Accounts Payable, Accrued Expenses and Other Current Liabilities

9 Months Ended

Oct. 29, 2022

Accounts Payable, Accrued Expenses and Other Current Liabilities

Accounts Payable, Accrued Expenses and Other Current Liabilities

NOTE 6—ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accounts payable and accrued expenses consist of the following:

	OCTOBER 29,		JANUARY 29,
	2022		2022
	(in thousands)
Accounts payable	$	180,484	$	242,035
Accrued compensation		71,825		96,859
Accrued occupancy		33,888		28,088
Accrued freight and duty		22,577		21,888
Accrued sales taxes		21,746		24,811
Accrued interest		11,814		5,185
Accrued professional fees		8,990		5,892
Accrued catalog costs		4,277		4,127
Other accrued expenses		34,364		13,494
Total accounts payable and accrued expenses	$	389,965	$	442,379

Other current liabilities consist of the following:

	OCTOBER 29,		JANUARY 29,
	2022		2022
	(in thousands)
Unredeemed gift card and merchandise credit liability	$	28,304	$	22,712
Current portion of term loans		25,000		20,000
Allowance for sales returns		24,399		25,256
Finance lease liabilities		16,557		15,511
Current portion of equipment promissory notes		1,691		13,625
Federal and state tax payable(1)		—		31,364
Other current liabilities		8,587		18,155
Total other current liabilities	$	104,538	$	146,623

(1) Refer to Note 12—Income Taxes.

Contract Liabilities

We defer revenue associated with merchandise delivered via the home-delivery channel. We expect that substantially all of the deferred revenue and customer deposits as of October 29, 2022 will be recognized within the next six months as the performance obligations are satisfied. Deferred revenue also includes the unrecognized portion of the annual RH Members Program fee. New membership fees are recorded as deferred revenue when collected from customers and recognized as revenue based on expected product revenues over the annual membership period, based on historical trends of sales to members. Membership renewal fees are recorded as deferred revenue when collected from customers and are recognized as revenue on a straight-line basis over the membership period, or one year.

In addition, we defer revenue when cash payments are received in advance of performance for unsatisfied obligations related to our gift cards. During the three months ended October 29, 2022 and October 30, 2021, we recognized $5.0 million and $4.4 million, respectively, of revenue related to previous deferrals related to our gift cards. During the nine months ended October 29, 2022 and October 30, 2021, we recognized $16 million and $14 million, respectively, of revenue related to previous deferrals related to our gift cards.

We recognize breakage associated with gift cards proportional to actual gift card redemptions. Breakage of $0.7 million and $0.5 million was recorded in net revenues in the three months ended October 29, 2022 and October 30, 2021, respectively. Breakage of $1.8 million and $1.4 million was recorded in net revenues in the nine months ended October 29, 2022 and October 30, 2021, respectively.

We expect that approximately 70% of the remaining gift card liabilities will be recognized when the gift cards are redeemed by customers.