Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Nov. 03, 2018 | Dec. 06, 2018 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Nov. 3, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 | |
Entity Registrant Name | Sears Hometown & Outlet Stores, Inc. | |
Entity Central Index Key | 1,548,309 | |
Current Fiscal Year End Date | --02-02 | |
Entity Filer Category | Non-accelerated Filer | |
Smaller Reporting Company | true | |
Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 22,702,132 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Nov. 03, 2018 | Oct. 28, 2017 | Nov. 03, 2018 | Oct. 28, 2017 | |
Income Statement [Abstract] | ||||
NET SALES | $ 339,115 | $ 385,959 | $ 1,151,428 | $ 1,324,177 |
COSTS AND EXPENSES | ||||
Cost of sales and occupancy | 254,284 | 299,271 | 887,167 | 1,051,386 |
Selling and administrative | 85,376 | 93,101 | 269,860 | 319,190 |
Depreciation and amortization | 2,399 | 3,002 | 8,786 | 9,910 |
Gain on sale of assets | (1,358) | 0 | (1,358) | 0 |
Total costs and expenses | 340,701 | 395,374 | 1,164,455 | 1,380,486 |
Operating loss | (1,586) | (9,415) | (13,027) | (56,309) |
Interest expense | (3,601) | (2,149) | (10,657) | (5,614) |
Other income | 93 | 194 | 349 | 744 |
Loss before income taxes | (5,094) | (11,370) | (23,335) | (61,179) |
Income tax benefit (expense) | 594 | 437 | 140 | (634) |
NET LOSS | $ (4,500) | $ (10,933) | $ (23,195) | $ (61,813) |
NET LOSS PER COMMON SHARE ATTRIBUTABLE TO STOCKHOLDERS | ||||
Basic (in dollars per share) | $ (0.20) | $ (0.48) | $ (1.02) | $ (2.72) |
Diluted (in dollars per share) | $ (0.20) | $ (0.48) | $ (1.02) | $ (2.72) |
Basic weighted average common shares outstanding (in shares) | 22,702 | 22,702 | 22,702 | 22,702 |
Diluted weighted average common shares outstanding (in shares) | 22,702 | 22,702 | 22,702 | 22,702 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Nov. 03, 2018 | Feb. 03, 2018 | Oct. 28, 2017 |
CURRENT ASSETS | |||
Cash and cash equivalents | $ 43,150 | $ 10,402 | $ 13,994 |
Accounts and franchisee receivables, net | 9,663 | 14,672 | 13,151 |
Merchandise inventories | 297,606 | 336,294 | 354,825 |
Prepaid expenses and other current assets | 7,749 | 7,131 | 9,777 |
Total current assets | 358,168 | 368,499 | 391,747 |
PROPERTY AND EQUIPMENT, net | 31,149 | 36,049 | 39,284 |
OTHER ASSETS, net | 3,574 | 8,140 | 9,767 |
TOTAL ASSETS | 392,891 | 412,688 | 440,798 |
CURRENT LIABILITIES | |||
Short-term borrowings | 107,000 | 137,900 | 119,200 |
Term Loan, net | 38,847 | 0 | 0 |
Payable to Sears Holdings Corporation | 21,706 | 28,082 | 26,114 |
Accounts payable | 15,553 | 15,741 | 23,613 |
Other current liabilities | 57,076 | 53,142 | 60,499 |
Total current liabilities | 240,182 | 234,865 | 229,426 |
OTHER LONG-TERM LIABILITIES | 2,484 | 2,284 | 2,589 |
TOTAL LIABILITIES | 242,666 | 237,149 | 232,015 |
COMMITMENTS AND CONTINGENCIES (Note 10) | |||
STOCKHOLDERS' EQUITY | |||
TOTAL STOCKHOLDERS' EQUITY | 150,225 | 175,539 | 208,783 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 392,891 | $ 412,688 | $ 440,798 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Nov. 03, 2018 | Oct. 28, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (23,195) | $ (61,813) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 8,786 | 9,910 |
Gain on sale of assets | (1,358) | 0 |
Amortization of debt issuance costs | 710 | 0 |
Provision for losses on franchisee receivables | 2,911 | 5,820 |
Share-based compensation | 0 | (103) |
Change in operating assets and liabilities: | ||
Accounts and franchisee receivables | 2,098 | (1,124) |
Merchandise inventories | 38,688 | 18,990 |
Payable to Sears Holdings Corporation | (6,376) | (54,610) |
Accounts payable | (188) | 5,760 |
Store closing accrual | (3,526) | (2,827) |
Other operating assets and liabilities, net | 9,271 | (5,559) |
Net cash provided by (used in) operating activities | 27,821 | (85,556) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Proceeds from sale of assets | 2,837 | 0 |
Purchases of property and equipment | (5,105) | (7,037) |
Net cash used in investing activities | (2,268) | (7,037) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Net short-term (payments) borrowings on senior ABL facility | (30,900) | 92,400 |
Net (payments) borrowings of capital lease obligations | (42) | 83 |
Proceeds from term loan agreement | 40,000 | 0 |
Debt issuance costs | (1,863) | 0 |
Net cash provided by financing activities | 7,195 | 92,483 |
NET CHANGE IN CASH AND CASH EQUIVALENTS | 32,748 | (110) |
CASH AND CASH EQUIVALENTS—Beginning of period | 10,402 | 14,104 |
CASH AND CASH EQUIVALENTS—End of period | 43,150 | 13,994 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||
Cash paid for interest | 8,156 | 5,781 |
Cash paid for income taxes | $ 1,135 | $ 757 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands | Total | Common Stock | Capital in Excess of Par Value | Accumulated Deficit |
Beginning balance (in shares) at Jan. 28, 2017 | 22,716 | |||
Beginning balance at Jan. 28, 2017 | $ 270,699 | $ 227 | $ 555,481 | $ (285,009) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Net loss | (61,813) | (61,813) | ||
Share-based compensation (in shares) | (14) | |||
Share-based compensation | (103) | (103) | ||
Ending balance (in shares) at Oct. 28, 2017 | 22,702 | |||
Ending balance at Oct. 28, 2017 | 208,783 | $ 227 | 555,378 | (346,822) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Cumulative effect adjustment from adoption of new accounting standards | (2,119) | (2,119) | ||
Beginning balance (in shares) at Feb. 03, 2018 | 22,702 | |||
Beginning balance at Feb. 03, 2018 | 175,539 | $ 227 | 555,378 | (380,066) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Net loss | (23,195) | (23,195) | ||
Ending balance (in shares) at Nov. 03, 2018 | 22,702 | |||
Ending balance at Nov. 03, 2018 | $ 150,225 | $ 227 | $ 555,378 | $ (405,380) |
Background and Basis of Present
Background and Basis of Presentation | 9 Months Ended |
Nov. 03, 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 November 3, 2018 the Company or its dealers and franchisees operated a total of 761 stores across 49 states, 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 and 39 weeks ended November 3, 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 third fiscal-quarter end is the Saturday closest to October 31. For 2018 and 2017, our third fiscal quarters ended as follows: Fiscal Year Third Quarter Ended Weeks 2018 November 3, 2018 13 2017 October 28, 2017 13 Our fiscal year end is the Saturday closest to January 31. Our 2018 fiscal year will end February 2, 2019. Unless otherwise stated, references to specific years and quarters in these notes are to fiscal years and fiscal quarters, respectively. On October 15, 2018 and thereafter Sears Holdings and many of its subsidiaries filed voluntary petitions in the United States Bankruptcy Court for the Southern District of New York seeking relief under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code"). The Company, which is not a subsidiary of Sears Holdings, is not included in the bankruptcy petitions filed by Sears Holdings and its subsidiaries, and neither the Company nor its subsidiaries have filed a bankruptcy petition. The Company has significant business relationships with Sears Holdings and its affiliates that are Chapter 11 debtors (together, the "Sears Holdings Debtors") through various agreements among the Company, Sears Holdings and, in some circumstances, subsidiaries of Sears Holdings (as amended, the “SHO-Sears Holdings Agreements”). Generally, debtors in Chapter 11 cases, like the Sears Holdings Debtors, have the right, subject to bankruptcy court approval, to reject contracts that are deemed to be "executory contracts" within the meaning of the Bankruptcy Code. Generally, the effect of rejection of an executory contract is that the debtor is relieved of its future performance obligations and any damages resulting from the rejection would be treated as prepetition unsecured claims. Some or all of the SHO-Sears Holdings Agreements may constitute executory contracts that could be subject to rejection in the Chapter 11 cases of the Sears Holdings Debtors (the "Sears Holdings Bankruptcy Proceedings"). None of the Sears Holdings Debtors has disclosed whether it will seek to reject the SHO-Sears Holdings Agreements. Sears Holdings has announced that it is seeking in the Sears Holdings Bankruptcy Proceedings to liquidate its assets through the sale of several hundred stores, together with other assets, on a going concern basis, and that it is seeking bids with the goal of completing a going concern sale in January 2019. The Official Committee of Unsecured Creditors appointed in the Sears Holdings Bankruptcy Proceedings (the "Sears Holdings UCC") objected to the entry of an order to approve bidding procedures for a going concern sale on the basis that the Sears Holdings UCC believes that the sale as a going concern, in contrast to a complete asset liquidation, might not maximize creditor recoveries. Sears Holdings has obtained Bankruptcy Court approval for the bid procedures, which contemplate going-concern and liquidation-basis bids. The Company believes that if the Sears Holdings Debtors were to liquidate on a basis other than as a going concern, there is an increased likelihood that the Sears Holdings Debtors would seek to reject