Accounting Policies, by Policy (Policies)

12 Months Ended

Feb. 03, 2018

Accounting Policies [Abstract]

Nature of Operations [Policy Text Block]

Nature of Operations: Trans World Entertainment Corporation and subsidiaries (“the Company”) operates in two reportable segments: fye and etailz. The fye segment is one of the largest specialty retailers of entertainment products, including trend, video, music, electronics and related products in the United States. The fye segment operates a chain of retail entertainment stores and e-commerce sites, www.fye.com and www.secondspin.com. As of February 3, 2018, the fye segment operated 260 stores totaling approximately 1.4 million square feet in the United States, the District of Columbia and the U.S. Virgin Islands. The etailz segment is a leading digital marketplace retailer and generates substantially all of its revenue through Amazon Marketplace. The Company’s business is seasonal in nature, with the peak selling period being the holiday season which falls in the Company’s fourth fiscal quarter.

Liquidity [Policy Text Block]

Liquidity: The Company’s primary sources of working capital are cash provided by operations and borrowing capacity under its revolving credit facility. The Company’s cash flows fluctuate from quarter to quarter due to various items, including seasonality of sales and earnings, merchandise inventory purchases and returns, the related terms on the purchases of inventory and capital expenditures. Management believes it will have adequate resources to fund its cash needs for the foreseeable future, including its capital spending, its seasonal increase in merchandise inventory and other operating cash requirements and commitments.

Management anticipates any cash requirements due to a shortfall in cash from operations will be funded by the Company’s revolving credit facility, discussed hereafter.

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation: The consolidated financial statements consist of Trans World Entertainment Corporation, its wholly-owned subsidiaries, Record Town, Inc. (“Record Town”), Record Town’s subsidiaries and etailz, Inc. All significant intercompany accounts and transactions have been eliminated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions, including those related to merchandise inventory and return costs; valuation of long-lived assets, goodwill and intangible assets, income taxes, accounting for gift card liability, retirement plan obligation liability, and other long-term liabilities that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Items Affecting Comparability [Policy Text Block]

Items Affecting Comparability: The Company’s fiscal year is a 52 or 53-week period ending the Saturday nearest to January 31. Fiscal 2017, 2016, and 2015 ended February 3, 2018, January 28, 2017, and January 30, 2016, respectively. Fiscal 2017 had 53 weeks and fiscal 2016 and fiscal 2015 had 52 weeks.

During the fiscal year 2016, the Company recorded an immaterial adjustment between Other Revenue and Selling, General and Administrative expenses in its fiscal 2016 and fiscal 2015 consolidated financial statements for miscellaneous income, primarily related to commissions earned from third parties. The immaterial adjustment did not impact fiscal 2016 or fiscal 2015 income (loss) from operations, net income, and basic and diluted income per share.

Concentration of Business Risks [Policy Text Block]

Concentration of Business Risks: The fye segment purchases inventory from approximately 350 suppliers. In fiscal 2017, 47% of fye purchases were made from ten suppliers including Universal Studio Home Entertainment, AEC - Paramount Video, Buena Vista Home Video, SONY Music, SONY Pictures, Twentieth Century Fox Home Entertainment, Warner/Elektra/Atlantic, Universal Music Group Distribution, Funko LLC, and Warner Home Video. The etailz segment sold over 34,000 SKU’s from over 2,300 suppliers during fiscal 2017. The Company does not have material long-term purchase contracts; rather, it purchases products from its suppliers on an order-by-order basis. Historically, the Company has not experienced difficulty in obtaining satisfactory sources of supply and management believes that it will continue to have access to adequate sources of supply.

etailz generates substantially all of its revenue through the Amazon Marketplace. Therefore, the Company depends in large part on its relationship with Amazon for the continued growth of the etailz segment. In particular, the Company depends on its ability to offer products on the Amazon Marketplace and on its timely delivery of products to customers.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents: The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentration of Credit Risks: The Company maintains centralized cash management and investment programs whereby excess cash balances are invested in short-term money market funds. The Company’s investments consist of short-term investment grade securities consistent with its investment guidelines. These guidelines include the provision that sufficient liquidity will be maintained to meet anticipated cash flow needs. The Company maintains these investments, all of which are classified as cash equivalents due to their short term nature, with Wells Fargo Securities, LLC. The Company limits the amount of credit exposure with any one financial institution and believes that no significant concentration of credit risk exists with respect to cash investments.

Receivables, Policy [Policy Text Block]

Accounts Receivable: Accounts receivable for the fye segment are primarily comprised of receivables due from commissions due from third parties. For the etailz segment, accounts receivable are comprised of receivables due from Amazon. There are no provisions for uncollectible amounts from retail sales of merchandise inventory since payment is received at the time of sale.

Inventory, Policy [Policy Text Block]

Merchandise Inventory and Return Costs: Merchandise inventory is stated at the lower of cost or market under the average cost method. Inventory valuation requires significant judgment and estimates, including obsolescence, shrink and any adjustments to market value, if market value is lower than cost. The Company records obsolescence and any adjustments to market value (if lower than cost) based on current and anticipated demand, customer preferences and market conditions. The provision for inventory shrink is estimated as a percentage of store sales for the period from the last date a physical inventory was performed to the end of the fiscal year. Such estimates are based on historical results and trends, and the shrink results from the last physical inventory. Physical inventories are taken at least annually for all stores and the distribution center throughout the year, and inventory records are adjusted accordingly.

The Company is generally entitled to return merchandise purchased from major music vendors for credit against other purchases from these vendors. Certain vendors reduce the credit with a merchandise return charge which varies depending on the type of merchandise being returned. Certain other vendors charge a handling fee based on units returned. The Company records all merchandise return charges in cost of sales.

Depreciation, Depletion, and Amortization [Policy Text Block]

Fixed Assets and Depreciation: Fixed assets are recorded at cost and depreciated or amortized over the estimated useful life of the asset using the straight-line method. The estimated useful lives are as follows:

Leasehold improvements	Lesser of estimated useful life of the asset or the lease term
Fixtures and equipment	3-7 years

Major improvements and betterments to existing facilities and equipment are capitalized. Expenditures for maintenance and repairs are expensed as incurred.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Impairment of Long-Lived Assets: Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the asset over its remaining useful life. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Fair value is generally measured based on discounted estimated future cash flows. Assets to be disposed of would be separately presented in the Consolidated Balance Sheets and reported at the lower of the carrying amount or fair value less disposition costs. For the purpose of the asset impairment test, the fye segment has multiple asset groupings - corporate and individual store level assets.

During fiscal 2017, the Company concluded, based on continued operating losses for the fye segment, that a triggering event had occurred, pursuant to FASB ASC 360, Property, Plant, and Equipment, requiring a test of long-lived assets for impairment at its retail stores in the fye segment. Long-lived assets at stores, the corporate home office and the Albany distribution center where impairment was determined to exist were written down to their estimated fair values as of the end of fiscal 2017 resulting in the recording of asset impairment charges of $29.1 million. Estimated fair values for long-lived assets at these locations, including store fixtures, equipment, and leasehold improvements were determined based on a measure of discounted future cash flows over the remaining lease terms at the respective locations. Future cash flows were estimated based on an individual store and corporate level plans and were discounted at a rate approximating the Company’s cost of capital. Management believes its assumptions were reasonable and consistently applied.

The Company did not recognize any other long-lived asset impairments during fiscal 2016 and fiscal 2015.

Losses for store closings in the ordinary course of business represent the write down of the net book value of abandoned fixtures and leasehold improvements. The loss on disposal of fixed assets related to store closings was $0.6 million, $1.1 million and $0.6 million in fiscal 2017, 2016 and 2015, respectively, and is included in selling, general and administrative (“SG&A”) expenses in the Consolidated Statements of Operations and loss on disposal of fixed assets in the Consolidated Statements of Cash Flows. Store closings usually occur at the expiration of the lease, at which time leasehold improvements, which constitute a majority of the abandoned assets, are fully depreciated.

Asset Retirement Obligation [Policy Text Block]

Conditional Asset Retirement Obligations: The Company records the fair value of an asset retirement obligation (“ARO”) as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and/or normal use of the asset. The Company also records a corresponding asset that is depreciated over the life of the asset. Subsequent to its initial measurement, the ARO is adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation.

Commitments and Contingencies, Policy [Policy Text Block]

Commitments and Contingencies: The Company is subject to legal proceedings and claims that have arisen in the ordinary course of its business and have not been finally adjudicated. Although there can be no assurance as to the ultimate disposition of these matters, it is management’s opinion, based upon the information available at this time, that the expected outcome of these matters, individually or in the aggregate, will not have a material adverse effect on the results of operations and financial condition of the Company.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition: The Company’s revenue is primarily from retail sales of merchandise inventory. Revenue is recognized at the point-of-sale. Internet sales for both segments, fye and etailz, are recognized as revenue upon shipment. Shipping and handling fee income from the fye segment’s internet operations is recognized as net sales. The Company records shipping and handling costs in cost of sales. Loyalty card revenue for the fye segment is amortized over the life of the membership period or upon cancelation of the membership. Net sales are recorded net of estimated amounts for sales returns and other allowances, and net of applicable sales taxes.

