Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
May 04, 2019 | Jun. 18, 2019 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | May 4, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Entity Registrant Name | Sears Hometown & Outlet Stores, Inc. | |
Entity Central Index Key | 0001548309 | |
Current Fiscal Year End Date | --02-01 | |
Entity Filer Category | Non-accelerated Filer | |
Smaller Reporting Company | true | |
Emerging Growth Company | false | |
Entity Current Reporting Status | Yes | |
Entity Shell 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 | |
May 04, 2019 | May 05, 2018 | |
Income Statement [Abstract] | ||
NET SALES | $ 291,072 | $ 381,281 |
COSTS AND EXPENSES | ||
Cost of sales and occupancy | 229,042 | 293,803 |
Selling and administrative | 67,543 | 90,479 |
Depreciation and amortization | 2,260 | 2,608 |
Loss on sale of assets | 52 | 0 |
Total costs and expenses | 298,897 | 386,890 |
Operating loss | (7,825) | (5,609) |
Interest expense | (3,970) | (3,452) |
Other income | 9 | 100 |
Loss before income taxes | (11,786) | (8,961) |
Income tax expense | (268) | (408) |
NET LOSS | $ (12,054) | $ (9,369) |
NET LOSS PER COMMON SHARE ATTRIBUTABLE TO STOCKHOLDERS | ||
Basic (in dollars per share) | $ (0.53) | $ (0.41) |
Diluted (in dollars per share) | $ (0.53) | $ (0.41) |
Basic weighted average common shares outstanding (in shares) | 22,702 | 22,702 |
Diluted weighted average common shares outstanding (in shares) | 22,702 | 22,702 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | May 04, 2019 | Feb. 02, 2019 | May 05, 2018 |
CURRENT ASSETS | |||
Cash and cash equivalents | $ 16,260 | $ 15,110 | $ 14,288 |
Accounts and franchisee receivables, net | 10,803 | 11,916 | 12,784 |
Merchandise inventories | 262,977 | 277,285 | 332,449 |
Prepaid expenses and other current assets | 5,407 | 9,452 | 8,101 |
Total current assets | 295,447 | 313,763 | 367,622 |
PROPERTY AND EQUIPMENT, net | 25,038 | 27,731 | 35,830 |
OPERATING LEASE RIGHT-OF-USE ASSETS | 112,683 | ||
OTHER ASSETS, net | 1,972 | 2,277 | 7,242 |
TOTAL ASSETS | 435,140 | 343,771 | 410,694 |
CURRENT LIABILITIES | |||
Short-term borrowings | 94,600 | 93,000 | 114,900 |
Current portion of term loan, net | 39,403 | 39,057 | 0 |
Payable to related party | 13,633 | 14,080 | 22,896 |
Accounts payable | 20,847 | 19,830 | 17,730 |
Current operating lease liabilities | 33,200 | ||
Other current liabilities | 42,623 | 56,009 | 50,594 |
Total current liabilities | 244,306 | 221,976 | 206,120 |
LONG-TERM OPERATING LEASE LIABILITIES | 83,197 | ||
LONG-TERM PORTION OF TERM LOAN, NET | 0 | 0 | 38,412 |
OTHER LONG-TERM LIABILITIES | 2,176 | 1,839 | 2,111 |
TOTAL LIABILITIES | 329,679 | 223,815 | 246,643 |
COMMITMENTS AND CONTINGENCIES (Note 11) | |||
STOCKHOLDERS' EQUITY | |||
TOTAL STOCKHOLDERS' EQUITY | 105,461 | 119,956 | 164,051 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 435,140 | $ 343,771 | $ 410,694 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
May 04, 2019 | May 05, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (12,054) | $ (9,369) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 2,260 | 2,608 |
Loss on sale of assets | 52 | 0 |
Amortization of debt issuance costs | 890 | 548 |
(Recovery of) provision for losses on franchisee receivables | (63) | 42 |
Change in operating assets and liabilities: | ||
Accounts and franchisee receivables | 1,176 | 2,134 |
Merchandise inventories | 14,308 | 3,845 |
Payable to related party | (447) | (5,186) |
Accounts payable | 1,017 | 1,989 |
Store closing accrual | (327) | (1,814) |
Other operating assets and liabilities, net | (7,409) | (4,040) |
Net cash provided by (used in) operating activities | (597) | (9,243) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Proceeds from sale of assets | 949 | 0 |
Purchases of property and equipment | (575) | (2,270) |
Net cash used in investing activities | 374 | (2,270) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Net short-term borrowings (payments) on senior ABL facility | 1,600 | (23,000) |
Net borrowings (payments) of capital lease obligations | (32) | (13) |
Proceeds from term loan agreement | 0 | 40,000 |
Debt issuance costs | (195) | (1,588) |
Net cash provided by financing activities | 1,373 | 15,399 |
NET CHANGE IN CASH AND CASH EQUIVALENTS | 1,150 | 3,886 |
CASH AND CASH EQUIVALENTS—Beginning of period | 15,110 | 10,402 |
CASH AND CASH EQUIVALENTS—End of period | 16,260 | 14,288 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||
Cash paid for interest | 3,144 | 3,387 |
Cash paid for income taxes | $ 20 | $ 877 |
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 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 | (9,369) | (9,369) | ||
Ending balance (in shares) at May. 05, 2018 | 22,702 | |||
Ending balance at May. 05, 2018 | 164,051 | $ 227 | 555,378 | (391,554) |
Beginning balance (in shares) at Feb. 02, 2019 | 22,702 | |||
Beginning balance at Feb. 02, 2019 | 119,956 | $ 227 | 555,378 | (435,649) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Net loss | (12,054) | (12,054) | ||
Ending balance (in shares) at May. 04, 2019 | 22,702 | |||
Ending balance at May. 04, 2019 | $ 105,461 | $ 227 | $ 555,378 | $ (450,144) |
Background and Basis of Present
Background and Basis of Presentation | 3 Months Ended |
May 04, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BACKGROUND AND BASIS OF PRESENTATION | BACKGROUND AND BASIS OF PRESENTATION Background Sears Hometown and Outlet Stores, Inc. is a national retailer primarily focused on selling home appliances, lawn and garden equipment, and tools. As of May 4, 2019 the Company or its dealers and franchisees operated a total of 639 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.” 2012 Separation The Company separated from Sears Holdings Corporation (“Sears Holdings”) in October 2012 (the “2012 Separation”). The Company has specified rights to use the "Sears" name under a license agreement from Transform Holdco LLC (as assignee from Sears Holdings). Basis of Presentation These unaudited Condensed Consolidated Financial Statements include the accounts of Sears Hometown and Outlet Stores, Inc. and its subsidiaries, all of which are wholly owned. These unaudited Condensed Consolidated Financial Statements do not include all of the information and footnotes required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In the opinion of management, all adjustments (which include normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the 13 weeks ended May 4, 2019 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 2, 2019 (the "2018 10-K"). We operate through two segments--our Sears Hometown segment ("Hometown") and our Sears Outlet segment ("Outlet"). Our first fiscal-quarter end is the Saturday closest to April 30. For 2019 and 2018 , our first fiscal quarters ended as follows: Fiscal Year First Quarter Ended Weeks 2019 May 4, 2019 13 2018 May 5, 2018 13 Our fiscal year end is the Saturday closest to January 31. Our 2019 fiscal year will end February 1, 2020. Unless otherwise stated, references to specific years and quarters in these notes are to fiscal years and fiscal quarters, respectively. The Company's Merger Agreement with Transform Holdco LLC The Company, Transform Holdco LLC (“Transform”), an affiliate of Edward S. Lampert (“ESL”), and Transform Merger Corporation, a wholly owned subsidiary of Transform (“Merger Subsidiary”), have entered into an Agreement and Plan of Merger dated as of June 1, 2019 (the “Merger Agreement”) pursuant to which Merger Subsidiary will merge with and into the Company (the “Merger”) after first affording the Company an opportunity for a specified period of time to sell the Company’s Sears Outlet and Buddy’s Home Furnishing Stores businesses (together, the “Outlet Segment”) to a third party. At the completion of the Merger, each share of the Company’s outstanding common stock not owned by ESL and his affiliates will be converted into the right to receive an amount in cash equal to $2.25 per share (the “Base Merger Consideration”), subject to an upward adjustment in the event a sale of the Outlet Segment (an “Outlet Sale”) has occurred that satisfies criteria specified in the Merger Agreement (the “Sale Criteria”). The Sale Criteria include that (i) the Outlet Sale will result in net proceeds (after taking account of specified deductions, including transaction fees, expenses and taxes incurred by the Company in connection with the sale, and any excess net working capital transferred to the buyer of the Outlet Segment) to the Company of not less than $97.5 million (the “Outlet Sale Minimum Proceeds”), (ii) an Outlet Sale agreement is entered into with a third party buyer not later than August 24, 2019 (extendable by ten days in specified circumstances) and (iii) the Outlet Sale has been completed by October 23, 2019 (extendable by fifteen days in specified circumstances). The per share upward adjustment to the Base Merger Consideration, if any, will be calculated by dividing (i) the excess, if any, of the net proceeds received by the Company as a result of the Outlet Sale over the Outlet Sale Minimum Proceeds by (ii) the aggregate number of shares of Company common stock and unvested Company restricted stock units issued and outstanding as of the closing of the Merger. Under the terms of the Merger Agreement, Transform will have the opportunity to match the economic terms of any proposed Outlet Sale to a third party that is expected to result in net proceeds to the Company of less than $120 million The Merger is expected to close in the Company’s third fiscal quarter of 2019, subject to the satisfaction of specified closing conditions. ESL, together with his affiliates, owns more than 58% of the outstanding shares of the Company’s common stock. The Merger Agreement was negotiated on behalf of the Company, and approved by, a special committee of the Company’s Board of Directors consisting of a director who is independent and disinterested. The Company's Relationship with Sears Holdings and Transform Subsequent to the 2012 Separation and until mid-February 2019 we had significant business relationships with Sears Holdings and its subsidiaries, and we relied on them for merchandise and services through various agreements among the Company, Sears Holdings and, in some circumstances, subsidiaries of Sears Holdings (together the “Operative Agreements”). During October 2018, Sears Holdings and many of its subsidiaries (together the “Sears Holdings Companies”) 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 Company, which is not a subsidiary of Sears Holdings, is not included in the bankruptcy petitions filed by the Sears Holdings Companies, and neither the Company nor its subsidiaries have filed a bankruptcy petition. As part of the Sears Holdings Companies' bankruptcy proceedings Transform acquired most of the operating assets (including Sears stores) and related assets of the Sears Holdings Companies (together the “Sears Assets”), and the Operative Agreements were assigned by the Sears Holdings Companies to, and the obligations thereunder were assumed by, Transform on or about February 11, 2019. Senior ABL Facility and Term Loan 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 9 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 Operative 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 termination of "the Separation Agreements" is an event of default thereunder, which could result in all amounts outstanding becoming immediately due and payable. The Company and specified subsidiaries have entered into an Amendments Agreement dated March 12, 2019 with Transform and its subsidiaries party thereto, as assignees. The Amendments Agreement extends until February 1, 2023 the duration of those Separation Agreements that by their express terms would have expired on February 1, 2020 (October 11, 2022 with respect to the Shop Your Way Rewards Retail Establishment Agreement). 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. As a result of our inability to conclude at this time that the refinancing of the Senior ABL Facility and the Term Loan will occur before their February 2020 maturity dates, and due to the uncertain impact on our business and financial performance associated with ongoing operating losses in our Hometown segment, "substantial doubt" (as defined by the Accounting Evaluation Requirements) is deemed to exist about our ability to continue as a going concern for the purposes of the Accounting Evaluation Requirements. We note, however, that we expect we will complete the Merger in accordance with the Merger Agreement during the Company's fiscal third quarter of 2019 prior to the maturity of the Senior ABL Facility and the Term Loan. The May 3, 2019 report of the Company's independent registered public accounting firm that accompanied the Consolidated Financial Statements included in the Annual Report on Form 10-K incorporated the firm's audit opinion, which expressed "Going Concern Uncertainty" (hereinafter the "Going Concern Uncertainty"). The Senior ABL Facility and the Term Loan Agreement provide that the Company's inability to obtain from the Company's independent registered public accounting firm a report and opinion that "shall not be subject to any 'going concern' or like qualification or exception" constitutes an event of default, which would give the Senior ABL Facility and the Term Loan Agreement lenders the right to accelerate the maturity of all outstanding loans, among other actions. The Senior ABL Facility and the Term Loan Agreement lenders have waived through October 31, 2019 any default resulting from the Going Concern Uncertainty. 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 $15.1 million and $11.9 million at May 4, 2019 and February 2, 2019 , respectively. The change in deferred revenue represents additional revenue deferred during the first quarter of 2019 . 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. Commissions earned on services, and delivery and handling revenues are presented net of related costs because we are acting as an agent in arranging the services for the customer and do not control the services being rendered. The Company accepts Transform's Sears gift cards as tender for purchases and is reimbursed weekly by Transform for gift cards tendered. Refund Liability and Right of Return Asset 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 refund liability was $2.9 million at May 4, 2019 and February 2, 2019 . We also recognize a return asset, and corresponding adjustment to cost of sales, for our right to recover the goods returned by the customer, measured at the former carrying amount of the goods, less any expected recovery cost. The right of return asset was $1.4 million at May 4, 2019 and February 2, 2019. At each financial reporting date, we assess our estimates of expected returns, refund liabilities, and return assets. 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 Transform (as assignee from 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 Transform (as assignee from Sears Holdings). Variable Interest Entities and Consolidation The Financial Accounting Standards Board ("FASB") has issued guidance on variable interest entities and consolidation for determining whether an entity is a variable interest entity ("VIE") as well as the methods permitted for determining the primary beneficiary of a VIE. In addition, this guidance requires ongoing reassessments as to whether a reporting company is the primary beneficiary of a VIE and disclosures regarding the reporting company’s involvement with a VIE. On an ongoing basis the Company evaluates its business relationships, such as those with its independent dealers, independent franchisees, and suppliers, to identify potential VIE's. Generally, these businesses either qualify for a scope exception under the consolidation guidance or, where a variable interest exists, the Company does not possess the power to direct the activities that most significantly impact the economic performance of these businesses. The Company has not consolidated any of such entities in the periods presented. Fair Value of Financial Instruments We determine the fair value of financial instruments in accordance with standards pertaining to fair value measurements. Such standards define fair value and establish a framework for measuring fair value under GAAP. Under fair value measurement accounting standards, fair value is considered to be the exchange price in an orderly transaction between market participants to sell an asset or transfer a liability at the measurement date. We report the fair value of financial assets and liabilities based on the fair value hierarchy prescribed by accounting standards for fair value measurements, which prioritizes the inputs to valuation techniques used to measure fair value into three levels, as follows: Level 1 inputs —unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. An active market for the asset or liability is one in which transactions for the asset or liability occurs with sufficient frequency and volume to provide ongoing pricing information. Level 2 inputs —inputs other than quoted market prices included in Level 1 that are observable, either directly or indirectly, for the asset or liability. Level 2 inputs include, but are not limited to, quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted market prices that are observable for the asset or liability, such as interest-rate curves and yield curves observable at commonly quoted intervals, volatilities, credit risks, and default rates. Level 3 inputs —unobservable inputs for the asset or liability. Cash and cash equivalents, merchandise payables, accrued expenses (Level 1), accounts and franchisee notes receivable, and short-term debt (Level 2) are reflected in the Condensed Consolidated Balance Sheets at cost, which approximates fair value due to the short-term nature of these instruments. For short-term borrowings and our Term