RELATED PARTY TRANSACTIONS

According to statements on form Schedule 13D filed with the SEC by ESL, ESL beneficially owned significant portions of both the Company's and Sears Holdings Corporation's outstanding shares of common stock. Therefore, Sears Holdings Corporation, the Company's former parent company, is considered a related party.

In connection with the Separation, the Company entered into various agreements with Sears Holdings which, among other things, (i) govern specified aspects of the Company's relationship following the Separation, especially with regards to the Lands’ End Shops at Sears, and (ii) establish terms pursuant to which subsidiaries of Sears Holdings Corporation are providing services to us.

See further descriptions of the transactions in the Company's 2015 Annual Report on Form 10-K. The components of the transactions between the Company and Sears Holdings, which exclude pass-through payments to third parties, are as follows:

Lands’ End Shops at Sears

Related party costs charged by Sears Holdings to the Company related to Lands’ End Shops at Sears are as follows:



	13 Weeks Ended				26 Weeks Ended
(in thousands, except for number of stores)	July 29, 2016		July 31, 2015		July 29, 2016		July 31, 2015
Rent, CAM and occupancy costs	$	6,237	$	6,532	$	12,543	$	12,882
Retail services, store labor	6,084		6,676		12,029		13,277
Financial services and payment processing	671		627		1,390		1,250
Supply chain costs	236		272		551		549
Total expenses	$	13,228	$	14,107	$	26,513	$	27,958
Number of Lands’ End Shops at Sears at period end	224		229		224		229

General Corporate Services

Related party costs charged by Sears Holdings to the Company for general corporate services are as follows:



	13 Weeks Ended				26 Weeks Ended
(in thousands)	July 29, 2016		July 31, 2015		July 29, 2016		July 31, 2015
Sourcing	$	1,666	$	2,454	$	3,038	$	4,038
Shop Your Way	612		730		1,074		1,255
Shared services	48		131		95		281
Total expenses	$	2,326	$	3,315	$	4,207	$	5,574

Sourcing

The Company contracts with a subsidiary of Sears Holdings to provide agreed upon buying agency services, on a non-exclusive basis, in foreign territories from where the Company purchases merchandise. These services, primarily based upon quantities purchased, include quality-control functions, regulatory compliance, product claims management and new vendor selection and setup assistance. These amounts are included in Cost of sales in the Consolidated and Combined Statements of Comprehensive Operations. During Second Quarter 2016 the Company entered into a new buying agency services agreement with a subsidiary of Sears Holding and terminated the agreement that was entered into at the time of the Separation. The new agreement provides for a higher commission rate and a higher annual commission minimum, as well as enhanced sourcing services, including for product development, costing analyses, vendor communications, vendor strategy and quality assurance.

Use of Intellectual Property or Services

Related party revenue and costs charged by the Company to and from Sears Holdings for the use of intellectual property or services is as follows:



	13 Weeks Ended						26 Weeks Ended
(in thousands)	July 29, 2016			July 31, 2015			July 29, 2016			July 31, 2015
Call center services	$	521		$	455		$	967		$	669
Lands' End business outfitters revenue	426			317			974			720
Credit card revenue	266			281			511			568
Royalty income	94			103			126			124
Gift card (expense)	(6		)	(7		)	(13		)	(11		)
Total income	$	1,301		$	1,149		$	2,565		$	2,070

Call Center Services

The Company has entered into a contract with Sears Holdings Management Corporation, a subsidiary of Sears Holdings Corporation, to provide call center services in support of Sears Holdings’ SYW member loyalty program. This income is net of agreed upon costs directly attributable to the Company providing these services. The income is included in Net revenue and costs are included in Selling and administrative expenses in the Condensed Consolidated Statements of Operations. Total call center service income included in Net revenue was $1.9 million, $1.7 million, $3.8 million and $3.1 million for the Second Quarter 2016, Second Quarter 2015, Year to Date 2016 and Year to Date 2015, respectively.

Additional Balance Sheet Information

At July 29, 2016, July 31, 2015 and January 29, 2016 the Company included $3.7 million, $4.2 million and $3.9 million in Accounts receivable, net, respectively, and $3.2 million, $9.5 million and $2.7 million in Accounts payable, respectively, in the Condensed Consolidated Balance Sheets to reflect amounts due from and owed to Sears Holdings.

At July 29, 2016, July 31, 2015 and January 29, 2016 a $14.2 million, $14.6 million and $13.7 million receivable, respectively, was recorded by the Company in Other assets in the Condensed Consolidated Balance Sheets to reflect the indemnification by Sears Holdings Corporation of the pre-Separation UTBs (including penalties and interest) for which Sears Holdings Corporation is responsible under the Tax Sharing Agreement.