Total annual membership fees collected in advance and recognized in revenue, net of estimated refunds, were as follows: the unearned revenue as of January 28, 2017, January 30, 2016, and January 31, 2015, was $7.0 million, $6.5 million, and $6.3 million, respectively. The amount of cash received from customers during fiscal 2017, 2016, and 2015, was $16.9 million, $16.8 million, and $15.8 million, respectively. The amount of revenue recognized in earnings was $17.9 million, $16.3 million, and $15.6 million in fiscal 2017, 2016, and 2015, respectively. The unearned revenue as of February 3, 2018 was $6.1 million.

Cost of Sales, Policy [Policy Text Block]

Cost of Sales: In addition to the cost of product, the Company includes in cost of sales those costs associated with purchasing, receiving, shipping, online marketplace fulfillment fees, inspecting and warehousing product, and depreciation related to distribution operations. Also included are costs associated with the return of product to vendors. Cost of sales further includes the cost of inventory shrink losses and obsolescence and the benefit of vendor allowances and discounts.

Selling, General and Administrative Expenses, Policy [Policy Text Block]

Selling, General and Administrative (“SG&A”) Expenses: Included in SG&A expenses are payroll and related costs, store operating costs, occupancy charges, Amazon fees, professional and service fees, general operating and overhead expenses and depreciation charges (excluding those related to distribution operations). Selling, general and administrative expenses also include fixed asset write offs associated with store closures, if any, and miscellaneous income and expense items, other than interest. The Company recorded miscellaneous income items for fiscal 2017, 2016, and 2015 in the amount of $0.4 million, $0.4 million, and $3.6 million, respectively. Included in fiscal 2015 miscellaneous income was a one-time reimbursement of expenses incurred in prior years, related to a legal settlement of $1.4 million.

Advertising Costs, Policy [Policy Text Block]

Advertising Costs and Vendor Allowances: The fye segment often receives allowances from its vendors to fund in-store displays, print and radio advertising, and other promotional events. Vendor advertising allowances which exceed specific, incremental and identifiable costs incurred in relation to the advertising and promotions offered by the Company to its vendors are classified as a reduction in the purchase price of merchandise inventory. Accordingly, advertising and sales promotion costs are charged to operations, offset by direct vendor reimbursements, as incurred. Total advertising expense, excluding vendor allowances, was $3.1 million, $3.2 million, and $2.9 million in fiscal 2017, 2016, and 2015, respectively. In the aggregate, vendor allowances supporting the fye segment’s advertising and promotion are included as a reduction of SG&A expenses, and reimbursements of such costs were $3.1 million, $3.2 million, and $2.9 million in fiscal 2017, 2016, and 2015, respectively. Advertising costs for the etailz segment primarily consist of Amazon marketing expenses which were $1.2 million in fiscal 2017.

Lessee, Leases [Policy Text Block]

Lease Accounting: The Company’s calculation of straight-line rent expense includes the impact of escalating rents for the lease period and includes any period during which the Company is not obligated to pay rent while the store is being constructed (“rent holiday”). The Company accounts for step rent provisions, escalation clauses and other lease concessions by recognizing these amounts on a straight line basis over the initial lease term. The Company capitalizes leasehold improvements funded by tenant improvement allowances, depreciating them over the term of the related leases. The tenant improvement allowances are recorded as deferred rent within other long-term liabilities in the Consolidated Balance Sheets and are amortized as a reduction in rent expense over the life of the related leases.

Store Closing Costs [Policy Text Block]

Store Closing Costs: Management periodically considers the closing of underperforming stores. In the event of a store closing, reserves are established at the time a liability is incurred for the present value of any remaining lease obligations, net of estimated sublease income, and other exit costs. Store closings are not considered discontinued operations and as such, closings do not represent a significant change on the Company’s operations and financial results.

Revenue Recognition, Gift Cards [Policy Text Block] (Deprecated 2017-01-31)

Gift Cards: The Company offers gift cards for sale. A deferred revenue account, which is included in deferred revenue in the Consolidated Balance Sheets, is established for gift cards issued. The deferred revenue balance related to gift cards was $1.7 million, $2.0 million and $2.3 million at the end of fiscal 2017, 2016 and 2015, respectively. When gift cards are redeemed at the store level, revenue is recorded and the related liability is reduced. Breakage is estimated based on the historical relationship of the redemption of gift cards redeemed to gift cards sold, over a certain period of time. The Company has the ability to reasonably and reliably estimate gift card liability based on historical experience with redemption rates associated with a large volume of homogeneous transactions, from a period of more than ten years. The Company’s estimate is not susceptible to significant external factors and the circumstances around purchases and redemptions have not changed significantly over time. The Company recorded breakage on its gift cards for fiscal 2017, 2016 and 2015 in the amount of $0.4 million, $0.4 million and $0.1 million, respectively. Gift card breakage is recorded as a reduction of SG&A expenses.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Goodwill and Intangible Assets: Our goodwill results from our acquisition of etailz and represents the excess purchase price over the net identifiable assets acquired. All of our goodwill is associated with etailz, a separate reporting unit, and there is no goodwill associated with our other reporting unit, fye. Goodwill is not amortized and we are required to evaluate our goodwill for impairment at least annually or whenever indicators of impairment are present. Our annual test is completed during the fourth fiscal quarter, and interim tests are conducted when circumstances indicate the carrying value of the goodwill or other intangible assets may not be recoverable. Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. It is possible that these judgments and estimates could change in future periods. The determination of the fair value of intangible assets and liabilities acquired in a business acquisition, including the Company’s acquisition of etailz in 2016, is subject to many estimates and assumptions. Our identifiable intangible assets that resulted from our acquisition of etailz consist of vendor relationships, technology and tradenames. We review amortizable intangible asset groups for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable.

Income Tax, Policy [Policy Text Block]

Income Taxes: Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are subject to valuation allowances based upon management’s estimates of realizability.

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. It is the Company’s practice to recognize interest and penalties related to income tax matters in income tax expense (benefit) in the Consolidated Statements of Operations.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-Based Compensation: Stock-based compensation represents the cost related to stock-based awards granted to employees and directors. The Company measures stock-based compensation cost at grant date, based on the estimated fair value of the award, and recognizes the cost as expense on a straight-line basis (net of estimated forfeitures) over the option’s requisite service period. The Company recognizes compensation expense based on estimated grant date fair value using the Black-Scholes option-pricing model. Tax benefits, if any, resulting from tax deductions in excess of the compensation cost recognized for those options are to be classified and reported as both an operating cash outflow and financing cash inflow.

Comprehensive Income, Policy [Policy Text Block]

Comprehensive Income (Loss):Comprehensive income (loss) consists of net income (loss) and a pension actuarial income (loss) adjustment that is recognized in other comprehensive income (loss) (see Note 10).

Earnings Per Share, Policy [Policy Text Block]

Income (Loss) Per Share: Basic and diluted income (loss) per share is calculated by dividing net income (loss) by the weighted average common shares outstanding for the period. Diluted income (loss) per share gives effect to all dilutive potential shares outstanding resulting from employee stock options during that period. The dilutive effect of employee stock options did not have any impact on basic income per share in fiscal 2016 and 2015, when net income was recorded.

The following is a reconciliation of the basic weighted average number of shares outstanding to the diluted weighted average number of shares outstanding:

	2017		2016		2015
	(in thousands)
Weighted average common shares outstanding – basic		36,191		32,162		31,167
Dilutive effect of employee stock options		-		159		156
Weighted average common shares outstanding–diluted		36,191		32,321		31,323
Anti-dilutive stock options		2,586		2,175		1,744

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments: The carrying amounts reported in the Consolidated Balance Sheets for cash and cash equivalents, accounts receivable, accounts payable and other current liabilities approximate fair value because of the immediate or short-term maturity of these financial instruments. The carrying value of life insurance policies included in other assets approximates fair value based on estimates received from insurance companies.

Segment Reporting, Policy [Policy Text Block]

Segment Information: The Company operates in two reportable segments: fye and etailz. Prior to the acquisition of etailz in October 2016, the Company operated as one segment. Operating earnings (loss) by operating segment, is defined as income (loss) from operations, net interest expense, other income, and income taxes. Results for etailz are included in the consolidated results for all periods presented for fiscal 2017. For periods presented for fiscal 2016, results for etailz are included in consolidated results from October 17, 2016 through January 28, 2017. Significant financial statement captions by reportable segment in U.S. dollars were as follows:

($ in thousands)	Fiscal Year Ended February 3, 2018		Fiscal Year Ended January 28, 2017
Total Revenue
fye	$	268,397	$	313,211
etailz		174,459		40,259
Total Company	$	442,856	$	353,470
Gross Profit
fye	$	104,254	$	124,735
etailz		39,589		9,924
Total Company	$	143,843	$	134,659
Loss From Operations
fye	$	(49,261)	$	(1,932)
etailz		(2,140)		(1,936)
Total Company	$	(51,401)	$	(3,868)
Merchandise Inventory
fye	$	86,217	$	109,612
etailz		22,895		16,392
Total Company	$	109,112	$	126,004
Total Assets
fye	$	153,050	$	215,466
etailz		94,856		92,344
Total Company	$	247,906	$	307,810
Other Long Term Liabilities
fye	$	27,777	$	38,792
etailz		1,354		349
Total Company	$	29,131	$	39,141
Capital Expenditures
fye	$	7,342	$	24,418
etailz		1,065		254
Total Company	$	8,407	$	24,672