Revenue Recognition

3 Months Ended

Apr. 25, 2020

Revenue Recognition

Revenue Recognition

9.    Revenue Recognition

We sell a broad assortment of home décor, including home furnishings and accent décor, and recognize revenue when the customer takes possession or control of goods at the time the sale is completed at the store register. Accordingly, we implicitly enter into a contract with customers at the point of sale. In addition to retail store sales, we also generate revenue through the sale of gift cards and through incentive arrangements associated with our credit card program.

As noted in the segment information in the notes to the consolidated financial statements included in our Annual Report, our business consists of one reportable segment. In accordance with ASC 606, we disaggregate net sales into the following product categories:

	Thirteen Weeks Ended
	April 25, 2020		April 27, 2019
Home furnishings	48	%	49	%
Accent décor	48		47
Other	4		4
Total	100	%	100	%

Contract liabilities are recognized primarily for gift card sales. Cash received from the sale of gift cards is recorded as a contract liability in accrued and other current liabilities, and we recognize revenue upon the customer’s redemption of the gift card. Gift card breakage is recognized as revenue in proportion to the pattern of customer redemptions by applying an estimated breakage rate that takes into account historical patterns of redemptions and deactivations of gift cards.

We recognized approximately $2.3 million and $3.7 million in gift card redemption revenue for the thirteen weeks ended April 25, 2020 and April 27, 2019, respectively, and recognized an immaterial amount in gift card breakage revenue for each of the thirteen weeks ended April 25, 2020 and April 27, 2019. Of the total gift card redemption revenue, approximately $1.2 million and $1.6 million for the thirteen weeks ended April 25, 2020 and April 27, 2019, respectively, related to gift cards issued in prior periods. We had outstanding gift card liabilities of $8.9 million, $9.2 million and $7.5 million as of April 25, 2020, January 25, 2020 and April 27, 2019, respectively, which are included in accrued and other current liabilities.

In fiscal year 2018, we launched a credit card program by which credit is extended to eligible customers through At Home branded credit cards with Synchrony Bank (“Synchrony”). Through the launch of the credit card program, we received reimbursement of costs associated with the launch of the credit card program as well as a one-time payment which has been deferred over the initial seven-year term of the agreement with Synchrony. We receive ongoing payments from Synchrony based on sales transacted on our credit cards and for reimbursement of joint marketing and advertising activities. During the thirteen weeks ended April 25, 2020 and April 27, 2019, we recognized approximately $0.5 million and $1.0 million, respectively, in revenue from our credit card program within net sales when earned.

Customers may return purchased items for an exchange or refund. We utilize the expected value methodology in which different scenarios, including current sales return data and historical quarterly sales return rates, are used to develop an estimated sales return rate. We present the sales returns reserve within other current liabilities and the estimated value of the inventory that will be returned within other current assets in the condensed consolidated balance sheets.