ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED MAY 5, 2018 | |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
DELAWARE | 80-0808358 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
5500 TRILLIUM BOULEVARD, SUITE 501 HOFFMAN ESTATES, ILLINOIS | 60192 | |
(Address of Principal Executive Offices) | (Zip Code) | |
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer (Do not check if a smaller reporting company) | ¨ | Smaller reporting company | ý | |||
Emerging growth company | ¨ | |||||
Page | ||
PART I—FINANCIAL INFORMATION | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II—OTHER INFORMATION | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 6. | ||
13 Weeks Ended | ||||||||
Thousands, except per share amounts | May 5, 2018 | April 29, 2017 | ||||||
NET SALES | $ | 381,281 | $ | 448,233 | ||||
COSTS AND EXPENSES | ||||||||
Cost of sales and occupancy | 293,803 | 354,478 | ||||||
Selling and administrative | 90,479 | 110,881 | ||||||
Depreciation and amortization | 2,608 | 2,204 | ||||||
Total costs and expenses | 386,890 | 467,563 | ||||||
Operating loss | (5,609 | ) | (19,330 | ) | ||||
Interest expense | (3,452 | ) | (1,591 | ) | ||||
Other income | 100 | 319 | ||||||
Loss before income taxes | (8,961 | ) | (20,602 | ) | ||||
Income tax expense | (408 | ) | (832 | ) | ||||
NET LOSS | $ | (9,369 | ) | $ | (21,434 | ) | ||
NET LOSS PER COMMON SHARE ATTRIBUTABLE TO STOCKHOLDERS | ||||||||
Basic: | $ | (0.41 | ) | $ | (0.94 | ) | ||
Diluted: | $ | (0.41 | ) | $ | (0.94 | ) | ||
Basic weighted average common shares outstanding | 22,702 | 22,702 | ||||||
Diluted weighted average common shares outstanding | 22,702 | 22,702 | ||||||
Thousands | May 5, 2018 | April 29, 2017 | February 3, 2018 | |||||||||
ASSETS | ||||||||||||
CURRENT ASSETS | ||||||||||||
Cash and cash equivalents | $ | 14,288 | $ | 22,360 | $ | 10,402 | ||||||
Accounts and franchisee receivables, net | 12,784 | 10,915 | 14,672 | |||||||||
Merchandise inventories | 332,449 | 372,487 | 336,294 | |||||||||
Prepaid expenses and other current assets | 8,101 | 8,883 | 7,131 | |||||||||
Total current assets | 367,622 | 414,645 | 368,499 | |||||||||
PROPERTY AND EQUIPMENT, net | 35,830 | 41,021 | 36,049 | |||||||||
OTHER ASSETS, net | 7,242 | 17,259 | 8,140 | |||||||||
TOTAL ASSETS | $ | 410,694 | $ | 472,925 | $ | 412,688 | ||||||
LIABILITIES | ||||||||||||
CURRENT LIABILITIES | ||||||||||||
Short-term borrowings | $ | 114,900 | $ | 93,700 | $ | 137,900 | ||||||
Payable to Sears Holdings Corporation | 22,896 | 36,023 | 28,082 | |||||||||
Accounts payable | 17,730 | 27,671 | 15,741 | |||||||||
Other current liabilities | 50,594 | 64,252 | 53,142 | |||||||||
Total current liabilities | 206,120 | 221,646 | 234,865 | |||||||||
TERM LOAN, net | 38,412 | — | — | |||||||||
OTHER LONG-TERM LIABILITIES | 2,111 | 2,117 | 2,284 | |||||||||
TOTAL LIABILITIES | 246,643 | 223,763 | 237,149 | |||||||||
COMMITMENTS AND CONTINGENCIES (Note 10) | ||||||||||||
STOCKHOLDERS' EQUITY | ||||||||||||
TOTAL STOCKHOLDERS' EQUITY | 164,051 | 249,162 | 175,539 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 410,694 | $ | 472,925 | $ | 412,688 | ||||||
13 Weeks Ended | ||||||||
Thousands | May 5, 2018 | April 29, 2017 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss | $ | (9,369 | ) | $ | (21,434 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 2,608 | 2,204 | ||||||
Share-based compensation | — | (103 | ) | |||||
Provision for losses on franchisee receivables | 42 | 116 | ||||||
Change in operating assets and liabilities: | ||||||||
Accounts and franchisee receivables | 2,134 | 970 | ||||||
Merchandise inventories | 3,845 | 1,328 | ||||||
Payable to Sears Holdings Corporation | (5,186 | ) | (44,701 | ) | ||||
Accounts payable | 1,989 | 9,818 | ||||||
Store closing accrual | (1,814 | ) | (3,440 | ) | ||||
Other operating assets and liabilities, net | (3,492 | ) | (1,248 | ) | ||||
Net cash used in operating activities | (9,243 | ) | (56,490 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchases of property and equipment | (2,270 | ) | (2,076 | ) | ||||
Net cash used in investing activities | (2,270 | ) | (2,076 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Net short-term (payments) borrowings on senior ABL facility | (23,000 | ) | 66,900 | |||||
Net payments of capital lease obligations | (13 | ) | (78 | ) | ||||
Proceeds from term loan agreement | 40,000 | — | ||||||
Debt issuance costs | (1,588 | ) | — | |||||
Net cash provided by financing activities | 15,399 | 66,822 | ||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | 3,886 | 8,256 | ||||||
CASH AND CASH EQUIVALENTS—Beginning of period | 10,402 | 14,104 | ||||||
CASH AND CASH EQUIVALENTS—End of period | $ | 14,288 | $ | 22,360 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
Cash paid for interest | $ | 3,387 | $ | 1,594 | ||||
Cash paid for income taxes | $ | 877 | $ | 616 | ||||
Thousands | Number of Shares of Common Stock | Common Stock/Par Value | Capital in Excess of Par Value | Accumulated Deficit | Total Stockholders' Equity | |||||||||||||
Balance at January 28, 2017 | 22,716 | $ | 227 | $ | 555,481 | $ | (285,009 | ) | $ | 270,699 | ||||||||
Net loss | — | — | — | (21,434 | ) | (21,434 | ) | |||||||||||
Share-based compensation | (14 | ) | — | (103 | ) | — | (103 | ) | ||||||||||
Balance at April 29, 2017 | 22,702 | $ | 227 | $ | 555,378 | $ | (306,443 | ) | $ | 249,162 | ||||||||
Balance at February 3, 2018 | 22,702 | $ | 227 | $ | 555,378 | $ | (380,066 | ) | $ | 175,539 | ||||||||
Net loss | — | — | — | (9,369 | ) | (9,369 | ) | |||||||||||
Cumulative effect adjustment from adoption of new accounting standards | — | — | — | (2,119 | ) | (2,119 | ) | |||||||||||
Balance at May 5, 2018 | 22,702 | $ | 227 | $ | 555,378 | $ | (391,554 | ) | $ | 164,051 | ||||||||
Fiscal Year | First Quarter Ended | Weeks |
2018 | May 5, 2018 | 13 |
2017 | April 29, 2017 | 13 |
• | Our revenue is primarily generated from the sales of merchandise to customers through the retail, e-commerce or wholesale channels. Our performance obligations underlying such sales, and the timing of revenue recognition related thereto, remain substantially unchanged following the adoption of this ASU. |
• | The adoption of ASU No. 2014-09 requires that we recognize our sales return allowance on a gross basis rather than as a net liability. As such, we now recognize (i) a return asset for the right to recover the goods returned by the customer, measured at the former carrying amount of the goods, less any expected recovery costs (recorded as an increase to other current assets) and (ii) a return liability for the amount of expected returns (recorded as an increase to other accrued expenses). |
Thousands | As Reported | ASU 2014-09 Effect | Excluding ASU 2014-09 Effect | |||||||||
Prepaid expenses and other current assets | $ | 8,101 | $ | 1,226 | $ | 6,875 | ||||||
Other current liabilities | 50,594 | 3,345 | 47,249 | |||||||||
Accumulated deficit | (391,554 | ) | (2,119 | ) | (389,435 | ) | ||||||
Thousands | 13 Weeks Ended May 5, 2018 | |||
Merchandise | $ | 351,978 | ||
Services | 22,811 | |||
Other | 6,492 | |||
Net sales | $ | 381,281 | ||
Thousands | May 5, 2018 | April 29, 2017 | February 3, 2018 | |||||||||
Short-term franchisee receivables | $ | 1,147 | $ | 1,838 | $ | 1,205 | ||||||
Miscellaneous receivables | 12,484 | 9,943 | 14,314 | |||||||||
Long-term franchisee receivables | 7,366 | 17,129 | 7,962 | |||||||||
Other assets | 4,486 | 6,702 | 5,106 | |||||||||
Allowance for losses on short-term franchisee receivables (1) | (837 | ) | (866 | ) | (847 | ) | ||||||
Allowance for losses on long-term franchisee receivables (1) | (4,620 | ) | (6,572 | ) | (4,928 | ) | ||||||
Net accounts and franchisee receivables and other assets | $ | 20,026 | $ | 28,174 | $ | 22,812 | ||||||
13 Weeks Ended | |||||||
Thousands | May 5, 2018 | April 29, 2017 | |||||
Allowance for losses on franchisee receivables, beginning of period | $ | 5,775 | $ | 8,242 | |||
Provisions during the period | 42 | 116 | |||||
Write off of franchisee receivables | (360 | ) | (920 | ) | |||
Allowance for losses on franchisee receivables, end of period | $ | 5,457 | $ | 7,438 | |||
Thousands | May 5, 2018 | April 29, 2017 | February 3, 2018 | ||||||||
Customer deposits | $ | 15,396 | $ | 20,417 | $ | 16,655 | |||||
Sales and other taxes | 7,195 | 12,841 | 9,221 | ||||||||
Accrued expenses | 21,931 | 21,939 | 17,755 | ||||||||
Payroll and related items | 5,342 | 6,953 | 7,140 | ||||||||
Store closing and severance costs | 2,841 | 4,219 | 4,655 | ||||||||
Total Other current and long-term liabilities | $ | 52,705 | $ | 66,369 | $ | 55,426 | |||||
• | We pay royalties related to our sale of products branded with the KENMORE®, CRAFTSMAN®, and DIEHARD® marks (which marks are owned by, or licensed to, subsidiaries of Sears Holdings, together the "KCD Marks"). The royalty rates vary but none exceeds 6%. |
• | We pay fees for participation in Sears Holdings' SHOP YOUR WAY REWARDS® program. |
• | We pay fees to Sears Holdings for logistics, handling, warehouse, and transportation services, which fees are based generally on merchandise inventory units. |
• | Sears Holdings provides the Company with specified corporate services. These services include accounting and finance, and information technology, among other services. Sears Holdings charges the Company for these corporate services based on actual usage or pro rata charges based upon sales or other measurements. |
• | Sears Holdings leases stores and distribution/repair facilities to the Company, for which the Company pays rent and related occupancy charges to Sears Holdings. |
• | SHO receives commissions from Sears Holdings for specified online sales, sales of extended service contracts, and sales of delivery and handling services, and commissions relating to the use in our stores of credit cards branded with the Sears name. For specified transactions SHO pays commissions to Sears Holdings. |
13 Weeks Ended | ||||||||
Thousands | May 5, 2018 | April 29, 2017 | ||||||
Net Commissions from Sears Holdings | $ | 15,139 | $ | 17,397 | ||||
Purchases related to cost of sales and occupancy | 191,652 | 264,530 | ||||||
Services included in selling and administrative expense | 13,529 | 16,533 | ||||||
13 Weeks Ended May 5, 2018 | ||||||||||||
Thousands | Hometown | Outlet | Total | |||||||||
Net sales | ||||||||||||
Appliances | $ | 172,560 | $ | 105,375 | $ | 277,935 | ||||||
Lawn and garden | 48,465 | 4,786 | 53,251 | |||||||||
Tools and paint | 19,153 | 3,149 | 22,302 | |||||||||
Other | 13,526 | 14,267 | 27,793 | |||||||||
Total | 253,704 | 127,577 | 381,281 | |||||||||
Costs and expenses | ||||||||||||
Cost of sales and occupancy | 198,728 | 95,075 | 293,803 | |||||||||
Selling and administrative | 65,010 | 25,469 | 90,479 | |||||||||
Depreciation and amortization | 1,324 | 1,284 | 2,608 | |||||||||
Total | 265,062 | 121,828 | 386,890 | |||||||||
Operating (loss) income | $ | (11,358 | ) | $ | 5,749 | $ | (5,609 | ) | ||||
Total assets | $ | 289,035 | $ | 121,659 | $ | 410,694 | ||||||
Capital expenditures | $ | 1,918 | $ | 352 | $ | 2,270 | ||||||
13 Weeks Ended April 29, 2017 | ||||||||||||
Thousands | Hometown | Outlet | Total | |||||||||
Net sales | ||||||||||||
Appliances | $ | 197,726 | $ | 125,865 | $ | 323,591 | ||||||
Lawn and garden | 63,563 | 5,595 | 69,158 | |||||||||
Tools and paint | 25,287 | 3,880 | 29,167 | |||||||||
Other | 10,638 | 15,679 | 26,317 | |||||||||
Total | 297,214 | 151,019 | 448,233 | |||||||||
Costs and expenses | ||||||||||||
Cost of sales and occupancy | 229,874 | 124,604 | 354,478 | |||||||||
Selling and administrative | 74,417 | 36,464 | 110,881 | |||||||||
