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 and four to eight 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 and include renewal options that are reasonably assured of being exercised. At the commencement date, the lease liabilities equal the present value of minimum lease payments over the accounting 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	May 3, 2025	February 1, 2025	May 4, 2024
Assets
Operating leases	Operating leases	$2,374	$2,394	$2,498
Finance leases	Property and equipment, net	1,632	1,666	1,844
Total operating and finance leases		$4,006	$4,060	$4,342
Liabilities
Current
Operating leases	Current portion of operating leases	99	102	92
Finance leases	Current portion of finance leases and financing obligations	71	72	73
Noncurrent
Operating leases	Operating leases	2,687	2,703	2,783
Finance leases	Finance leases and financing obligations	1,982	2,008	2,213
Total operating and finance leases		$4,839	$4,885	$5,161


Consolidated Statement of Operations		Quarter Ended
(Dollars in Millions)	Classification	May 3, 2025	May 4, 2024
Operating leases	Selling, general, and administrative	$67	$69
Finance leases
Amortization of leased assets	Depreciation and amortization	27	29
Interest on leased assets	Interest expense, net	30	36
Total operating and finance leases		$124	$134


Consolidated Statement of Cash Flows	Quarter Ended
(Dollars in Millions)	May 3, 2025	May 4, 2024
Cash paid for amounts included in the measurement of leased liabilities
Operating cash flows from operating leases	$69	$66
Operating cash flows from finance leases	29	35
Financing cash flows from finance leases	19	19

The following table summarizes future lease payments by fiscal year:


	May 3, 2025
(Dollars in Millions)	Operating Leases	Finance Leases	Total
2025	$204	$141	$345
2026	262	186	448
2027	258	185	443
2028	255	181	436
2029	255	177	432
After 2029	3,713	2,746	6,459
Total lease payments	$4,947	$3,616	$8,563
Amount representing interest	(2,161)	(1,563)	(3,724)
Lease liabilities	$2,786	$2,053	$4,839

Total lease payments include $3.8 billion related to options to extend operating lease terms that are reasonably certain of being exercised and $2.7 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, weighted-average remaining contractually obligated lease term, and discount rate:


	May 3, 2025	February 1, 2025
Weighted-average remaining term (years)
Operating leases	19	19
Finance leases	19	19
Weighted-average remaining contractually obligated term (years)
Operating leases	4	4
Finance leases	5	5
Weighted-average discount rate
Operating leases	6%	6%
Finance leases	6%	6%

The remaining contractually obligated term represents only the remaining noncancelable portion of the leases.

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	May 3, 2025	February 1, 2025	May 4, 2024
Assets
Financing obligations	Property and equipment, net	$38	$39	$43
Liabilities
Current	Current portion of finance leases and financing obligations	9	9	8
Noncurrent	Finance leases and financing obligations	451	448	438
Total financing obligations		$460	$457	$446


Consolidated Statement of Operations		Quarter Ended
(Dollars in Millions)	Classification	May 3, 2025	May 4, 2024
Amortization of financing obligation assets	Depreciation and amortization	$1	$1
Interest on financing obligations	Interest expense, net	18	18
Total financing obligations		$19	$19

The following table summarizes future financing obligation payments by fiscal year:


	May 3, 2025
(Dollars in Millions)	Financing Obligations
2025	$60
2026	82
2027	81
2028	78
2029	77
After 2029	1,107
Total financing obligation payments	$1,485
Non-cash gain on future sale of property	116
Amount representing interest	(1,141)
Financing obligation liability	$460

Total financing obligation payments include $1.1 billion related to options to extend terms that are reasonably certain of being exercised.

The remaining contractually obligated term represents only the remaining noncancelable portion of the financing obligations.