Quarterly report pursuant to Section 13 or 15(d)

Revenue Recognition

v3.24.1.1.u2
Revenue Recognition
 3 Months Ended
May 05, 2024
Revenue from Contract with Customer [Abstract]  
Revenue Recognition Revenue Recognition
The Company’s revenue consists substantially of product net sales. The Company reports product net sales net of discounts and recognizes them at the point in time when control transfers to the customer, which generally occurs upon our delivery to a third-party carrier.
Shipping and handling charges billed to customers are included in revenue. The Company recognizes shipping and handling expense as fulfillment activities (rather than a promised good or service) when the activities are performed. Accordingly, the Company records the expenses for shipping and handling activities at the same time the Company recognizes revenue. Shipping and handling costs incurred are included in cost of merchandise sold and include inbound freight and tariff costs relative to inventory sold, warehousing, and last mile shipping to our customers. Shipping and handling costs were $28.4 million and $37.9 million during the thirteen weeks ended May 5, 2024 and April 30, 2023, respectively.
Estimated refunds for returns and allowances are recorded using our historical return patterns, adjusting for any changes in returns policies. The Company records estimated refunds for net sales returns on a monthly basis as a reduction of net sales and cost of sales on the condensed statements of operations and an increase in inventory and customers returns liability on the condensed balance sheets. As of May 5, 2024 and February 4, 2024, there was a returns allowance recorded on the condensed balance sheet in the amount of $2.5 million and $5.6 million, respectively, which was included in accrued expenses, and sales returns of $0.6 million and $1.3 million, respectively, included in merchandise inventories.
In some cases, deposits are received before the Company transfers control, resulting in contract liabilities. These contract liabilities are reported as customer deposits on the Company’s condensed balance sheet. As of May 5, 2024 and February 4, 2024, the Company recorded customer deposit liabilities in the amount of $12.1 million and $8.3 million respectively. During the thirteen weeks ended May 5, 2024 and April 30, 2023, the Company recognized $8.3 million and $6.8 million, respectively, related to customer deposits from fiscal 2024 and 2023, respectively.
The Company offers its products through an inventory lean omni-channel platform that provides a seamless and meaningful experience to its customers in showrooms, which include mobile concierge and kiosks, and through the internet. The Other channel predominantly represents net sales through the use of online and in store pop-up-shops, shop-in-shops, and barter inventory transactions. In store pop-up-shops and shop-in-shops are staffed with associates trained to demonstrate and sell our product. The following represents net sales disaggregated by channel:
Thirteen weeks ended
(amounts in thousands) May 5,
2024		 April 30,
2023
Showrooms $ 81,619  $ 83,574 
Internet 36,603  40,225 
Other 14,421  17,394 
Total net sales $ 132,643  $ 141,193 
The Company has no foreign operations and its net sales to foreign countries was less than .01% of total net sales for the thirteen weeks ended May 5, 2024 and April 30, 2023.  The Company had no customers that comprise more than 10% of total net sales for the thirteen weeks ended May 5, 2024 and April 30, 2023. 
See Note 9 for sales disaggregated by product.
Barter Arrangements
The Company has a bartering arrangement with a third-party vendor. The Company repurposes returned open-box inventory in exchange for media credits, which are being used to support our advertising initiatives to create brand awareness and drive net sales growth. Barter transactions with commercial substance are recorded at a transaction price based on the estimated fair value of the non-cash consideration of the media credits to be received, and the revenue is recognized when control of inventory is transferred, which is when the inventory is picked up in our warehouse. Fair value is estimated using various considerations, including the cost of similar media advertising if transacted directly, the expected sales price of product given up in exchange for the media credits, and the expected usage of media credits prior to expiration based on forecasted media spend subject to media credits under the barter arrangement. The Company recognizes an asset for media credits which is subsequently evaluated for impairment at each reporting period for any changes in circumstances. As the barter credits are expected to be utilized at various dates through their expiration dates, the Company will classify the amount expected to be utilized in the next fiscal year as current, which is included in Prepaid expenses, with the remaining balance included as part of Other assets on the balance sheet.
During the thirteen weeks ended May 5, 2024 and April 30, 2023, the Company recognized $4.0 million and $4.1 million, respectively, of barter sales in exchange for media credits. As of May 5, 2024 and February 4, 2024, the Company had $6.8 million and $5.1 million, respectively, of unused media credits expected to be utilized in the next fiscal year classified as current, and the remaining balance of $29.2 million and $27.7 million, respectively, classified as non-current. The credits expire March 28, 2034 and the Company expects to utilize all credits prior to expiration. The Company did not recognize any impairment during the thirteen weeks ended May 5, 2024 and April 30, 2023. The difference between the opening and closing balances of the Company's prepaid barter credit primarily results from the inventory exchanged for media credits during the period, offset by utilization of those credits.