Depreciation and amortization | 855 | 1,349 | 2,204 | |||||||||
Total | 305,146 | 162,417 | 467,563 | |||||||||
Operating loss | $ | (7,932 | ) | $ | (11,398 | ) | $ | (19,330 | ) | |||
Total assets | $ | 320,074 | $ | 152,851 | $ | 472,925 | ||||||
Capital expenditures | $ | 1,255 | $ | 821 | $ | 2,076 | ||||||
13 Weeks Ended | |||||||
Thousands except income per common share | May 5, 2018 | April 29, 2017 | |||||
Basic weighted average shares | 22,702 | 22,702 | |||||
Diluted weighted average shares | 22,702 | 22,702 | |||||
Net loss | $ | (9,369 | ) | $ | (21,434 | ) | |
Loss per common share: | |||||||
Basic | $ | (0.41 | ) | $ | (0.94 | ) | |
Diluted | $ | (0.41 | ) | $ | (0.94 | ) | |
Thousands | Lease Termination Costs (1) | Inventory Related (1) | Impairment and Accelerated Depreciation (2) | Other Charges (3) | Total Store Closing Costs | ||||||||||||||
13 weeks ended May 5, 2018 | $ | 79 | $ | — | $ | — | $ | — | $ | 79 | |||||||||
Thousands | Lease Termination Costs (1) | Inventory Related (1) | Impairment and Accelerated Depreciation (2) | Other Charges (3) | Total Store Closing Costs | ||||||||||||||
13 weeks ended April 29, 2017 | $ | (950 | ) | $ | — | $ | — | $ | — | $ | (950 | ) | |||||||
(1) | Recorded within cost of sales and occupancy in the Condensed Consolidated Statements of Operations. Lease termination costs are net of estimated sublease income, and include the reversal of closed store reserves when a lease agreement is terminated for an amount less than the remaining reserve established for the store. |
(2) | Recorded within depreciation and amortization in the Condensed Consolidated Statements of Operations. |
(3) | Recorded within selling and administrative in the Condensed Consolidated Statements of Operations. |
Thousands | Total | |||
Balance at February 3, 2018 | $ | 4,655 | ||
Store closing costs | 79 | |||
Payments/utilization | (1,893 | ) | ||
Balance at May 5, 2018 | $ | 2,841 | ||
• | 695 Sears Hometown Stores—Primarily independently operated stores, predominantly located in smaller communities and offering appliances, lawn and garden equipment, and hardware. Most of our Sears Hometown Stores carry Kenmore, Craftsman, and DieHard brand products as well as a wide assortment of other national brand products. |
• | 18 Sears Hardware Stores—Stores that carry Craftsman brand tools and lawn and garden equipment, DieHard brand batteries, and a wide assortment of other national brands and other home improvement products along with a selection of Kenmore and other national brands of appliances. |
• | 34 Sears Home Appliance Showrooms—Stores that have a simple, primarily appliance showroom design that are positioned in metropolitan areas. |
• | 5 Buddy's Home Furnishings Rent-to-Own Franchise Stores - Stores where we are a franchisee, enabling us to benefit from Buddy's expertise and systems infrastructure in the Rent-to-Own business in which we own the inventory that we rent to our customers. |
13 Weeks Ended | ||||||||
Thousands | May 5, 2018 | April 29, 2017 | ||||||
NET SALES | $ | 381,281 | $ | 448,233 | ||||
COSTS AND EXPENSES | ||||||||
Cost of sales and occupancy | 293,803 | 354,478 | ||||||
Selling and administrative | 90,479 | 110,881 | ||||||
Selling and administrative expense as a percentage of net sales | 23.7 | % | 24.7 | % | ||||
Depreciation and amortization | 2,608 | 2,204 | ||||||
Total costs and expenses | 386,890 | 467,563 | ||||||
Operating loss | (5,609 | ) | (19,330 | ) | ||||
Interest expense | (3,452 | ) | (1,591 | ) | ||||
Other income | 100 | 319 | ||||||
Loss before income taxes | (8,961 | ) | (20,602 | ) | ||||
Income tax expense | (408 | ) | (832 | ) | ||||
NET LOSS | $ | (9,369 | ) | $ | (21,434 | ) | ||
Gross Margin | $ | 87,478 | $ | 93,755 | ||||
Margin rate | 22.9 | % | 20.9 | % | ||||
• | EBITDA excludes the effects of financing and investing activities by eliminating the effects of interest and depreciation costs; and |
• | Other significant items, while periodically affecting our results, may vary significantly from period to period and may have a disproportionate effect in a given period, which affects comparability of results. These items may also include cash charges such as severance and executive transition costs and IT transformation investments that make it difficult for investors to assess the Company's core operating performance. |
13 Weeks Ended | ||||||||
Thousands | May 5, 2018 | April 29, 2017 | ||||||
Net loss | $ | (9,369 | ) | $ | (21,434 | ) | ||
Income tax expense | 408 | 832 | ||||||
Other income | (100 | ) | (319 | ) | ||||
Interest expense | 3,452 | 1,591 | ||||||
Operating loss | (5,609 | ) | (19,330 | ) | ||||
Depreciation and amortization | 2,608 | 2,204 | ||||||
Provision for franchisee note losses, net of recoveries | 42 | 116 | ||||||
IT transformation investments | 5,743 | 9,255 | ||||||
Accelerated closure of under-performing stores | 79 | (950 | ) | |||||
Adjusted EBITDA | $ | 2,863 | $ | (8,705 | ) | |||
13 Weeks Ended | |||||||
Thousands, except for number of stores | May 5, 2018 | April 29, 2017 | |||||
NET SALES | $ | 253,704 | $ | 297,214 | |||
Comparable store sales % | (11.6 | )% | (6.8 | )% | |||
COSTS AND EXPENSES | |||||||
Cost of sales and occupancy | 198,728 | 229,874 | |||||
Selling and administrative | 65,010 | 74,417 | |||||
Selling and administrative expense as a percentage of net sales | 25.6 | % | 25.0 | % | |||
Depreciation and amortization | 1,324 | 855 | |||||
Total costs and expenses | 265,062 | 305,146 | |||||
Operating loss | $ | (11,358 | ) | $ | (7,932 | ) | |
Gross margin dollars | 54,976 | 67,340 | |||||
Margin rate | 21.7 | % | 22.7 | % | |||
Total Hometown stores | 752 | 864 | |||||
13 Weeks Ended | ||||||||
Thousands | May 5, 2018 | April 29, 2017 | ||||||
Operating loss | (11,358 | ) | (7,932 | ) | ||||
Depreciation and amortization | 1,324 | 855 | ||||||
Provision for franchisee note losses, net of recoveries | (57 | ) | (83 | ) | ||||
IT transformation investments | 3,976 | 6,154 | ||||||
Accelerated closure of under-performing stores | 221 | (950 | ) | |||||
Adjusted EBITDA | $ | (5,894 | ) | $ | (1,956 | ) | ||
13 Weeks Ended | ||||||||
Thousands, except for number of stores | May 5, 2018 | April 29, 2017 | ||||||
NET SALES | $ | 127,577 | $ | 151,019 | ||||
Comparable store sales % | (8.3 | )% | (8.3 | )% | ||||
COSTS AND EXPENSES | ||||||||
Cost of sales and occupancy | 95,075 | 124,604 | ||||||
Selling and administrative | 25,469 | 36,464 | ||||||
Selling and administrative expense as a percentage of net sales | 20.0 | % | 24.1 | % | ||||
Depreciation and amortization | 1,284 | 1,349 | ||||||
Total costs and expenses | 121,828 | 162,417 | ||||||
Operating income (loss) | $ | 5,749 | $ | (11,398 | ) | |||
Gross margin dollars | 32,502 | 26,415 | ||||||
Margin rate | 25.5 | % | 17.5 | % | ||||
Total Outlet stores | 130 | 148 | ||||||
13 Weeks Ended | ||||||||
Thousands | May 5, 2018 | April 29, 2017 | ||||||
Operating income (loss) | 5,749 | (11,398 | ) | |||||
Depreciation and amortization | 1,284 | 1,349 | ||||||
Provision for franchisee note losses, net of recoveries | 99 | 199 | ||||||
IT transformation investments | 1,767 | 3,101 | ||||||
Accelerated closure of under-performing stores | (142 | ) | — | |||||
Adjusted EBITDA | $ | 8,757 | $ | (6,749 | ) | |||
Sears Hometown and Outlet Stores, Inc. | ||
By: | /S/ E. J. BIRD | |
Name: | E. J. Bird | |
Title: | Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | |
Date: | June 7, 2018 | |
Exhibit Number | Document Description |
3.1 | |
3.2 | |
3.3 | |
31.1(1) | |
31.2(1) | |
32(1) | |
101(2) | The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended May 5, 2018, formatted in XBRL (eXtensible Business Reporting Language) and furnished electronically herewith: (i) the Condensed Consolidated Statements of Operations (Unaudited) for the 13 Weeks Ended May 5, 2018 and April 29, 2017; (ii) the Condensed Consolidated Balance Sheets (Unaudited) at May 5, 2018, April 29, 2017, and February 3, 2018; (iii) the Condensed Consolidated Statements of Cash Flows (Unaudited) for the 13 Weeks Ended May 5, 2018 and April 29, 2017; (iv) the Condensed Combined Statements of Stockholders' Equity (Unaudited) for the 13 Weeks Ended May 5, 2018 and April 29, 2017; and (v) the Notes to the Condensed Consolidated Financial Statements (Unaudited). |
1. | I have reviewed this quarterly report on Form 10-Q of Sears Hometown and Outlet Stores, Inc. |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | June 7, 2018 | |
/s/ WILL POWELL | ||
Will Powell | ||
Chief Executive Officer and President | ||
Sears Hometown and Outlet Stores, Inc. | ||
1. | I have reviewed this quarterly report on Form 10-Q of Sears Hometown and Outlet Stores, Inc. |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | June 7, 2018 | |
/s/ E. J. BIRD | ||
E. J. Bird | ||
Senior Vice President and Chief Financial Officer | ||
Sears Hometown and Outlet Stores, Inc. | ||
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
June 7, 2018 | ||
/s/ WILL POWELL | ||
Will Powell | ||
Chief Executive Officer and President | ||
/s/ E. J. BIRD | |
E. J. Bird | |
Senior Vice President and Chief Financial Officer | |
Document and Entity Information - shares |
3 Months Ended | |
|---|---|---|
May 05, 2018 |
Jun. 07, 2018 |
|
| Document and Entity Information [Abstract] | ||
| Document Type | 10-Q | |
| Amendment Flag | false | |
| Document Period End Date | May 05, 2018 | |
| Document Fiscal Year Focus | 2018 | |
| Document Fiscal Period Focus | Q1 | |
| Entity Registrant Name | Sears Hometown & Outlet Stores, Inc. | |
| Entity Central Index Key | 0001548309 | |
| Current Fiscal Year End Date | --02-03 | |
| Entity Filer Category | Smaller Reporting Company | |
| Entity Common Stock, Shares Outstanding | 22,702,132 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |
|---|---|---|
May 05, 2018 |
Apr. 29, 2017 |
|
| Income Statement [Abstract] | ||
| NET SALES | $ 381,281 | $ 448,233 |
| COSTS AND EXPENSES | ||
| Cost of sales and occupancy | 293,803 | 354,478 |
| Selling and administrative | 90,479 | 110,881 |
| Depreciation and amortization | 2,608 | 2,204 |
| Total costs and expenses | 386,890 | 467,563 |
| Operating (loss) income | (5,609) | (19,330) |
| Interest expense | (3,452) | (1,591) |
| Other income | 100 | 319 |
| Loss before income taxes | (8,961) | (20,602) |
| Income tax expense | (408) | (832) |
| NET LOSS | $ (9,369) | $ (21,434) |
| NET LOSS PER COMMON SHARE ATTRIBUTABLE TO STOCKHOLDERS | ||
| Basic (in dollars per share) | $ (0.41) | $ (0.94) |
| Diluted (in dollars per share) | $ (0.41) | $ (0.94) |
| Basic weighted average common shares outstanding (in shares) | 22,702 | 22,702 |
| Diluted weighted average common shares outstanding (in shares) | 22,702 | 22,702 |
