COMMITMENTS AND CONTINGENCIES (Tables)

6 Months Ended

Jul. 01, 2023

Commitments and Contingencies Disclosure [Abstract]

Summary of Recall Reserve Adjustment of Estimated Product Recall Expenses

The product recalls, which includes the recall reserve adjustment and other incurred costs, had the following effect on our income before income taxes (in thousands):

	Three Months Ended		Six Months Ended
	July 1, 2023		July 1, 2023
Decrease to net sales(1)	$	(24,490)	$	(24,506)
Decrease to cost of goods sold(2)	5,052		6,305
Decrease to gross profit	(19,438)		(18,201)
Decrease to selling, general and administrative expenses(3)	10,716		10,549
Decrease to income before income taxes	$	(8,722)	$	(7,652)

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(1)Primarily reflects the unfavorable impact of the recall reserve adjustment related to higher estimated future recall remedies (i.e., estimated gift card elections). Of the total net sales impact, $8.1 million and $16.4 million was allocated to our DTC and wholesale channels, respectively, for the three and six months ended July 1, 2023. These amounts were allocated based on the historical channel sell-in basis of the affected products.

(2)Primarily reflects the favorable impact of the recall reserve adjustment related to lower estimated costs of future product replacement remedy elections and logistics costs for the three and six months ended July 1, 2023. The six months ended July 1, 2023 also includes a $1.3 million favorable impact related to an inventory reserve adjustment.

(3)Primarily reflects the favorable impact of the recall reserve adjustment related to lower estimated other recall-related costs, including logistics costs.

Summary of Reserve for the Estimated Product Recall Expenses

The following table summarizes the activity of the reserve for the estimated product recall expenses (in thousands):

	July 1, 2023
Balance, January 1, 2023	$	94,807
Actual product refunds, replacements and recall-related costs	(38,246)
Gift card issuances(1)	(22,137)
Reserve adjustment	8,515
Balance, July 1, 2023	42,939

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(1)For the three and six months ended July 1, 2023, we recognized net sales of $12.5 million from redeemed recall-related gift cards. As of July 1, 2023, we had $9.6 million in unredeemed recall-related gift card liabilities, which are included in contract liabilities within accrued expenses and other current liabilities on our consolidated balance sheet.