Annual report pursuant to Section 13 and 15(d)

Properties and Leases

v3.19.1
Properties and Leases
12 Months Ended
Feb. 02, 2019
Property Plant and Equipment and Leases of Lessee [Abstract]  
Properties and Leases
Properties and Leases
The major classes of property and equipment, net as of February 2, 2019 and February 3, 2018 are as follows: 
 
February 2,
2019
 
February 3,
2018
 
(millions)
Land
$
1,454

 
$
1,494

Buildings on owned land
4,019

 
4,106

Buildings on leased land and leasehold improvements
1,404

 
1,444

Fixtures and equipment
4,230

 
4,204

Leased properties under capitalized leases
25

 
34

 
11,132

 
11,282

Less accumulated depreciation and amortization
4,495

 
4,610

 
$
6,637

 
$
6,672



In connection with various shopping center agreements, the Company is obligated to operate certain stores within the centers for periods of up to fifteen years. Some of these agreements require that the stores be operated under a particular name.
The Company leases a portion of the real estate and personal property used in its operations. Most leases require the Company to pay real estate taxes, maintenance and other executory costs; some also require additional payments based on percentages of sales and some contain purchase options. Certain of the Company’s real estate leases have terms that extend for significant numbers of years and provide for rental rates that increase or decrease over time. In addition, certain of these leases contain covenants that restrict the ability of the tenant (typically a subsidiary of the Company) to take specified actions (including the payment of dividends or other amounts on account of its capital stock) unless the tenant satisfies certain financial tests.
As of February 2, 2019, minimum rental commitments (excluding executory costs) for noncancellable leases, including executed leases not yet commenced, are as follows:
 
 
Capitalized
Leases
 
Operating
Leases
 
Total
 
(millions)
Fiscal year
 
 
 
 
 
2019
$
3

 
$
325

 
$
328

2020
3

 
315

 
318

2021
3

 
309

 
312

2022
3

 
283

 
286

2023
3

 
264

 
267

After 2023
31

 
2,758

 
2,789

Total minimum lease payments
46

 
$
4,254

 
$
4,300

Less amount representing interest
20

 
 
 
 
Present value of net minimum capitalized lease payments
$
26

 
 
 
 


Capitalized leases are included in the Consolidated Balance Sheets as property and equipment while the related obligation is included in short-term ($1 million) and long-term ($25 million) debt. Amortization of assets subject to capitalized leases is included in depreciation and amortization expense. Total minimum lease payments shown above have not been reduced by minimum sublease rentals of $1 million on operating leases.
The Company is a guarantor with respect to certain lease obligations associated with The May Department Stores Company and previously disposed subsidiaries or businesses. The leases, one of which includes potential extensions to 2070, have future minimum lease payments aggregating $240 million and are offset by payments from existing tenants and subtenants. In addition, the Company is contingently liable for other expenses related to the above leases, such as property taxes and common area maintenance, which are also payable by existing tenants and subtenants. Potential liabilities related to these guarantees are subject to certain defenses by the Company. The Company believes that the risk of significant loss from the guarantees of these lease obligations is remote.
Rental expense consists of:
 
 
2018
 
2017
 
2016
 
(millions)
Real estate (excluding executory costs)
 
 
 
 
 
Operating leases –
 
 
 
 
 
Minimum rentals
$
317

 
$
317

 
$
312

Contingent rentals
11

 
11

 
12

 
328

 
328

 
324

Less income from subleases –
 
 
 
 
 
Operating leases
(1
)
 
(3
)
 
(5
)
 
$
327

 
$
325

 
$
319

Personal property – Operating leases
$
9

 
$
10

 
$
11



Included as a reduction to the expense above is deferred rent amortization of $14 million for 2018 and 2017, and $9 million for 2016 related to contributions received from landlords.