Leases

12 Months Ended

Dec. 31, 2024

The Company leases most of its retail stores, mail order facilities and primary care centers, as well as certain distribution centers and corporate offices under operating or finance leases, typically with initial terms of 15 to 25 years. The Company also leases certain equipment and other assets under operating or finance leases, typically with initial terms of 3 to 10 years.

In addition, the Company leases pharmacy space at the stores of another retail chain for which the noncancelable contractual term of the pharmacy lease arrangement exceeds the remaining estimated economic life of the buildings. For these pharmacy lease arrangements, the Company concluded that for accounting purposes the lease term was the remaining estimated economic life of the buildings. Consequently, most of these individual pharmacy leases are finance leases.

The following table is a summary of the components of net lease cost for the years ended December 31, 2024, 2023 and 2022:


In millions	2024		2023		2022
Operating lease cost	$	2,423	$	2,532	$	2,579
Finance lease cost:
Amortization of right-of-use assets	92		84		79
Interest on lease liabilities	71		73		68
Total finance lease costs	163		157		147
Short-term lease costs	33		22		27
Variable lease costs	635		635		610
Less: sublease income	(67)		(63)		(61)
Net lease cost	$	3,187	$	3,283	$	3,302

Supplemental cash flow information related to leases for the years ended December 31, 2024, 2023 and 2022 was as follows:


In millions	2024		2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases	$	2,733	$	2,756	$	2,689
Operating cash flows paid for interest portion of finance leases	71		73		68
Financing cash flows paid for principal portion of finance leases	74		70		62
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	852		1,132		591
Finance leases	30		(4)		232

Supplemental balance sheet information related to leases as of December 31, 2024 and 2023 is as follows:


In millions, except remaining lease term and discount rate	2024			2023
Operating leases:
Operating lease right-of-use assets	$	15,944		$	17,252

Current portion of operating lease liabilities	$	1,751		$	1,741
Long-term operating lease liabilities	14,899			16,034
Total operating lease liabilities	$	16,650		$	17,775

Finance leases:
Property and equipment, gross	$	1,587		$	1,604
Accumulated depreciation	(447)			(375)
Property and equipment, net	$	1,140		$	1,229

Current portion of long-term debt	$	65		$	66
Long-term debt	1,295			1,325
Total finance lease liabilities	$	1,360		$	1,391

Weighted average remaining lease term (in years)
Operating leases	10.7			11.4
Finance leases	16.5			17.3

Weighted average discount rate
Operating leases	4.6		%	4.5		%
Finance leases	5.1		%	5.0		%

The following table summarizes the maturity of lease liabilities under finance and operating leases as of December 31, 2024:


In millions	Finance Leases		Operating Leases (1)		Total
2025	$	144	$	2,683	$	2,827
2026	135		2,528		2,663
2027	132		2,343		2,475
2028	129		2,167		2,296
2029	127		1,911		2,038
Thereafter	1,371		9,557		10,928
Total lease payments (2)	2,038		21,189		23,227
Less: imputed interest	(678)		(4,539)		(5,217)
Total lease liabilities	$	1,360	$	16,650	$	18,010

_____________________________________________

(1)Future operating lease payments have not been reduced by minimum sublease rentals of $297 million due in the future under noncancelable subleases.

(2)The Company leases pharmacy and clinic space from Target Corporation. Amounts related to such finance and operating leases are reflected above. Pharmacy lease amounts due in excess of the remaining estimated economic life of the buildings of approximately $2.2 billion are not reflected in this table since the estimated economic life of the buildings is shorter than the contractual term of the pharmacy lease arrangement.

Store Impairment Charges

During the year ended December 31, 2024, the Company recorded a store impairment charge of $483 million related to operating and financing lease right-of-use assets in connection with its enterprise-wide restructuring plan. See Note 3 ‘‘Restructuring’’ for additional information on the Company’s store impairment charges.

Office Real Estate Optimization Charges

The Company evaluates its corporate office real estate space in response to its ongoing flexible work arrangement and evaluates its current real estate space and changes in employee work arrangement requirements to ensure it has the appropriate space to support the business. As a result of this assessment, the Company determined that it would vacate and abandon certain leased corporate office spaces. During the year ended December 31, 2022, the Company recorded office real estate optimization charges of $117 million, primarily consisting of $71 million related to operating lease right-of-use assets and $44 million related to property and equipment. During the year ended December 31, 2023, the Company recorded $46 million of office real estate optimization charges, primarily consisting of $20 million related to operating lease right-of-use assets and $18 million related to property and equipment. During the year ended December 31, 2024, the Company recorded $30 million of office real estate optimization charges, primarily consisting of $14 million related to operating lease right-of-use assets and $14 million related to property and equipment. The office real estate optimization charges were recorded in operating expenses within each segment.

Leases