Allowance for Doubtful Accounts

9 Months Ended

Oct. 31, 2020

Allowance for Doubtful Accounts [Abstract]

Allowance for Doubtful Accounts

Note 3 – Allowance for Doubtful Accounts

On February 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” which had no material impact on the Company’s financial statements. The Company’s financial instruments consist of trade receivables arising from revenue transactions in the ordinary course of business. The Company considers its trade receivables to consist of two portfolio segments: wholesale and retail trade receivables. Wholesale trade receivables result from credit the Company has extended to its wholesale customers based on pre-defined criteria and are generally due within 30 to 60 days. Retail trade receivables primarily relate to amounts due from third-party credit card processors for the settlement of debit and credit card transactions and are typically collected within 3 to 5 days.

The Company’s accounts receivable and allowance for doubtful accounts as of October 31, 2020 were:

	October 31, 2020
	Wholesale		Retail		Total
	(In thousands)
Accounts receivable, gross	$	734,481	$	1,968	$	736,449
Allowance for doubtful accounts		(15,437)		(37)		(15,474)
Accounts receivable, net	$	719,044	$	1,931	$	720,975

The allowance for doubtful accounts for wholesale trade receivables is estimated based on several factors. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations (such as in the case of bankruptcy filings (including potential bankruptcy filings), extensive delay in payment or substantial downgrading by credit rating agencies), a specific reserve for bad debts is recorded against amounts due from that customer to reduce the net recognized receivable to the amount reasonably expected to be collected. For all other wholesale customers, an allowance for doubtful accounts is determined through analysis of the aging of accounts receivable at the end of the reporting period for financial statements, assessments of collectability based on historical trends and an evaluation of the impact of economic conditions. The Company considers both current and forecasted future economic conditions in determining the adequacy of its allowance for doubtful accounts.

The allowance for doubtful accounts for retail trade receivables is estimated at the credit card chargeback rate applied to the previous 90 days of credit card sales. In addition, the Company considers both current and forecasted future economic conditions in determining the adequacy of its allowance for doubtful accounts.

During the three and nine months ended October 31, 2020, the Company recorded a $4.3 million and $14.9 million increase in its allowance for doubtful accounts primarily due to allowances recorded against the outstanding receivables of certain department store customers that have publicly announced bankruptcy filings or possible bankruptcy filings. The Company had the following activity in its allowance for credit losses for the nine months ended October 31, 2020:

	October 31, 2020
	Wholesale		Retail		Total
	(In thousands)
Balance as of January 31, 2020	$	(628)	$	(82)	$	(710)
Provision for credit losses		(14,919)		45		(14,874)
Accounts written off as uncollectible		110		—		110
Balance as of October 31, 2020	$	(15,437)	$	(37)	$	(15,474)