KOHLS Corp
For the period ended Feb 1, 2025. Filed Mar 20, 2025.
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FY2025 · Filed Mar 20, 2025
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3. Leases
- Leases
We lease certain property and equipment used in our operations. Some of our store leases include additional rental payments based on a percentage of sales over contractual levels or payments that are adjusted periodically for inflation. Our typical store lease has an initial term of 20 to 25 years andfour toeight five-year renewal options.
Lease assets represent our right to use an underlying asset for the lease term. Lease assets are recognized at commencement date based on the value of the lease liability and are adjusted for any lease payments made to the lessor at or before commencement date, minus any lease incentives received and any initial direct costs incurred by the lessee.
Lease liabilities represent our contractual obligation to make lease payments. At the commencement date, the lease liabilities equal the present value of minimum lease payments over the lease term. As the implicit interest rate is not readily identifiable in our leases, we estimate our collateralized incremental borrowing rate to calculate the present value of lease payments.
Leases with a term of 12 months or less are excluded from the balance; we recognize lease expense for these leases on a straight-line basis over the lease term. We combine lease and non-lease components for new and modified leases.
The following tables summarize our operating and finance leases, which are predominately store related, and where they are presented in our Consolidated Financial Statements:
| Consolidated Balance Sheets | |||
|---|---|---|---|
| (Dollars in Millions) | Classification | February 1, 2025 | February 3, 2024 |
| Assets | |||
| Operating leases | Operating leases | $2,394 | $2,499 |
| Finance leases | Property and equipment, net | 1,666 | 1,883 |
| Total operating and finance leases | 4,060 | 4,382 | |
| Liabilities | |||
| Current | |||
| Operating leases | Current portion of operating leases | 102 | 102 |
| Finance leases | Current portion of finance leases and financing obligations | 72 | 74 |
| Noncurrent | |||
| Operating leases | Operating leases | 2,703 | 2,781 |
| Finance leases | Finance leases and financing obligations | 2,008 | 2,242 |
| Total operating and finance leases | $4,885 | $5,199 | |
| Consolidated Statement of Operations | ||||
|---|---|---|---|---|
| (Dollars in Millions) | Classification | 2024 | 2023 | 2022 |
| Operating leases | Selling, general, and administrative | $276 | $271 | $264 |
| Finance Leases | ||||
| Amortization of leased assets | Depreciation and amortization | 113 | 121 | 126 |
| Interest on leased assets | Interest expense, net | 136 | 144 | 140 |
| Total operating and finance leases | $525 | $536 | $530 | |
| Consolidated Statement of Cash Flows | |||
|---|---|---|---|
| (Dollars in Millions) | 2024 | 2023 | 2022 |
| Cash paid for amounts included in measurement of leased liabilities | |||
| Operating cash flows from operating leases | $265 | $272 | $266 |
| Operating cash flows from finance leases | 132 | 140 | 133 |
| Financing cash flows from finance leases | 74 | 78 | 86 |
The following table summarizes future lease payments by fiscal year:
| February 1, 2025 | |||
|---|---|---|---|
| (Dollars in millions) | Operating Leases | Finance Leases | Total |
| 2025 | $271 | $189 | $460 |
| 2026 | 260 | 186 | 446 |
| 2027 | 257 | 186 | 443 |
| 2028 | 254 | 182 | 436 |
| 2029 | 254 | 178 | 432 |
| After 2029 | 3,694 | 2,761 | 6,455 |
| Total lease payments | $4,990 | $3,682 | $8,672 |
| Amount representing interest | (2,185) | (1,602) | (3,787) |
| Lease liabilities | $2,805 | $2,080 | $4,885 |
Total lease payments include $3.8 billion related to options to extend operating lease terms that are reasonably certain of being exercised and $2.8 billion related to options to extend finance lease terms that are reasonably certain of being exercised. Additionally, total lease payments exclude $9 million of legally binding lease payments for leases signed but not yet commenced.
The following table summarizes weighted-average remaining lease term and discount rate:
| February 1, 2025 | February 3, 2024 | |
|---|---|---|
| Weighted-average remaining term (years) | ||
| Operating leases | 19 | 20 |
| Finance leases | 19 | 20 |
| Weighted-average discount rate | ||
| Operating leases | 6% | 6% |
| Finance leases | 6% | 6% |
Other lease information is as follows:
| (Dollars in Millions) | 2024 | 2023 | 2022 |
|---|---|---|---|
| Property and equipment acquired (disposed) through exchange of: | |||
| Finance lease liabilities | (70) | (36) | 714 |
| Operating lease liabilities | 85 | 278 | 179 |
Financing Obligations
Historical failed sale-leasebacks that did not qualify for sale-leaseback accounting upon adoption of ASC 842 continue to be accounted for as financing obligations.
The following tables summarize our financing obligations, which are all store related, and where they are presented in our Consolidated Financial Statements:
| Consolidated Balance Sheets | |||
|---|---|---|---|
| (Dollars in millions) | Classification | February 1, 2025 | February 3, 2024 |
| Assets | |||
| Financing obligations | Property and equipment, net | $39 | $44 |
| Liabilities | |||
| Current | Current portion of finance leases and financing obligations | 9 | 9 |
| Noncurrent | Finance leases and financing obligations | 448 | 438 |
| Total financing obligations | $457 | $447 | |
| Consolidated Statement of Operations | ||||
|---|---|---|---|---|
| (Dollars in millions) | Classification | 2024 | 2023 | 2022 |
| Amortization of financing obligation assets | Depreciation and amortization | $4 | $5 | $7 |
| Interest on financing obligations | Interest expense, net | 74 | 70 | 58 |
| Total financing obligations | $78 | $75 | $65 | |
| Consolidated Statement of Cash Flows | |||
|---|---|---|---|
| (Dollars in millions) | 2024 | 2023 | 2022 |
| Cash paid for amounts included in measurement of financing obligations | |||
| Operating cash flows from financing obligations | $71 | $68 | $56 |
| Financing cash flows from financing obligations | 5 | 15 | 20 |
| Proceeds from financing obligations | 1 | 21 | 11 |
The following table summarizes future financing obligation payments by fiscal year:
| February 1, 2025 | |
|---|---|
| (Dollars in millions) | Financing Obligations |
| 2025 | $80 |
| 2026 | 81 |
| 2027 | 81 |
| 2028 | 78 |
| 2029 | 77 |
| After 2029 | 1,103 |
| Total lease payments | $1,500 |
| Non-cash gain on future sale of property | 116 |
| Amount representing interest | (1,159) |
| Financing obligation liability | $457 |
Total payments exclude $7 million of legally binding payments for contracts signed, but not yet commenced.
The following table summarizes the weighted-average remaining term and discount rate for financing obligations:
| February 1, 2025 | February 3, 2024 | |
|---|---|---|
| Weighted-average remaining term (years) | 16 | 16 |
| Weighted-average discount rate | 16% | 16% |
The following table shows the cash rent out flows for the operating leases, finance leases, and financing obligations:
| Consolidated Statement of Cash Flows | |||
|---|---|---|---|
| (Dollars in millions) | 2024 | 2023 | 2022 |
| Operating cash flows from operating leases | $265 | $272 | $266 |
| Operating cash flows from finance leases | 132 | 140 | 133 |
| Financing cash flows from finance leases | 74 | 78 | 86 |
| Operating cash flows from financing obligations | 71 | 68 | 56 |
| Financing cash flows from financing obligations | 5 | 15 | 20 |
| Total cash rent | $547 | $573 | $561 |
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.