Loan, the variable interest rates are a significant input in our fair value assessments and are consistent with the interest rates in the market. The carrying value of long-term notes receivable approximates fair value. We may be required, on a nonrecurring basis, to adjust the carrying value of the Company's long-lived assets. When necessary, these valuations are determined by the Company using Level 3 inputs. These assets are subject to fair value adjustments in certain circumstances as when there is evidence that impairment may exist. The Company was not required to measure any other significant non-financial asset or liability at fair value as of May 4, 2019 . Recently Issued Accounting Pronouncements Recently issued accounting pronouncements that are not yet effective and that we have not discussed in the 2018 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. Recently Adopted Accounting Pronouncements ASU 2016-02 "Leases (Topic 842)" In February 2016, the FASB issued Accounting Standards Update ("ASU") 2016-02, "Leases (Topic 842)", which establishes a right-of-use model and requires an entity that is a lessee to recognize the right-of-use assets and liabilities arising from leases on the balance sheet. ASU No. 2016-02 also requires disclosures about the amount, timing, and uncertainty of cash flows arising from leases. Leases will be classified as finance or operating, with classification affecting both the pattern and classification of expense recognition in the statements of earnings. This guidance was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2019-10, Codification Improvements to Topic 842; and ASU No. 2018-11, Targeted Improvements. ASU No. 2016-02 and subsequent updates require a modified retrospective transition, with the cumulative effect of transition, including initial recognition of lease assets and liabilities for existing operating leases, as of (i) the effective date or (ii) the beginning of the earliest comparative period presented. These updates also provide a number of practical expedients for implementation which we are applying, as discussed below. On February 3, 2019 (the "effective date"), we adopted ASU No. 2016-02 and subsequent updates, collectively referred to as Topic 842, using the modified retrospective transition method. In addition, we adopted the package of practical expedients in transition, which permits us to not reassess our prior conclusions pertaining to lease identification, lease classification and initial direct costs on leases that commenced prior to our adoption of the new standard. We also elected to treat the lease and non-lease components of leases as a single lease component and to exempt leases with an initial term of twelve months or less from balance sheet recognition. As a result of adopting Topic 842, we recognized net operating right-of-use assets of $119.6 million and operating lease liabilities of $123.3 million on the effective date. Existing prepaid rent, accrued rent, and deferred rent were recorded as an offset to our gross operating lease right-of-use assets. The cumulative effect of the adoption resulted in a $2.4 million adjustment to the opening balance of retained earnings as of February 3, 2019. The standard did not have a material impact on our results of operations or cash flows. |
Net Sales
Net Sales | 3 Months Ended |
May 04, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Net Sales | NET SALES During the 13 weeks ended May 4, 2019 and May 5, 2018, respectively, approximately 98% of our revenues were generated in the United States. Net sales of merchandise and services for the 13 weeks ended were as follows: 13 weeks ended Thousands May 4, 2019 May 5, 2018 Merchandise $ 268,622 $ 351,978 Services 17,359 22,811 Other 5,091 6,492 Net sales $ 291,072 $ 381,281 |
Property and Leases
Property and Leases | 3 Months Ended |
May 04, 2019 | |
Leases [Abstract] | |
PROPERTY AND LEASES | PROPERTY AND LEASES Net Property and Equipment Net property and equipment includes accumulated depreciation and amortization of $42.0 million as of May 4, 2019 and $40.8 million as of February 2, 2019. Leases We lease certain retail locations, office space, warehouse and distribution space and vehicles. While most of these leases are operating leases, certain vehicles are leased under finance leases. We consider various factors such as market conditions and the terms of any renewal options that may exist to determine whether we will renew or replace the lease. A majority of our leases have remaining lease terms of one to ten years , typically with the option to extend the leases for up to five years . Some of our leases may include the option to terminate in less than five years . In the event we are reasonably certain to exercise the option to extend a lease, we will include the extended terms in the operating lease right-of-use asset and operating lease liability. Real estate taxes, insurance, maintenance, and operating expenses applicable to the leased property are our obligations under the lease agreements. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The gross amounts of assets and liabilities related to both operating and finance leases are as follows: Thousands Balance Sheet Caption May 4, 2019 Assets: Operating lease assets Operating lease right-of-use assets $ 112,683 Finance lease assets Net property and equipment 702 Total lease assets $ 113,385 Liabilities: Current: Operating lease liabilities Current operating lease liabilities $ 33,200 Finance lease liabilities Other current liabilities 331 Long-term: Operating lease liabilities Long-term operating lease liabilities 83,197 Finance lease liabilities Other long-term liabilities 371 Total lease liabilities $ 117,099 The components of lease costs are as follows: Thousands Statement of Operations Caption 13 Weeks Ended May 4, 2019 Operating lease cost Cost of sales and occupancy $ 13,367 Finance lease cost: Amortization of leased assets Depreciation and amortization 25 Interest on lease liabilities Interest expense 5 Net lease cost $ 13,397 ASU 2016-02 requires that public companies use a secured incremental borrowing rate as the discount rate for present value of lease payments. Lease terms and discount rates are as follows: Weighted Average Remaining Lease Term (Years) May 4, 2019 Operating leases 3.9 Finance leases 2.7 Weighted Average Discount Rate: Operating leases 11.1 % Finance leases 7.1 % The approximate future minimum lease payments under finance and operating leases at May 4, 2019 are as follows: Fiscal Year (thousands) Finance Leases Operating Leases 2019 $ 231 $ 26,982 2020 387 37,840 2021 77 32,838 2022 42 23,464 2023 19 13,198 Thereafter 3 4,541 Total lease payments 759 138,863 Less imputed interest 57 22,466 Net Minimum Lease Payments $ 702 $ 116,397 Capital lease obligations 702 Less Current Portion of Capital Lease Obligations (331 ) Long-term Capital Lease Obligations $ 371 Note: Amounts presented do not include payments relating to immaterial leases excluded from the balance sheets as part of transition elections adopted upon implementation of Topic 842. The approximate future minimum lease payments under capital and operating leases at February 2, 2019 were as follows: Fiscal Year (thousands) Capital Leases Operating Leases 2019 $ 259 $ 39,292 2020 359 33,666 2021 21 26,523 2022 14 19,037 2023 5 9,486 Thereafter — 4,374 Total lease payments 658 132,378 Less sublease income on leased properties — (3,036 ) Net Minimum Lease Payments $ 658 $ 129,342 Capital lease obligations 658 Less Current Portion of Capital Lease Obligations (259 ) Long-term Capital Lease Obligations $ 399 Other lease information as follows: Thousands 13 Weeks Ended May 4, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows - operating leases $ 12,936 Operating cash flows - finance leases 32 Financing cash flows - finance leases 5 |
Accounts and Franchisee Receiva
Accounts and Franchisee Receivables and Other Assets | 3 Months Ended |
May 04, 2019 | |
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 May 4, 2019 May 5, 2018 February 2, 2019 Short-term franchisee receivables $ 574 $ 1,147 $ 584 Miscellaneous receivables 10,803 12,484 11,916 Long-term franchisee receivables 1,305 7,366 1,422 Other assets 1,972 4,486 2,277 Allowance for losses on short-term franchisee receivables (574 ) (837 ) (584 ) Allowance for losses on long-term franchisee receivables (1,305 ) (4,620 ) (1,422 ) Net accounts and franchisee receivables and other assets $ 12,775 $ 20,026 $ 14,193 |
Allowance for Losses on Franchi
Allowance for Losses on Franchisee Receivables | 3 Months Ended |
May 04, 2019 | |
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: 13 Weeks Ended Thousands May 4, 2019 May 5, 2018 Allowance for losses on franchisee receivables, beginning of period $ 2,006 $ 5,775 (Recoveries) provisions during the period (63 ) 42 Write off of franchisee receivables (64 ) (360 ) Allowance for losses on franchisee receivables, end of period $ 1,879 $ 5,457 |
