Quarterly report pursuant to Section 13 or 15(d)

REVENUE RECOGNITION

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REVENUE RECOGNITION
6 Months Ended
Aug. 03, 2019
REVENUE RECOGNITION  
REVENUE RECOGNITION

3. REVENUE RECOGNITION

Our revenue is primarily associated with sales of merchandise to customers within our stores, customers utilizing our e-commerce platforms and through our Darice wholesale business (“Darice”). Revenue from sales of our merchandise is recognized when the customer takes possession of the merchandise. Payment for our retail sales is typically due at the time of the sale.

Right of Return

A sales return reserve is established using historical customer return behavior and reduces both revenue and cost of goods sold. The Company presents the gross sales return reserve in other current liabilities and the estimated value of the merchandise expected to be returned in prepaid expenses and other in the consolidated balance sheets.

Customer Receivables

As of August 3, 2019, February 2, 2019 and August 4, 2018, receivables from customers, which consist primarily of trade receivables related to Darice, were approximately $15.4 million, $32.1 million and $23.9 million, respectively, and are included in accounts receivable, net in the consolidated balance sheets.

Gift Cards

The gift card liability is included in accrued liabilities and other in the consolidated balance sheets. The following table includes activity related to gift cards (in thousands):

13 Weeks Ended

26 Weeks Ended

August 3,

August 4,

August 3,

August 4,

2019

2018

2019

2018

Balance at beginning of period

$

55,708

$

51,513

$

61,071

$

56,729

Issuance of gift cards

13,140

13,734

24,465

25,278

Revenue recognized (1)

(13,668)

(13,685)

(29,415)

(29,601)

Gift card breakage

584

(1,049)

(357)

(1,893)

Balance at end of period

$

55,764

$

50,513

$

55,764

$

50,513

(1) Revenue recognized from the beginning liability during the second quarters of fiscal 2019 and fiscal 2018 totaled $7.5 million and $7.6 million, respectively. Revenue recognized from the beginning liability during the first six months of fiscal 2019 and fiscal 2018 totaled $15.8 million and $16.0 million, respectively.