Background and Basis of Presentation |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 05, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BACKGROUND AND BASIS OF PRESENTATION | BACKGROUND AND BASIS OF PRESENTATION Background Sears Hometown and Outlet Stores, Inc. is a national retailer primarily focused on selling home appliances, lawn and garden equipment, and tools. As of May 5, 2018 the Company or its dealers and franchisees operated a total of 882 stores across all 50 states and in Puerto Rico and Bermuda. In these notes and elsewhere in this Quarterly Report on Form 10-Q the terms “we,” “us,” “our,” “SHO,” and the “Company” refer to Sears Hometown and Outlet Stores, Inc. and its subsidiaries. Our common stock trades on the Nasdaq Stock Market under the trading symbol “SHOS.” The Separation The Company separated from Sears Holdings Corporation (“Sears Holdings”) in October 2012 (the “Separation”). To our knowledge Sears Holdings does not own any shares of our common stock. The Company has specified rights to use the "Sears" name under a license agreement from Sears Holdings. Basis of Presentation These unaudited Condensed Consolidated Financial Statements include the accounts of Sears Hometown and Outlet Stores, Inc. and its subsidiaries, all of which are wholly owned. These unaudited Condensed Consolidated Financial Statements do not include all of the information and footnotes required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In the opinion of management, all adjustments (which include normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the 13 weeks ended May 5, 2018 are not necessarily indicative of the results that may be expected for the full fiscal year. These financial statements and related notes should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended February 3, 2018 (the "2017 10-K"). We operate through two segments--our Sears Hometown segment ("Hometown") and our Sears Outlet segment ("Outlet"). Our first fiscal quarter end is the Saturday closest to April 30 unless the preceding fiscal year was a 53-week year. Fiscal 2017 was a 53-week year. For 2018 and 2017, our first fiscal quarters ended as follows.
Our fiscal year end is the Saturday closest to January 31. Unless otherwise stated, references to specific years and quarters in these notes are to fiscal years and fiscal quarters, respectively. Reclassifications- certain amounts have been reclassified in order to conform to the current period presentation. The Company’s accounting policies, as updated from our Annual Report on Form 10-K for the year ended February 3, 2018, pursuant to the adoption of the new standard, are as follows. Revenue Recognition Revenues from contracts with customers include sales of merchandise, commissions on merchandise sales made through www.sears.com, Company websites, services and extended-service plans, financing programs, and delivery and handling revenues related to merchandise sold. Revenue is measured based on the amount of fixed consideration that we expect to receive, reduced by estimates for variable consideration such as returns. Revenue also excludes any amounts collected from customers and remitted or payable to governmental authorities. In arrangements where we have multiple performance obligations, the transaction price is allocated to each performance obligation using the relative stand-alone selling price. We recognize revenues from retail operations upon the transfer of control of goods to the customer. We satisfy our performance obligations at the point of sale for retail store transactions and upon delivery for online transactions. We defer revenue for retail store and online transactions including commissions on extended-service plans, where we have received consideration but have not transferred control of the goods to the customer at the end of the period. The performance obligation is generally satisfied in the following reporting period. The balance of deferred revenue was $15.0 million and $16.4 million at May 5, 2018 and February 3, 2018, respectively. The change in deferred revenue represents revenue recognized during the first quarter of 2018. We recognize revenues from commissions on services, and delivery and handling revenues related to merchandise sold, at the point of sale as we are not the primary obligor with respect to such services and have no future obligations for future performance. The Company accepts Sears Holdings gift cards as tender for purchases and is reimbursed by Sears Holdings for gift cards tendered. Cost of Sales and Occupancy Cost of sales and occupancy are comprised principally of merchandise costs, warehousing and distribution (including receiving and store delivery) costs, retail store occupancy costs, home services and installation costs, warranty cost, royalties payable to Sears Holdings related to our sale products branded with one of the KENMORE®, CRAFTSMAN®, and DIEHARD® marks (the "KCD Marks," and products branded with one of the KCD Marks are referred to as the "KCD Products"), customer shipping and handling costs, vendor allowances, markdowns, and physical inventory losses. The KCD Marks are owned by subsidiaries of Sears Holdings. Reserve for Sales Returns and Allowances Revenues from merchandise sales and services are reported net of estimated returns and allowances and exclude sales taxes. The typical return period is 30 days and the refund liability for returns is calculated as a percentage of sales based on historical return percentages. Estimated returns are recorded as a reduction of revenues. The reserve for returns and allowances was $3.9 million and $1.1 million at May 5, 2018 and February 3, 2018, respectively. Variable Interest Entities and Consolidation The Financial Accounting Standards Board ("FASB") has issued guidance on variable interest entities and consolidation for determining whether an entity is a variable interest entity ("VIE") as well as the methods permitted for determining the primary beneficiary of a VIE. In addition, this guidance requires ongoing reassessments as to whether a reporting company is the primary beneficiary of a VIE and disclosures regarding the reporting company’s involvement with a VIE. On an ongoing basis the Company evaluates its business relationships, such as those with its independent dealers, independent franchisees, and suppliers, to identify potential VIE's. Generally, these businesses either qualify for a scope exception under the consolidation guidance or, where a variable interest exists, the Company does not possess the power to direct the activities that most significantly impact the economic performance of these businesses. The Company has not consolidated any of such entities in the periods presented. Fair Value of Financial Instruments We determine the fair value of financial instruments in accordance with standards pertaining to fair value measurements. Such standards define fair value and establish a framework for measuring fair value under GAAP. Under fair value measurement accounting standards, fair value is considered to be the exchange price in an orderly transaction between market participants to sell an asset or transfer a liability at the measurement date. We report the fair value of financial assets and liabilities based on the fair value hierarchy prescribed by accounting standards for fair value measurements, which prioritizes the inputs to valuation techniques used to measure fair value into three levels, as follows: Level 1 inputs—unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. An active market for the asset or liability is one in which transactions for the asset or liability occurs with sufficient frequency and volume to provide ongoing pricing information. Level 2 inputs—inputs other than quoted market prices included in Level 1 that are observable, either directly or indirectly, for the asset or liability. Level 2 inputs include, but are not limited to, quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted market prices that are observable for the asset or liability, such as interest-rate curves and yield curves observable at commonly quoted intervals, volatilities, credit risks, and default rates. Level 3 inputs—unobservable inputs for the asset or liability. Cash and cash equivalents, merchandise payables, accrued expenses (Level 1), accounts and franchisee notes receivable, and short-term debt (Level 2) are reflected in the Condensed Consolidated Balance Sheets at cost, which approximates fair value due to the short-term nature of these instruments. For short-term borrowings and our Term Loan, the variable interest rates are a significant input in our fair value assessments and are consistent with the interest rates in the market. The carrying value of long-term notes receivable approximates fair value. We may be required, on a nonrecurring basis, to adjust the carrying value of the Company's long-lived assets. When necessary, these valuations are determined by the Company using Level 3 inputs. These assets are subject to fair value adjustments in certain circumstances as when there is evidence that impairment may exist. The Company was not required to measure any other significant non–financial asset or liability at fair value as of May 5, 2018. Recently Issued Accounting Pronouncements Recent accounting pronouncements pending adoption not discussed below or in the 2017 Form 10-K are either not applicable or will not have or are not expected to have a material impact on the consolidated financial statements. ASU 2016-02 "Leases (Topic 842)" In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)". This ASU created a new Topic under the accounting standards codification to account for the provisions of the ASU. This ASU amendment is meant to provide transparency and to improve comparability between entities. This ASU requires companies to record an asset and liability on the balance sheet for leases that were formerly designated as operating leases as well as leases designated as financing leases. The provisions of the ASU predominately change the recognition of leases for lessees, but the provisions do not substantially change the accounting for lessors. This ASU will supersede the provisions of Topic 840 Leases. The liability recorded for a lease is generally intended to recognize the present value of lease payments and the asset as a right to use the underlying asset for the lease, including optional periods if it is reasonably certain the option will be exercised. If a lease term is less than twelve months, a company is allowed to elect not to record the asset and liability. Expense related to these leases are to be amortized straight-line over the expected term of the lease. Additionally, the provisions of this ASU provide additional guidance on separating lease terms from maintenance and other type of provisions that provide a good or service, accounting for sale-leaseback provisions, and leveraged leases. These updates are required to be applied under a modified retrospective approach from the beginning of the earliest period presented. The modified approach provides optional practical expedients that may be elected, which will allow companies to continue to account for leases under the previous guidance for leases that commenced prior to the effective date. Reporting in the cash flow statement remains virtually unchanged. Additional qualitative and quantitative disclosures are required. The provisions of this ASU are effective for fiscal years beginning after December 15, 2018, and interim periods within those periods. Early adoption is allowed. We are in the initial stages of evaluating the impact of the new standard on the accounting policies, processes, and system requirements. While the Company continues to assess the potential impacts of the new standard and anticipates this standard could have a material impact on the consolidated financial statements, the Company does not know or cannot reasonably estimate quantitative information related to the impact of the new standard on the financial statements at this time. However, upon adoption, we expect that the right of use asset and the lease liability will be recognized in the balance sheets in amounts that will be material. Recently Adopted Accounting Pronouncements ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)", which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) 605, Revenue Recognition. Several additional ASUs have subsequently been issued amending and clarifying the standard. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a five-step process to achieve that core principle and to determine when and how revenue is recognized. The updates may be applied retrospectively for each period presented or as a cumulative-effect adjustment at the date of adoption. We adopted this standard on February 4, 2018, using the modified retrospective approach. The impact of the adoption of ASU 2014-09 on our condensed consolidated financial statements is as follows:
We have made an accounting policy election to exclude from the measurement of transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by us from a customer (sales tax, value added tax, etc.). We have made an accounting policy election to account for shipping and handling activities performed after a customer obtains control of the good as activities to fulfill the promise to transfer the good. We applied ASU No. 2014-09 only to contracts that were not completed prior to fiscal 2018. The cumulative effect of initially applying ASU No. 2014-09 was a $2.1 million increase to the opening balance of accumulated deficit as of February 4, 2018. The comparative prior period information continues to be reported under the accounting standards in effect during those periods. We expect the impact of the adoption to be immaterial to our financial position, results of operations, and cash flows on an ongoing basis. The effect of the adoption of ASU No. 2014-09 on our consolidated balance sheet as of May 5, 2018 was as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Sales |
3 Months Ended | |||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 05, 2018 | ||||||||||||||||||||||||||||||||||||
| Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||
| NET SALES | NET SALES During the 13 weeks ended May 5, 2018, approximately 97% of our revenues were generated in the United States. Net sales of merchandise and services for the 13 weeks ended May 5, 2018 were as follows:
|
|||||||||||||||||||||||||||||||||||
Accounts and Franchisee Receivables and Other Assets |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 05, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACCOUNTS AND FRANCHISEE RECEIVABLES AND OTHER ASSETS | ACCOUNTS AND FRANCHISEE RECEIVABLES AND OTHER ASSETS Accounts and franchisee receivables and other assets consist of the following:
(1) The Company recognizes an allowance for losses on franchisee receivables (which consist primarily of franchisee promissory notes) in an amount equal to estimated probable losses net of recoveries. The allowance is based on an analysis of expected future write-offs and existing economic conditions and an assessment of specific identifiable franchisee promissory notes and other franchisee receivables considered at risk or uncollectible. We recognize the expense associated with the allowance for losses on franchisee receivables as selling and administrative expense. Most of our franchisee promissory notes authorize us to deduct debt service from our commissions otherwise due and payable to the franchisees, and we routinely make those deductions to the extent of available commissions payable. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for Losses on Franchisee Receivables |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 05, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ALLOWANCE FOR LOSSES ON FRANCHISEE RECEIVABLES | ALLOWANCE FOR LOSSES ON FRANCHISEE RECEIVABLES The allowance for losses on franchisee receivables consists of the following as of the periods indicated:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Current and Long-Term Liabilities |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 05, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OTHER CURRENT AND LONG-TERM LIABILITIES | OTHER CURRENT AND LONG-TERM LIABILITIES Other current and long-term liabilities consist of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes |
3 Months Ended |
|---|---|
May 05, 2018 | |
| Income Tax Disclosure [Abstract] | |
| INCOME TAXES | INCOME TAXES SHO and Sears Holdings entered into a Tax Sharing Agreement that governs the rights and obligations of the parties with respect to pre-Separation and post-Separation tax matters. Under the Tax Sharing Agreement, Sears Holdings generally is responsible for any federal, state, or foreign income tax liability relating to tax periods ending on or before the Separation. For all periods after the Separation, the Company generally is responsible for any federal, state, or foreign tax liability. Current income taxes payable for any federal, state, or foreign income tax returns is reported in the period incurred. We account for uncertainties in income taxes according to accounting standards for uncertain tax positions. The Company is present in a large number of taxable jurisdictions and, at any point in time, can have tax audits underway at various stages of completion in one or more of these jurisdictions. We evaluate our tax positions and establish liabilities for uncertain tax positions that may be challenged by local authorities and may not be fully sustained, despite our belief that the underlying tax positions are fully supportable. Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law, and closings of statutes of limitation. Such adjustments are reflected in the tax provision as appropriate. For the 13 weeks ended May 5, 2018 and April 29, 2017, no unrecognized tax benefits have been identified and reflected in the Condensed Consolidated Financial Statements. We classify interest expense and penalties related to unrecognized tax benefits and interest income on tax overpayments as components of income tax expense. As no unrecognized tax benefits have been identified and reflected in the Condensed Consolidated Financial Statements, no interest or penalties related to unrecognized tax benefits are reflected in the Condensed Consolidated Balance Sheets or Statements of Operations. Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to realize the benefit of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss for the three years ended February 3, 2018. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future income. On the basis of this analysis, management has established a full valuation allowance to offset the net deferred tax assets that are not expected to be realized. Management will continue to evaluate objective and subjective evidence for changes in circumstances that cause a change in judgment about the realizability of the deferred tax assets. We file federal, state, and city income tax returns in the United States and foreign tax returns in Puerto Rico. The U.S. Internal Revenue Service has commenced an audit of the Company's federal income tax return for the year ended January 30, 2016. SHO was also a part of the Sears Holdings' combined state returns for the years ended February 2, 2013 and February 1, 2014. Currently, the Company is under audit in one state for the years ended February 2, 2013 and February 1, 2014 as part of the Sears Holdings' combined return audits and one separate return state audit for the year ended February 1, 2014. The Tax Cuts and Jobs Act was enacted on December 22, 2017. The Act reduced the U.S. federal corporate income tax rate from 35% to 21%, eliminated corporate alternative minimum tax (AMT) and changed how existing credits can be realized, and enacted various other miscellaneous changes that were effective in fiscal 2017. The Tax Act also established other new tax laws that affect fiscal 2018, including a new limitation on deductible interest expense, limitations on the deductibility of certain executive compensation, limitations on the use of FTCs to reduce the U.S. income tax liability, and limitations on net operating losses (NOLs) generated in tax years beginning after December 31, 2017, to 80% of taxable income. We are applying the guidance in SAB 118 when accounting for the enactment-date effects of the Act; however, in certain cases, as described below, aspects of our accounting are complete. Additionally, we have made a reasonable estimate of other effects. Currently, we have not adjusted our provisional amounts recorded at February 3, 2018. We will continue to make and refine our calculations as additional analysis is completed. In connection with our initial analysis of the impact of the Tax Act, we recorded a discrete net tax benefit of $0.8 million in the fiscal year ended February 3, 2018. This net tax benefit consisted of a reduction in the valuation allowance by $0.8 million as a result of the elimination of the AMT credit as a deferred tax asset and corresponding establishment of a long term receivable. The Tax Act reduced the corporate rate to 21%, effective January 1, 2018. Our net deferred tax assets and deferred tax liabilities decreased by $35.2 million with a corresponding net adjustment to the valuation allowance for the year ended February 3, 2018. While we were able to make a reasonable estimate of the impact of the reduction in the corporate rate and valuation allowances, it may be affected by other analyses related to the Tax Act. Estimates for the applicable various new tax laws effective in fiscal 2018, were included in the first quarter tax provision analysis. Due to our NOLs and valuation allowance, no additional tax provision was recorded due to the Tax Act changes. We will continue to make and refine our calculations as additional information is known and added to the analysis throughout the year. |
Related Party Agreements and Transactions |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 05, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RELATED-PARTY AGREEMENTS AND TRANSACTIONS | RELATED-PARTY AGREEMENTS AND TRANSACTIONS According to publicly available information ESL Investments, Inc. and investment affiliates including Edward S. Lampert (collectively, "ESL") beneficially own 58.8% of our outstanding shares of common stock and more than 50% of Sears Holdings' shares of common stock. SHO and Sears Holdings (and in some circumstances, its subsidiaries) have entered into various agreements (as amended, the "SHO-Sears Holdings Agreements") that, among other things, (1) govern specified aspects of our relationship with Sears Holdings, (2) establish terms under which subsidiaries of Sears Holdings provide services to us, and (3) establish terms pursuant to which subsidiaries of Sears Holdings obtain merchandise inventories for us. The terms of the SHO-Sears Holdings Agreements were agreed to prior to the Separation (except for amendments entered into after the Separation that were approved by the Audit Committee of SHO's Board of Directors) in the context of a parent-subsidiary relationship and in the overall context of the Separation. The costs and allocations charged to the Company by Sears Holdings do not necessarily reflect the costs of obtaining the services from unaffiliated third parties or of the Company itself providing the applicable services. The Company has engaged in frequent discussions, and has resolved disputes, with Sears Holdings about the terms and conditions of the SHO-Sears Holdings Agreements, the business relationships that are reflected in the SHO-Sears Holdings Agreements, and the details of these business relationships, many of which details had not been addressed by the terms and conditions of the SHO-Sears Holdings Agreements or, if addressed, in the past were, and in the future could be, in dispute as to their meaning or application in the context of the existing business relationships. Many of these discussions have resulted in adjustments to the relationships that the Company believes together are in the Company's best interests. The following is a summary of the nature of the related-party transactions between SHO and Sears Holdings: •We obtain a significant amount of our merchandise inventories from Sears Holdings.