some or all of the SHO-Sears Holdings Agreements. If Sears Holdings were to cease performing under any of the SHO-Sears Holdings Agreements, as a result of the rejection in the Sears Holdings Bankruptcy Proceedings or otherwise, the Company could lose access to services performed by Sears Holdings (including merchandise supply services) and rights granted to the Company under the SHO-Sears Holdings Agreements that are critical to the operation of the Company’s businesses. In such a situation, there could be a significant risk (1) to the Company's ability to conduct its businesses in the ordinary course (especially the Hometown businesses, given their dependence on purchasing KENMORE ® and CRAFTSMAN ® branded merchandise and other merchandise from Sears Holdings under the SHO-Sears Holdings Agreements), and (2) that the Company's results of operations, financial condition, liquidity, and cash flows could be materially and adversely affected. A termination of the SHO-Sears Holdings Agreements could require the Company to, among other things, find different service and product providers. Even if the Company were able to find replacement products and services, these products and services might not be of the same type or quality as those which are currently provided by Sears Holdings, and the Company's access to Kenmore and Craftsman branded merchandise could become significantly more expensive or cease altogether. If the Company were forced to enter into new agreements for replacement products and services, the new agreements could include terms and conditions that were less favorable to the Company than the terms and conditions of the SHO-Sears Holdings Agreements, including products and services that are lower in quality and value and more expensive. The Company has developed plans and alternatives that are intended to mitigate many of the adverse consequences to the Company if Sears Holdings were to cease performing critical services (including merchandise supply services) for the Company. These plans and alternatives include but are not limited to (1) taking actions to reduce or eliminate dependence on Sears Holdings’s IT systems by completing the Company’s IT transformation project, (2) contracting with third-party logistics providers to replace services currently provided by Sears Holdings, and (3) using direct purchasing agreements that are in place with a significant portion of the Company’s merchandise vendors to provide to the Company critical categories of merchandise currently supplied by Sears Holdings. The Company is party to 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 $170 million (the “Senior ABL Facility”). The Company is also a party to a Term Loan Agreement with Gordon Brothers Finance Company, as agent, lead arranger, and sole bookrunner, and Gordon Brothers Finance Company, LLC, as lender (the “Term Loan”). See Note 8 - Financing Arrangements. The Senior ABL Facility will mature on the earliest of the following dates: (1) February 29, 2020; (2) six months prior to the expiration of specified "Separation Agreements" (which term is defined in the Senior ABL Facility to include specified SHO-Sears Holdings Agreements) unless the Separation Agreements are extended to a date later than February 29, 2020 or are terminated on a basis reasonably satisfactory to the Senior ABL lenders; and (3) acceleration of the maturity date following an event of default in accordance with 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. The Senior ABL Facility and the Term Loan Agreement each provides that the rejection by Sears Holdings of "the Separation Agreements" is an event of default thereunder, which could result in all amounts outstanding to become immediately due and payable. The Company has proposed to Sears Holdings that the duration of the Separation Agreements that expire on February 1, 2020 be extended, which proposal Sears Holdings has not yet accepted. The Company believes that the Senior ABL Facility lenders, with respect to the Senior ABL Facility, and the Term Loan lenders, with respect to the Term Loan, could assert that the Senior ABL Facility and the Term Loan would mature on August 1, 2019. The Company will seek to refinance the Senior ABL Facility and Term Loan prior to August 1, 2019, which efforts the Company believes will be augmented by the Company’s improved adjusted EBITDA performance over the last 18 months as well as the value of the Company’s inventory and other assets that would be available as collateral to lenders. The Company has had initial discussions with the administrative agent for the Senior ABL Facility about its extension or refinancing, and the Company expects to continue such discussions and to engage in discussions with the Term Loan lender, with a goal of completing a replacement credit facility or facilities for the Senior ABL Facility and the Term Loan during the first quarter of fiscal 2019. The Company is subject to Accounting Standards Update 2014-15, Presentation of Financial Statements - Going Concern, codified as Accounting Standards Codification (ASC) 205-40 (the "Accounting Evaluation Requirements"), which requires management to evaluate an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or, in certain cases, available to be issued). ASC 205-40 states that conditions or events that raise "substantial doubt" about an entity’s ability to continue as a going concern typically relate to the entity’s ability to meet its obligations as they become due, generally within one year after the date that the financial statements are issued. The evaluation of whether substantial doubt is raised does not take into account the potential mitigating effect of management’s plans that have not been fully implemented. If conditions or events indicate that substantial doubt is raised, management is required to evaluate whether its plans that are intended to mitigate those conditions and events will alleviate substantial doubt. ASC 205-40 specifies that management may consider its plans only when it is "probable" that those plans will be effectively implemented and that the plans will mitigate the relevant conditions and events within one year after the financial statements are issued. This probability determination is based on the specific facts and circumstances of the entity and involves significant judgment. While we believe that we will be able to refinance the Senior ABL Facility and the Term Loan, and that the refinancing would satisfy our liquidity needs through the end of our 2019 fiscal year, such refinancing has not occurred and cannot be considered "probable" (as defined by the Accounting Evaluation Requirements) as of the date of inclusion of these financial statements in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 3, 2018. The Company will continue to seek to refinance the Senior ABL Facility and the Term Loan. Because we cannot at this time conclude that any proposed refinancing is "probable" of occurring under the Accounting Evaluation Requirements, and due to the uncertainty of the effect on our businesses (especially with respect to our Hometown businesses) and financial performance that could occur if Sears Holdings were to cease performing critical services for the Company, "substantial doubt" (as defined by the Accounting Evaluation Requirements) is deemed to exist about our ability to continue as a going concern. Reclassifications Certain amounts have been reclassified in order to conform to the current-period presentation. 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 $16.6 million and $16.4 million at November 3, 2018 and February 3, 2018 , respectively. The change in deferred revenue represents additional revenue deferred during the first three quarters 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 weekly by Sears Holdings for gift cards tendered. Cost of Sales and Occupancy Cost of sales and occupancy is 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 of products branded with one of the KENMORE ® , CRAFTSMAN ® , and DIEHARD ® marks (the "KCD Marks"), customer shipping and handling costs, vendor allowances, markdowns, and physical inventory losses. The KCD Marks are owned by, or licensed to, 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. 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 November 3, 2018 and February 3, 2018 , respectively. Refer to the Recently Adopted Accounting Pronouncements discussion below. 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 November 3, 2018 . Recently Issued Accounting Pronouncements Recently issued accounting pronouncements that are not yet effective and that we have not discussed in the 2017 10-K or below are either inapplicable to us or, if applicable, we do not expect that they will have a material impact on our consolidated results of operations, consolidated financial condition, or consolidated cash flows. ASU 2016-02 "Leases (Topic 842)" In February 2016, the FASB issued Accounting Standards Update ("ASU") 2016-02, "Leases (Topic 842)". This ASU is a comprehensive new accounting standard with respect to leases that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. It requires companies to record assets and liabilities 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. In July 2018, the FASB issued ASU 2018-11, "Leases (Topic 842): Targeted Improvements", which provides an optional transition method to apply ASU 2016-02 in the period of adoption and recognize a cumulative-effect opening transition adjustment to retained earnings, without applying the standard to comparative periods. This ASU also provides lessors with a practical expedient to account for lease and associated non-lease components as a single component when certain criteria are met. 