Basis of Presentation and Accounting Policies (Policies)

6 Months Ended

Aug. 03, 2019

Basis of Presentation and Accounting Policies [Abstract]

We acquired City Gear, LLC (City Gear) on November 5, 2018 with an effective date of November 4, 2018 for approximately $88.0 million, including $86.8 million of cash paid. (See Note 3, Acquisition)

Property and Equipment

Property and equipment are recorded at cost and at February 2, 2019 included assets acquired through capital leases. At August 3, 2019, finance lease assets are shown as right-of-use (ROU) assets and are excluded from property and equipment. (See Note 4, Leases). In Fiscal 2020, we initiated a strategic realignment that incorporates the closure of more than 90 stores. The asset impairment charge related to the strategic realignment was not material in the 13 weeks or 26 weeks ended August 3, 2019.

Property and equipment as of August 3, 2019 and February 2, 2019 consists of the following (in thousands):

	August 3, 2019		February 2, 2019
Land	$	7,277	$	7,277
Buildings		21,347		21,311
Buildings under capital lease		-		3,363
Equipment		95,098		96,402
Equipment under capital lease		-		678
Automobiles under capital lease		-		1,829
Furniture and fixtures		35,541		36,980
Leasehold improvements		101,394		101,572
Construction in progress		1,202		2,080
Total property and equipment		261,859		271,492
Less: accumulated depreciation and amortization		157,995		156,098
Total property and equipment, net	$	103,864	$	115,394

Revenue Recognition

We recognize revenue in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers when control of the merchandise is transferred to our customer. Sales are recorded net of expected returns at the time the customer takes possession of the merchandise. Net sales exclude sales taxes because we are a pass-through conduit for collecting and remitting these taxes.

Retail Store Sales: For merchandise sold in our stores, revenue is recognized at the point of sale when tender is accepted and the customer takes possession of the merchandise.

Retail Store Orders: Retail store customers may order merchandise available in other retail store locations for pickup in the selling store at a later date. Customers make a deposit with the remaining balance due at pickup. These deposits are recorded as deferred revenue until the transaction is completed and the customer takes possession of the merchandise. Retail store customers may also order merchandise to be shipped to home. Payment is received in full at the time of order and recorded as deferred revenue until delivery.

Layaways: We offer a retail store program giving customers the option of paying a deposit and placing merchandise on layaway. The customer may make further payments in installments, but the full purchase price must be received by us within 30 days. The payments are recorded as deferred revenue until the transaction is completed and the customer takes possession of the merchandise.

Digital Channel Sales: For merchandise shipped to home, customer payment is received when the order ships. Revenue is deferred until control passes to the customer at delivery. Shipping and handling costs billed to customers are included in net sales.

Loyalty Programs: We offer two loyalty programs; the Hibbett Rewards program and the City Gear Reward Points program. Upon registration and in accordance with the terms of the programs, customers earn points on certain purchases. Points convert into rewards at defined thresholds. The short-term future performance obligation liability is estimated at each reporting period based on historical conversion and redemption patterns. The liability is included in other accrued expenses on our condensed consolidated balance sheets and was $2.4 million and $2.2 million at August 3, 2019 and February 2, 2019, respectively.

Gift Cards: Proceeds received from the issuance of our non-expiring gift cards are initially recorded as deferred revenue. Revenue is subsequently recognized at the time the customer redeems the gift cards and takes possession of the merchandise. Unredeemed gift cards are recorded in accounts payable on our unaudited condensed consolidated balance sheets.

The net deferred revenue liability for gift cards, customer orders and layaways at August 3, 2019 and February 2, 2019 was $8.4 million and $7.5 million, respectively, and is recognized in accounts payable on our unaudited condensed consolidated balance sheets. Gift card breakage income is recognized in net sales in proportion to the redemption pattern of rights exercised by the customer and was not material in any period presented.

During the 13 weeks and 26 weeks ended August 3, 2019, $0.6 million and $1.2 million of gift card deferred revenue from prior periods was realized, respectively.

Return Sales: The liability for return sales is estimated at each reporting period based on historical return patterns and is recognized at the transaction price. The liability is included in accounts payable on our unaudited condensed consolidated balance sheet. We also recognize a return asset and a corresponding adjustment to cost of goods sold for our right to recover the merchandise returned by the customer. This right to recover asset is included in net inventory on our unaudited condensed consolidated balance sheet at the former carrying value of the merchandise less any expected recovery costs which was $0.9 million at August 3, 2019.

Revenues disaggregated by major product categories are as follows (in thousands):

	13 Weeks Ended				26 Weeks Ended
	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018
Footwear	$	152,468	$	119,062	$	367,543	$	277,650
Apparel		66,597		55,896		146,154		120,260
Equipment		33,375		36,165		82,038		87,920
Total	$	252,440	$	211,123	$	595,735	$	485,830