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REVENUE RECOGNITION | 12 Months Ended
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Aug. 01, 2020
Revenue Recognition and Deferred Revenue [Abstract] |
REVENUE RECOGNITION | NOTE 3—REVENUE RECOGNITION Revenue Recognition Accounting Policy The Company recognizes revenue in an amount that reflects the consideration that is expected to be received for goods or services when its performance obligations are satisfied by transferring control of those promised goods or services to its customers. ASC 606 defines a five-step process to recognize revenue that requires judgment and estimates, including identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract and recognizing revenue when or as the performance obligation is satisfied. This footnote addresses the Company’s revenue recognition policies. Revenues from wholesale product sales are recognized when control is transferred, which typically happens upon either shipment or delivery, depending on the contract terms with the customer. Typically, shipping and customer receipt of wholesale products occur on the same business day. Discounts and allowances provided to customers are recognized as a reduction in Net sales as control of the products is transferred to customers. The Company recognizes freight revenue related to transportation of its products when control of the product is transferred, which is typically upon delivery. Revenues from Retail product sales are recognized at the point of sale upon customer check-out. Advertising income earned from our franchisees that participate in our Retail advertising program are recognized as Net sales. We recognize loyalty program expense in the form of fuel rewards as a reduction of Net sales. Sales tax is excluded from Net sales. Limited rights of return exist with our customers due to the nature of the products we sell. Product sales The Company enters into wholesale customer distribution agreements that provide terms and conditions of our order fulfillment. The Company’s distribution agreements often specify levels of required minimum purchases in order to earn certain rebates or incentives. Certain contracts include rebates and other forms of variable consideration, including consideration payable to the customer up-front, over time or at the end of a contract term. Many of the Company’s contracts with customers outline various other promises to be performed in conjunction with the sale of product. The Company determined that these promises provided are immaterial within the overall context of the respective contract, and as such has not allocated the transaction price to these obligations. In transactions for goods or services where the Company engages third-parties to participate in its order fulfillment process, it evaluates whether it is the principal or an agent in the transaction. The Company’s analysis considers whether it controls the goods or services before they are transferred to its customer, including an evaluation of whether the Company has the ability to direct the use of, and obtain substantially all the remaining benefits from, the specified good or service before it is transferred to the customer. Agent transactions primarily reflect circumstances where the Company is not involved in order fulfillment or where it is involved in the order fulfillment but is not contractually obligated to purchase the related goods or services from vendors, and instead extends wholesale customers credit by paying vendor trade accounts payable and does not control products prior to their sale. Under ASC 606, if the Company determines that it is acting in an agent capacity, transactions are recorded on a net basis. If the Company determines that it is acting in a principal capacity, transactions are recorded on a gross basis. The Company also evaluates vendor sales incentives to determine whether they reduce the transaction price with its customers. The Company’s analysis considers which party tenders the incentive, whether the incentive reflects a direct reimbursement from a vendor, whether the incentive is influenced by or negotiated in conjunction with any other incentive arrangements and whether the incentive is subject to an agency relationship with the vendor, whether expressed or implied. Typically, when vendor incentives are offered directly by vendors to the Company’s customers, require the achievement of vendor-specified requirements to be earned by customers, and are not negotiated by the Company or in conjunction with any other incentive agreement whereby the Company does not control the direction or earning of these incentives, then Net sales are not reduced as part of the Company’s determination of the transaction price. In circumstances where the vendors provide the Company consideration to promote the sale of their goods and the Company determines the specific performance requirements for its customers to earn these incentives, Net sales are reduced for these customer incentives as part of the determination of the transaction price. Sales from the Company’s Wholesale segment to its retail discontinued operations are presented within Net Sales when the Company holds the business for sale with a supply agreement that it anticipates the sale of the retail banner to include upon its disposal. The Company recorded $0.0 million and $12.4 million within Net sales from continuing operations attributable to discontinued operations inter-company product purchases in fiscal 2020 and 2019, respectively, related to retail disposal groups, which were sold with a supply agreement and were classified within discontinued operations prior to their disposal. These amounts were recorded at gross margin rates consistent with sales to other similar wholesale customers of the acquired Supervalu business. No net sales were recorded within continuing operations for retail banners that the Company disposed of and expects to dispose of without a supply agreement, as they have been eliminated upon consolidation within continuing