The following table summarizes the results of the transactions with Sears Holdings reflected in the Company’s Condensed Consolidated Financial Statements:
We incur payables to Sears Holdings for merchandise inventory purchases and service and occupancy charges (net of commissions) based on the SHO-Sears Holdings Agreements. Amounts due to or from Sears Holdings are non-interest bearing and, except as provided in the following sentences of this paragraph, are settled on a net basis and have payment terms of 10 days after the invoice date. In accordance with the SHO–Sears Holdings Agreements and at the request of Sears Holdings, the Company can pay invoices early and receive a deduction on invoices for early–payment discounts commensurate with the number of days paid early. The Company and Sears Holdings each can, in its sole discretion, revert to ten–day, no–discount payment terms at any time upon notice to the other. The discount received for payments made on accelerated terms, net of incremental interest expense, results in a net financial benefit to the Company. During the first quarters of 2018 and 2017, the Company paid most invoices early and received discounts of $0.5 million and $0.6 million, respectively, which are reflected in the Condensed Consolidated Statements of Operations. We recorded real estate occupancy payments of $0.2 million and $0.3 million for the 13 weeks ended May 5, 2018 and April 29, 2017, respectively, to Seritage Growth Properties, a real estate investment trust. Edward S. Lampert is the Chairman of the Board of Trustees of Seritage. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financing Arrangements |
3 Months Ended |
|---|---|
May 05, 2018 | |
| Debt Disclosure [Abstract] | |
| FINANCING ARRANGEMENTS | FINANCING ARRANGEMENTS Senior ABL Facility In October 2012, the Company entered into a Credit Agreement with a syndicate of lenders, including Bank of America, N.A., as administrative agent, which provided (subject to availability under a borrowing base) for aggregate maximum borrowings of $250 million (the “Prior Facility”). Under the Prior Facility the Company initially borrowed $100 million which was used to pay a cash dividend to Sears Holdings prior to the Separation. On November 1, 2016, the Company and its primary operating subsidiaries, entered into an Amended and Restated Credit Agreement with a syndicate of lenders, including Bank of America, N.A., as administrative agent and collateral agent, which provides (subject to availability under a borrowing base) for aggregate maximum borrowings of $250 million (the “Senior ABL Facility”). The Senior ABL Facility, which amended and restated the Prior Facility in its entirety, provides for extended revolving credit commitments of specified lenders in an aggregate amount equal to $170 million (the “Extended Revolving Credit Commitments”) and provided for non-extended revolving credit commitments of specified lenders in an aggregate amount equal to $80 million (the “Non-Extended Revolving Credit Commitments”). The Extended Revolving Credit Commitments will mature on the earliest of (1) February 29, 2020, (2) six months prior to the expiration of specified agreements entered into with Sears Holdings and its subsidiaries in connection with the Separation (the “Subject Agreements”) unless they are extended to a date later than February 29, 2020 or terminated on a basis reasonably satisfactory to the administrative agent under the Senior ABL Facility, and (3) acceleration of the maturity date following an event of default in accordance with the Senior ABL Facility. The Non-Extended Revolving Credit Commitments matured on October 11, 2017 and the Company repaid in full all outstanding borrowings associated with these commitments. Unamortized debt costs related to the Senior ABL Facility of $3.0 million are included in Prepaid and Other current assets on the Condensed Consolidated Balance Sheet as of May 5, 2018 and are being amortized over the remaining term of the Senior ABL Facility. As of May 5, 2018, we had $114.9 million outstanding under the Senior ABL Facility, which approximated the fair value of these borrowings. Up to $75 million of the Senior ABL Facility is available for the issuance of letters of credit and up to $25 million is available for swingline loans. The Senior ABL Facility permits us to request commitment increases in an aggregate principal amount of up to $100 million. Availability under the Senior ABL Facility as of May 5, 2018 was $47.9 million, with $7.2 million of letters of credit outstanding under the facility. We continued our agreement with Sears Holdings whereby SHO paid Sears Holdings' invoices for merchandise and services on accelerated terms in exchange for a cash discount depending on the number of days we paid before the invoice due date. The Senior ABL Facility borrowings increased by approximately $18 million as of May 5, 2018 as a result of our accelerated payments. The discounts we received for the accelerated payments, less the incremental interest expense, resulted in a net financial benefit to the Company that is described in Note 7 to these Condensed Consolidated Financial Statements. The principal terms of the Senior ABL Facility are summarized below. Prepayments The Senior ABL Facility is subject to mandatory prepayment in amounts equal to the amount by which the outstanding extensions of credit exceed the lesser of the borrowing base and the commitments then in effect. Security and Guarantees The Senior ABL Facility is secured by a first lien security interest on substantially all the assets of the Company and its subsidiaries, including, without limitation, accounts receivable, inventory, general intangibles, investment property, equipment, cash, cash equivalents, deposit accounts and securities accounts, as well as certain other assets (other than intellectual property and fee-owned interests in real property) ancillary to any of the foregoing and all proceeds of any of the foregoing, including cash proceeds and the proceeds of applicable insurance. The Senior ABL Facility is guaranteed by the Company and each of its existing and future direct and indirect wholly owned domestic subsidiaries (other than specified immaterial subsidiaries). Interest; Fees The interest rates per annum applicable to the loans under the Senior ABL Facility are based on a fluctuating rate of interest measured by reference to, at the Company’s election, either (1) an adjusted London inter-bank offered rate (LIBOR) plus a borrowing margin ranging from 3.50% to 4.50% (the rate was approximately 6.25% at May 5, 2018), and in each case based on availability under the Senior ABL Facility, or (2) an alternate base rate plus a borrowing margin, ranging from 2.50% to 3.50% (the rate was approximately 8.25% at May 5, 2018), and in each case based on availability under the Senior ABL Facility. Customary fees are payable in respect of the Senior ABL Facility, including letter of credit fees and commitment fees. Covenants The Senior ABL Facility includes a number of negative covenants that, among other things, limit or restrict the ability of the Company and its subsidiaries (including the guarantors) to, subject to certain exceptions, incur additional indebtedness (including guarantees), grant liens, make investments, make prepayments on other indebtedness, engage in mergers, and change the nature of the business of the Company and its subsidiaries (including the guarantors). The Senior ABL Facility also imposes various other requirements, which take effect if availability falls below designated thresholds, including a cash dominion requirement with additional borrowing base reporting requirements in addition to a requirement that the fixed charge ratio at the last day of any quarter be not less than 1.0 to 1.0. The Senior ABL Facility also limits SHO’s ability to declare and pay cash dividends and to repurchase its common stock. The Senior ABL Facility would not have permitted us to pay cash dividends or to repurchase our common stock as of May 5, 2018. The Senior ABL Facility also contains affirmative covenants, including financial and other reporting requirements. Events of Default The Senior ABL Facility includes customary and other events of default including non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations or warranties, cross default to other material indebtedness, bankruptcy and insolvency events, invalidity or impairment of guarantees or security interests, material judgments, change of control, failure to perform a “Material Contract” (which includes specified SHO-Sears Holdings Agreements) to the extent required to maintain it in full force and effect, failure to enforce a Material Contract in accordance with its terms, or termination by Sears Holdings of specified “Separation Agreements” (which include specified SHO-Sears Holdings Agreements). Term Loan Agreement On February 16, 2018 the Company’s three operating subsidiaries, Sears Authorized Hometown Stores, LLC, Sears Home Appliance Showrooms, LLC, and Sears Outlet Stores, L.L.C., as borrowers, and the Company, as guarantor, entered into a Term Loan Credit Agreement with Gordon Brothers Finance Company, as agent, lead arranger, and sole bookrunner, and Gordon Brothers Finance Company, LLC, as lender (the “Term Loan Agreement”). The Term Loan Agreement provides for a $40 million term loan (the “Term Loan”), which amount the Company has borrowed, and is outstanding, in accordance with and subject to the terms and conditions of the Term Loan Agreement. The Company used the proceeds of the Term Loan to pay down borrowings under the Senior ABL Facility. The Term Loan will mature on the earliest of (1) the maturity date specified in the Senior ABL Facility, (2) February 16, 2023, and (3) acceleration of the maturity date following an event of default in accordance with the Term Loan Agreement. Unamortized debt costs related to the Term Loan are $1.6 million netted against the term note on the Condensed Consolidated Balance Sheets as of May 5, 2018 and are being amortized over the remaining term of the Term Loan. The principal terms of the Term Loan Agreement are summarized below. Security and Guarantees The Term Loan Agreement is secured by a second lien security interest (subordinate only to the liens securing the Senior ABL Facility) on substantially all the assets of the Company and its subsidiaries (the same assets as the assets specified with respect to the Senior ABL Facility), including without limitation accounts receivable, inventory, general intangibles, investment property, equipment, cash, cash equivalents, deposit accounts and securities accounts, as well as other assets (other than intellectual property and fee-owned interests in real property) ancillary to any of the foregoing and all proceeds of any of the foregoing, including cash proceeds and the proceeds of applicable insurance. The Term Loan Agreement is guaranteed by the Company and each of its existing and future direct and indirect wholly owned domestic subsidiaries (other than specified immaterial subsidiaries). Prepayments The Term Loan is subject to mandatory prepayment in amounts equal to the amount by which the outstanding Term Loan exceeds the borrowing base specified in the Term Loan Agreement plus a reserve to be maintained against the borrowing base for the Senior ABL Facility (the “push-down reserve”), which reserve will be equal to total outstandings under the Term Loan Agreement that exceed the Term Loan Agreement’s borrowing base, if such excess were to arise. The Company may not reborrow amounts prepaid. Interest; Fees The interest rate applicable to the Term Loan under the Term Loan Agreement is a fluctuating rate of interest (payable and adjusted monthly) equal to the greater of (1) three-month LIBOR (the rate was approximately 2.37% at May 5, 2018) plus 8.5% per annum and (2) a minimum interest rate of 9.5% per annum. Customary fees are payable in respect of the Term Loan Agreement, including a commitment fee and an early prepayment fee. Covenants The Term Loan Agreement includes a number of negative covenants that, among other things, limit or restrict the ability of the Company, the Borrowers, and the Company’s other subsidiaries to, subject to exceptions, incur additional indebtedness (including guarantees), grant liens, make investments, make dividends or other distributions with respect to, or repurchase, the Company’s capital stock, make prepayments on other indebtedness, engage in mergers, or change the nature of the business. In addition, upon excess availability falling below a specified level or the occurrence of an event of default the Company would be subject to a cash dominion requirement. The Term Loan Agreement also provides that the Borrowers will not permit availability under the Term Loan Agreement and the Senior ABL Facility to be less than 10% of a combined loan cap. The Term Loan Agreement also contains affirmative covenants including, among others, financial and other reporting and notification requirements, maintenance of properties, inspection rights, and physical inventories. The Company and the Borrowers also agree that the Company and the Borrowers will cause the push-down reserve to be established and maintained when and if required by the Term Loan Agreement. The Term Loan Agreement borrowing base generally means specified amounts of credit card receivables and inventory (net of reserves), minus the loan cap for the Senior ABL Facility and availability reserves. Events of Default The Term Loan Agreement includes customary events of default including non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations or warranties in any material respect, cross default to the Senior ABL Facility and other material indebtedness, bankruptcy and insolvency events, invalidity or impairment of the Term Loan Agreement and the other related loan documents (including the guarantees or security interests provided therein), material judgments, and change of control. |
Summary of Segment Data |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 05, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF SEGMENT DATA | SUMMARY OF SEGMENT DATA The Hometown reportable segment consists of the aggregation of our Hometown Stores, Hardware Stores, and Home Appliance Showrooms business formats described in “Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations-Executive Overview" of this Quarterly Report on Form 10-Q. The Outlet reportable segment also represents a business format. These segments are evaluated by our Chief Operating Decision Maker to make decisions about resource allocation and to assess performance. Each of these segments derives its revenues from the sale of merchandise and related services to customers, primarily in the U.S. Sales categories include appliances, lawn and garden, tools and paint, and other.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies |
3 Months Ended |
|---|---|
May 05, 2018 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES We are subject to various legal and governmental proceedings arising out of the ordinary course of business, the outcome of which, individually or in the aggregate, in the opinion of management would not have a material adverse effect on our business, financial position, results of operations, or cash flows. |
Loss Per Common Share |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 05, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LOSS PER COMMON SHARE | LOSS PER COMMON SHARE Basic earnings per share is calculated by dividing net loss by the weighted average number of common shares outstanding for each period. Diluted income per common share also includes the dilutive effect of potential common shares. In the periods where the Company records a net loss the diluted per share amount is equal to the basic per share amount. The following table sets forth the components used to calculate basic and diluted loss per share attributable to our stockholders.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity |
3 Months Ended |
|---|---|
May 05, 2018 | |
| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
| EQUITY | EQUITY Stock-Based Compensation Under our stock-based employee compensation plan, referred to as the Company's Amended and Restated 2012 Stock Plan (the "Plan"), there are four million shares of stock reserved for issuance (less stock units that have vested and outstanding stock units that have not yet vested). We are authorized to grant restricted stock, stock units, stock options, and to make other awards pursuant to the Plan. A total of 14,000 shares of restricted stock were granted under the Plan to an eligible individual in the second quarter of 2015 and were forfeited in the first quarter of 2017. During 2015 the Company granted a total of 159,475 stock units under the Plan, which were payable solely in cash based on the Nasdaq stock price on the vesting date. As of April 13, 2018 34,091 of these stock units had been forfeited and on that date the remaining 125,384 stock units vested in accordance with, and subject to the terms and conditions of, governing stock unit agreements and the Plan. During 2017 the Company granted a total of 262,788 stock units under the Plan, which are payable solely in cash based on the Nasdaq stock price on the vesting dates. On January 30, 2018 76,485 of these stock units vested in accordance with, and subject to the terms and conditions of, governing stock unit agreements and the Plan and as of May 5, 2018 40,000 of these stock units had been forfeited. The remaining 146,303 stock units will vest, if at all, in two substantially equal installments on January 30 in 2019 and 2020 in accordance with, and subject to the terms and conditions of, governing stock unit agreements, including forfeiture conditions, and the Plan. The fair value of these awards varies based on changes in our Nasdaq stock price at the end of each reporting period. On January 18, 2018 the Company granted a total of 361,393 stock units under the Plan, which are payable solely in cash based on the Nasdaq stock price on the vesting dates. These stock units will vest in three substantially equal installments on January 30 in 2019, 2020 and 2021 in accordance with, and subject to the terms and conditions of, governing stock unit agreements, including forfeiture conditions, and the Plan. The fair value of these awards varies based on changes in our Nasdaq stock price at the end of each reporting period. The shares of restricted stock referred to above constituted outstanding shares of the Company's common stock. The recipient of the restricted stock grant had full voting and dividend rights with respect to, but was unable to transfer or pledge, the shares of restricted stock prior to the applicable vesting date. The stock units referred to above, which were, and are, payable solely in cash based on the Nasdaq closing price of our common stock on the applicable vesting dates, do not constitute outstanding shares of the Company's common stock. The recipients of the stock unit grants have, with respect to their stock units, no rights to receive the Company's common stock or other securities of the Company, no rights as a stockholder of the Company, no dividend rights, and no voting rights. We are authorized to grant stock options and to make other awards (in addition to restricted stock and stock units) to eligible participants pursuant to the Plan. The Company has made no stock-option awards under the Plan. We do not currently have a broad-based program that provides for awards under the Plan on an annual basis. We account for stock-based compensation using the fair value method in accordance with accounting standards regarding share-based payment transactions. During the first quarter of 2018 no stock-based compensation expense was recorded. At May 5, 2018 we had $1.0 million in total estimated unrecognized compensation cost related to the remaining non-vested stock units, which cost we expect to recognize over the next approximately 2.75 years. Share Repurchase Program On August 28, 2013 the Company's Board of Directors authorized a $25 million repurchase program for the Company's outstanding shares of common stock. The timing and amount of repurchases depend on various factors, including market conditions, the Company's capital position and internal cash generation, and other factors. The Company's repurchase program does not include specific price targets, may be executed through open-market, privately negotiated, and other transactions that may be available, and may include utilization of Rule 10b5-1 plans. The repurchase program does not obligate the Company to repurchase any dollar amount, or any number of shares, of common stock. The repurchase program does not have a termination date, and the Company may suspend or terminate the repurchase program at any time. See Note 8 to these Condensed Consolidated Financial Statements regarding the limits included in the Senior ABL Facility and the Company's Term Loan Credit Agreement on the Company’s ability to repurchase its common stock. Shares that are repurchased by the Company pursuant to the repurchase program would be retired and would resume the status of authorized and unissued shares of common stock. No shares were repurchased during the 13 weeks ended May 5, 2018. At May 5, 2018, we had $12.5 million of remaining authorization under the repurchase program. |
Store Closing Charges |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 05, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restructuring and Related Activities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| STORE CLOSING CHARGES | STORE CLOSING CHARGES Accelerated Closed Store Charges We continue to take proactive steps to make the best use of capital by closing unprofitable stores. In accordance with accounting standards governing costs associated with exit or disposal activities, expenses related to future rent payments for which we no longer expect to receive any economic benefit are accrued when we cease to use the leased space and have been reduced for estimated sublease income. Accelerated (prior to lease expiration) store closing costs (benefit) for the 13 weeks ended May 5, 2018 and April 29, 2017 were as follows:
Closed Store Reserves Store closing reserves at May 5, 2018 and February 3, 2018 are shown in the table below. Store closing reserves of $2.8 million, $4.2 million, and $4.7 million are included within other current liabilities in the Condensed Consolidated Balance Sheets at May 5, 2018, April 29, 2017 and February 3, 2018, respectively.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Subsequent Event |
3 Months Ended |
|---|---|
May 05, 2018 | |
| Subsequent Events [Abstract] | |
| Subsequent Event | SUBSEQUENT EVENT Store Closings In June 2018 the Company determined that during the second quarter of 2018 it will close, or seek the closure by dealers of, between 90 to 100 Hometown stores (in most instances prior to the expiration of leases or dealer agreements) to continue the Company's efforts to reduce costs, make the best use of capital, and improve the Company's profitability. The closings are expected to result in a one-time charge of between $6.5 million and $7.5 million during the second quarter of 2018 for inventory markdowns and write-offs and other store-closing costs. |
Background and Basis of Presentation (Policies) |
3 Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 05, 2018 | ||||||||||||||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||
| Basis of Presentation | Basis of Presentation These unaudited Condensed Consolidated Financial Statements include the accounts of Sears Hometown and Outlet Stores, Inc. and its subsidiaries, all of which are wholly owned. These unaudited Condensed Consolidated Financial Statements do not include all of the information and footnotes required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In the opinion of management, all adjustments (which include normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the 13 weeks ended May 5, 2018 are not necessarily indicative of the results that may be expected for the full fiscal year. These financial statements and related notes should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended February 3, 2018 (the "2017 10-K"). We operate through two segments--our Sears Hometown segment ("Hometown") and our Sears Outlet segment ("Outlet"). |
|||||||||||||||
| Fiscal Period | Our first fiscal quarter end is the Saturday closest to April 30 unless the preceding fiscal year was a 53-week year. Fiscal 2017 was a 53-week year. For 2018 and 2017, our first fiscal quarters ended as follows.
Our fiscal year end is the Saturday closest to January 31. Unless otherwise stated, references to specific years and quarters in these notes are to fiscal years and fiscal quarters, respectively. |
|||||||||||||||
| Reclassifications | Reclassifications- certain amounts have been reclassified in order to conform to the current period presentation. |
|||||||||||||||
| Revenue Recognition | Revenue Recognition Revenues from contracts with customers include sales of merchandise, commissions on merchandise sales made through www.sears.com, Company websites, services and extended-service plans, financing programs, and delivery and handling revenues related to merchandise sold. Revenue is measured based on the amount of fixed consideration that we expect to receive, reduced by estimates for variable consideration such as returns. Revenue also excludes any amounts collected from customers and remitted or payable to governmental authorities. In arrangements where we have multiple performance obligations, the transaction price is allocated to each performance obligation using the relative stand-alone selling price. We recognize revenues from retail operations upon the transfer of control of goods to the customer. We satisfy our performance obligations at the point of sale for retail store transactions and upon delivery for online transactions. We defer revenue for retail store and online transactions including commissions on extended-service plans, where we have received consideration but have not transferred control of the goods to the customer at the end of the period. The performance obligation is generally satisfied in the following reporting period. The balance of deferred revenue was $15.0 million and $16.4 million at May 5, 2018 and February 3, 2018, respectively. The change in deferred revenue represents revenue recognized during the first quarter of 2018. We recognize revenues from commissions on services, and delivery and handling revenues related to merchandise sold, at the point of sale as we are not the primary obligor with respect to such services and have no future obligations for future performance. The Company accepts Sears Holdings gift cards as tender for purchases and is reimbursed by Sears Holdings for gift cards tendered. |
|||||||||||||||
| Cost of Sales and Occupancy | Cost of Sales and Occupancy Cost of sales and occupancy are comprised principally of merchandise costs, warehousing and distribution (including receiving and store delivery) costs, retail store occupancy costs, home services and installation costs, warranty cost, royalties payable to Sears Holdings related to our sale products branded with one of the KENMORE®, CRAFTSMAN®, and DIEHARD® marks (the "KCD Marks," and products branded with one of the KCD Marks are referred to as the "KCD Products"), customer shipping and handling costs, vendor allowances, markdowns, and physical inventory losses. The KCD Marks are owned by subsidiaries of Sears Holdings. |
|||||||||||||||
| Reserve for Sales Returns and Allowances | Reserve for Sales Returns and Allowances Revenues from merchandise sales and services are reported net of estimated returns and allowances and exclude sales taxes. The typical return period is 30 days and the refund liability for returns is calculated as a percentage of sales based on historical return percentages. Estimated returns are recorded as a reduction of revenues. The reserve for returns and allowances was $3.9 million and $1.1 million at May 5, 2018 and February 3, 2018, respectively. |
|||||||||||||||
| Variable Interest Entities and Consolidation | Variable Interest Entities and Consolidation The Financial Accounting Standards Board ("FASB") has issued guidance on variable interest entities and consolidation for determining whether an entity is a variable interest entity ("VIE") as well as the methods permitted for determining the primary beneficiary of a VIE. In addition, this guidance requires ongoing reassessments as to whether a reporting company is the primary beneficiary of a VIE and disclosures regarding the reporting company’s involvement with a VIE. On an ongoing basis the Company evaluates its business relationships, such as those with its independent dealers, independent franchisees, and suppliers, to identify potential VIE's. Generally, these businesses either qualify for a scope exception under the consolidation guidance or, where a variable interest exists, the Company does not possess the power to direct the activities that most significantly impact the economic performance of these businesses. The Company has not consolidated any of such entities in the periods presented. |
|||||||||||||||
| Fair Value of Financial Instruments | Fair Value of Financial Instruments We determine the fair value of financial instruments in accordance with standards pertaining to fair value measurements. Such standards define fair value and establish a framework for measuring fair value under GAAP. Under fair value measurement accounting standards, fair value is considered to be the exchange price in an orderly transaction between market participants to sell an asset or transfer a liability at the measurement date. We report the fair value of financial assets and liabilities based on the fair value hierarchy prescribed by accounting standards for fair value measurements, which prioritizes the inputs to valuation techniques used to measure fair value into three levels, as follows: Level 1 inputs—unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. An active market for the asset or liability is one in which transactions for the asset or liability occurs with sufficient frequency and volume to provide ongoing pricing information. Level 2 inputs—inputs other than quoted market prices included in Level 1 that are observable, either directly or indirectly, for the asset or liability. Level 2 inputs include, but are not limited to, quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted market prices that are observable for the asset or liability, such as interest-rate curves and yield curves observable at commonly quoted intervals, volatilities, credit risks, and default rates. Level 3 inputs—unobservable inputs for the asset or liability. Cash and cash equivalents, merchandise payables, accrued expenses (Level 1), accounts and franchisee notes receivable, and short-term debt (Level 2) are reflected in the Condensed Consolidated Balance Sheets at cost, which approximates fair value due to the short-term nature of these instruments. For short-term borrowings and our Term Loan, the variable interest rates are a significant input in our fair value assessments and are consistent with the interest rates in the market. The carrying value of long-term notes receivable approximates fair value. We may be required, on a nonrecurring basis, to adjust the carrying value of the Company's long-lived assets. When necessary, these valuations are determined by the Company using Level 3 inputs. These assets are subject to fair value adjustments in certain circumstances as when there is evidence that impairment may exist. The Company was not required to measure any other significant non–financial asset or liability at fair value as of May 5, 2018. |
|||||||||||||||
| Recently Issued and Adopted Accounting Pronouncements | Recently Issued Accounting Pronouncements Recent accounting pronouncements pending adoption not discussed below or in the 2017 Form 10-K are either not applicable or will not have or are not expected to have a material impact on the consolidated financial statements. ASU 2016-02 "Leases (Topic 842)" In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)". This ASU created a new Topic under the accounting standards codification to account for the provisions of the ASU. This ASU amendment is meant to provide transparency and to improve comparability between entities. This ASU requires companies to record an asset and liability on the balance sheet for leases that were formerly designated as operating leases as well as leases designated as financing leases. The provisions of the ASU predominately change the recognition of leases for lessees, but the provisions do not substantially change the accounting for lessors. This ASU will supersede the provisions of Topic 840 Leases. The liability recorded for a lease is generally intended to recognize the present value of lease payments and the asset as a right to use the underlying asset for the lease, including optional periods if it is reasonably certain the option will be exercised. If a lease term is less than twelve months, a company is allowed to elect not to record the asset and liability. Expense related to these leases are to be amortized straight-line over the expected term of the lease. Additionally, the provisions of this ASU provide additional guidance on separating lease terms from maintenance and other type of provisions that provide a good or service, accounting for sale-leaseback provisions, and leveraged leases. These updates are required to be applied under a modified retrospective approach from the beginning of the earliest period presented. The modified approach provides optional practical expedients that may be elected, which will allow companies to continue to account for leases under the previous guidance for leases that commenced prior to the effective date. Reporting in the cash flow statement remains virtually unchanged. Additional qualitative and quantitative disclosures are required. The provisions of this ASU are effective for fiscal years beginning after December 15, 2018, and interim periods within those periods. Early adoption is allowed. We are in the initial stages of evaluating the impact of the new standard on the accounting policies, processes, and system requirements. While the Company continues to assess the potential impacts of the new standard and anticipates this standard could have a material impact on the consolidated financial statements, the Company does not know or cannot reasonably estimate quantitative information related to the impact of the new standard on the financial statements at this time. However, upon adoption, we expect that the right of use asset and the lease liability will be recognized in the balance sheets in amounts that will be material. Recently Adopted Accounting Pronouncements ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)", which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) 605, Revenue Recognition. Several additional ASUs have subsequently been issued amending and clarifying the standard. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a five-step process to achieve that core principle and to determine when and how revenue is recognized. The updates may be applied retrospectively for each period presented or as a cumulative-effect adjustment at the date of adoption. We adopted this standard on February 4, 2018, using the modified retrospective approach. The impact of the adoption of ASU 2014-09 on our condensed consolidated financial statements is as follows:
We have made an accounting policy election to exclude from the measurement of transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by us from a customer (sales tax, value added tax, etc.). We have made an accounting policy election to account for shipping and handling activities performed after a customer obtains control of the good as activities to fulfill the promise to transfer the good. We applied ASU No. 2014-09 only to contracts that were not completed prior to fiscal 2018. The cumulative effect of initially applying ASU No. 2014-09 was a $2.1 million increase to the opening balance of accumulated deficit as of February 4, 2018. The comparative prior period information continues to be reported under the accounting standards in effect during those periods. We expect the impact of the adoption to be immaterial to our financial position, results of operations, and cash flows on an ongoing basis. |
|||||||||||||||
