Accounts Payable, Accrued Expenses and Other Current Liabilities

3 Months Ended

Apr. 30, 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:

	APRIL 30,		JANUARY 29,
	2022		2022
	(in thousands)
Accounts payable	$	254,537	$	242,035
Accrued compensation		54,471		96,859
Accrued freight and duty		27,339		21,888
Accrued sales taxes		26,732		24,811
Accrued occupancy		26,208		28,088
Accrued professional fees		17,134		5,892
Accrued catalog costs		7,946		4,127
Other accrued expenses		14,582		18,679
Total accounts payable and accrued expenses	$	428,949	$	442,379

Other current liabilities consist of the following:

	APRIL 30,		JANUARY 29,
	2022		2022
	(in thousands)
Unredeemed gift card and merchandise credit liability	$	25,237	$	22,712
Allowance for sales returns		24,709		25,256
Current portion of term loan		20,000		20,000
Finance lease liabilities		15,982		15,511
Current portion of equipment promissory notes		3,875		13,625
Federal and state tax payable(1)		—		31,364
Other current liabilities		17,998		18,155
Total other current liabilities	$	107,801	$	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 April 30, 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 April 30, 2022 and May 1, 2021, we recognized $4.7 million and $4.9 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 $0.4 million was recorded in net revenues in the three months ended April 30, 2022 and May 1, 2021, respectively.

We expect that approximately 75% of the remaining gift card liabilities will be recognized when the gift cards are redeemed by customers.