operations and amounted to $125.0 million and $221.4 million in fiscal 2020 and 2019, respectively. Certain customer agreements provide for the right to license one or more of the Company’s tradenames, such as FESTIVAL FOODS®, SENTRY®, COUNTY MARKET®, NEWMARKET®, FOODLAND®, JUBILEE® and SUPERVALU®. In addition, the Company enters into franchise agreements to separately charge its customers, who the Company also sells wholesale products to, for the right to use its CUB FOODS® tradename. The Company typically does not separately charge for the right to license its tradenames. The Company believes that these tradenames are capable of being distinct, but are not distinct within the context of the contracts with its customers. Accordingly, the Company does not separately recognize revenue related to tradenames utilized by its customers. The Company enters into distribution agreements with manufacturers to provide wholesale supplies to the Defense Commissary Agency (“DeCA”) and other government agency locations. DeCA contracts with manufacturers to obtain grocery products for the commissary system. The Company contracts with manufacturers to distribute products to the commissaries after being authorized by the manufacturers to be a military distributor to DeCA. The Company must adhere to DeCA’s delivery system procedures governing matters such as product identification, ordering and processing, information exchange and resolution of discrepancies. DeCA identifies the manufacturer with which an order is to be placed, determines which distributor is contracted by the manufacturer for a particular commissary or exchange location, and then places a product order with that distributor that is covered under DeCA’s master contract with the applicable manufacturer. The Company supplies product from its existing inventory, delivers it to the DeCA designated location, and bills the manufacturer for the product price plus a drayage fee. The manufacturer then bills DeCA under the terms of its master contract. The Company has determined that it controls the goods before they are transferred to the customer, and as such it is the principal in the transaction. Revenue is recognized on a gross basis when control of the product passes to the DeCA designated location. Customer incentives The Company provides incentives to its wholesale customers in various forms established under the applicable agreement, including advances, payments over time that are earned by achieving specified purchasing thresholds, and upon the passage of time. The Company typically records customer advances within Other assets and Other current assets and typically recognizes customer incentive payments that are based on expected purchases over the term of the agreement as a reduction to Net sales. To the extent that the transaction price for product sales includes variable consideration, such as certain of these customer incentives, the Company estimates the amount of variable consideration that should be included in the transaction price primarily by utilizing the expected value method. Variable consideration is included in the transaction price if it is probable that a significant future reversal of cumulative revenue under the agreement will not occur. The Company believes that there will not be significant changes to its estimates of variable consideration, as the uncertainty will be resolved within a relatively short time and there is a significant amount of historical data that is used in the estimation of the amount of variable consideration to be received. Therefore, the Company has not constrained its estimates of variable consideration. Customer incentive assets are reviewed for impairment when circumstances exist for which the Company no longer expects to recover the applicable customer incentives. Professional services and equipment sales Separate from the services provided in conjunction with the sale of product describe above, many of the Company’s agreements with customers also include distinct professional services and other promises to customers, in addition to the sale of the product itself, such as retail store support, advertising, store layout and design services, merchandising support, couponing, e-commerce, network and data hosting solutions, training and certifications classes, and administrative back-office solutions. These professional services may contain a single performance obligation for each respective service, in which case such services revenues are recognized when delivered. Relative to total Net sales, revenue from professional services is insignificant. Wholesale equipment sales are recorded as direct sales to customers when shipped or delivered, consistent with the recognition of product sales. Disaggregation of Revenues The Company records revenue to five customer channels, which are described below:
• | Chains, which consists of customer accounts that typically have more than 10 operating stores and exclude stores included within the Supernatural and Other channels defined below;
• | Independent retailers, which include smaller size accounts and include single store and multiple store locations, but are not classified within Chains above or Other discussed below;
• | Supernatural, which consists of chain accounts that are national in scope and carry primarily natural products, and currently consists solely of Whole Foods Market;
• | Retail, which includes our Retail segment, including the Cub Foods business and the majority of the remaining Shoppers locations, excluding five Shoppers locations that are held for sale; and
• | Other, which includes international customers outside of Canada, foodservice, e-commerce, conventional military business and other sales.
The following tables detail the Company’s net sales for the periods presented by customer channel for each of its segments. The Company does not record its revenues within its wholesale reportable segment for financial reporting purposes by product group, and it is therefore impracticable for it to report them accordingly.
