Revenue Recognition

On February 4, 2018, the Company adopted ASU 2014-09 ("Topic 606") using the modified retrospective approach for all contracts not completed as of the adoption date. Financial results for reporting periods beginning after February 3, 2018 are presented in accordance with Topic 606, while prior periods will continue to be reported in accordance with our pre-adoption accounting policies and therefore have not been adjusted to conform to Topic 606.

The primary impact to the Company's accounting policies of adopting Topic 606 relates to the timing of revenue recognition for gift card breakage. Gift card breakage prior to adoption was recognized at the point gift card redemption was deemed remote. As a result of the adoption of Topic 606, the Company now recognizes gift card breakage over time in proportion to the pattern of rights exercised by the customer. This change in accounting policy was accounted for through a cumulative effect adjustment to increase beginning retained earnings during the first quarter of fiscal 2018. The Company reclassified $27.7 million from deferred revenue and other liabilities resulting in a cumulative effect adjustment of $20.5 million, net of tax, to retained earnings on the Company's Consolidated Balance Sheets and Consolidated Statement of Changes in Stockholders' Equity. Additionally, the adoption of Topic 606 resulted in insignificant financial statement presentation reclassifications related to our customer loyalty program and our sales return reserve. The Company does not expect the adoption of Topic 606 to have a significant impact on the Consolidated Financial Statements on a prospective basis.

In accordance with Topic 606, revenue shall be recognized upon satisfaction of all contractual performance obligations and transfer of control to the customer. The Company elected the practical expedient within Topic 606 related to sales taxes that are assessed by a governmental authority, which allows for the exclusion of sales tax from transaction price. The Company also elected the practical expedient within Topic 606 related to shipping and handling costs, which allows for shipping and handling activities occurring subsequent to the transfer of control to the customer to be accounted for as fulfillment costs rather than a promised service.

Deferred gift card revenue - Our gift card liability was $156.5 million and $179.5 million as of February 2, 2019 and February 3, 2018, respectively. During the fiscal year ended February 2, 2019, we recognized $13.6 million of gift card breakage revenue and experienced approximately $81.9 million of gift card redemptions that were included in our gift card liability as of February 3, 2018. Based on the Company's historical experience, the vast majority of gift card revenue is recognized within twelve months of deferral.

Customer loyalty program - Loyalty program points are accrued at the estimated retail value per point, net of estimated breakage. We estimate the breakage of loyalty points based on historical redemption rates experienced within the loyalty program. Our customer loyalty program liability was $32.4 million and $29.9 million as of February 2, 2019 and February 3, 2018, respectively. During the fiscal year ended February 2, 2019, we recognized approximately $27.5 million of revenue that was included in our customer loyalty program liability as of February 3, 2018. Based on the Company's customer loyalty program policies, the vast majority of program points earned are redeemed or expire within twelve months.

Net sales by category - The following table disaggregates the amount of net sales attributable to hardlines, apparel and footwear for the periods presented (in thousands):



	Fiscal Year
	2018		2017		2016
Hardlines ⁽¹⁾	$	3,632,147	$	3,886,993	$	3,573,562
Apparel	2,962,347		2,920,345		2,756,099
Footwear	1,719,456		1,694,590		1,529,381
Other ⁽²⁾	122,620		88,544		62,939
Total net sales	$	8,436,570	$	8,590,472	$	7,921,981


⁽¹⁾	Includes items such as sporting goods equipment, fitness equipment, golf equipment and hunting and fishing gear.


⁽²⁾	Includes the Company's non-merchandise sales categories, including in-store services, shipping revenues and credit card processing revenues.