addition to the straight-line rent expense. This results in some variability in lease expense as a percentage of revenues over the term of the lease in stores where contingent rent is paid.

Leases with an initial term of 12 months or less (“short-term leases”) are not recorded on the balance sheet. Short-term lease expense is recognized on a straight-line basis over the lease term.

The Company subleases certain real estate to third parties for stores with excess square footage space.

The Company does not separate lease and non-lease components (e.g., common area maintenance).

As the interest rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate corresponding with the lease term. As there are no outstanding borrowings under the Company’s credit facility, this rate is estimated based on prevailing market conditions, comparable company and credit analysis, and judgment. The incremental borrowing rate is reassessed if there is a change to the lease term or if a modification occurs and it is not accounted for as a separate contract.

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The following table presents supplemental balance sheet information, the weighted-average remaining lease term, and discount rate for operating leases as of August 3, 2019:



(In thousands)	Classification on the Balance Sheet	August 3, 2019
Right-of-use assets	Operating lease assets	$	1,499,556

Current lease liabilities	Current operating lease liabilities		208,261
Non-current lease liabilities	Non-current operating lease liabilities		1,683,743
Total lease liabilities		$	1,892,004

Weighted-average remaining lease term			7.2 years
Weighted-average discount rate			4.1%

Lease cost

The following table presents the components of lease cost for operating leases:


		13 Weeks Ended		26 Weeks Ended
(In thousands)	Classification on the Statement of Income	August 3, 2019		August 3, 2019
Operating lease cost	Cost of sales (1)	$	71,579	$	142,921
Variable lease cost	Cost of sales		(1,524)		(3,324)
Short-term lease cost	Selling, general and administrative expenses		73		138
Sublease income	Net sales		(149)		(290)
Total lease cost		$	69,979	$	139,445

(1) The majority of operating lease cost relates to retail stores and distribution centers and is classified within cost of sales. Operating lease cost for corporate offices is classified within selling, general and administrative expenses. Operating lease cost from the control date through store opening date is classified within pre-opening expenses.

Other information

The following table presents supplemental disclosures of cash flow information related to operating leases: