The
Company
recognizes
sales
at
the
point
of
purchase
when
the
customer
takes possession
of the
merchandise and pays
for the
purchase, generally with
cash or
credit. Sales
from
purchases
made
with
Cato
credit,
gift
cards
and
layaway
sales
from
stores
are
also
recorded
when
the
customer
takes
possession
of
the
merchandise.
E-commerce sales
are
recorded
when
the
risk
of
loss
is
transferred
to
the
customer.
Gift
cards
are
recorded
as
deferred
revenue
until
they
are
redeemed
or
forfeited. Gift
cards do
not have
expiration dates.
Layaway sales
are recorded
as deferred
revenue until
the customer takes possession or forfeits the merchandise. A provision is made for estimated merchandise
returns based
on sales
volumes and
the Company’s
experience; actual
returns have
not varied
materially
from historical amounts. A provision is made for estimated write-offs associated with
sales made with the
Company’s proprietary credit card.
In addition, a provision is made for estimated rewards cards issued to
customers based
on their
purchases with the
Company’s propriety
credit card.
The rewards
cards issued
by the Company have a
90
-day expiration.
Amounts related to shipping and handling billed to
customers
in
a
sales
transaction
are
classified
as
Other
revenue
and
the
costs
related
to
shipping
product
to
customers (billed and accrued) are classified as Cost of goods sold.
In accordance with ASU 2014-09,
Revenue from Contracts with Customers (Topic
606)
in
fiscal
2025,
2024
and
2023,
the
Company
recognized
$
1,034,000
1,448,000
1,116,000
,
respectively,
of
income
on
unredeemed
gift
cards
(“gift
card
breakage”)
as
a
component
of
Other
Revenue
on
the
Consolidated
Statements
of
Income (Loss)
and
Comprehensive Income
(Loss).
Under
Topic
606, the
Company recognizes
gift card
breakage using
an expected
breakage percentage
based on
historical redeemed gift cards. See Note 2 for further information on miscellaneous
income.
The Company
offers
its own
proprietary credit
card to
customers. All
credit activity
is performed
by
the
Company’s
wholly-owned
subsidiaries.
None
of
the
credit
card
receivables
are
secured.
The
Company
estimated
customer
credit
losses
of
$
856,000
654,000
for
the
twelve
months
ended
January 31, 2026 and February 1, 2025,
respectively, on sales purchased using the Company’s
proprietary
21.4
21.8
million
for
the
twelve
months
ended
January
31,
2026
and
February 1, 2025, respectively.
The following table provides information about receivables
and contract liabilities from contracts with
customers (in thousands):