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; however, we will adopt the standard in the first quarter of fiscal 2019. We have upgraded our existing third-party leasing software and identified business processes, systems and controls to support adoption of the new standard. We are in the process of evaluating the impact that the new standard will have on the condensed consolidated financial statements. While we are unable to quantify the impact at this time, we expect the adoption of the new standard to result in a material increase in the assets and liabilities in the condensed consolidated balance sheets. At this time, we do not expect the adoption of ASU 2016-02 to have a material impact on our condensed consolidated statements of operations as the majority of our leases will remain operating in nature. As such, expense recognition will be similar to previously required straight-line expense treatment. 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: • 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 prepaid expenses and other current assets), (ii) a return liability for the amount of expected returns (recorded as an increase to other current liabilities) and (iii) deferred revenue for commissions earned on extended protection agreements (recorded as an increase to other current liabilities). We have made accounting policy elections to (1) 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.) and (2) 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. The effect of the adoption of ASU No. 2014-09 on our consolidated balance sheet as of November 3, 2018 was as follows: Thousands As Reported ASU 2014-09 Effect Excluding ASU 2014-09 Effect Prepaid expenses and other current assets $ 7,749 $ 1,226 $ 6,523 Other current liabilities 57,076 3,345 53,731 Accumulated deficit (405,380 ) (2,119 ) (403,261 ) |
Net Sales
Net Sales | 9 Months Ended |
Nov. 03, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Net Sales | NET SALES During the 13 and 39 weeks ended November 3, 2018 , approximately 98% of our revenues were generated in the United States. Net sales of merchandise and services for the 13 and 39 weeks ended November 3, 2018 were as follows: Thousands 13 Weeks Ended November 3, 2018 39 Weeks Ended November 3, 2018 Merchandise $ 312,441 $ 1,064,057 Services 20,155 66,934 Other 6,519 20,437 Net sales $ 339,115 $ 1,151,428 |
Accounts and Franchisee Receiva
Accounts and Franchisee Receivables and Other Assets | 9 Months Ended |
Nov. 03, 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: Thousands November 3, 2018 October 28, 2017 February 3, 2018 Short-term franchisee receivables $ 591 $ 1,584 $ 1,205 Miscellaneous receivables 9,663 12,593 14,314 Long-term franchisee receivables 1,683 10,829 7,962 Other assets 3,574 5,057 5,106 Allowance for losses on short-term franchisee receivables (1) (591 ) (1,027 ) (847 ) Allowance for losses on long-term franchisee receivables (1) (1,683 ) (6,118 ) (4,928 ) Net accounts and franchisee receivables and other assets $ 13,237 $ 22,918 $ 22,812 (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. The expense associated with the allowance for losses on franchisee receivables is recognized 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. As of November 3, 2018, all franchisee receivables have been fully reserved for losses. |
Allowance for Losses on Franchi
Allowance for Losses on Franchisee Receivables | 9 Months Ended |
Nov. 03, 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: 39 Weeks Ended Thousands November 3, 2018 October 28, 2017 Allowance for losses on franchisee receivables, beginning of period $ 5,775 $ 8,242 Provisions during the period 2,911 5,820 Write off of franchisee receivables (6,412 ) (6,917 ) Allowance for losses on franchisee receivables, end of period $ 2,274 $ 7,145 On November 2, 2018, the Company and a franchisee entered into a transaction consisting of agreements that terminated all of the franchisee's franchise agreements and sublease arrangements for 21 franchised locations. The agreements provided that the franchisee transferred ownership of all assets, management of stores, and certain rights to property leases. The assets the Company purchased included all store furniture, fixtures, and equipment. As of the transaction date, the franchisee was the obligor on promissory notes to the Company with a total carrying value, net of reserves, of $2.7 million . As part of the transaction, the Company waived the remaining unpaid principal on these promissory notes. During the 39 weeks ended November 3, 2018, the Company recognized a loss of $2.7 million on the transaction. On June 7, 2017, the Company and a franchisee entered into a transaction consisting of agreements that terminated all of the franchisee's franchise agreements and sublease arrangements for 14 franchised locations (except with respect to one location as to which the Company would either assume the lease or enter into a lease directly with the landlord). The agreements provided that the franchisee transferred ownership of all assets, management of stores, and certain rights to property leases (in one instance pursuant to an Occupancy Agreement). The assets the Company purchased included all store furniture, fixtures, and equipment. As of the transaction date, the franchisee was the obligor on promissory notes to the Company with a total carrying value, net of reserves, of $5.5 million . As part of the transaction, the Company waived the remaining unpaid principal on these promissory notes and received a new promissory note from the franchisee in the amount of $1.5 million , which is payable in installments through December 11, 2022. During the 39 weeks ended October 28, 2017, the Company recognized a loss of $5.5 million on the transaction. |
Other Current and Long-Term Lia
Other Current and Long-Term Liabilities | 9 Months Ended |
Nov. 03, 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: Thousands November 3, 2018 October 28, 2017 February 3, 2018 Customer deposits $ 16,675 $ 17,761 $ 16,655 Sales and other taxes 7,148 8,782 9,221 Accrued expenses 25,154 23,191 17,755 Payroll and related items 9,454 8,522 7,140 Store closing and severance costs 1,129 4,832 4,655 Other current and long-term liabilities $ 59,560 $ 63,088 $ 55,426 |
Income Taxes
Income Taxes | 9 Months Ended |
Nov. 03, 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 taxes are 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 and 39 weeks ended November 3, 2018 and October 28, 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 ("IRS") has commenced an audit of the Company's federal income tax return for the fiscal year ended January 30, 2016. SHO was also a part of Sears Holdings's combined state returns for the fiscal 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 two separate return states for the years ended February 1, 2014 through January 28, 2017. 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 foreign tax credits 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 Staff Accounting Bulletin 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 finalize 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. During the third quarter the long term receivable was increased by $0.2 million due to an IRS adjustment and related payment of additional alternative minimum tax associated with an ongoing IRS exam. 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 fiscal 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 second 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 Tr
Related Party Agreements and Transactions | 9 Months Ended |
