Quarterly report pursuant to Section 13 or 15(d)


9 Months Ended
Nov. 02, 2019


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.

The following table presents supplemental balance sheet information, the weighted-average remaining lease term, and discount rate for operating leases as of November 2, 2019:

(In thousands)

Classification on the Balance Sheet


November 2, 2019

Right-of-use assets

Operating lease assets



Current lease liabilities

Current operating lease liabilities



Non-current lease liabilities

Non-current operating lease liabilities


Total lease liabilities



Weighted-average remaining lease term


6.8 years

Weighted-average discount rate


Lease cost

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

13 Weeks Ended

39 Weeks Ended

(In thousands)


Classification on the Statement of Income


November 2, 2019


November 2, 2019

Operating lease cost

Cost of sales (1)





Variable lease cost

Cost of sales



Short-term lease cost

Selling, general and administrative expenses



Sublease income

Net sales



Total lease cost





(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:


39 Weeks Ended

(In thousands)


November 2, 2019

Cash paid for operating lease liabilities (1)



Operating lease assets obtained in exchange for operating lease liabilities (non-cash)



(1) Excludes $57,160 related to cash received for tenant incentives.

Maturity of lease liabilities

The following table presents maturities of operating lease liabilities as of November 2, 2019:

Fiscal year


(In thousands)

2019 (1)











2024 and thereafter


Total lease payments



Less: Imputed interest


Present value of operating lease liabilities



(1) Excluding the 39 weeks ended November 2, 2019 and net of tenant incentives.

Operating lease payments exclude $186,632 of legally binding minimum lease payments for leases signed but not yet commenced.