LEASES
We lease our stores, our distribution center located in New Jersey, and other facilities under operating lease arrangements with unrelated parties and related parties owned by the Schottenstein Affiliates. We pay variable amounts for certain lease and non-lease components, contingent rent based on sales for certain leases where the sales are in excess of specified levels, and leases that have certain contingent triggering events that are in effect. We also lease equipment under operating leases. We receive operating sublease income from unrelated third parties for leasing portions or all of certain properties.
Operating sublease income and lease expense consisted of the following:
| | | | | | | | | | | | | | | | | |
| (in thousands) | 2024 | | 2023 | | 2022 |
| Operating sublease income | $ | 5,636 | | | $ | 7,916 | | | $ | 10,077 | |
| Operating lease expense: | | | | | |
| Lease expense to unrelated parties | $ | 191,134 | | | $ | 190,497 | | | $ | 187,372 | |
| Lease expense to related parties | 5,727 | | | 6,622 | | | 7,783 | |
| Variable lease expense to unrelated parties | 67,822 | | | 69,324 | | | 71,830 | |
| Variable lease expense to related parties | 1,503 | | | 1,460 | | | 1,422 | |
| $ | 266,186 | | | $ | 267,903 | | | $ | 268,407 | |
Lease term and discount rate for our operating leases were as follows:
| | | | | | | | | | | |
| February 1, 2025 | | February 3, 2024 |
| Other operating lease information: | | | |
| Weighted-average remaining lease term | 5.8 years | | 5.9 years |
| Weighted-average discount rate | 5.9 | % | | 4.9 | % |
As of February 1, 2025, our future fixed minimum lease payments are as follows:
| | | | | | | | | | | | | | | | | |
| (in thousands) | Unrelated Parties | | Related Parties | | Total |
| 2025 | $ | 193,893 | | | $ | 4,753 | | | $ | 198,646 | |
| 2026 | 182,810 | | | 4,523 | | | 187,333 | |
| 2027 | 155,263 | | | 4,390 | | | 159,653 | |
| 2028 | 117,533 | | | 2,851 | | | 120,384 | |
| 2029 | 82,893 | | | 1,431 | | | 84,324 | |
| Future fiscal years thereafter | 200,084 | | | 3,526 | | | 203,610 | |
| 932,476 | | | 21,474 | | | 953,950 | |
| Less discounting impact on operating leases | (155,374) | | | (3,576) | | | (158,950) | |
| Total operating lease liabilities | 777,102 | | | 17,898 | | | 795,000 | |
| Less current operating lease liabilities | (155,470) | | | (4,454) | | | (159,924) | |
| Non-current operating lease liabilities | $ | 621,632 | | | $ | 13,444 | | | $ | 635,076 | |
As of February 1, 2025, we had entered into lease commitments for six new store locations, one store relocation, and one new distribution center where the leases have not yet commenced, and therefore the lease liabilities have not yet been recorded. We expect the store lease commencements to begin over the next three fiscal quarters for these locations, and we will record additional operating lease liabilities of approximately $15.0 million. As it relates to the new distribution center, the lease for the facility commenced in March 2025 and we recorded an additional operating lease liability of $22.4 million in the first quarter of 2025. We have also entered into lease commitments for the equipment that will be used to operate the distribution center, which also commenced in March 2025, and we recorded additional finance lease liabilities of $31.8 million in the first quarter of 2025.
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.