Nov. 03, 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's shares of common stock. ESL also has disclosed that it is a significant Sears Holdings creditor. The SHO-Sears Holdings Agreements, 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. On October 15, 2018 Sears Holdings and many of its subsidiaries filed voluntary petitions in the United States Bankruptcy Court for the Southern District of New York seeking relief under Chapter 11 of the Bankruptcy Code. Sears Holdings has the right, subject to Bankruptcy Court approval, to reject the SHO-Sears Holdings Agreements to the extent they are determined to be "executory contracts" within the meaning of the Bankruptcy Code. If the SHO-Sears Holdings Agreements were rejected as part of Sears Holdings's reorganization or its liquidation (especially if the liquidation were effected other than through a going concern sale), there is a significant risk that the Company's ability to conduct its businesses (especially the Hometown businesses, given their dependence on purchasing Kenmore and Craftsman branded merchandise and other merchandise from Sears Holdings under the SHO-Sears Holdings Agreements) and the Company's results of operations, financial condition, liquidity, and cash flows could be materially and adversely affected. See Note 1 to these Condensed Consolidated Financial Statements. 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. • We pay royalties related to our sale of products branded with the KCD Marks. The royalty rates vary but none exceeds 6% . • We pay fees for participation in Sears Holdings's 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. The following table summarizes the results of the transactions with Sears Holdings reflected in the Company’s Condensed Consolidated Financial Statements: 13 Weeks Ended 39 Weeks Ended Thousands November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017 Net Commissions from Sears Holdings $ 12,981 $ 15,548 $ 44,292 $ 51,393 Purchases related to cost of sales and occupancy 165,988 218,445 562,873 751,559 Services included in selling and administrative expense 9,571 12,150 36,820 46,053 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 discounts received for payments made on accelerated terms, net of incremental interest expense, results in a net financial benefit to the Company. In the third quarter of 2018, we continued our agreement with Sears Holdings whereby SHO paid Sears Holdings's invoices for merchandise and services on accelerated payment terms in exchange for cash discounts until the Sears Holdings Chapter 11 bankruptcy filing. Shortly before the bankruptcy filing, we reverted to our normal ten-day, no-discount payment terms and the Senior ABL Facility borrowings did not increase as of November 3, 2018 as a result of accelerated payments. The Company paid invoices early and received discounts of $0.4 million and $2.1 million for the 13 and 39 weeks ended November 3, 2018 , respectively, and $1.1 million and $3.2 million for the 13 and 39 weeks ended October 28, 2017 , respectively, which are reflected in the Condensed Consolidated Statements of Operations. We recorded real estate occupancy payments of $0.1 million and $0.5 million for the 13 and 39 weeks ended November 3, 2018 , respectively, and $0.3 million and $0.9 million for the 13 and 39 weeks ended October 28, 2017 , respectively, to Seritage Growth Properties ("Seritage"), a real estate investment trust. Edward S. Lampert is the Chairman of the Board of Trustees of Seritage. |
Financing Arrangements
Financing Arrangements | 9 Months Ended |
Nov. 03, 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 the following dates: (1) February 29, 2020; (2) six months prior to the expiration of specified Separation Agreements unless the Separation Agreements are extended to a date later than February 29, 2020 or are terminated on a basis reasonably satisfactory to the Senior ABL lenders; and (3) acceleration of the maturity date following an event of default in accordance with the Senior ABL Facility. See Note 1 to these Condensed Consolidated Financial Statements. 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 $2.0 million are included in Prepaid and Other current assets on the Condensed Consolidated Balance Sheet as of November 3, 2018 and are being amortized over the remaining term of the Senior ABL Facility. As of November 3, 2018 , we had $107.0 million outstanding under the Senior ABL Facility. 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 November 3, 2018 was $32.0 million , with $7.2 million of letters of credit outstanding under the facility. The ending cash balance as of November 3, 2018 and October 27, 2017, was $43.2 million and $14.0 million , respectively. Availability under the Senior ABL Facility may be reduced from time to time in the discretion of the agent under the Senior ABL Facility by the imposition of reserves against the borrowing base. The principal terms of the Senior ABL Facility are summarized below. See Note 1 to these Condensed Consolidated Financial Statements and the 2017 10-K for additional information about the terms of our Senior ABL Facility, including conditions to borrowing. 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. If availability under the Senior ABL Facility is reduced from time to time in the discretion of the agent under the Senior ABL Facility by the imposition of additional reserves against the borrowing base, the Company may be required to make additional prepayments. 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 November 3, 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 November 3, 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 dividends or other distributions with respect to, or repurchase, the Company’s capital stock, 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 or an event of default occurs, including a cash dominion requirement with additional borrowing base reporting requirements in addition to a requirement that a fixed charge ratio, calculated on a trailing twelve-month basis, be not less than 1.0 to 1.0. 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 (upon which all amounts outstanding would become immediately due and payable) 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 and other Senior ABL Facility loan documents (including an agreement with the Company, Sears Holdings, and the agents under the Senior ABL Facility and the Term Loan Agreement), 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 (including as a result of rejection in an insolvency proceeding) by Sears Holdings of "the Separation Agreements” (which include specified SHO-Sears Holdings Agreements) and cessation of business activities in the ordinary course. 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. See Note 1 to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. Unamortized debt costs of $1.2 million related to the Term Loan are netted against the Term Loan on the Condensed Consolidated Balance Sheets as of November 3, 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 securing 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. If any additional reserves are imposed by the Senior ABL Facility agent against the borrowing base under the Senior ABL Facility or if, under certain circumstances, the agent under the Term Loan imposes reserves against the borrowing base under the Term Loan Agreement, the Company may be required to make additional prepayments under the Term Loan. 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 2.59% at November 3, 2018 ) plus 8.50% per annum and (2) a minimum interest rate of 9.50% 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. The borrowing base under the Term Loan Agreement may be further reduced if the agent under the Senior ABL Facility or, under certain circumstances, the agent under the Term Loan elects in their respective applicable discretion to impose additional reserves against the borrowing base under the Senior ABL Facility or the Term Loan. 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 and other Term Loan loan documents (including an agreement with the Company, Sears Holdings, and the agents under the Senior ABL Facility and the Term Loan Agreement)), material judgments, change of control, and 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 (including as a result of rejection in an insolvency proceeding) by Sears Holdings of "the Separation Agreements” (which include specified SHO-Sears Holdings Agreements) and cessation of business activities in the ordinary course. |
Summary of Segment Data
Summary of Segment Data | 9 Months Ended |
Nov. 03, 2018 | |
Segment Reporting [Abstract] | |
SUMMARY OF SEGMENT DATA | SUMMARY OF SEGMENT DATA Our two reportable segments are Hometown and Outlet. The Hometown reportable segment consists of the aggregation of our Hometown Stores, Hardware Stores, Home Appliance Showrooms and Buddy's Home Furnishings Stores 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 business format also represents a reportable segment. 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 other. 13 Weeks Ended November 3, 2018 Thousands Hometown Outlet Total Net sales Appliances $ 155,166 $ 106,295 $ 261,461 Lawn and garden 33,805 3,564 37,369 Tools 15,681 3,221 18,902 Other 8,039 13,344 21,383 Total 212,691 126,424 339,115 Costs and expenses Cost of sales and occupancy 165,049 89,235 254,284 Selling and administrative 55,060 30,316 85,376 Depreciation and amortization 1,173 1,226 2,399 Gain on sale of assets — (1,358 ) (1,358 ) Total 221,282 119,419 340,701 Operating (loss) income $ (8,591 ) $ 7,005 $ (1,586 ) Total assets $ 281,048 $ 111,843 $ 392,891 Capital expenditures $ 1,119 $ 371 $ 1,490 13 Weeks Ended October 28, 2017 Thousands Hometown Outlet Total Net sales Appliances $ 188,591 $ 104,356 $ 292,947 Lawn and garden 40,315 4,804 45,119 Tools 20,575 3,167 23,742 Other 10,473 13,678 24,151 Total 259,954 126,005 385,959 Costs and expenses Cost of sales and occupancy 202,473 96,798 299,271 Selling and administrative 64,287 28,814 93,101 Depreciation and amortization 1,175 1,827 3,002 Total 267,935 127,439 395,374 Operating loss $ (7,981 ) $ (1,434 ) $ (9,415 ) Total assets $ 298,859 $ 141,939 $ 440,798 Capital expenditures $ 829 $ 1,567 $ 2,396 39 Weeks Ended November 3, 2018 Thousands Hometown Outlet Total Net sales Appliances $ 526,820 $ 317,290 844,110 Lawn and garden 152,804 14,443 167,247 Tools 54,392 9,505 63,897 Other 35,616 40,558 76,174 Total 769,632 381,796 1,151,428 Costs and expenses Cost of sales and occupancy 610,408 276,759 887,167 Selling and administrative 187,915 81,945 269,860 Depreciation and amortization 4,379 4,407 8,786 Gain on sale of assets — (1,358 ) (1,358 ) Total 802,702 361,753 1,164,455 Operating (loss) income $ (33,070 ) $ 20,043 $ (13,027 ) Total assets $ 281,048 $ 111,843 $ 392,891 Capital expenditures $ 4,040 $ 1,065 $ 5,105 39 Weeks Ended October 28, 2017 Thousands Hometown Outlet Total Net sales Appliances $ 608,830 $ 346,876 $ 955,706 Lawn and garden 185,115 16,096 201,211 Tools 70,398 10,433 80,831 Other 40,465 45,964 86,429 Total 904,808 419,369 1,324,177 Costs and expenses Cost of sales and occupancy 712,473 338,913 1,051,386 Selling and administrative 214,463 104,727 319,190 Depreciation and amortization 3,920 5,990 9,910 Total 930,856 449,630 1,380,486 Operating loss $ (26,048 ) $ (30,261 ) $ (56,309 ) Total assets $ 298,859 $ 141,939 $ 440,798 Capital expenditures $ 3,180 $ 3,857 $ 7,037 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Nov. 03, 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 and 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