Other Current and Long-Term Lia
Other Current and Long-Term Liabilities | 3 Months Ended |
May 04, 2019 | |
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 May 4, 2019 May 5, 2018 February 2, 2019 Customer deposits $ 15,025 $ 15,396 $ 12,826 Sales and other taxes 3,908 7,195 7,165 Accrued expenses 18,020 21,931 23,097 Payroll and related items 5,528 5,342 12,115 Store closing and severance costs 2,318 2,841 2,645 Total other current and long-term liabilities $ 44,799 $ 52,705 $ 57,848 |
Income Taxes
Income Taxes | 3 Months Ended |
May 04, 2019 | |
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 2012 Separation. For all periods after the 2012 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 weeks ended May 4, 2019 and May 5, 2018 , 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. We account for income taxes in accordance with accounting standards for such taxes, which require that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the financial reporting and tax bases of recorded assets and liabilities. Accounting standards also require that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion of or all of the deferred tax assets will not be realized. 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 2, 2019 . 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 recently completed an audit of the Company's federal income tax return for the fiscal year ended January 30, 2016. Currently, the Company is under audit in one state for the years ended February 1, 2014 through January 28, 2017. |
Related Party Agreements and Tr
Related Party Agreements and Transactions | 3 Months Ended |
May 04, 2019 | |
Related Party Transactions [Abstract] | |
RELATED-PARTY AGREEMENTS AND TRANSACTIONS | RELATED-PARTY AGREEMENTS AND TRANSACTIONS See Note 1 for information regarding the Merger Agreement among the Company, Transform, and Merger Subsidiary. According to publicly available information, ESL Investments, Inc. and its investment affiliates including Edward S. Lampert (together, "ESL") beneficially own more than 58% of our outstanding shares of common stock and control Transform and its subsidiaries. The Operative Agreements, among other things, (1) govern specified aspects of our relationship with Transform (as assignee from Sears Holdings of the Operative Agreements), (2) establish terms under which subsidiaries of Transform are providing services to us, and (3) establish terms pursuant to which subsidiaries of Transform are obtaining merchandise inventories for us. The terms of the Operative Agreements were agreed to prior to the 2012 Separation (except for amendments entered into after the 2012 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 2012 Separation. The costs and allocations charged to the Company by Transform (Sears Holdings prior to mid-February 2019) do not necessarily reflect the costs of obtaining the services from unaffiliated third parties or of the Company itself providing the applicable services. Prior to mid-February 2019 the Company had engaged in frequent discussions, and has resolved disputes, with Sears Holdings about the terms and conditions of the Operative Agreements, the business relationships that are reflected in the Operative Agreements, and the details of these business relationships, many of which details had not been addressed by the terms and conditions of the Operative Agreements or, if addressed, in the past were, and with respect to Transform in the future could be, in dispute as to their meaning or application in the context of the existing business relationships. Many of these discussions have resulted in adjustments to the relationships that the Company believes together are in the Company's best interests. The following is a summary of the nature of the principle related-party transactions between SHO and Transform: • We are party to an agreement with Transform (as assignee from Sears Holdings) pursuant to which Sears Holdings consummated the 2012 Separation. The agreement, among other things, provided for as part of the 2012 Separation the allocation and transfer, through a series of intercompany transactions, of the assets and the liabilities comprising the Sears Hometown and Hardware and Sears Outlet businesses of Sears Holdings. In the agreement SHO and Transform agree to release each other from all pre-2012 Separation claims (other than with respect to the agreements executed in connection with the 2012 Separation) and each agrees to defend and indemnify the other with respect to its post-2012 Separation business. • We obtain a significant amount of our merchandise inventories from Transform. This enables us to take advantage of the amount and scope of Transform's purchasing activities. The Operative Agreements include an Amended and Restated Merchandising Agreement with subsidiaries of Transform (the "Merchandising Agreement") pursuant to which they (1) sell to us, with respect to certain specified product categories, Sears-branded products including KCD Products and vendor-branded products obtained from Transform's vendors and suppliers and (2) grant us licenses to use the trademarks owned by subsidiaries of Transform, or the "Sears marks," including the KCD Marks in connection with the marketing and sale of products sold under the Sears marks. The initial term of the Merchandising Agreement will expire on February 1, 2023, subject to one three -year renewal term with respect to the KCD Products. We pay, on a weekly basis, a royalty determined by multiplying our net sales of the KCD Products by specified fixed royalties rates for each brand’s licensed products, subject to adjustments based on the extent to which we feature Kenmore brand products in certain of our advertising and the extent to which we pay specified minimum commissions to our franchisees and Hometown Store owners. The Operative Agreements also provide for related logistics, handling, warehouse and transportation services, the charges for which are based generally on merchandise inventory units. We also pay fees for participation in Transform's Shop Your Way program. • We obtain our merchandise from Transform and other vendors. Products which we acquired from Transform, including KCD Products and other products, accounted for approximately 52% and 64% of our total purchases of inventory from all vendors during the first quarter of 2019 and 2018, respectively. The loss of or a reduction in the amount of merchandise made available to us by Transform could have a material adverse effect on our business and results of operations. • Transform (as assignee from Sears Holdings) provides the Company with specified corporate services pursuant to the Operative Agreements. These services include tax, accounting, procurement, risk management and insurance, advertising and marketing, loss prevention, environmental, product and human safety, facilities, logistics and distribution, information technology (including the point-of-sale system used by the Company and our dealers and franchisees), online, payment clearing, and other financial, real estate management, merchandise-related and other support services. Transform charges the Company for these corporate services generally based on actual usage, a pro rata charge based upon sales, head count, or square footage, or a fixed fee or commission as agreed between the parties. • Transform (as assignee from Sears Holdings) has licensed the Company until October 11, 2029, on a royalty-free basis, to use under specified conditions (1) the name "Sears" in our corporate name and to promote our businesses and (2) the www.SearsOutlet.com (our license to use "SearsOutlet.com" on a web platform not operated by Transform will expire on February 1, 2023), www.searshomeapplianceshowroom.com, www.searshometownstores.com, and www.searshardwarestores.com domain names to promote our businesses. Also, Transform has licensed the Company until October 11, 2029, on an exclusive, royalty-free basis, under specified conditions to use for the purpose of operating our stores the names "Sears Appliance & Hardware," "Sears Authorized Hometown Stores," "Sears Hometown Store," "Sears Home Appliance Showroom," "Sears Hardware," and "Sears Outlet Store." • Transform (as assignee from Sears Holdings) has assigned to us leases for, or has subleased to us, many of the stores that we operate or that we have, in turn, subleased to franchisees. Generally, the terms of the subleases match the terms, including the payment of rent and expiration date, of the existing leases between Transform (or one of its subsidiaries) and the landlord. In addition, a small number of our stores are in locations where Transform currently operates one of its stores or a distribution facility. In such cases we have entered into a lease or sublease with Transform (or one of its subsidiaries) for the portion of the space in which our store will operate, and we pay rent directly to Transform on the terms negotiated in connection with the 2012 Separation. We also lease from Transform office space for our corporate headquarters. • SHO receives commissions from Transform for specified sales of merchandise made through www.sears.com and www.SearsOutlet.com, the sale of extended-service plans, delivery and handling services and relating to the use in our stores of credit cards branded with the Sears name. For certain transactions SHO pays a commission to Transform. The Operative Agreements may be terminated by either party upon a material breach if the breaching party fails to cure such breach within 30 days following written notice of such breach or, if such breach is not curable, immediately upon delivery of notice of the non-breaching party’s intention to terminate. The following table summarizes the results of the transactions with Transform (and with Sears Holdings during the period of February 3, 2019 through February 11, 2019) that are reflected in the Company’s condensed consolidated financial statements: 13 Weeks Ended Thousands May 4, 2019 May 5, 2018 Net commissions $ 10,569 $ 15,139 Purchases related to cost of sales and occupancy 105,869 191,652 Services included in selling and administrative expense 2,211 13,529 We incur payables to Transform (and incurred payables to Sears Holdings prior to mid-February 2019) for merchandise inventory purchases and service and occupancy charges (net of commissions) based on the Operative Agreements. Amounts due to or from Transform 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 Operative Agreements and at the request of Transform, the Company can pay invoices on two or three -day terms and receive a deduction on invoices for early–payment discounts of 43 basis points or 37 basis points, respectively. The Company can, in its sole discretion, revert to ten –day, no–discount payment terms at any time upon notice to Transform. The discount received for payments made on accelerated terms, net of incremental interest expense, results in a net financial benefit to the Company. We paid Seritage Growth Properties $0.1 million and $0.2 million for the 13 weeks ended May 4, 2019 and and May 5, 2018 , respectively, for occupancy charges for properties we lease from Seritage. Edward S. Lampert is the Chairman of the Board of Trustees of Seritage. |
Financing Arrangements
Financing Arrangements | 3 Months Ended |
May 04, 2019 | |
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 2012 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 $0.9 million are included in Prepaid and Other current assets on the Condensed Consolidated Balance Sheet as of May 4, 2019 and are being amortized over the remaining term of the Senior ABL Facility. As of May 4, 2019 , we had $94.6 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 May 4, 2019 was $21.9 million , with $7.2 million of letters of credit outstanding under the facility. 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 2018 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 7.00% at May 4, 2019 ), 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 9.00% at May 4, 2019 ), 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. The Company's ability to complete the Outlet Sale is subject to the consent of, or waiver by, the Senior ABL facility lenders. 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, Transform (as assignee from 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 Operative 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 Transform of "the Separation Agreements” (which include specified Operative Agreements) and cessation of business activities in the ordinary course. Recent Amendments On May 3, 2019 the Company and the Senior ABL Facility lenders entered into a Waiver, Consent and First Amendment to Amended and Restated Credit Agreement (the “ABL Amendment”) with respect to the Senior ABL Facility. The ABL Amendment generally provides for the following, among other things: (1) the definition of “Change of Control” is amended to provide that a Change of Control occurs if the Permitted Holders (as defined in the Senior ABL Facility) beneficially own more than 75.0% of the Company’s common stock; (2) under specified conditions cash in excess of $ 2.0 million must be applied to pay amounts outstanding under the Senior ABL Facility; (3) the lenders under the Senior ABL Facility waive until October 31, 2019 any default arising as a result of the Going Concern Uncertainty; and (4) the lender under the Senior ABL Facility consent on a limited basis to the Loan Parties (as defined in the ABL Credit Agreement) negotiating and entering into specified acquisitions with Permitted Holders upon compliance with specified conditions, including a requirement that the acquisition agreement must contain a condition precedent to the closing of the acquisition requiring payment in full in cash of all outstanding loans under the Senior ABL Facility. 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 $0.6 million related to the Term Loan are netted against the Term Loan on the Condensed Consolidated Balance Sheets as of May 4, 2019 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 2.56% at May 4, 2019 ) 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 Company's ability to complete the Outlet Sale is subject to the consent of, or waiver by, the Term Loan lenders. 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, Transform (as assignee from 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 Operative 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 Transform of "the Separation Agreements” (which include specified Operative Agreements) and cessation of business activities in the ordinary course. Recent Amendments On May 3, 2019 the Company and the Term Loan lenders entered into a Waiver, Consent and First Amendment to Term Loan Credit Agreement (the “Term Loan Amendment”) with respect to the Term Loan. The Term Loan Amendment generally provides for the following, among other things: (1) the definition of “Change of Control” is amended to provide that a Change of Control occurs if the Permitted Holders (as defined in the Term Loan) beneficially own more than 75.0% of the Company’s common stock; (2) under specified conditions cash in excess of $2.0 million must be applied to pay amounts outstanding under the Term Loan; (3) the lenders under the Term Loan waive until October 31, 2019 any default arising as a result of the Going Concern Uncertainty; and (4) the lenders under the Term Loan consent on a limited basis to the Loan Parties (as defined in the Term Loan) negotiating and entering into specified acquisitions with Permitted Holders upon compliance with specified conditions, including a requirement that the acquisition agreement must contain a condition precedent to the closing of the acquisition requiring payment in full in cash of all outstanding loans under the Term Loan. |
Summary of Segment Data
Summary of Segment Data | 3 Months Ended |
May 04, 2019 | |
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 May 4, 2019 Thousands Hometown Outlet Total Net sales Appliances $ 116,554 $ 98,471 $ 215,025 Lawn and garden 31,625 5,243 36,868 Tools 13,460 3,128 16,588 Other 7,837 14,754 22,591 Total 169,476 121,596 291,072 Costs and expenses Cost of sales and occupancy 141,253 87,789 229,042 Selling and administrative 41,126 26,417 67,543 Depreciation and amortization 1,161 1,099 2,260 Loss on sale of assets — 52 52 Total 183,540 115,357 298,897 Operating (loss) income $ (14,064 ) $ 6,239 $ (7,825 ) Total assets $ 225,612 $ 209,528 $ 435,140 Capital expenditures $ 482 $ 93 $ 575 13 Weeks Ended May 5, 2018 Thousands Hometown Outlet Total Net sales Appliances $ 172,560 $ 105,375 $ 277,935 Lawn and garden 48,465 4,786 53,251 Tools 19,153 3,149 22,302 Other 13,526 14,267 27,793 Total 253,704 127,577 381,281 Costs and expenses Cost of sales and occupancy 198,728 95,075 293,803 Selling and administrative 65,010 25,469 90,479 Depreciation and amortization 1,324 1,284 2,608 Total 265,062 121,828 386,890 Operating (loss) income $ (11,358 ) $ 5,749 $ (5,609 ) Total assets $ 289,035 $ 121,659 $ 410,694 Capital expenditures $ 1,918 $ 352 $ 2,270 |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
May 04, 2019 | |
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 | 3 Months Ended |
May 04, 2019 | |
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 Thousands except income per common share May 4, 2019 May 5, 2018 Basic weighted average shares 22,702 22,702 Diluted weighted average shares 22,702 22,702 Net loss $ (12,054 ) $ (9,369 ) Loss per common share: Basic $ (0.53 ) $ (0.41 ) Diluted $ (0.53 ) $ (0.41 ) |
Equity
Equity | 3 Months Ended |
May 04, 2019 | |
