The Company leases all of its store locations and its corporate headquarters, which also includes its distribution center, under operating leases. The store leases typically have initial terms of 5 years to 10 years, with options that usually permit renewal for additional five-year periods.

In the second quarter of fiscal 2025, the Company extended the term of its corporate lease from February 1, 2026 to January 31, 2033, with the opportunity to extend for three additional consecutive periods of five years. In connection with the lease amendment to extend the term of the lease, the landlord provided the Company with an improvement allowance in an amount up to $4.7 million, which has been included as an offset to the ROU assets and will be amortized as a reduction to rent expense over the lease term.

The Company also leases certain equipment and other assets under operating leases, typically with initial terms of 3 to 5 years. The Company is generally obligated for the cost of property taxes, insurance and common area maintenance fees relating to its leases, which are considered variable lease costs and are expensed as incurred.

ASC 842 requires the assessment of any lease modification to determine if the modification should be treated as a separate lease and if not, modification accounting would be applied. Lease modification accounting requires the recalculation of the ROU asset, lease liability and lease expense over the respective lease term. As of May 2, 2026, the Company’s operating leases liabilities represent the present value of the remaining future minimum lease payments updated based on concessions and lease modifications.

Lease costs related to store locations are included in cost of goods sold, including occupancy costs on the Consolidated Statements of Operations, and expenses and lease costs related to the corporate headquarters and equipment leases are included in selling, general and administrative expenses on the Consolidated Statements of Operations.

The following table is a summary of the Company’s components of net lease cost for the three months ended May 2, 2026 and May 3, 2025, respectively:


	For the Three Months Ended
	May 2, 2026		May 3, 2025
(in thousands)
Operating lease cost (1)	$	13,363	$	12,981
Variable lease costs (2)		3,849		3,625
Total lease costs	$	17,212	$	16,606

(1)

During the first quarter of fiscal 2026, the landlord for one of the Company's store locations exercised their right to terminate the lease agreement. As consideration for the landlord's right to terminate prior to the end of the lease term, the landlord paid the Company a termination fee of $1.4 million, which was recognized as a gain in accordance with ASC 842 and not included in the above operating lease cost for the first quarter of fiscal 2026. The gain from the early termination of the lease was recognized as an offset to cost of goods sold, including occupancy costs, on the Consolidated Statements of Operations for the first three months of fiscal 2026.

(2)

Variable lease costs include the cost of property taxes, insurance and common area maintenance fees related to leases.

Supplemental cash flow and balance sheet information related to leases as of and for the first three months ended May 2, 2026 and May 3, 2025 was as follows:



(dollars in thousands)	For the Three Months Ended
Cash paid for amounts included in the measurement of lease liabilities:	May 2, 2026			May 3, 2025
Operating cash flows for operating leases (1)	$	14,123		$	13,894
Non-cash operating activities:
Right-of-use assets obtained in exchange for operating lease liabilities	$	12,744		$	12,688

	As of
	May 2, 2026			May 3, 2025
Weighted average remaining lease term	5.6 years			5.4 years
Weighted average discount rate		6.55	%		6.35	%

(1)

The cash paid for the first three months of fiscal 2026 and fiscal 2025 included prepaid rent of $4.7 million and $4.5 million, respectively. The cash paid for the three months of fiscal 2026 does not include the cash received of $1.4 million for the early lease termination, as discussed above.

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded on the Consolidated Balance Sheet as of May 2, 2026:


(in thousands)
2026 (remaining)	$	34,829
2027		52,993
2028		45,702
2029		37,726
2030		29,614
Thereafter		56,787
Total minimum lease payments	$	257,651
Less: amount of lease payments representing interest		44,568
Present value of future minimum lease payments	$	213,083
Less: current obligations under leases		36,273
Long-term lease obligations	$	176,810