Loss Per Common Share | 9 Months Ended |
Nov. 03, 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. 13 Weeks Ended 39 Weeks Ended Thousands except income per common share November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017 Basic weighted average shares 22,702 22,702 22,702 22,702 Diluted weighted average shares 22,702 22,702 22,702 22,702 Net loss $ (4,500 ) $ (10,933 ) $ (23,195 ) $ (61,813 ) Loss per common share: Basic $ (0.20 ) $ (0.48 ) $ (1.02 ) $ (2.72 ) Diluted $ (0.20 ) $ (0.48 ) $ (1.02 ) $ (2.72 ) |
Equity
Equity | 9 Months Ended |
Nov. 03, 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 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 November 3, 2018 , 53,889 of these stock units had been forfeited. The remaining 132,414 stock units will vest 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. As of November 3, 2018 , 27,412 of these stock units had been forfeited. The remaining 333,981 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 13 and 39 weeks ended November 3, 2018 no stock-based compensation expense was recorded. During the 13 and 39 weeks ended November 3, 2018 we recorded $0.5 million and $1.3 million , respectively, in compensation cost related to the then outstanding stock units and at November 3, 2018 we had $1.4 million in total unrecognized compensation cost, which we expect to recognize over the next approximately 2.25 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. 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 39 weeks ended November 3, 2018 . At November 3, 2018 , we had $12.5 million of remaining authorization under the repurchase program. The Company has not repurchased any shares under the repurchase program since late 2013. The Senior ABL Facility and the Term Loan Agreement each limits the Company’s ability to declare and pay cash dividends and to repurchase its common stock and each would not have permitted the Company to pay cash dividends or to repurchase its common stock as of November 3, 2018 . |
Store Closing Charges
Store Closing Charges | 9 Months Ended |
Nov. 03, 2018 | |
Restructuring and Related Activities [Abstract] | |
STORE CLOSING CHARGES | STORE CLOSING CHARGES Accelerated Closed Store Charges We continue to take proactive steps to reduce costs, make the best use of capital, and improve our profitability by closing, or seeking the closure by dealers of, under-performing 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 closure costs for the 13 and 39 weeks ended November 3, 2018 and October 28, 2017 , respectively, were as follows: Thousands Lease Termination Costs (1) Inventory Related (1) Impairment and Accelerated Depreciation (2) Other Charges (3) Total Store Closing Costs 13 weeks ended November 3, 2018 $ — $ (1,100 ) $ — $ 7 $ (1,093 ) 13 weeks ended October 28, 2017 $ (169 ) $ 2,614 $ — $ (169 ) $ 2,276 Thousands Lease Termination Costs (1) Inventory Related (1) Impairment and Accelerated Depreciation (2) Other Charges (3) Total Store Closing Costs 39 weeks ended November 3, 2018 $ (235 ) $ 5,556 $ 774 $ 531 $ 6,626 39 weeks ended October 28, 2017 $ 8,278 $ 4,410 $ 979 $ 217 $ 13,884 (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. Closed Store Reserves The store closing and severance costs reserve included within other current liabilities in the Condensed Consolidated Balance Sheets, consists of the following: 39 Weeks Ended Thousands November 3, 2018 October 28, 2017 Store closing and severance costs reserve, beginning of period $ 4,655 $ 7,659 Store closing costs 5,852 8,495 Payments/utilization (9,378 ) (11,322 ) Store closing and severance costs reserve, end of period $ 1,129 $ 4,832 |
Sale of Assets
Sale of Assets | 9 Months Ended |
Nov. 03, 2018 | |
Property, Plant and Equipment [Abstract] | |
Sale of Assets | SALE OF ASSETS On August 10, 2018, we completed the sale of a property located in Newington, Connecticut. The sale price of the property was $2.8 million net of closing costs, and we recorded a gain on sale of approximately $1.3 million during the third quarter of fiscal 2018. |
Subsequent Event
Subsequent Event | 9 Months Ended |
Nov. 03, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Event | SUBSEQUENT EVENT In November 2018 the Company determined that during the fourth quarter of 2018 it will close, or seek the closure by dealers of, between 80 to 100 Hometown stores 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 $4.5 million and $6.0 million during the fourth quarter of 2018 for inventory markdowns and write-offs and other store-closing costs. |
Background and Basis of Prese_2
Background and Basis of Presentation (Policies) | 9 Months Ended |
Nov. 03, 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 and 39 weeks ended November 3, 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"). |
Segment Reporting | We operate through two segments--our Sears Hometown segment ("Hometown") and our Sears Outlet segment ("Outlet"). |
Fiscal Period | Our third fiscal-quarter end is the Saturday closest to October 31. For 2018 and 2017, our third fiscal quarters ended as follows: Fiscal Year Third Quarter Ended Weeks 2018 November 3, 2018 13 2017 October 28, 2017 13 Our fiscal year end is the Saturday closest to January 31. Our 2018 fiscal year will end February 2, 2019. 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, Cost of Sales and Occupancy, Reserve for Sales Returns and Allowances | 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 $16.6 million and $16.4 million at November 3, 2018 and February 3, 2018 , respectively. The change in deferred revenue represents additional revenue deferred during the first three quarters 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 weekly by Sears Holdings for gift cards tendered. Cost of Sales and Occupancy Cost of sales and occupancy is 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 of products branded with one of the KENMORE ® , CRAFTSMAN ® , and DIEHARD ® marks (the "KCD Marks"), customer shipping and handling costs, vendor allowances, markdowns, and physical inventory losses. The KCD Marks are owned by, or licensed to, 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. 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. |
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 November 3, 2018 . |
Recently Issued and Adopted Accounting Pronouncements | Recently Issued Accounting Pronouncements Recently issued accounting pronouncements that are not yet effective and that we have not discussed in the 2017 10-K or below are either inapplicable to us or, if applicable, we do not expect that they will have a material impact on our consolidated results of operations, consolidated financial condition, or consolidated cash flows. ASU 2016-02 "Leases (Topic 842)" In February 2016, the FASB issued Accounting Standards Update ("ASU") 2016-02, "Leases (Topic 842)". This ASU is a comprehensive new accounting standard with respect to leases that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. It requires companies to record assets and liabilities 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. In July 2018, the FASB issued ASU 2018-11, "Leases (Topic 842): Targeted Improvements", which provides an optional transition method to apply ASU 2016-02 in the period of adoption and recognize a cumulative-effect opening transition adjustment to retained earnings, without applying the standard to comparative periods. This ASU also provides lessors with a practical expedient to account for lease and associated non-lease components as a single component when certain criteria are met. 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; however, we will adopt the standard in the first quarter of fiscal 2019. We have upgraded our existing third-party leasing software and identified business processes, systems and controls to support adoption of the new standard. We are in the process of evaluating the impact that the new standard will have on the condensed consolidated financial statements. While we are unable to quantify the impact at this time, we expect the adoption of the new standard to result in a material increase in the assets and liabilities in the condensed consolidated balance sheets. At this time, we do not expect the adoption of ASU 2016-02 to have a material impact on our condensed consolidated statements of operations as the majority of our leases will remain operating in nature. As such, expense recognition will be similar to previously required straight-line expense treatment. 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: • 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 prepaid expenses and other current assets), (ii) a return liability for the amount of expected returns (recorded as an increase to other current liabilities) and (iii) deferred revenue for commissions earned on extended protection agreements (recorded as an increase to other current liabilities). We have made accounting policy elections to (1) 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.) and (2) 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. The effect of the adoption of ASU No. 2014-09 on our consolidated balance sheet as of November 3, 2018 was as follows: Thousands As Reported ASU 2014-09 Effect Excluding ASU 2014-09 Effect Prepaid expenses and other current assets $ 7,749 $ 1,226 $ 6,523 Other current liabilities 57,076 3,345 53,731 Accumulated deficit (405,380 ) (2,119 ) (403,261 ) |