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. During 2017 the Company granted a total of 262,788 stock units under the Plan, which were payable solely in cash based on the Nasdaq stock price on the vesting dates. As of May 4, 2019 , 47,805 of these stock units had been forfeited and 149,748 had vested. The remaining 65,235 stock units will vest, if at all, on January 30, 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 May 4, 2019 , 25,074 of these stock units had been forfeited and 116,224 had vested. The remaining 220,095 stock units will vest, if at all, in two substantially equal installments on January 30, 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. On February 20, 2019 the Company granted a total of 492,758 stock units under the Plan, which are payable solely in cash based on the Nasdaq stock price on the vesting dates. As of May 4, 2019 , 5,170 of these stock units had been forfeited. The remaining 487,588 stock units will vest, if at all, in three substantially equal installments on February 20, 2020, February 20, 2021 and February 20, 2022 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 stock units referred to above in this Note 13, which were, and are, payable solely in cash based on the Nasdaq closing price of our common stock at 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 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 weeks ended May 4, 2019 no stock-based compensation expense was recorded. During the 13 weeks ended May 4, 2019 and May 5, 2018 , we recorded $0.3 million and $0.2 million , respectively, in compensation cost related to the then-outstanding stock units, which are included in Selling and administrative expenses in the consolidated condensed statements of operations and Other current liabilities in the consolidated condensed balance sheets. At May 4, 2019 we had $1.2 million in total estimated unrecognized compensation cost related to the remaining non-vested stock units, which cost we expect to recognize over the next approximately 2.75 years. Share Repurchase Program During 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. At May 4, 2019 , 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 May 4, 2019 . |
Store Closing Charges
Store Closing Charges | 3 Months Ended |
May 04, 2019 | |
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 weeks ended May 4, 2019 and May 5, 2018 , 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 May 4, 2019 $ 76 $ 5,146 $ — $ 340 $ 5,562 13 weeks ended May 5, 2018 $ 79 $ — $ — $ — $ 79 (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 reserves included within other current liabilities in the Condensed Consolidated Balance Sheets, consists of the following: Thousands May 4, 2019 May 5, 2018 Store closing and severance costs reserve, beginning of period $ 2,633 $ 4,655 Store closing costs 2,145 79 Payments/utilization (2,460 ) (1,893 ) Store closing and severance costs reserve, end of period $ 2,318 $ 2,841 |
Subsequent Event
Subsequent Event | 3 Months Ended |
May 04, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Event | SUBSEQUENT EVENT See Note 1 for information regarding the Merger Agreement among the Company, Transform, and Merger Subsidiary. |
Background and Basis of Prese_2
Background and Basis of Presentation (Policies) | 3 Months Ended |
May 04, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation These unaudited Condensed Consolidated Financial Statements include the accounts of Sears Hometown and Outlet Stores, Inc. and its subsidiaries, all of which are wholly owned. These unaudited Condensed Consolidated Financial Statements do not include all of the information and footnotes required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In the opinion of management, all adjustments (which include normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the 13 weeks ended May 4, 2019 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 2, 2019 (the "2018 10-K"). |
Segment Reporting | We operate through two segments--our Sears Hometown segment ("Hometown") and our Sears Outlet segment ("Outlet"). |
Fiscal Period | Our first fiscal-quarter end is the Saturday closest to April 30. For 2019 and 2018 , our first fiscal quarters ended as follows: Fiscal Year First Quarter Ended Weeks 2019 May 4, 2019 13 2018 May 5, 2018 13 Our fiscal year end is the Saturday closest to January 31. Our 2019 fiscal year will end February 1, 2020. 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, Refund Liability and Right of Return Asset, and Cost of Sales and Occupancy | Revenue Recognition Revenues from contracts with customers include sales of merchandise, commissions on merchandise sales made through www.sears.com, Company websites, services and extended-service plans, financing programs, and delivery and handling revenues related to merchandise sold. Revenue is measured based on the amount of fixed consideration that we expect to receive, reduced by estimates for variable consideration such as returns. Revenue also excludes any amounts collected from customers and remitted or payable to governmental authorities. In arrangements where we have multiple performance obligations, the transaction price is allocated to each performance obligation using the relative stand-alone selling price. We recognize revenues from retail operations upon the transfer of control of goods to the customer. We satisfy our performance obligations at the point of sale for retail store transactions and upon delivery for online transactions. We defer revenue for retail store and online transactions including commissions on extended-service plans, where we have received consideration but have not transferred control of the goods to the customer at the end of the period. The performance obligation is generally satisfied in the following reporting period. The balance of deferred revenue was $15.1 million and $11.9 million at May 4, 2019 and February 2, 2019 , respectively. The change in deferred revenue represents additional revenue deferred during the first quarter of 2019 . 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. Commissions earned on services, and delivery and handling revenues are presented net of related costs because we are acting as an agent in arranging the services for the customer and do not control the services being rendered. The Company accepts Transform's Sears gift cards as tender for purchases and is reimbursed weekly by Transform for gift cards tendered. Refund Liability and Right of Return Asset 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 refund liability was $2.9 million at May 4, 2019 and February 2, 2019 . We also recognize a return asset, and corresponding adjustment to cost of sales, for our right to recover the goods returned by the customer, measured at the former carrying amount of the goods, less any expected recovery cost. The right of return asset was $1.4 million at May 4, 2019 and February 2, 2019. At each financial reporting date, we assess our estimates of expected returns, refund liabilities, and return assets. 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 Transform (as assignee from 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 Transform (as assignee from Sears Holdings). |
Variable Interest Entities and Consolidation | Variable Interest Entities and Consolidation The Financial Accounting Standards Board ("FASB") has issued guidance on variable interest entities and consolidation for determining whether an entity is a variable interest entity ("VIE") as well as the methods permitted for determining the primary beneficiary of a VIE. In addition, this guidance requires ongoing reassessments as to whether a reporting company is the primary beneficiary of a VIE and disclosures regarding the reporting company’s involvement with a VIE. On an ongoing basis the Company evaluates its business relationships, such as those with its independent dealers, independent franchisees, and suppliers, to identify potential VIE's. Generally, these businesses either qualify for a scope exception under the consolidation guidance or, where a variable interest exists, the Company does not possess the power to direct the activities that most significantly impact the economic performance of these businesses. The Company has not consolidated any of such entities in the periods presented. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments We determine the fair value of financial instruments in accordance with standards pertaining to fair value measurements. Such standards define fair value and establish a framework for measuring fair value under GAAP. Under fair value measurement accounting standards, fair value is considered to be the exchange price in an orderly transaction between market participants to sell an asset or transfer a liability at the measurement date. We report the fair value of financial assets and liabilities based on the fair value hierarchy prescribed by accounting standards for fair value measurements, which prioritizes the inputs to valuation techniques used to measure fair value into three levels, as follows: Level 1 inputs —unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. An active market for the asset or liability is one in which transactions for the asset or liability occurs with sufficient frequency and volume to provide ongoing pricing information. Level 2 inputs —inputs other than quoted market prices included in Level 1 that are observable, either directly or indirectly, for the asset or liability. Level 2 inputs include, but are not limited to, quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted market prices that are observable for the asset or liability, such as interest-rate curves and yield curves observable at commonly quoted intervals, volatilities, credit risks, and default rates. Level 3 inputs —unobservable inputs for the asset or liability. Cash and cash equivalents, merchandise payables, accrued expenses (Level 1), accounts and franchisee notes receivable, and short-term debt (Level 2) are reflected in the Condensed Consolidated Balance Sheets at cost, which approximates fair value due to the short-term nature of these instruments. For short-term borrowings and our Term Loan, the variable interest rates are a significant input in our fair value assessments and are consistent with the interest rates in the market. The carrying value of long-term notes receivable approximates fair value. We may be required, on a nonrecurring basis, to adjust the carrying value of the Company's long-lived assets. When necessary, these valuations are determined by the Company using Level 3 inputs. These assets are subject to fair value adjustments in certain circumstances as when there is evidence that impairment may exist. The Company was not required to measure any other significant non-financial asset or liability at fair value as of May 4, 2019 . |
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 2018 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. Recently Adopted Accounting Pronouncements ASU 2016-02 "Leases (Topic 842)" In February 2016, the FASB issued Accounting Standards Update ("ASU") 2016-02, "Leases (Topic 842)", which establishes a right-of-use model and requires an entity that is a lessee to recognize the right-of-use assets and liabilities arising from leases on the balance sheet. ASU No. 2016-02 also requires disclosures about the amount, timing, and uncertainty of cash flows arising from leases. Leases will be classified as finance or operating, with classification affecting both the pattern and classification of expense recognition in the statements of earnings. This guidance was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2019-10, Codification Improvements to Topic 842; and ASU No. 2018-11, Targeted Improvements. ASU No. 2016-02 and subsequent updates require a modified retrospective transition, with the cumulative effect of transition, including initial recognition of lease assets and liabilities for existing operating leases, as of (i) the effective date or (ii) the beginning of the earliest comparative period presented. These updates also provide a number of practical expedients for implementation which we are applying, as discussed below. On February 3, 2019 (the "effective date"), we adopted ASU No. 2016-02 and subsequent updates, collectively referred to as Topic 842, using the modified retrospective transition method. In addition, we adopted the package of practical expedients in transition, which permits us to not reassess our prior conclusions pertaining to lease identification, lease classification and initial direct costs on leases that commenced prior to our adoption of the new standard. We also elected to treat the lease and non-lease components of leases as a single lease component and to exempt leases with an initial term of twelve months or less from balance sheet recognition. As a result of adopting Topic 842, we recognized net operating right-of-use assets of $119.6 million and operating lease liabilities of $123.3 million on the effective date. Existing prepaid rent, accrued rent, and deferred rent were recorded as an offset to our gross operating lease right-of-use assets. The cumulative effect of the adoption resulted in a $2.4 million adjustment to the opening balance of retained earnings as of February 3, 2019. The standard did not have a material impact on our results of operations or cash flows. |
Background and Basis of Prese_3
Background and Basis of Presentation (Tables) | 3 Months Ended |
May 04, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Fiscal Period | For 2019 and 2018 , our first fiscal quarters ended as follows: Fiscal Year First Quarter Ended Weeks 2019 May 4, 2019 13 2018 May 5, 2018 13 |
Net Sales (Tables)
Net Sales (Tables) | 3 Months Ended |
May 04, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Disaggregated Net Sales | Net sales of merchandise and services for the 13 weeks ended were as follows: 13 weeks ended Thousands May 4, 2019 May 5, 2018 Merchandise $ 268,622 $ 351,978 Services 17,359 22,811 Other 5,091 6,492 Net sales $ 291,072 $ 381,281 |
Property and Leases (Tables)
Property and Leases (Tables) | 3 Months Ended |
May 04, 2019 | |
Leases [Abstract] | |
Schedule of Assets and Liabilities | The gross amounts of assets and liabilities related to both operating and finance leases are as follows: Thousands Balance Sheet Caption May 4, 2019 Assets: Operating lease assets Operating lease right-of-use assets $ 112,683 Finance lease assets Net property and equipment 702 Total lease assets $ 113,385 Liabilities: Current: Operating lease liabilities Current operating lease liabilities $ 33,200 Finance lease liabilities Other current liabilities 331 Long-term: Operating lease liabilities Long-term operating lease liabilities 83,197 Finance lease liabilities Other long-term liabilities 371 Total lease liabilities $ 117,099 |
Schedule of Lease Costs, Terms and Discount Rates, and Other Information | Other lease information as follows: Thousands 13 Weeks Ended May 4, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows - operating leases $ 12,936 Operating cash flows - finance leases 32 Financing cash flows - finance leases 5 The components of lease costs are as follows: Thousands Statement of Operations Caption 13 Weeks Ended May 4, 2019 Operating lease cost Cost of sales and occupancy $ 13,367 Finance lease cost: Amortization of leased assets Depreciation and amortization 25 Interest on lease liabilities Interest expense 5 Net lease cost $ 13,397 ASU 2016-02 requires that public companies use a secured incremental borrowing rate as the discount rate for present value of lease payments. Lease terms and discount rates are as follows: Weighted Average Remaining Lease Term (Years) May 4, 2019 Operating leases 3.9 Finance leases 2.7 Weighted Average Discount Rate: Operating leases 11.1 % Finance leases 7.1 % |
Schedule of Future Minimum Lease Payments, Finance and Operating Leases | The approximate future minimum lease payments under finance and operating leases at May 4, 2019 are as follows: Fiscal Year (thousands) Finance Leases Operating Leases 2019 $ 231 $ 26,982 2020 387 37,840 2021 77 32,838 2022 42 23,464 2023 19 13,198 Thereafter 3 4,541 Total lease payments 759 138,863 Less imputed interest 57 22,466 Net Minimum Lease Payments $ 702 $ 116,397 Capital lease obligations 702 Less Current Portion of Capital Lease Obligations (331 ) Long-term Capital Lease Obligations $ 371 |
Schedule of Future Minimum Lease Payments for Operating Leases | The approximate future minimum lease payments under capital and operating leases at February 2, 2019 were as follows: Fiscal Year (thousands) Capital Leases Operating Leases 2019 $ 259 $ 39,292 2020 359 33,666 2021 21 26,523 2022 14 19,037 2023 5 9,486 Thereafter — 4,374 Total lease payments 658 132,378 Less sublease income on leased properties — (3,036 ) Net Minimum Lease Payments $ 658 $ 129,342 Capital lease obligations 658 Less Current Portion of Capital Lease Obligations (259 ) Long-term Capital Lease Obligations $ 399 |
Schedule of Future Minimum Lease Payments for Capital Leases | The approximate future minimum lease payments under capital and operating leases at February 2, 2019 were as follows: Fiscal Year (thousands) Capital Leases Operating Leases 2019 $ 259 $ 39,292 2020 359 33,666 2021 21 26,523 2022 14 19,037 2023 5 9,486 Thereafter — 4,374 Total lease payments 658 132,378 Less sublease income on leased properties — (3,036 ) Net Minimum Lease Payments $ 658 $ 129,342 Capital lease obligations 658 Less Current Portion of Capital Lease Obligations (259 ) Long-term Capital Lease Obligations $ 399 |
Accounts and Franchisee Recei_2
Accounts and Franchisee Receivables and Other Assets (Tables) | 3 Months Ended |
May 04, 2019 | |
Receivables [Abstract] | |
Schedule of Accounts and Franchisee Receivables and Other Assets | Accounts and franchisee receivables and other assets consist of the following: Thousands May 4, 2019 May 5, 2018 February 2, 2019 Short-term franchisee receivables $ 574 $ 1,147 $ 584 Miscellaneous receivables 10,803 12,484 11,916 Long-term franchisee receivables 1,305 7,366 1,422 Other assets 1,972 4,486 2,277 Allowance for losses on short-term franchisee receivables (574 ) (837 ) (584 ) Allowance for losses on long-term franchisee receivables (1,305 ) (4,620 ) (1,422 ) Net accounts and franchisee receivables and other assets $ 12,775 $ 20,026 $ 14,193 |
