Basis of Presentation: (Policies)

3 Months Ended

May 05, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Recently Issued Accounting Standards Applicable to Future Periods

In February 2016, the FASB issued revised lease accounting guidance. The guidance will require companies to record substantially all leases as assets and liabilities on the balance sheet. For these leases, we will be required to recognize (1) a right to use asset which will represent our right to use, or control the use of, a specified asset for a lease term and (2) a lease liability equal to our obligation to make lease payments arising from a lease measured on a discounted basis. Also, the revised guidance will require additional qualitative and quantitative footnote disclosures in our consolidated financial statements. This guidance will be effective in the First Quarter of Fiscal 2019 with early adoption permitted. The guidance requires the use of the modified retrospective transition approach, which includes a number of optional practical expedients that companies may elect to apply. In March 2018, the FASB approved a new, optional transition method that will provide companies the option to use the effective date as the date of initial application on transition.

We are in the process of evaluating the potential impact of the revised lease accounting guidance on our consolidated balance sheet, statement of operations and statement of cash flows, as well as our systems, processes and controls. This plan includes assessing lease arrangements, evaluating practical expedient and policy elections, implementing software to meet the accounting and reporting requirements of the guidance and identifying changes to our business processes and controls to support the adoption of the revised guidance. Considering the magnitude of our existing operating leases to our business operations, we anticipate that the new lease guidance will have a significant impact on our consolidated balance sheet by requiring the recognition of a significant amount of lease-related right of use assets and liabilities. While we are still evaluating the potential impact of the revised guidance, we do not anticipate the adoption of the guidance will have a material impact on our consolidated statement of operations and statement of cash flows.

In June 2016, the FASB issued guidance on the measurement of credit losses on financial instruments. This guidance amends the impairment model by requiring companies to use a forward-looking approach based on expected losses to estimate credit losses on certain financial instruments, including trade receivables. This guidance will be effective in Fiscal 2020 with early adoption permitted. We are currently assessing the impact that adopting this guidance will have on our consolidated financial statements.

Revenue Recognition for Contracts with Customers

In May 2014, the FASB issued guidance which provided a single, comprehensive accounting model for revenue arising from contracts with customers. This guidance was revised and clarified through supplemental adoption guidance subsequent to May 2014. This new revenue recognition guidance superseded most of the prior revenue recognition guidance, which specified that revenue should be recognized when risks and rewards transfer to a customer. Under the new guidance, revenue is recognized at an amount that reflects the consideration expected to be received for those goods and services pursuant to a five-step approach: (1) identify the contracts with the customer; (2) identify the separate performance obligations in the contracts; (3) determine the transaction price; (4) allocate the transaction price to separate performance obligations; and (5) recognize revenue when, or as, each performance obligation is satisfied. The new guidance also requires additional disclosures about the nature, timing and uncertainty of revenue and cash flow arising from customer contracts, including significant judgments and changes in judgments.

We adopted the revised revenue recognition guidance as of the first day of the First Quarter of Fiscal 2018 using the modified retrospective method, applying the guidance only to contracts that were not completed prior to Fiscal 2018. We have implemented this guidance for all contracts at the effective date. There was no adjustment for the cumulative effect of applying the guidance to retained earnings upon adoption. We have changed our accounting policies and practices and designed and implemented specific controls over our evaluation of the impact of the new guidance, including disclosure requirements and the collection of relevant data for the reporting process.

Deferred income taxes for intra-entity asset transfers

In October 2016, the FASB issued guidance on the recognition of current and deferred income taxes for intra-entity asset transfers. The revised guidance requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset (other than inventory) when the transfer occurs. We adopted this guidance in the First Quarter of Fiscal 2018, resulting in a $0.1 million reduction to retained earnings as of February 4, 2018 and no impact on net earnings for any period presented.

Revenue Recognition for Contracts with Customers

Our revenue streams consist of direct to consumer sales, including retail store, e-commerce and restaurant operations, and wholesale sales, as well as royalty income, which is included in royalties and other income in our consolidated statements of operations. The table below quantifies the amount of net sales by distribution channel (in thousands) and as a percentage of net sales.



	First Quarter of Fiscal 2018				First Quarter of Fiscal 2017
Retail	$	107,735	40	%	$	102,663	38	%
E-commerce	44,522		16	%	35,673		13	%
Restaurant	25,293		9	%	23,409		9	%
Wholesale	94,376		35	%	109,850		40	%
Other	702		—	%	768		—	%
Net sales	$	272,628	100	%	$	272,363	100	%

The tables below provide net sales by operating group (in thousands) and the percentage of net sales by distribution channel for each operating group.



	First Quarter of Fiscal 2018
	Net Sales		Retail	E-commerce	Restaurant	Wholesale	Other
Tommy Bahama	$	167,132	46%	15%	15%	24%	—%
Lilly Pulitzer	68,627		44%	24%	—%	32%	—%
Lanier Apparel	19,909		—%	—%	—%	100%	—%
Southern Tide	13,472		—%	12%	—%	88%	—%
Corporate and Other	3,488		—%	60%	—%	23%	17%

	First Quarter of Fiscal 2017
	Net Sales		Retail	E-commerce	Restaurant	Wholesale	Other
Tommy Bahama	$	172,496	46%	12%	14%	28%	—%
Lilly Pulitzer	63,343		37%	20%	—%	43%	—%
Lanier Apparel	23,356		—%	—%	—%	100%	—%
Southern Tide	12,642		—%	12%	—%	88%	—%
Corporate and Other	526		—%	—%	—%	—%	100%

Revenue is recognized when performance obligations under the terms of the contracts with our customers are satisfied. Our performance obligation generally consists of delivering our products to our direct to consumer and wholesale customers. Control of the products is generally transferred upon providing the products to consumers in our brick and mortar retail stores and restaurants, upon physical delivery of the products to consumers in our e-commerce operations and upon shipment from the distribution center to customers in our wholesale operations. Once control is transferred to the customer, we have completed our performance obligations related to the contract. After completion of our performance obligation, we have an unconditional right to consideration as outlined in the contract. Our receivables resulting from contracts with customers in our direct to consumer operations are generally collected within a few days, upon settlement of the credit card transaction. Our receivables resulting from contracts with our customers in our wholesale operations are generally collected within one quarter, in accordance with established credit terms. All of our performance obligations under the terms of our contracts with customers in our direct to consumer and wholesale operations have an expected original duration of one year or less. Our revenue, including any freight income, is recognized net of applicable taxes in our consolidated statements of operations.

