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Revenue Recognition | 9 Months Ended
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Nov. 02, 2019
Revenue Recognition |
Revenue Recognition | (3) Revenue Recognition Revenue recognition accounting policy The Company operates solely as an outdoor retailer, which includes both retail stores and an e-commerce platform, that offers a broad range of products in the United States and online. Generally, all revenues are recognized when control of the promised goods is transferred to customers, in an amount that reflects the consideration in exchange for those goods. Accordingly, the Company implicitly enters into a contract with customers to deliver merchandise inventory at the point of sale. Collectability is reasonably assured since the Company only extends immaterial credit purchases to certain municipalities. Substantially all of the Company’s revenue is for single performance obligations for the following distinct items:
| · |  | Retail store sales
| · |  | E-commerce sales
| · |  | Gift cards and loyalty reward program
For performance obligations related to retail store sales contracts, the Company typically transfers control upon consummation of the sale when the product is paid for and taken by the customer. For performance obligations related to e-commerce sales contracts, the Company typically transfers control when the products are tendered for delivery to the common carrier The transaction price for each contract is the stated price on the product, reduced by any stated discounts at that point in time. The Company does not engage in sales of products that attach a future material right which could result in a separate performance obligation for the purchase of goods in the future at a material discount. The implicit point-of-sale contract with the customer, as reflected in the transaction receipt, states the final terms of the sale, including the description, quantity, and price of each product purchased. Payment for the Company’s contracts is due in full upon delivery. The customer agrees to a stated price implicit in the contract that does not vary over the contract. The transaction price relative to sales subject to a right of return reflects the amount of estimated consideration to which the Company expects to be entitled. This amount of variable consideration included in the transaction price, and measurement of net sales, is included in net sales only to the extent that it is probable that there will be no significant reversal in a future period. Actual amounts of consideration ultimately received may differ from the Company’s estimates. The allowance for sales returns is estimated based upon historical experience and a provision for estimated returns is recorded as a reduction in sales in the relevant period. The estimated merchandise inventory cost related to the sales returns is recorded in prepaid expenses and other. The estimated refund liabilities are recorded in accrued expenses. If actual results in the future vary from the Company’s estimates, the Company adjusts these estimates, which would affect net sales and earnings in the period such variances become known. Contract liabilities are recognized primarily for gift card sales and our loyalty reward program. Cash received from the sale of gift cards is recorded as a contract liability in accrued expenses, and the Company recognizes revenue upon the customer’s redemption of the gift card. Gift card breakage is recognized as revenue in proportion to the pattern of customer redemptions by applying a historical breakage rate of 3.0% when no escheat liability to relevant jurisdictions exists. Based upon historical experience, gift cards are predominantly redeemed in the first two years following their issuance date. The Company does not sell or provide gift cards that carry expiration dates. ASC 606 requires the Company to allocate the transaction price between the goods and the loyalty reward points based on the relative stand alone selling price. The Company recognized revenue for the breakage of loyalty reward points as revenue in proportion to the pattern of customer redemption of the points by applying a historical breakage rate of 35% when no escheat liability to relevant jurisdictions exists. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. Sales returns The Company estimates a reserve for sales returns and records the respective reserve amounts, including a right of return asset when a product is expected to be returned and resold. Historical experience of actual returns and customer return rights are the key factors used in determining the estimated sales returns. Contract balances The following table provides information about right of return assets, contract liabilities, and sales return liabilities with customers as of November 2, 2019:
|  | November 2, 2019 |  | February 2, 2019
Right of return assets, which are included in prepaid expenses and other |  | $ | 1,608 |  | $ | 1,496
Estimated contract liabilities, net of breakage |  |  | (18,725) |  |  | (20,298)
Sales return liabilities, which are included in accrued expenses |  |  | (2,400) |  |  | (2,233)
For the 13 and 39 weeks ended November 2, 2019, the Company recognized approximately $235 and $740 in gift card breakage and approximately $404 and $1,064 in loyalty reward breakage, respectively. For the 13 and 39 weeks ended November 3, 2018, the Company recognized approximately $147 and $652 in gift card breakage and approximately $327 and $880 in loyalty reward breakage, respectively. The current balance of the right of return assets is the expected amount of inventory to be returned that is expected to be resold. The current balance of the contract liabilities primarily relates to the gift card and loyalty reward program liabilities. The Company expects the revenue associated with these liabilities to be recognized in proportion to the pattern of customer redemptions over the next two years. The current balance of sales return liabilities is the expected amount of sales returns from sales that have occurred. Disaggregation of revenue from contracts with customers In the following table, revenue from contracts with customers is disaggregated by department. The percentage of net sales related to the Company’s departments for the 13 and 39 weeks ended November 2, 2019 and November 3, 2018, was approximately:
|  |  |  | Thirteen Weeks Ended |  | Thirty-Nine Weeks Ended |
|  |  |  | November 2, |  | November 3, |  | November 2, |  | November 3, |
Department |  | Product Offerings |  | 2019 |  | 2018 |  | 2019 |  | 2018 |
Camping |  | Backpacks, camp essentials, canoes and kayaks, coolers, outdoor cooking equipment, sleeping bags, tents and tools |  | 14.9% |  | 14.5% |  | 15.5% |  | 15.6% |
Clothing |  | Camouflage, jackets, hats, outerwear, sportswear, technical gear and work wear |  | 10.3% |  | 9.8% |  | 8.7% |  | 8.2% |
Fishing |  | Bait, electronics, fishing rods, flotation items, fly fishing, lines, lures, reels, tackle and small boats |  | 8.9% |  | 8.6% |  | 12.6% |  | 12.3% |
Footwear |  | Hiking boots, socks, sport sandals, technical footwear, trail shoes, casual shoes, waders and work boots |  | 7.5% |  | 7.8% |  | 7.4% |  | 7.3% |
Hunting and Shooting |  | Ammunition, archery items, ATV accessories, blinds and tree stands, decoys, firearms, reloading equipment and shooting gear |  | 48.5% |  | 48.7% |  | 47.4% |  | 47.9% |
Optics, Electronics, Accessories, and Other |  | Gift items, GPS devices, knives, lighting, optics (e.g. binoculars), two-way radios, and other license revenue, net of revenue discounts |  | 9.9% |  | 10.6% |  | 8.4% |  | 8.7% |
Total |  |  |  | 100.0% |  | 100.0% |  | 100.0% |  | 100.0% |

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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 + Details
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