Background and Basis of Prese_3
Background and Basis of Presentation (Tables) | 9 Months Ended |
Nov. 03, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Fiscal Period | For 2018 and 2017, our third fiscal quarters ended as follows: Fiscal Year Third Quarter Ended Weeks 2018 November 3, 2018 13 2017 October 28, 2017 13 |
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 November 3, 2018 was as follows: Thousands As Reported ASU 2014-09 Effect Excluding ASU 2014-09 Effect Prepaid expenses and other current assets $ 7,749 $ 1,226 $ 6,523 Other current liabilities 57,076 3,345 53,731 Accumulated deficit (405,380 ) (2,119 ) (403,261 ) |
Net Sales (Tables)
Net Sales (Tables) | 9 Months Ended |
Nov. 03, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Disaggregated Net Sales | Net sales of merchandise and services for the 13 and 39 weeks ended November 3, 2018 were as follows: Thousands 13 Weeks Ended November 3, 2018 39 Weeks Ended November 3, 2018 Merchandise $ 312,441 $ 1,064,057 Services 20,155 66,934 Other 6,519 20,437 Net sales $ 339,115 $ 1,151,428 |
Accounts and Franchisee Recei_2
Accounts and Franchisee Receivables and Other Assets (Tables) | 9 Months Ended |
Nov. 03, 2018 | |
Receivables [Abstract] | |
Schedule of Accounts and Franchisee Receivables and Other Assets | Accounts and franchisee receivables and other assets consist of the following: Thousands November 3, 2018 October 28, 2017 February 3, 2018 Short-term franchisee receivables $ 591 $ 1,584 $ 1,205 Miscellaneous receivables 9,663 12,593 14,314 Long-term franchisee receivables 1,683 10,829 7,962 Other assets 3,574 5,057 5,106 Allowance for losses on short-term franchisee receivables (1) (591 ) (1,027 ) (847 ) Allowance for losses on long-term franchisee receivables (1) (1,683 ) (6,118 ) (4,928 ) Net accounts and franchisee receivables and other assets $ 13,237 $ 22,918 $ 22,812 (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. The expense associated with the allowance for losses on franchisee receivables is recognized 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. As of November 3, 2018, all franchisee receivables have been fully reserved for losses. |
Allowance for Losses on Franc_2
Allowance for Losses on Franchisee Receivables (Tables) | 9 Months Ended |
Nov. 03, 2018 | |
Receivables [Abstract] | |
Schedule of Provision for Losses on Franchisee Receivables | The allowance for losses on franchisee receivables consists of the following as of: 39 Weeks Ended Thousands November 3, 2018 October 28, 2017 Allowance for losses on franchisee receivables, beginning of period $ 5,775 $ 8,242 Provisions during the period 2,911 5,820 Write off of franchisee receivables (6,412 ) (6,917 ) Allowance for losses on franchisee receivables, end of period $ 2,274 $ 7,145 |
Other Current and Long-Term L_2
Other Current and Long-Term Liabilities (Tables) | 9 Months Ended |
Nov. 03, 2018 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Expenses and Other Long-term Liabilities | Other current and long-term liabilities consist of the following: Thousands November 3, 2018 October 28, 2017 February 3, 2018 Customer deposits $ 16,675 $ 17,761 $ 16,655 Sales and other taxes 7,148 8,782 9,221 Accrued expenses 25,154 23,191 17,755 Payroll and related items 9,454 8,522 7,140 Store closing and severance costs 1,129 4,832 4,655 Other current and long-term liabilities $ 59,560 $ 63,088 $ 55,426 |
Related Party Agreements and _2
Related Party Agreements and Transactions (Tables) | 9 Months Ended |
Nov. 03, 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: 13 Weeks Ended 39 Weeks Ended Thousands November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017 Net Commissions from Sears Holdings $ 12,981 $ 15,548 $ 44,292 $ 51,393 Purchases related to cost of sales and occupancy 165,988 218,445 562,873 751,559 Services included in selling and administrative expense 9,571 12,150 36,820 46,053 |
Summary of Segment Data (Tables
Summary of Segment Data (Tables) | 9 Months Ended |
Nov. 03, 2018 | |
Segment Reporting [Abstract] | |
Schedule of Segment Data | Sales categories include appliances, lawn and garden, tools and other. 13 Weeks Ended November 3, 2018 Thousands Hometown Outlet Total Net sales Appliances $ 155,166 $ 106,295 $ 261,461 Lawn and garden 33,805 3,564 37,369 Tools 15,681 3,221 18,902 Other 8,039 13,344 21,383 Total 212,691 126,424 339,115 Costs and expenses Cost of sales and occupancy 165,049 89,235 254,284 Selling and administrative 55,060 30,316 85,376 Depreciation and amortization 1,173 1,226 2,399 Gain on sale of assets — (1,358 ) (1,358 ) Total 221,282 119,419 340,701 Operating (loss) income $ (8,591 ) $ 7,005 $ (1,586 ) Total assets $ 281,048 $ 111,843 $ 392,891 Capital expenditures $ 1,119 $ 371 $ 1,490 13 Weeks Ended October 28, 2017 Thousands Hometown Outlet Total Net sales Appliances $ 188,591 $ 104,356 $ 292,947 Lawn and garden 40,315 4,804 45,119 Tools 20,575 3,167 23,742 Other 10,473 13,678 24,151 Total 259,954 126,005 385,959 Costs and expenses Cost of sales and occupancy 202,473 96,798 299,271 Selling and administrative 64,287 28,814 93,101 Depreciation and amortization 1,175 1,827 3,002 Total 267,935 127,439 395,374 Operating loss $ (7,981 ) $ (1,434 ) $ (9,415 ) Total assets $ 298,859 $ 141,939 $ 440,798 Capital expenditures $ 829 $ 1,567 $ 2,396 39 Weeks Ended November 3, 2018 Thousands Hometown Outlet Total Net sales Appliances $ 526,820 $ 317,290 844,110 Lawn and garden 152,804 14,443 167,247 Tools 54,392 9,505 63,897 Other 35,616 40,558 76,174 Total 769,632 381,796 1,151,428 Costs and expenses Cost of sales and occupancy 610,408 276,759 887,167 Selling and administrative 187,915 81,945 269,860 Depreciation and amortization 4,379 4,407 8,786 Gain on sale of assets — (1,358 ) (1,358 ) Total 802,702 361,753 1,164,455 Operating (loss) income $ (33,070 ) $ 20,043 $ (13,027 ) Total assets $ 281,048 $ 111,843 $ 392,891 Capital expenditures $ 4,040 $ 1,065 $ 5,105 39 Weeks Ended October 28, 2017 Thousands Hometown Outlet Total Net sales Appliances $ 608,830 $ 346,876 $ 955,706 Lawn and garden 185,115 16,096 201,211 Tools 70,398 10,433 80,831 Other 40,465 45,964 86,429 Total 904,808 419,369 1,324,177 Costs and expenses Cost of sales and occupancy 712,473 338,913 1,051,386 Selling and administrative 214,463 104,727 319,190 Depreciation and amortization 3,920 5,990 9,910 Total 930,856 449,630 1,380,486 Operating loss $ (26,048 ) $ (30,261 ) $ (56,309 ) Total assets $ 298,859 $ 141,939 $ 440,798 Capital expenditures $ 3,180 $ 3,857 $ 7,037 |
Loss Per Common Share (Tables)
Loss Per Common Share (Tables) | 9 Months Ended |
Nov. 03, 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. 13 Weeks Ended 39 Weeks Ended Thousands except income per common share November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017 Basic weighted average shares 22,702 22,702 22,702 22,702 Diluted weighted average shares 22,702 22,702 22,702 22,702 Net loss $ (4,500 ) $ (10,933 ) $ (23,195 ) $ (61,813 ) Loss per common share: Basic $ (0.20 ) $ (0.48 ) $ (1.02 ) $ (2.72 ) Diluted $ (0.20 ) $ (0.48 ) $ (1.02 ) $ (2.72 ) |
Store Closing Charges (Tables)
Store Closing Charges (Tables) | 9 Months Ended |
Nov. 03, 2018 | |
Restructuring and Related Activities [Abstract] | |
Schedule of Accelerated Store Closure Costs | Accelerated (prior to lease expiration) store closure costs for the 13 and 39 weeks ended November 3, 2018 and October 28, 2017 , respectively, were as follows: Thousands Lease Termination Costs (1) Inventory Related (1) Impairment and Accelerated Depreciation (2) Other Charges (3) Total Store Closing Costs 13 weeks ended November 3, 2018 $ — $ (1,100 ) $ — $ 7 $ (1,093 ) 13 weeks ended October 28, 2017 $ (169 ) $ 2,614 $ — $ (169 ) $ 2,276 Thousands Lease Termination Costs (1) Inventory Related (1) Impairment and Accelerated Depreciation (2) Other Charges (3) Total Store Closing Costs 39 weeks ended November 3, 2018 $ (235 ) $ 5,556 $ 774 $ 531 $ 6,626 39 weeks ended October 28, 2017 $ 8,278 $ 4,410 $ 979 $ 217 $ 13,884 (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. |
Schedule of Store Closing Reserves | The store closing and severance costs reserve included within other current liabilities in the Condensed Consolidated Balance Sheets, consists of the following: 39 Weeks Ended Thousands November 3, 2018 October 28, 2017 Store closing and severance costs reserve, beginning of period $ 4,655 $ 7,659 Store closing costs 5,852 8,495 Payments/utilization (9,378 ) (11,322 ) Store closing and severance costs reserve, end of period $ 1,129 $ 4,832 |
