Revenue

Merchandise sales

We sell merchandise through our brick and mortar and e-commerce sales channels. Revenues are recognized when control of the promised merchandise is transferred to our customers. Within our brick and mortar sales channel, control is transferred at the point of sale. Within our e-commerce sales channel, control is transferred upon delivery of the merchandise to our customers. Shipping revenues associated with the e-commerce channel are recognized upon the completion of the delivery. The revenue recorded reflects the consideration that we expect to receive in exchange for our merchandise. The Company has elected, as an accounting policy, to exclude from the transaction price all taxes assessed by governmental authorities imposed on merchandise sales.

Right of return

As part of our merchandise sales, we offer customers a right of return on merchandise that lapses based on the original purchase date. The Company estimates the amount of sales that may be returned by our customers and record this estimate as a reduction of revenue in the period in which the related revenues are recognized. We utilize historical and industry data to estimate the total return liability. Conversely, the reduction in revenue results in a corresponding reduction in merchandise, buying and occupancy costs which results in a contract asset for the anticipated merchandise returned. The total reduction in revenue from estimated returns was $2.0 million for the thirteen weeks ended May 5, 2018, which is included within accrued liabilities and other current liabilities in the condensed consolidated balance sheet.

Friendship rewards program

The Company established the Friendship Rewards program as a loyalty program where customers earn points towards future discount certificates based on their purchase activity. We have identified the additional benefits received from this program as a separate performance obligation within a sales contract in the form of the discount certificates earned by customers. Accordingly, we assess any incremental discounts issued to our customers through the program and allocate a portion of the transaction price associated with merchandise sales from loyalty program members to the future discounts earned. The transaction price allocated to future discounts is recorded as deferred revenue until the discounts are used or forfeited.

In addition, the Company estimates breakage on the points earned within the program that will not be used by customers for future discounts. The Company estimates breakage based on the historical redemption rate and considers industry trends. Breakage is recorded as a reduction to the deferred revenue associated with the program.

For the thirteen weeks ended May 5, 2018 the Company recorded $4.1 million in deferred revenue associated with the program, which is included in accrued liabilities and other current liabilities in the condensed consolidated balance sheet.

Gift card revenue

The Company sells gift cards to customers which can be redeemed for merchandise within our brick and mortar and e-commerce sales channels. Gift cards are recorded as deferred revenue when issued and are subsequently recorded as revenue upon redemption. The Company estimates breakage related to gift cards when the likelihood of redemption is remote. This estimate utilizes historical trends based on the vintage of the gift card. Breakage on gift cards is recorded as revenue in proportion to the rate of gift card redemptions by vintage. This represents a change in the methodology used to estimate breakage as we have historically recognized breakage for the portion of the gift card balances that remained outstanding following 36 months of issuance.

For the thirteen weeks ended May 5, 2018 the Company had $3.6 million of deferred revenue associated with the issuance of gift cards, which is included in accrued liabilities and other current liabilities in the condensed consolidated balance sheet.

Private label credit card

The Company offers a private label credit card (PLCC) which bears the Christopher and Banks brand names offered under an agreement with Comenity Bank. Pursuant to this agreement, there are several obligations on behalf of Comenity Bank that impact the recording of revenue.

As part of the agreement, the Company received a signing bonus. We have determined that the benefits associated with signing the agreement are recognized over time throughout its term. This is a faithful depiction of the transfer of services as the customer receives and consumes the benefits by obtaining and having the ability to use financing through Comenity Bank for purchases within our brick and mortar and e-commerce sales channels throughout the agreement's term. As of May 5, 2018, the Company had $1.8 million recorded as deferred revenue associated with the signing bonus, which is included in accrued liabilities and other current liabilities in the condensed consolidated balance sheet. The Company recorded $0.1 million into revenue for the thirteen weeks then ended associated with the signing bonus.

The Company records revenue associated with royalties received for purchases made using the PLCC. Royalty revenue is recognized based on the total amount to which we have a right to invoice in accordance with the practical expedient included in ASC 606-10-55-18. Therefore, royalty revenue is recognized in the period in which the related purchases are recognized.

The Company receives a performance bonus based on the total amount of new accounts that are opened during the year. We have determined that this is a form of variable consideration. Variable consideration is recorded if, in the Company’s judgment, it is probable that a significant future reversal of revenue under the contract will not occur. For the thirteen weeks ended May 5, 2018 the Company does not anticipate meeting the performance metrics within the contract and recorded no revenue associated with performance bonuses.

Disaggregation of revenue

The following table provides information about disaggregated revenue by sales channel. All revenue illustrated below is included within our one reportable segment.



	Thirteen Weeks Ended
	May 5, 2018
Brick and mortar stores	$	68,055
eCommerce sales	18,794
Other	(948		)
Net sales	$	85,901

Amounts included within other revenue relate to revenues earned from our private label credit card, net of any revenue adjustments and accruals.

Contract balances

The following table provides information about contract assets and liabilities from contracts with customers (in thousands):



	Contract liabilities (current)		Contract liabilities (non-current)
Right of return	$	1,079	$	—
Friendship rewards program	3,501		—
Gift card revenue	4,986		—
Private label credit card	274		1,622
Total - February 4, 2018	$	9,840	$	1,622

Right of return	$	1,960	$	—
Friendship rewards program	4,130		—
Gift card revenue	3,600		—
Private label credit card	274		1,553
Total - May 5, 2018	$	9,964	$	1,553

The Company recognized revenue of $2.4 million in the thirteen weeks ended May 5, 2018 related to contract liabilities recorded at the beginning of the period. Such revenues were comprised of the redemption and forfeiture of Friendship Rewards discount certificates, redemption of gift cards, and amortization of the PLCC signing bonus. The Company does not have any material contract assets as of May 5, 2018.

For the thirteen weeks ended May 5, 2018 the Company did not recognize any revenue resulting from changes in the estimated variable consideration to be received associated with performance obligations satisfied or partially satisfied in prior periods.

Transaction price allocated to remaining performance obligations

The following table includes the estimated revenue expected to be recognized in future periods related to performance obligations that are unsatisfied or partially unsatisfied as of May 5, 2018:



	Remainder of
	Fiscal 2018		Fiscal 2019		Thereafter
Private label credit card	$	206	$	274	$	1,348
Total	$	206	$	274	$	1,348

Contract Costs

The Company has not incurred any costs to obtain or fulfill a contract.