In our direct to consumer operations, consumers have certain rights to return products within a specified period and are eligible for certain point of sale discounts, thus retail store, e-commerce and restaurant revenues are recorded net of estimated returns and discounts, as applicable. The sales return allowance is recognized on a gross basis, with the recognition of a return liability for the estimated amount of sales that would be returned and a return asset for the right to recover the goods returned by the customer, measured at the previous carrying amounts of the goods. The value of inventory associated with right to recover the goods returned are included in prepaid expenses and other current assets in our consolidated balance sheet as of May 5, 2018, whereas in all prior periods those amounts were included in inventories. The changes in the return liability are recognized in net sales in our consolidated statements of operations and the changes in the return asset are recognized in cost of goods sold in our consolidated statements of operations for all periods presented.

In the ordinary course in certain of our wholesale operations, we offer discounts, allowances and cooperative advertising support to our wholesale customers. Certain of these arrangements are written agreements, while others may be implied by customary practices or expectations in the industry. Wholesale sales are recorded net of such discounts, allowances and cooperative advertising support for our customers, operational chargebacks and provisions for estimated wholesale returns. As certain allowances, other deductions and returns are not finalized until the end of a season, program or other event which may not have occurred yet, we estimate such discounts, allowances and returns on an ongoing basis to estimate the consideration from the customer that we expect to ultimately receive. In accordance with the new revenue recognition guidance, we only recognize revenue to the extent that it is probable that we will not recognize a significant reversal of revenue when the uncertainties related to the variability are ultimately resolved. Significant considerations in determining our estimates for discounts, allowances, operational chargebacks and returns for wholesale customers may include historical and current trends, agreements with customers, projected seasonal results, an evaluation of current economic conditions, specific program or product expectations and retailer performance. We record the discounts, returns and allowances as a reduction to net sales in our consolidated statements of operations and as a reduction to receivables, net in our consolidated balance sheets, with the estimated value of inventory expected to be returned in prepaid expenses and other current assets in our consolidated balance sheets as of May 5, 2018. As of May 5, 2018, February 3, 2018 and April 29, 2017, reserve balances recorded as a reduction to receivables related to these items were $6 million, $7 million and $9 million, respectively.

In addition to trade and other receivables, an income tax receivable of $5 million is included in receivables, net in our consolidated balance sheet as of both May 5, 2018 and February 3, 2018, with no material income tax receivable as of April 29, 2017. Substantially all other amounts recognized in receivables, net as of those dates represent receivables related to contracts with customers. As of May 5, 2018, prepaid expenses and other current assets includes $3 million representing the estimate of the value of inventory for wholesale and direct to consumer sales returns, which would have been recognized in inventories pursuant to the previous guidance, while the estimated sales returns amount of $5 million for expected direct to consumer returns is classified in other accrued expenses and liabilities in our consolidated balance sheet as of May 5, 2018. We do not have any significant contract assets related to contracts with customers, other than receivables and the value of inventory associated with reserves for expected sales returns, as of May 5, 2018, February 3, 2018 or April 29, 2017. In addition to our estimated return amounts, our contract liabilities related to contracts with customers include gift cards and merchandise credits issued by us, which do not have an expiration date, but are redeemable on demand by the holder of the card. Substantially all gift cards and merchandise credits are redeemed within one year of issuance.

Gift cards and merchandise credits are recorded as a liability until our performance obligation is satisfied, which occurs when redeemed by the consumer, at which point revenue is recognized. However, we recognize breakage income for gift cards and merchandise credits using the redemption recognition method, subject to applicable laws in certain states. Contract liabilities for gift cards purchased by consumers and merchandise credits received by customers but not yet redeemed, less any breakage income recognized to date, is included in other accrued expenses and liabilities in our consolidated balance sheets and totaled $10 million, $10 million and $9 million as of May 5, 2018, February 3, 2018, and April 29, 2017, respectively. Gift card breakage, which was not material in any period presented, is included in net sales in our consolidated statements of operations.

Royalties from the license of our owned brands, which are generally based on the greater of a percentage of the licensee's actual net sales or a contractually determined minimum royalty amount, are recognized over time based upon the guaranteed minimum levels and adjusted as sales data, or estimates thereof, is received from licensees. Royalty income represents substantially all of the amounts included in royalties and other operating income in our consolidated statements of operations.

We have made the following accounting policy elections and practical expedients related to the new revenue recognition guidance:

•We exclude any taxes collected from customers that are remitted to taxing authorities from net sales;

•We deem charges incurred by us before and after the customer obtains control of goods, as applicable, as fulfillment costs;

•As customer payment terms are less than one year from the transfer of goods, we do not adjust receivable amounts for the effects of time value of money; and

•We utilize the portfolio approach when multiple contracts or performance obligations are involved in the determination of revenue recognition.

We do not believe the use of any practical expedients utilized by us had a material impact on our financial statements upon our adoption of the revised guidance.