Background and Basis of Prese_4
Background and Basis of Presentation (Narrative) (Details) | 9 Months Ended | |||
Nov. 03, 2018USD ($)storesegmentstate | Feb. 03, 2018USD ($) | Nov. 01, 2016USD ($) | Oct. 31, 2012USD ($) | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Number of stores | store | 761 | |||
Number of states in which the Company operates | state | 49 | |||
Number of operating segments | segment | 2 | |||
Deferred revenue | $ 16,600,000 | $ 16,400,000 | ||
Reserve for returns and allowances | 3,900,000 | 1,100,000 | ||
Cumulative effect of new accounting principle in period of adoption | 405,380,000 | |||
ASU 2014-09 Effect | Accounting Standards Update 2014-09 | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Cumulative effect of new accounting principle in period of adoption | 2,119,000 | $ 2,100,000 | ||
Senior ABL Facility | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Aggregate maximum borrowings | $ 170,000,000 | $ 250,000,000 | $ 250,000,000 |
Background and Basis of Prese_5
Background and Basis of Presentation (Schedule of Effect of the Adoption of ASU No. 2014-09) (Details) - USD ($) $ in Thousands | Nov. 03, 2018 | Feb. 03, 2018 | Oct. 28, 2017 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Prepaid expenses and other current assets | $ 7,749 | $ 7,131 | $ 9,777 |
Other current liabilities | 57,076 | 53,142 | $ 60,499 |
Accumulated deficit | (405,380) | ||
Excluding ASU 2014-09 Effect | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Prepaid expenses and other current assets | 6,523 | ||
Other current liabilities | 53,731 | ||
Accumulated deficit | (403,261) | ||
Accounting Standards Update 2014-09 | ASU 2014-09 Effect | |||
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) |
Net Sales - Narrative (Details)
Net Sales - Narrative (Details) | 3 Months Ended | 9 Months Ended |
Nov. 03, 2018 | Nov. 03, 2018 | |
Revenue from Contract with Customer | Geographic Concentration Risk | UNITED STATES | ||
Disaggregation of Revenue [Line Items] | ||
Net sales (in percent) | 98.00% | 98.00% |
Net Sales - Schedule of Disaggr
Net Sales - Schedule of Disaggregated Net Sales (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Nov. 03, 2018 | Nov. 03, 2018 | |
Disaggregation of Revenue [Line Items] | ||
Net sales | $ 339,115 | $ 1,151,428 |
Merchandise | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 312,441 | 1,064,057 |
Services | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 20,155 | 66,934 |
Other | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | $ 6,519 | $ 20,437 |
Accounts and Franchisee Recei_3
Accounts and Franchisee Receivables and Other Assets (Details) - USD ($) $ in Thousands | Nov. 03, 2018 | Feb. 03, 2018 | Oct. 28, 2017 |
Receivables [Abstract] | |||
Short-term franchisee receivables | $ 591 | $ 1,205 | $ 1,584 |
Miscellaneous receivables | 9,663 | 14,314 | 12,593 |
Long-term franchisee receivables | 1,683 | 7,962 | 10,829 |
Other assets | 3,574 | 5,106 | 5,057 |
Allowance for losses on short-term franchisee receivables | (591) | (847) | (1,027) |
Allowance for losses on long-term franchisee receivables | (1,683) | (4,928) | (6,118) |
Net accounts and franchisee receivables and other assets | $ 13,237 | $ 22,812 | $ 22,918 |
Allowance for Losses on Franc_3
Allowance for Losses on Franchisee Receivables - Schedule of Allowance for Losses on Franchisee Receivables (Details) - Franchise Receivable - USD ($) $ in Thousands | 9 Months Ended | |
Nov. 03, 2018 | Oct. 28, 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 | 2,911 | 5,820 |
Write off of franchisee receivables | (6,412) | (6,917) |
Allowance for losses on franchisee receivables, end of period | $ 2,274 | $ 7,145 |
Allowance for Losses on Franc_4
Allowance for Losses on Franchisee Receivables - Narrative (Details) $ in Millions | 9 Months Ended | |||
Nov. 03, 2018USD ($) | Oct. 28, 2017USD ($) | Nov. 02, 2018USD ($)location | Jun. 07, 2017USD ($)location | |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||
Number of franchise locations terminated | location | 21 | 14 | ||
Franchise Receivable | ||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||
Promissory note carrying amount | $ 2.7 | |||
Loss on transaction | $ 2.7 | |||
Previous Franchisee Note Receivable | ||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||
Promissory note carrying amount | $ 5.5 | |||
Loss on transaction | $ 5.5 | |||
New Franchisee Note Receivable | ||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||
Promissory note carrying amount | $ 1.5 |
Other Current and Long-Term L_3
Other Current and Long-Term Liabilities (Details) - USD ($) $ in Thousands | Nov. 03, 2018 | Feb. 03, 2018 | Oct. 28, 2017 |
Payables and Accruals [Abstract] | |||
Customer deposits | $ 16,675 | $ 16,655 | $ 17,761 |
Sales and other taxes | 7,148 | 9,221 | 8,782 |
Accrued expenses | 25,154 | 17,755 | 23,191 |
Payroll and related items | 9,454 | 7,140 | 8,522 |
Store closing and severance costs | 1,129 | 4,655 | 4,832 |
Other current and long-term liabilities | $ 59,560 | $ 55,426 | $ 63,088 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 12 Months Ended | |
Feb. 03, 2018 | Nov. 03, 2018 | |
Income Tax Disclosure [Abstract] | ||
Discrete net tax benefit | $ 0.8 | |
Reduction in valuation allowance | 0.8 | |
Increase in long term receivable due to an IRS adjustment and related payment of additional alternative minimum tax | $ 0.2 | |
Reduction in DTAs and DTLs | $ 35.2 |
Related Party Agreements and _3
Related Party Agreements and Transactions (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Nov. 03, 2018 | Oct. 28, 2017 | Nov. 03, 2018 | Oct. 28, 2017 | |
ESL | ||||
Related Party Transaction [Line Items] | ||||
Beneficial interest acquired by related party, percentage | 58.80% | 58.80% | ||
ESL | Sears Holdings | ||||
Related Party Transaction [Line Items] | ||||
Beneficial interest acquired by related party, percentage | 50.00% | 50.00% | ||
Sears Holdings Corporation | ||||
Related Party Transaction [Line Items] | ||||
Maximum percentage of royalty rates | 6.00% | |||
Net Commissions from Sears Holdings | $ 12,981 | $ 15,548 | $ 44,292 | $ 51,393 |
Purchases related to cost of sales and occupancy | 165,988 | 218,445 | 562,873 | 751,559 |
Services included in selling and administrative expense | 9,571 | 12,150 | $ 36,820 | 46,053 |
Invoice payment term | 10 days | |||
Discounts received | 400 | 1,100 | $ 2,100 | 3,200 |
Seritage Growth Properties | ||||
Related Party Transaction [Line Items] | ||||
Occupancy payments | $ 100 | $ 300 | $ 500 | $ 900 |
Financing Arrangements (Details
Financing Arrangements (Details) | Feb. 16, 2018USD ($)subsidiary | Oct. 31, 2012USD ($) | Nov. 03, 2018USD ($) | May 05, 2018 | Feb. 03, 2018USD ($) | Oct. 28, 2017USD ($) | Jan. 28, 2017USD ($) | Nov. 01, 2016USD ($) |
Debt Instrument [Line Items] | ||||||||
Unamortized debt costs | $ 2,000,000 | |||||||
Ending cash balance | 43,150,000 | $ 10,402,000 | $ 13,994,000 | $ 14,104,000 | ||||
Number of operating subsidiaries | subsidiary | 3 | |||||||
Senior ABL Facility | ||||||||
Debt Instrument [Line Items] | ||||||||
Aggregate maximum borrowings | $ 250,000,000 | 170,000,000 | $ 250,000,000 | |||||
Permitted increase in aggregate principal | $ 100,000,000 | 100,000,000 | ||||||
Short-term debt outstanding under the Senior ABL Facility | 107,000,000 | |||||||
Remaining borrowing capacity | 32,000,000 | |||||||
Fixed charge coverage ratio | 1 | |||||||
Senior ABL Facility | Letter of Credit | ||||||||
Debt Instrument [Line Items] | ||||||||
Aggregate maximum borrowings | 75,000,000 | |||||||
Remaining borrowing capacity | 7,200,000 | |||||||
Senior ABL Facility | Swingline Loans | ||||||||
Debt Instrument [Line Items] | ||||||||
Aggregate maximum borrowings | $ 25,000,000 | |||||||
Extended Revolving Credit Commitments | ||||||||
Debt Instrument [Line Items] | ||||||||
Aggregate maximum borrowings | 170,000,000 | |||||||
Extended Revolving Credit Commitments | LIBOR | ||||||||
Debt Instrument [Line Items] | ||||||||
Blended interest rate | 6.25% | |||||||
Extended Revolving Credit Commitments | Base Rate | ||||||||
Debt Instrument [Line Items] | ||||||||
Blended interest rate | 8.25% | |||||||
Extended Revolving Credit Commitments | Minimum | LIBOR | ||||||||
Debt Instrument [Line Items] | ||||||||
Basis spread on variable rate | 3.50% | |||||||
Extended Revolving Credit Commitments | Minimum | Base Rate | ||||||||
Debt Instrument [Line Items] | ||||||||
Basis spread on variable rate | 2.50% | |||||||
Extended Revolving Credit Commitments | Maximum | LIBOR | ||||||||
Debt Instrument [Line Items] | ||||||||
Basis spread on variable rate | 4.50% | |||||||
Extended Revolving Credit Commitments | Maximum | Base Rate | ||||||||
Debt Instrument [Line Items] | ||||||||
Basis spread on variable rate | 3.50% | |||||||
Non-Extended Revolving Credit Commitments | ||||||||
Debt Instrument [Line Items] | ||||||||
Aggregate maximum borrowings | $ 80,000,000 | |||||||
Term Loan | ||||||||
Debt Instrument [Line Items] | ||||||||
Aggregate maximum borrowings | $ 40,000,000 | |||||||
Debt issuance costs | $ 1,200,000 | |||||||
