

Note 4	Revenues

Accounting Policy

Revenue is recognized when obligations under the terms of a contract with the consumer are satisfied. This generally occurs at the time of transfer of control of merchandise. The Company considers several control indicators in its assessment of the timing of the transfer of control, including significant risks and rewards of ownership, physical possession and the Company's right to receive payment. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring merchandise. The Company excludes sales and similar taxes collected from customers from the measurement of the transaction price for its retail sales.

Disaggregation of Revenues

The following table disaggregates revenue by segment and major source for the periods ended May 4, 2019 and May 5, 2018:



	Thirteen Weeks Ended May 4, 2019
($ thousands)	Famous Footwear		Brand Portfolio		Eliminations and Other			Total

Retail stores	$	320,242	$	36,650	$	—		$	356,892
Landed wholesale	—		233,370		(15,461		)	217,909
First-cost wholesale	—		14,771		—			14,771
E-commerce	31,781		53,046		—			84,827
Licensing and royalty	—		3,132		—			3,132
Other ⁽¹⁾	142		81		—			223
Net sales	$	352,165	$	341,050	$	(15,461	)	$	677,754



	Thirteen Weeks Ended May 5, 2018
($ thousands)	Famous Footwear		Brand Portfolio		Eliminations and Other			Total

Retail stores	$	338,256	$	42,784	$	—		$	381,040
Landed wholesale	—		182,576		(14,766		)	167,810
First-cost wholesale	—		13,405		—			13,405
E-commerce	25,014		40,950		—			65,964
Licensing and royalty	—		3,712		—			3,712
Other ⁽¹⁾	141		70		—			211
Net sales	$	363,411	$	283,497	$	(14,766	)	$	632,142
⁽¹⁾Includes breakage revenue from unredeemed gift cards

Retail stores

The majority of the Company's revenue is generated from retail sales where control is transferred and revenue is recognized at the point of sale. Retail sales are recorded net of estimated returns and exclude sales tax. The Company carries a returns reserve and a corresponding return asset for expected returns of merchandise.

Retail sales to members of the Company's loyalty programs, including the Famously You Rewards program, include two performance obligations: the sale of merchandise and the delivery of points that may be redeemed for future purchases. The transaction price is allocated to the separate performance obligations based on the relative stand-alone selling price. The stand-alone selling price for the points is estimated using the retail value of the merchandise earned, adjusted for estimated breakage based upon historical redemption patterns. The revenue associated with the initial merchandise purchased is recognized immediately and the value assigned to the points is deferred until the points are redeemed, forfeited or expired.

Landed wholesale

Landed sales are wholesale sales in which the merchandise is shipped directly to the customer from the Company’s warehouses. Many landed customers arrange their own transportation of merchandise and, with limited exceptions, control is transferred at the time of shipment.

First-cost wholesale

First-cost sales are wholesale sales in which the Company purchases merchandise from an international factory that manufactures the product. Revenue is recognized at the time the merchandise is delivered to the customer’s designated freight forwarder and control is transferred to the customer.

E-commerce

The Company also generates revenue from sales on websites maintained by the Company that are shipped from the Company's distribution centers or retail stores directly to the consumer, picked up directly by the consumer from the Company's stores and e-commerce sales from our wholesale customers' websites that are fulfilled on a drop-ship basis (collectively referred to as "e-commerce"). The Company transfers control and recognizes revenue for merchandise sold that is shipped directly to an individual consumer upon delivery to the consumer.

Licensing and royalty

The Company has license agreements with third parties allowing them to sell the Company’s branded product, or other merchandise that uses the Company’s owned or licensed brand names. These license agreements provide the licensee access to the Company's symbolic intellectual property, and revenue is therefore recognized over the license term. For royalty contracts that do not have guaranteed minimums, the Company recognizes revenue as the licensee's sales occur. For royalty contracts that have guaranteed minimums, revenue for the guaranteed minimum is recognized on a straight-line basis during the term, until such time that the cumulative royalties exceed the total minimum guarantee. Up-front payments are recognized over the contractual term to which the guaranteed minimum relates.

Contract Balances

Revenue is recorded at the transaction price, net of estimates for variable consideration for which reserves are established, including returns, allowances and discounts. Variable consideration is estimated using the expected value method and given the large number of contracts with similar characteristics, the portfolio approach is applied to determine the variable consideration for each revenue stream. Reserves for projected returns are based on historical patterns and current expectations.

Information about significant contract balances from contracts with customers is as follows:



($ thousands)	May 4, 2019		May 5, 2018		February 2, 2019
Customer allowances and discounts	$	20,063	$	19,416	$	25,090
Loyalty programs liability	15,700		14,920		14,637
Returns reserve	16,621		12,606		13,841
Gift card liability	4,944		4,661		5,426

Changes in contract balances with customers generally reflect differences in relative sales volume for the periods presented. In addition, during the thirteen weeks ended May 4, 2019, the loyalty programs liability increased $5.2 million due to points accrued for purchases and decreased $4.1 million due to expirations and redemptions. During the thirteen weeks ended May 5, 2018, the loyalty programs liability increased $6.4 million due to the adoption of Topic 606 and $5.9 million due to points accrued for purchases and decreased $5.5 million due to expirations and redemptions.