Annual report pursuant to Section 13 and 15(d)

Properties and Leases

v3.21.1
Properties and Leases
12 Months Ended
Jan. 30, 2021
Property Plant And Equipment And Leases Of Lessee [Abstract]  
Properties and Leases

 

5.

Properties and Leases

Property and Equipment, net

The major classes of property and equipment, net as of January 30, 2021 and February 1, 2020 are as follows:

 

 

 

January 30,

 

 

February 1,

 

 

 

2021

 

 

2020

 

 

 

(millions)

 

Land

 

$

1,390

 

 

$

1,436

 

Buildings on owned land

 

 

3,650

 

 

 

3,822

 

Buildings on leased land and leasehold improvements

 

 

1,268

 

 

 

1,365

 

Fixtures and equipment

 

 

4,032

 

 

 

4,402

 

 

 

 

10,340

 

 

 

11,025

 

Less accumulated depreciation and amortization

 

 

4,400

 

 

 

4,392

 

 

 

$

5,940

 

 

$

6,633

 

 

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.

Leases

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, insurance and other similar costs; some also require additional payments based on percentages of sales and some contain purchase options. Certain of the Company's 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.

ROU assets and lease liabilities consist of:

 

 

 

 

 

January 30,

 

 

February 1,

 

 

 

 

 

2021

 

 

2020

 

 

 

Classification

 

(millions)

 

Assets

 

 

 

 

 

 

 

 

 

 

Finance lease assets (a)

 

Right of Use Assets

 

$

12

 

 

$

13

 

Operating lease assets (b)

 

Right of Use Assets

 

 

2,866

 

 

 

2,655

 

Total lease assets

 

 

 

$

2,878

 

 

$

2,668

 

Liabilities

 

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

 

 

Finance (a)

 

Accounts payable and accrued liabilities

 

$

2

 

 

$

2

 

Operating (b)

 

Accounts payable and accrued liabilities

 

 

198

 

 

 

331

 

Noncurrent

 

 

 

 

 

 

 

 

 

 

Finance (a)

 

Long-Term Lease Liabilities

 

 

19

 

 

 

21

 

Operating (b)

 

Long-Term Lease Liabilities

 

 

3,166

 

 

 

2,897

 

Total lease liabilities

 

 

 

$

3,385

 

 

$

3,251

 

 

(a)

Finance lease assets are recorded net of accumulated amortization of $13 million and $12 million as of January 30, 2021 and February 1, 2020, respectively. As of January 30, 2021 and February 1, 2020, finance lease assets and noncurrent lease liabilities each included $2 million of non-lease components.

(b)

As of January 30, 2021, operating lease assets included $383 million of non-lease components and current and noncurrent lease liabilities included $35 million and $384 million, respectively, of non-lease components.  As of February 1, 2020, operating lease assets included $403 million of non-lease components and current and noncurrent lease liabilities included $36 million and $397 million, respectively, of non-lease components.

The components of net lease expense, recognized primarily within selling, general and administrative expenses are disclosed below. For 2020 and 2019, lease expense included $87 million and $83 million, respectively, related to non-lease components.

 

 

 

2020

 

 

2019

 

 

2018

 

 

 

 

 

 

 

(millions)

 

 

 

 

 

Real estate

 

 

 

 

 

 

 

 

 

 

 

 

Operating leases (c) –

 

 

 

 

 

 

 

 

 

 

 

 

Minimum rents

 

$

376

 

 

$

364

 

 

$

317

 

Variable rents

 

 

45

 

 

 

54

 

 

 

11

 

 

 

 

421

 

 

 

418

 

 

 

328

 

Less income from subleases –

 

 

 

 

 

 

 

 

 

 

 

 

Operating leases

 

 

(1

)

 

 

(2

)

 

 

(1

)

 

 

$

420

 

 

$

416

 

 

$

327

 

Personal property – Operating leases

 

$

7

 

 

$

8

 

 

$

9

 

 

(c)

Certain supply chain operating lease expense amounts are included in cost of sales.

As of January 30, 2021, the maturity of lease liabilities is as follows:

 

 

 

 

 

 

 

Operating

 

 

 

 

 

 

 

Finance

 

 

Leases

 

 

 

 

 

 

 

Leases

 

 

(d and e)

 

 

Total

 

 

 

 

 

 

 

(millions)

 

 

 

 

 

Fiscal year

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

$

3

 

 

$

239

 

 

$

242

 

2022

 

 

3

 

 

 

350

 

 

 

353

 

2023

 

 

3

 

 

 

344

 

 

 

347

 

2024

 

 

3

 

 

 

334

 

 

 

337

 

2025

 

 

3

 

 

 

329

 

 

 

332

 

After 2025

 

 

16

 

 

 

5,443

 

 

 

5,459

 

Total undiscounted lease payments

 

 

31

 

 

 

7,039

 

 

 

7,070

 

Less amount representing interest

 

 

10

 

 

 

3,675

 

 

 

3,685

 

Total lease liabilities

 

$

21

 

 

$

3,364

 

 

$

3,385

 

 

(d)

Operating lease payments include $3,063 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $2 million of legally binding minimum lease payments for leases signed but not yet commenced.

(e)

Operating lease payments include $1,151 million related to non-lease component payments, with $840 million of such payments related to options to extend lease terms that are reasonably certain of being exercised.

Additional supplemental information regarding assumptions and cash flows for operating and finance leases is as follows:

 

 

 

January 30,

 

 

February 1,

 

Lease Term and Discount Rate

 

2021

 

 

2020

 

Weighted-average remaining lease term (years)

 

 

 

 

 

 

 

 

Finance leases

 

 

12.1

 

 

 

12.7

 

Operating leases

 

 

22.4

 

 

 

23.3

 

Weighted-average discount rate

 

 

 

 

 

 

 

 

Finance leases

 

 

6.70

%

 

 

6.69

%

Operating leases

 

 

6.32

%

 

 

6.53

%

 

 

 

 

52 Weeks Ended

 

 

52 Weeks Ended

 

Other Information

 

January 30, 2021

 

 

February 1, 2020

 

 

 

(millions)

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

 

 

 

Operating cash flows used from operating leases

 

$

521

 

 

$

363

 

Financing cash flows used from financing leases

 

 

4

 

 

 

2

 

Leased assets obtained in exchange for new operating lease liabilities

 

 

430

 

 

 

216

 

 

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 $211 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.