Minimum percentage of loan cap | 10.00% | |||||||
Term Loan | LIBOR | ||||||||
Debt Instrument [Line Items] | ||||||||
Basis spread on variable rate | 8.50% | |||||||
Blended interest rate | 2.59% | |||||||
Term Loan | Minimum | ||||||||
Debt Instrument [Line Items] | ||||||||
Blended interest rate | 9.50% |
Summary of Segment Data (Detail
Summary of Segment Data (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Nov. 03, 2018USD ($) | Oct. 28, 2017USD ($) | Nov. 03, 2018USD ($)segment | Oct. 28, 2017USD ($) | Feb. 03, 2018USD ($) | |
Segment Reporting Information [Line Items] | |||||
Number of reportable segments | segment | 2 | ||||
Net sales | $ 339,115 | $ 385,959 | $ 1,151,428 | $ 1,324,177 | |
Cost of sales and occupancy | 254,284 | 299,271 | 887,167 | 1,051,386 | |
Selling and administrative | 85,376 | 93,101 | 269,860 | 319,190 | |
Depreciation and amortization | 2,399 | 3,002 | 8,786 | 9,910 | |
Gain on sale of assets | (1,358) | 0 | (1,358) | 0 | |
Total costs and expenses | 340,701 | 395,374 | 1,164,455 | 1,380,486 | |
Operating loss | (1,586) | (9,415) | (13,027) | (56,309) | |
Total assets | 392,891 | 440,798 | 392,891 | 440,798 | $ 412,688 |
Capital expenditures | 1,490 | 2,396 | 5,105 | 7,037 | |
Appliances | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 261,461 | 292,947 | 844,110 | 955,706 | |
Lawn and garden | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 37,369 | 45,119 | 167,247 | 201,211 | |
Tools | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 18,902 | 23,742 | 63,897 | 80,831 | |
Other | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 21,383 | 24,151 | 76,174 | 86,429 | |
Hometown | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 212,691 | 259,954 | 769,632 | 904,808 | |
Cost of sales and occupancy | 165,049 | 202,473 | 610,408 | 712,473 | |
Selling and administrative | 55,060 | 64,287 | 187,915 | 214,463 | |
Depreciation and amortization | 1,173 | 1,175 | 4,379 | 3,920 | |
Gain on sale of assets | 0 | 0 | |||
Total costs and expenses | 221,282 | 267,935 | 802,702 | 930,856 | |
Operating loss | (8,591) | (7,981) | (33,070) | (26,048) | |
Total assets | 281,048 | 298,859 | 281,048 | 298,859 | |
Capital expenditures | 1,119 | 829 | 4,040 | 3,180 | |
Hometown | Appliances | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 155,166 | 188,591 | 526,820 | 608,830 | |
Hometown | Lawn and garden | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 33,805 | 40,315 | 152,804 | 185,115 | |
Hometown | Tools | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 15,681 | 20,575 | 54,392 | 70,398 | |
Hometown | Other | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 8,039 | 10,473 | 35,616 | 40,465 | |
Outlet | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 126,424 | 126,005 | 381,796 | 419,369 | |
Cost of sales and occupancy | 89,235 | 96,798 | 276,759 | 338,913 | |
Selling and administrative | 30,316 | 28,814 | 81,945 | 104,727 | |
Depreciation and amortization | 1,226 | 1,827 | 4,407 | 5,990 | |
Gain on sale of assets | (1,358) | (1,358) | |||
Total costs and expenses | 119,419 | 127,439 | 361,753 | 449,630 | |
Operating loss | 7,005 | (1,434) | 20,043 | (30,261) | |
Total assets | 111,843 | 141,939 | 111,843 | 141,939 | |
Capital expenditures | 371 | 1,567 | 1,065 | 3,857 | |
Outlet | Appliances | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 106,295 | 104,356 | 317,290 | 346,876 | |
Outlet | Lawn and garden | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 3,564 | 4,804 | 14,443 | 16,096 | |
Outlet | Tools | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 3,221 | 3,167 | 9,505 | 10,433 | |
Outlet | Other | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | $ 13,344 | $ 13,678 | $ 40,558 | $ 45,964 |
Loss Per Common Share (Details)
Loss Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Nov. 03, 2018 | Oct. 28, 2017 | Nov. 03, 2018 | Oct. 28, 2017 | |
Earnings Per Share [Abstract] | ||||
Basic weighted average shares (in shares) | 22,702 | 22,702 | 22,702 | 22,702 |
Diluted weighted average shares (in shares) | 22,702 | 22,702 | 22,702 | 22,702 |
Net loss | $ (4,500) | $ (10,933) | $ (23,195) | $ (61,813) |
Loss per common share: | ||||
Basic (in dollars per share) | $ (0.20) | $ (0.48) | $ (1.02) | $ (2.72) |
Diluted (in dollars per share) | $ (0.20) | $ (0.48) | $ (1.02) | $ (2.72) |
Equity (Details)
Equity (Details) - USD ($) | Apr. 13, 2018 | Jan. 30, 2018 | Jan. 18, 2018 | Nov. 03, 2018 | Aug. 01, 2015 | Nov. 03, 2018 | Nov. 03, 2018 | Feb. 03, 2018 | Jan. 30, 2016 | Nov. 03, 2018 | Aug. 28, 2013 |
Stock-based Compensation | |||||||||||
Shares reserved under plan (in shares) | 4,000,000 | 4,000,000 | 4,000,000 | 4,000,000 | |||||||
Stock-based compensation cost | $ 0 | $ 0 | |||||||||
Share Repurchase Program | |||||||||||
Authorized amount | $ 25,000,000 | ||||||||||
Stock repurchased (in shares) | 0 | ||||||||||
Remaining authorized repurchase amount | $ 12,500,000 | $ 12,500,000 | $ 12,500,000 | $ 12,500,000 | |||||||
Restricted Stock | |||||||||||
Stock-based Compensation | |||||||||||
Stock granted (in shares) | 14,000 | ||||||||||
Restricted Stock Units (RSUs) | |||||||||||
Stock-based Compensation | |||||||||||
Unvested (in shares) | 132,414 | 132,414 | 132,414 | 132,414 | |||||||
Stock-based compensation cost | $ 500,000 | $ 1,300,000 | |||||||||
Total unrecognized compensation cost | $ 1,400,000 | $ 1,400,000 | $ 1,400,000 | $ 1,400,000 | |||||||
Compensation to be recognized term | 2 years 3 months | ||||||||||
Share-based Compensation Award, Tranche One | Restricted Stock Units (RSUs) | |||||||||||
Stock-based Compensation | |||||||||||
Vesting installment percentage | 33.00% | ||||||||||
Share-based Compensation Award, Tranche Two | Restricted Stock Units (RSUs) | |||||||||||
Stock-based Compensation | |||||||||||
Vesting installment percentage | 33.00% | ||||||||||
Share-based Compensation Award, Tranche Three | Restricted Stock Units (RSUs) | |||||||||||
Stock-based Compensation | |||||||||||
Vesting installment percentage | 33.00% | ||||||||||
Amended and Restated 2012 Stock Plan (the 'Plan') | Restricted Stock Units (RSUs) | |||||||||||
Stock-based Compensation | |||||||||||
Stock granted (in shares) | 361,393 | 262,788 | 159,475 | ||||||||
Forfeited in period (in shares) | 34,091 | 27,412 | 53,889 | ||||||||
2015 Grant | Amended and Restated 2012 Stock Plan (the 'Plan') | Restricted Stock Units (RSUs) | |||||||||||
Stock-based Compensation | |||||||||||
Unvested (in shares) | 125,384 | ||||||||||
2017 Grant | Amended and Restated 2012 Stock Plan (the 'Plan') | Restricted Stock Units (RSUs) | |||||||||||
Stock-based Compensation | |||||||||||
Vested (in shares) | 76,485 | ||||||||||
2018 Grant | Amended and Restated 2012 Stock Plan (the 'Plan') | Restricted Stock Units (RSUs) | |||||||||||
Stock-based Compensation | |||||||||||
Unvested (in shares) | 333,981 | 333,981 | 333,981 | 333,981 |
Store Closing Charges (Schedule
Store Closing Charges (Schedule of Store Closing Costs) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Nov. 03, 2018 | Oct. 28, 2017 | Nov. 03, 2018 | Oct. 28, 2017 | |
Restructuring Cost and Reserve [Line Items] | ||||
Total Store Closing Costs | $ 5,852 | $ 8,495 | ||
Facility Closing | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total Store Closing Costs | $ (1,093) | $ 2,276 | 6,626 | 13,884 |
Cost of Sales and Occupancy | Facility Closing | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Lease Termination Costs | 0 | (169) | (235) | 8,278 |
Inventory Related | (1,100) | 2,614 | 5,556 | 4,410 |
Depreciation and Amortization | Facility Closing | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Impairment and Accelerated Depreciation | 0 | 0 | 774 | 979 |
Other Charges | Facility Closing | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Other Charges | $ 7 | $ (169) | $ 531 | $ 217 |
Store Closing Charges (Schedu_2
Store Closing Charges (Schedule of Store Closing Reserves) (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Nov. 03, 2018 | Oct. 28, 2017 | |
Restructuring Reserve [Roll Forward] | ||
Store closing and severance costs reserve, beginning of period | $ 4,655 | $ 7,659 |
Store closing costs | 5,852 | 8,495 |
Payments/utilization | (9,378) | (11,322) |
Store closing and severance costs reserve, end of period | $ 1,129 | $ 4,832 |
Sale of Assets (Details)
Sale of Assets (Details) - Land $ in Millions | Aug. 10, 2018USD ($) |
Property, Plant and Equipment [Line Items] | |
Sale price of property, net of closing costs | $ 2.8 |
Gain on sale of property | $ 1.3 |
Subsequent Event (Details)
Subsequent Event (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Feb. 02, 2019USD ($)store | Nov. 03, 2018USD ($) | Oct. 28, 2017USD ($) | Nov. 03, 2018USD ($) | Oct. 28, 2017USD ($) | |
Subsequent Event [Line Items] | |||||
Store closing costs | $ 5,852 | $ 8,495 | |||
Facility Closing | |||||
Subsequent Event [Line Items] | |||||
Store closing costs | $ (1,093) | $ 2,276 | $ 6,626 | $ 13,884 | |
Subsequent Event | Facility Closing | Scenario, Forecast | Minimum | |||||
Subsequent Event [Line Items] | |||||
Number of store closings | store | 80 | ||||
Store closing costs | $ 4,500 | ||||
Subsequent Event | Facility Closing | Scenario, Forecast | Maximum | |||||
Subsequent Event [Line Items] | |||||
Number of store closings | store | 100 | ||||
Store closing costs | $ 6,000 |