We lease certain property and equipment used in our operations. 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 certain 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	August 1, 2026	January 31, 2026	August 2, 2025
Assets
Operating leases	Operating leases	$2,297	$2,338	$2,363
Finance leases	Property and equipment, net	1,480	1,553	1,612
Total operating and finance leases		$3,777	$3,891	$3,975
Liabilities
Current
Operating leases	Current portion of operating leases	96	94	96
Finance leases	Current portion of finance leases and financing obligations	82	76	75
Noncurrent
Operating leases	Operating leases	2,613	2,650	2,672
Finance leases	Finance leases and financing obligations	1,853	1,919	1,959
Total operating and finance leases		$4,644	$4,739	$4,802


Consolidated Statements of Operations		Three Months Ended		Six Months Ended
(Dollars in Millions)	Classification	August 1, 2026	August 2, 2025	August 1, 2026	August 2, 2025
Operating leases	Selling, general, and administrative	$68	$68	$136	$135
Finance leases
Amortization of leased assets	Depreciation and amortization	29	27	59	54
Interest on leased assets	Interest expense, net	29	30	58	60
Total operating and finance leases		$126	$125	$253	$249

The following table summarizes future lease payments by fiscal year:


	August 1, 2026
(Dollars in Millions)	Operating Leases	Finance Leases	Total
2026	$133	$98	$231
2027	267	184	451
2028	264	183	447
2029	262	182	444
2030	260	173	433
After 2030	3,518	2,497	6,015
Total lease payments	$4,704	$3,317	$8,021
Amount representing interest	(1,995)	(1,382)	(3,377)
Lease liabilities	$2,709	$1,935	$4,644

Total lease payments include $3.5 billion related to options to extend operating lease terms that are reasonably certain of being exercised and $2.5 billion related to options to extend finance lease terms that are reasonably certain of being exercised.

The following table summarizes weighted-average remaining lease term, weighted-average remaining contractually obligated lease term, and weighted-average discount rate:


	August 1, 2026	January 31, 2026	August 2, 2025
Weighted-average remaining term (years)
Operating leases	18	18	19
Finance leases	18	18	18
Weighted-average remaining contractually obligated term (years)
Operating leases	4	4	4
Finance leases	4	4	5
Weighted-average discount rate
Operating leases	7%	6%	6%
Finance leases	6%	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	August 1, 2026	January 31, 2026	August 2, 2025
Assets
Financing obligations	Property and equipment, net	$34	$36	$37
Liabilities
Current	Current portion of finance leases and financing obligations	10	9	9
Noncurrent	Finance leases and financing obligations	442	446	450
Total financing obligations		$452	$455	$459


Consolidated Statements of Operations		Three Months Ended		Six Months Ended
(Dollars in Millions)	Classification	August 1, 2026	August 2, 2025	August 1, 2026	August 2, 2025
Amortization of financing obligation assets	Depreciation and amortization	$1	$1	$2	$2
Interest on financing obligations	Interest expense, net	19	19	37	37
Total financing obligations		$20	$20	$39	$39


Consolidated Statements of Cash Flows	Six Months Ended
(Dollars in Millions)	August 1, 2026	August 2, 2025
Cash paid for and proceeds from amounts included in the measurement of financing obligations
Operating cash flows from financing obligations	$37	$36
Financing cash flows from financing obligations	4	4
Proceeds from financing obligations	—	10

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


	August 1, 2026
(Dollars in Millions)	Financing Obligations
2026	$39
2027	80
2028	78
2029	77
2030	75
After 2030	1,012
Total financing obligation payments	$1,361
Non-cash gain on future sale of property	115
Amount representing interest	(1,024)
Financing obligation liability	$452

Total financing obligation payments include $1.0 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.