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Related Party Transactions
3 Months Ended
May 01, 2020
Related Party Transactions [Abstract]  
Related Party Transactions

NOTE 10. RELATED PARTY TRANSACTIONS

 

According to statements on Schedule 13D filed with the SEC by ESL, ESL beneficially owns 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.

 

On February 11, 2019 Transform Holdco acquired from Sears Holdings substantially all of the go-forward retail footprint, and other assets and component businesses of Sears Holdings as a going concern. The Company believes that ESL holds a significant portion of the membership interest of Transform Holdco and therefore considers that entity to be a related party as well.

 

Sourcing

 

The Company is party to a contract 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.  Total expense from these services in First Quarter 2020 was $1.4 million compared to $1.7 million in First Quarter 2019. These amounts are capitalized into inventory and are expensed through cost of goods sold over the course of inventory turns and included in Cost of sales in the Condensed Consolidated Statements of Operations.

 

The Company’s contract for these services expires on June 30, 2020 and services rendered to the Company under this contract ceased on April 20, 2020.