Background and Basis of Presentation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 05, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Fiscal Period | For 2018 and 2017, our first fiscal quarters ended as follows.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Effect of the Adoption of ASU No. 2014-09 | The effect of the adoption of ASU No. 2014-09 on our consolidated balance sheet as of May 5, 2018 was as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Sales (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 05, 2018 | ||||||||||||||||||||||||||||||||||||
| Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||
| Schedule of Disaggregated Net Sales | Net sales of merchandise and services for the 13 weeks ended May 5, 2018 were as follows:
|
|||||||||||||||||||||||||||||||||||
Accounts and Franchisee Receivables and Other Assets (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 05, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accounts and Franchisee Receivables and Other Assets | Accounts and franchisee receivables and other assets consist of the following:
(1) The Company recognizes an allowance for losses on franchisee receivables (which consist primarily of franchisee promissory notes) in an amount equal to estimated probable losses net of recoveries. The allowance is based on an analysis of expected future write-offs and existing economic conditions and an assessment of specific identifiable franchisee promissory notes and other franchisee receivables considered at risk or uncollectible. We recognize the expense associated with the allowance for losses on franchisee receivables as selling and administrative expense. Most of our franchisee promissory notes authorize us to deduct debt service from our commissions otherwise due and payable to the franchisees, and we routinely make those deductions to the extent of available commissions payable. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for Losses on Franchisee Receivables (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 05, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Provision for Losses on Franchisee Receivables | The allowance for losses on franchisee receivables consists of the following as of the periods indicated:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Current and Long-Term Liabilities (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 05, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accrued Expenses and Other Long-term Liabilities | Other current and long-term liabilities consist of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Agreements and Transactions (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 05, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Related Party Transactions | The following table summarizes the results of the transactions with Sears Holdings reflected in the Company’s Condensed Consolidated Financial Statements:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Segment Data (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 05, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Segment Data | Sales categories include appliances, lawn and garden, tools and paint, and other.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss Per Common Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 05, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Loss Per Common Share, Basic and Diluted | The following table sets forth the components used to calculate basic and diluted loss per share attributable to our stockholders.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Store Closing Charges (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 05, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accelerated Store Closure Costs | Accelerated (prior to lease expiration) store closing costs (benefit) for the 13 weeks ended May 5, 2018 and April 29, 2017 were as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Store Closing Reserves | Store closing reserves at May 5, 2018 and February 3, 2018 are shown in the table below. Store closing reserves of $2.8 million, $4.2 million, and $4.7 million are included within other current liabilities in the Condensed Consolidated Balance Sheets at May 5, 2018, April 29, 2017 and February 3, 2018, respectively.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Background and Basis of Presentation - Narrative (Details) $ in Thousands |
3 Months Ended | 12 Months Ended |
|---|---|---|
|
May 05, 2018
USD ($)
store
segment
state
|
Feb. 03, 2018
USD ($)
|
|
| New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
| Deferred revenue | $ 15,000 | $ 16,400 |
| Reserve for returns and allowances | $ 3,900 | 1,100 |
| Number of stores | store | 882 | |
| Number of states in which the Company operates | state | 50 | |
| Number of operating segments | segment | 2 | |
| Cumulative effect of new accounting principle in period of adoption | $ 391,554 | |
| Accounting Standards Update 2014-09 | ASU 2014-09 Effect | ||
| New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
| Cumulative effect of new accounting principle in period of adoption | $ 2,119 | $ 2,100 |
Background and Basis of Presentation - Schedule of Effect of the Adoption of ASU No. 2014-09 (Details) - USD ($) $ in Thousands |
May 05, 2018 |
Feb. 03, 2018 |
Apr. 29, 2017 |
|---|---|---|---|
| New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
| Prepaid expenses and other current assets | $ 8,101 | $ 7,131 | $ 8,883 |
| Other current liabilities | 50,594 | 53,142 | $ 64,252 |
| Accumulated deficit | (391,554) | ||
| ASU 2014-09 Effect | Accounting Standards Update 2014-09 | |||
| New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
| Prepaid expenses and other current assets | 1,226 | ||
| Other current liabilities | 3,345 | ||
| Accumulated deficit | (2,119) | $ (2,100) | |
| Excluding ASU 2014-09 Effect | |||
| New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
| Prepaid expenses and other current assets | 6,875 | ||
| Other current liabilities | 47,249 | ||
| Accumulated deficit | $ (389,435) |
Net Sales - Narrative (Details) |
3 Months Ended |
|---|---|
May 05, 2018 | |
| Geographic Concentration Risk | Revenue from Contract with Customer | UNITED STATES | |
| Disaggregation of Revenue [Line Items] | |
| Net sales (in percent) | 97.00% |
Net Sales - Schedule of Disaggregated Net Sales (Details) $ in Thousands |
3 Months Ended |
|---|---|
|
May 05, 2018
USD ($)
| |
| Disaggregation of Revenue [Line Items] | |
| Net sales | $ 381,281 |
| Merchandise | |
| Disaggregation of Revenue [Line Items] | |
| Net sales | 351,978 |
| Services | |
| Disaggregation of Revenue [Line Items] | |
| Net sales | 22,811 |
| Other | |
| Disaggregation of Revenue [Line Items] | |
| Net sales | $ 6,492 |
Accounts and Franchisee Receivables and Other Assets (Details) - USD ($) $ in Thousands |
May 05, 2018 |
Feb. 03, 2018 |
Apr. 29, 2017 |
|---|---|---|---|
| Receivables [Abstract] | |||
| Short-term franchisee receivables | $ 1,147 | $ 1,205 | $ 1,838 |
| Miscellaneous receivables | 12,484 | 14,314 | 9,943 |
| Long-term franchisee receivables | 7,366 | 7,962 | 17,129 |
| Other assets | 4,486 | 5,106 | 6,702 |
| Allowance for losses on short-term franchisee receivables | (837) | (847) | (866) |
| Allowance for losses on long-term franchisee receivables | (4,620) | (4,928) | (6,572) |
| Net accounts and franchisee receivables and other assets | $ 20,026 | $ 22,812 | $ 28,174 |
Allowance for Losses on Franchisee Receivables (Details) - Franchise Receivable - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
May 05, 2018 |
Apr. 29, 2017 |
|
| Provision for Losses on Franchisee Receivables [Roll Forward] | ||
| Allowance for losses on franchisee receivables, beginning of period | $ 5,775 | $ 8,242 |
| Provisions during the period | 42 | 116 |
| Write off of franchisee receivables | (360) | (920) |
| Allowance for losses on franchisee receivables, end of period | $ 5,457 | $ 7,438 |
Other Current and Long-Term Liabilities (Details) - USD ($) $ in Thousands |
May 05, 2018 |
Feb. 03, 2018 |
Apr. 29, 2017 |
|---|---|---|---|
| Payables and Accruals [Abstract] | |||
| Customer deposits | $ 15,396 | $ 16,655 | $ 20,417 |
| Sales and other taxes | 7,195 | 9,221 | 12,841 |
| Accrued expenses | 21,931 | 17,755 | 21,939 |
| Payroll and related items | 5,342 | 7,140 | 6,953 |
| Store closing and severance costs | 2,841 | 4,655 | 4,219 |
| Total Other current and long-term liabilities | $ 52,705 | $ 55,426 | $ 66,369 |
Income Taxes (Details) $ in Millions |
12 Months Ended |
|---|---|
|
Feb. 03, 2018
USD ($)
| |
| Income Tax Disclosure [Abstract] | |
| Discrete net tax benefit | $ 0.8 |
| Reduction in valuation allowance | 0.8 |
| Reduction in DTAs and DTLs | $ 35.2 |
Related Party Agreements and Transactions (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
May 05, 2018 |
Apr. 29, 2017 |
|
| ESL | ||
| Related Party Transaction [Line Items] | ||
| Beneficial interest acquired by related party, percentage | 58.80% | |
| ESL | Sears Holdings | ||
| Related Party Transaction [Line Items] | ||
| Beneficial interest acquired by related party, percentage | 50.00% | |
| Sears Holdings Corporation | ||
| Related Party Transaction [Line Items] | ||
| Maximum percentage of royalty rates | 6.00% | |
| Net Commissions from Sears Holdings | $ 15,139 | $ 17,397 |
| Purchases related to cost of sales and occupancy | 191,652 | 264,530 |
| Services included in selling and administrative expense | $ 13,529 | 16,533 |
| Invoice payment term | 10 days | |
| Discounts received | $ 500 | 600 |
| Seritage Growth Properties | ||
| Related Party Transaction [Line Items] | ||
| Occupancy payments | $ 200 | $ 300 |
Loss Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
|---|---|---|
May 05, 2018 |
Apr. 29, 2017 |
|
| Earnings Per Share [Abstract] | ||
| Basic weighted average shares (in shares) | 22,702 | 22,702 |
| Diluted weighted average shares (in shares) | 22,702 | 22,702 |
| Net loss | $ (9,369) | $ (21,434) |
| Loss per common share: | ||
| Basic (in dollars per share) | $ (0.41) | $ (0.94) |
| Diluted (in dollars per share) | $ (0.41) | $ (0.94) |
Store Closing Charges - Schedule of Store Closing Costs (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
May 05, 2018 |
Apr. 29, 2017 |
|
| Restructuring Cost and Reserve [Line Items] | ||
| Total Store Closing Costs | $ 79 | |
| Facility Closing | ||
| Restructuring Cost and Reserve [Line Items] | ||
| Total Store Closing Costs | 79 | $ (950) |
| Cost of Sales and Occupancy | Facility Closing | ||
| Restructuring Cost and Reserve [Line Items] | ||
| Lease Termination Costs | 79 | (950) |
| Inventory Related | 0 | 0 |
| Depreciation and Amortization | Facility Closing | ||
| Restructuring Cost and Reserve [Line Items] | ||
| Impairment and Accelerated Depreciation | 0 | 0 |
| Selling and Administrative Expenses | Facility Closing | ||
| Restructuring Cost and Reserve [Line Items] | ||
| Other Charges | $ 0 | $ 0 |
Store Closing Charges - Narrative (Details) - USD ($) $ in Thousands |
May 05, 2018 |
Feb. 03, 2018 |
Apr. 29, 2017 |
|---|---|---|---|
| Restructuring and Related Activities [Abstract] | |||
| Store closing restructuring reserves | $ 2,841 | $ 4,700 | $ 4,200 |
Store Closing Charges - Schedule of Store Closing Reserves (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
May 05, 2018 |
Apr. 29, 2017 |
|
| Restructuring and Related Activities [Abstract] | ||
| Balance at February 3, 2018 | $ 4,700 | |
| Store closing costs | 79 | |
| Payments/utilization | (1,893) | |
| Balance at May 5, 2018 | $ 2,841 | $ 4,200 |
Subsequent Event (Details) $ in Thousands |
1 Months Ended | 3 Months Ended | |
|---|---|---|---|
|
Jun. 30, 2018
location
|
Jul. 28, 2018
USD ($)
|
May 05, 2018
USD ($)
|
|
| Subsequent Event [Line Items] | |||
| Store closing costs | $ 79 | ||
| Scenario, Forecast | Minimum | |||
| Subsequent Event [Line Items] | |||
| Number of planned store closings | location | 90 | ||
| Store closing costs | $ 6,500 | ||
| Scenario, Forecast | Maximum | |||
| Subsequent Event [Line Items] | |||
| Number of planned store closings | location | 100 | ||
| Store closing costs | $ 7,500 | ||