(in millions) |  | Net Sales for Fiscal 2020 (52 weeks)
Customer Channel |  | Wholesale |  | Retail |  | Other |  | Eliminations |  | Consolidated
Chains |  | $ | 11,982 |  |  | $ | — |  |  | $ | — |  |  | $ | (1,319 | ) |  | $ | 10,663 |
Independent retailers |  | 6,699 |  |  | — |  |  | — |  |  | — |  |  | 6,699 |
Supernatural |  | 4,720 |  |  | — |  |  | — |  |  | — |  |  | 4,720 |
Retail |  | — |  |  | 2,331 |  |  | — |  |  | — |  |  | 2,331 |
Other |  | 2,095 |  |  | — |  |  | 228 |  |  | (222 | ) |  | 2,101 |
Total |  | $ | 25,496 |  |  | $ | 2,331 |  |  | $ | 228 |  |  | $ | (1,541 | ) |  | $ | 26,514 |
(in millions) |  | Net Sales for Fiscal 2019(1) (53 weeks)
Customer Channel |  | Wholesale |  | Retail |  | Other |  | Eliminations |  | Consolidated
Chains |  | $ | 9,749 |  |  | $ | — |  |  | $ | — |  |  | $ | (937 | ) |  | $ | 8,812 |
Independent retailers |  | 5,536 |  |  | — |  |  | — |  |  | — |  |  | 5,536 |
Supernatural |  | 4,394 |  |  | — |  |  | — |  |  | — |  |  | 4,394 |
Retail |  | — |  |  | 1,653 |  |  | — |  |  | — |  |  | 1,653 |
Other |  | 1,851 |  |  | — |  |  | 235 |  |  | (174 | ) |  | 1,912 |
Total |  | $ | 21,530 |  |  | $ | 1,653 |  |  | $ | 235 |  |  | $ | (1,111 | ) |  | $ | 22,307 |
(in millions) |  | Net Sales for Fiscal 2018(1) (52 weeks)
Customer Channel |  | Wholesale |  | Other |  | Eliminations |  | Consolidated
Chains |  | $ | 3,299 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,299 |
Supernatural |  | 3,758 |  |  | — |  |  | — |  |  | 3,758 |
Independent retailers |  | 2,100 |  |  | — |  |  | — |  |  | 2,100 |
Other |  | 1,014 |  |  | 228 |  |  | (172 | ) |  | 1,070 |
Total |  | $ | 10,171 |  |  | $ | 228 |  |  | $ | (172 | ) |  | $ | 10,227 |
(1) | Certain prior period amounts in the above tables have been reclassified to conform with the Company’s current sales channel presentation.
Whole Foods Market, Inc. was the Company’s largest customer in each fiscal year presented. Whole Foods Market, Inc. accounted for approximately 18%, 20% and 37% of the Company’s net sales for fiscal 2020, 2019 and 2018, respectively. There were no other customers that individually generated 10% or more of the Company’s net sales during those periods. The Company serves customers in the United States and Canada, as well as customers located in other countries. However, all of the Company’s revenue is earned in the U.S. and Canada and international distribution occurs through freight-forwarders. The Company does not have any performance obligations on international shipments subsequent to delivery to the domestic port. Contract Balances The Company does not typically incur costs that are required to be capitalized in connection with obtaining a contract with a customer. The Company typically does not have any performance obligations to deliver products under its contracts until its customers submit a purchase order, as it stands ready to deliver product upon receipt of a purchase order under contracts with its customers. These performance obligations are generally satisfied within a very short period of time. Therefore, the Company has utilized the practical expedient that provides an exemption from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less. The Company does not typically receive pre-payments from its customers. Customer payments are due when control of goods or services are transferred to the customer and are typically not conditional on anything other than payment terms, which typically are less than 30 days. Since no significant financing components exist between the period of time the Company transfers goods or services to the customer and when it receives payment for those goods or services, the Company generally does not adjust the transaction price to recognize a financing component. Customer incentives are not considered contract assets as they are not generated through the transfer of goods or services to the customers. No material contract asset or liability exist for any period reported within these Consolidated Financial Statements. Accounts and notes receivable are as follows:
(in thousands) | August 1, 2020 |  | August 3, 2019
Customer accounts receivable | $ | 1,156,694 |  |  | $ | 1,064,502 |
Allowance for uncollectible receivables | (55,928 | ) |  | (20,725 | )
Other receivables, net | 19,433 |  |  | 23,235 |
Accounts receivable, net | $ | 1,120,199 |  |  | $ | 1,067,012 |
Notes receivable, net, included within Prepaid expenses and other current assets | $ | 49,268 |  |  | $ | 11,912 |
Long-term notes receivable, net, included within Other assets | $ | 25,800 |  |  | $ | 34,408 |
The allowance for uncollectible receivables, and estimated variable consideration allowed for as sales concessions consists of the following:
(in thousands) |  | 2020 |  | 2019 |  | 2018
Balance at beginning of year |  | $ | 20,725 |  |  | $ | 15,996 |  |  | $ | 14,509 |
Additions charged to operating expenses |  | 37,849 |  |  | 9,749 |  |  | 12,006 |
Reductions of net sales |  | 12,470 |  |  | 7,061 |  |  | — |
Deductions |  | (15,116 | ) |  | (12,081 | ) |  | (10,519 | )
Balance at end of year |  | $ | 55,928 |  |  | $ | 20,725 |  |  | $ | 15,996 |

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130551-203045 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 13 -Subparagraph (b)(2) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130556-203045 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130550-203045 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (e) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130558-203045 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045 + Details
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