Revenue Recognition
Performance Obligations
The Company identifies each distinct performance obligation to transfer goods (or bundle of goods) or services. Refer to “Note 2. Summary of Significant Accounting Policies” for a description of the Company's performance obligations including net sales, rewards programs, membership, and gift card programs. Contract Balances
Current and long-term deferred revenue balances are included within accrued expenses and other current liabilities and other non-current liabilities, respectively, in the consolidated balance sheets.
The following table summarizes the Company's deferred revenue balance related to outstanding performance obligations for contracts with customers, excluding earned rewards which are noted below (in thousands):
| | | | | | | | | | | |
| January 31, 2026 | | February 1, 2025 |
| Current: | | | |
| Rewards programs: | | | |
| Royalty revenue | $ | 10,572 | | | $ | 9,972 | |
| Co-brand initiatives | 2,910 | | | 4,082 | |
| Total rewards programs | 13,482 | | | 14,054 | |
| Membership | 240,643 | | | 253,262 | |
| Gift card program | 18,252 | | | 16,778 | |
| E-commerce sales | 9,059 | | | 7,839 | |
| Long-term: | | | |
| Rewards programs: | | | |
| Co-brand initiatives | 2,324 | | | 3,139 | |
| Total deferred revenue | $ | 283,760 | | | $ | 295,072 | |
The following table presents deferred revenue activity related to earned rewards (in thousands):
| | | | | | | | | | | |
| Fiscal Year Ended |
| January 31, 2026 | | February 1, 2025 |
| Earned rewards balance, beginning of period | $ | 57,474 | | | $ | 49,135 | |
| Rewards earned | 370,559 | | | 326,261 | |
| Revenue recognized on rewards | (356,606) | | | (317,922) | |
| Earned rewards balance, end of period | $ | 71,427 | | | $ | 57,474 | |
Earned rewards are combined in one homogeneous pool and are not separately identifiable. Revenue recognized on rewards consists of rewards that were included in the deferred revenue balance at the beginning of the period as well as rewards that were earned during the period.
The following table summarizes the Company's revenue recognized during the period that was included in the opening deferred balance, excluding earned rewards, as of February 1, 2025 and February 3, 2024 (in thousands):
| | | | | | | | | | | |
| Fiscal Year Ended |
| January 31, 2026 | | February 1, 2025 |
| Rewards programs: | | | |
| Royalty revenue | $ | 9,972 | | | $ | 4,593 | |
| Co-brand initiatives | 3,852 | | | 3,545 | |
| Total rewards programs | 13,824 | | | 8,138 | |
| Membership | 253,262 | | | 231,440 | |
| Gift card program | 5,019 | | | 5,109 | |
| E-commerce sales | 7,839 | | | 6,757 | |
| Total revenue | $ | 279,944 | | | $ | 251,444 | |
Performance obligations related to royalty revenue, membership fees, and e-commerce sales are typically satisfied over a period of twelve months or less. Funds received related to marketing and other integration costs in connection with our co-brand credit card program are recognized as performance obligations are satisfied. The timing and recognition of earned rewards and gift card redemptions varies depending on consumer behavior and spending patterns.
Disaggregation of Revenue
The following table summarizes the Company’s percentage of net sales disaggregated by category:
| | | | | | | | | | | | | | | | | |
| Fiscal Year Ended |
| January 31, 2026 | | February 1, 2025 | | February 3, 2024 |
| Perishables, Grocery, and Sundries | 72 | % | | 71 | % | | 70 | % |
| General Merchandise and Services | 11 | % | | 11 | % | | 11 | % |
| Gasoline and Other | 17 | % | | 18 | % | | 19 | % |
About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.