Allowance for Losses on Franc_2
Allowance for Losses on Franchisee Receivables (Tables) | 3 Months Ended |
May 04, 2019 | |
Receivables [Abstract] | |
Schedule of Provision for Losses on Franchisee Receivables | The allowance for losses on franchisee receivables consists of the following: 13 Weeks Ended Thousands May 4, 2019 May 5, 2018 Allowance for losses on franchisee receivables, beginning of period $ 2,006 $ 5,775 (Recoveries) provisions during the period (63 ) 42 Write off of franchisee receivables (64 ) (360 ) Allowance for losses on franchisee receivables, end of period $ 1,879 $ 5,457 |
Other Current and Long-Term L_2
Other Current and Long-Term Liabilities (Tables) | 3 Months Ended |
May 04, 2019 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Expenses and Other Long-term Liabilities | Other current and long-term liabilities consist of the following: Thousands May 4, 2019 May 5, 2018 February 2, 2019 Customer deposits $ 15,025 $ 15,396 $ 12,826 Sales and other taxes 3,908 7,195 7,165 Accrued expenses 18,020 21,931 23,097 Payroll and related items 5,528 5,342 12,115 Store closing and severance costs 2,318 2,841 2,645 Total other current and long-term liabilities $ 44,799 $ 52,705 $ 57,848 |
Related Party Agreements and _2
Related Party Agreements and Transactions (Tables) | 3 Months Ended |
May 04, 2019 | |
Related Party Transactions [Abstract] | |
Schedule of Related Party Transactions | The following table summarizes the results of the transactions with Transform (and with Sears Holdings during the period of February 3, 2019 through February 11, 2019) that are reflected in the Company’s condensed consolidated financial statements: 13 Weeks Ended Thousands May 4, 2019 May 5, 2018 Net commissions $ 10,569 $ 15,139 Purchases related to cost of sales and occupancy 105,869 191,652 Services included in selling and administrative expense 2,211 13,529 |
Summary of Segment Data (Tables
Summary of Segment Data (Tables) | 3 Months Ended |
May 04, 2019 | |
Segment Reporting [Abstract] | |
Schedule of Segment Data | 13 Weeks Ended May 4, 2019 Thousands Hometown Outlet Total Net sales Appliances $ 116,554 $ 98,471 $ 215,025 Lawn and garden 31,625 5,243 36,868 Tools 13,460 3,128 16,588 Other 7,837 14,754 22,591 Total 169,476 121,596 291,072 Costs and expenses Cost of sales and occupancy 141,253 87,789 229,042 Selling and administrative 41,126 26,417 67,543 Depreciation and amortization 1,161 1,099 2,260 Loss on sale of assets — 52 52 Total 183,540 115,357 298,897 Operating (loss) income $ (14,064 ) $ 6,239 $ (7,825 ) Total assets $ 225,612 $ 209,528 $ 435,140 Capital expenditures $ 482 $ 93 $ 575 13 Weeks Ended May 5, 2018 Thousands Hometown Outlet Total Net sales Appliances $ 172,560 $ 105,375 $ 277,935 Lawn and garden 48,465 4,786 53,251 Tools 19,153 3,149 22,302 Other 13,526 14,267 27,793 Total 253,704 127,577 381,281 Costs and expenses Cost of sales and occupancy 198,728 95,075 293,803 Selling and administrative 65,010 25,469 90,479 Depreciation and amortization 1,324 1,284 2,608 Total 265,062 121,828 386,890 Operating (loss) income $ (11,358 ) $ 5,749 $ (5,609 ) Total assets $ 289,035 $ 121,659 $ 410,694 Capital expenditures $ 1,918 $ 352 $ 2,270 |
Loss Per Common Share (Tables)
Loss Per Common Share (Tables) | 3 Months Ended |
May 04, 2019 | |
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 Thousands except income per common share May 4, 2019 May 5, 2018 Basic weighted average shares 22,702 22,702 Diluted weighted average shares 22,702 22,702 Net loss $ (12,054 ) $ (9,369 ) Loss per common share: Basic $ (0.53 ) $ (0.41 ) Diluted $ (0.53 ) $ (0.41 ) |
Store Closing Charges (Tables)
Store Closing Charges (Tables) | 3 Months Ended |
May 04, 2019 | |
Restructuring and Related Activities [Abstract] | |
Schedule of Accelerated Store Closure Costs | Accelerated (prior to lease expiration) store closure costs for the 13 weeks ended May 4, 2019 and May 5, 2018 , 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 May 4, 2019 $ 76 $ 5,146 $ — $ 340 $ 5,562 13 weeks ended May 5, 2018 $ 79 $ — $ — $ — $ 79 (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 reserves included within other current liabilities in the Condensed Consolidated Balance Sheets, consists of the following: Thousands May 4, 2019 May 5, 2018 Store closing and severance costs reserve, beginning of period $ 2,633 $ 4,655 Store closing costs 2,145 79 Payments/utilization (2,460 ) (1,893 ) Store closing and severance costs reserve, end of period $ 2,318 $ 2,841 |
Background and Basis of Prese_4
Background and Basis of Presentation (Details) | Jun. 01, 2019USD ($)$ / shares | May 04, 2019USD ($)storesegmentstate | Feb. 03, 2019USD ($) | Feb. 02, 2019USD ($) | Nov. 01, 2016USD ($) |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Number of stores | store | 639 | ||||
Number of states in which the Company operates | state | 49 | ||||
Number of operating segments | segment | 2 | ||||
Deferred revenue | $ 15,100,000 | $ 11,900,000 | |||
Reserve for returns and allowances | 2,900,000 | 2,900,000 | |||
Right of return asset | 1,400,000 | $ 1,400,000 | |||
Operating lease assets | 112,683,000 | ||||
Operating lease liability | $ 116,397,000 | ||||
Accounting Standards Update 2016-02 | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Operating lease assets | $ 119,600,000 | ||||
Operating lease liability | 123,300,000 | ||||
Cumulative effect of new accounting principle in period of adoption | $ 2,400,000 | ||||
Senior ABL Facility | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Aggregate maximum borrowings | $ 170,000,000 | ||||
ESL | Sears Hometown & Outlet Stores, Inc. | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Outstanding shares owned (in percentage) | 58.00% | ||||
Transform Holdco, LLC | Merger Agreement | Scenario, Forecast | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Conversion amount per share (in dollars per share) | $ / shares | $ 2.25 | ||||
Net proceeds (not less than) | $ 97,500,000 | ||||
Net proceeds (less than) | $ 120,000,000 |
Net Sales - Narrative (Details)
Net Sales - Narrative (Details) | 3 Months Ended | |
May 04, 2019 | May 05, 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 | |
May 04, 2019 | May 05, 2018 | |
Disaggregation of Revenue [Line Items] | ||
Net sales | $ 291,072 | $ 381,281 |
Merchandise | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 268,622 | 351,978 |
Services | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 17,359 | 22,811 |
Other | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | $ 5,091 | $ 6,492 |
Property and Leases - Narrative
Property and Leases - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | |
May 04, 2019 | Feb. 02, 2019 | |
Lessee, Lease, Description [Line Items] | ||
Accumulated depreciation and amortization | $ 42 | $ 40.8 |
Option to extend lease | 5 years | |
Termination period | 5 years | |
Minimum | ||
Lessee, Lease, Description [Line Items] | ||
Remaining lease terms | 1 year | |
Maximum | ||
Lessee, Lease, Description [Line Items] | ||
Remaining lease terms | 10 years |
Property and Leases - Schedule
Property and Leases - Schedule of Asset and Liabilities (Details) $ in Thousands | May 04, 2019USD ($) |
Assets: | |
Operating lease assets | $ 112,683 |
Finance lease assets | 702 |
Total lease assets | 113,385 |
Current: | |
Operating lease liabilities | 33,200 |
Finance lease liabilities | 331 |
Long-term: | |
Operating lease liabilities | 83,197 |
Finance lease liabilities | 371 |
Total lease liabilities | $ 117,099 |
Property and Leases - Schedul_2
Property and Leases - Schedule of Lease Costs, Terms and Discount Rates, and Other Information (Details) $ in Thousands | 3 Months Ended |
May 04, 2019USD ($) | |
Leases [Abstract] | |
Operating lease cost | $ 13,367 |
Finance lease cost, amortization of leased assets | 25 |
Finance lease cost, interest on lease liabilities | 5 |
Net lease cost | $ 13,397 |
Weighted average remaining lease term (years), operating leases | 3 years 10 months 24 days |
Weighted average remaining lease term (years), finance leases | 2 years 8 months 12 days |
Weighted average discount rate, operating leases | 11.10% |
Weighted average discount rate, finance leases | 7.10% |
Operating cash flows - operating leases | $ 12,936 |
Operating cash flows - finance leases | 32 |
Financing cash flows - finance leases | $ 5 |
Property and Leases - Schedul_3
Property and Leases - Schedule of Future Minimum Lease Payments (Details) - USD ($) $ in Thousands | May 04, 2019 | Feb. 02, 2019 |
Finance Leases | ||
2019 | $ 231 | |
2020 | 387 | |
2021 | 77 | |
2022 | 42 | |
2023 | 19 | |
Thereafter | 3 | |
Total lease payments | 759 | |
Less imputed interest | 57 | |
Capital lease obligations | 702 | |
Less Current Portion of Capital Lease Obligations | (331) | |
Long-term Capital Lease Obligations | 371 | |
Operating Leases | ||
2019 | 26,982 | |
2020 | 37,840 | |
2021 | 32,838 | |
2022 | 23,464 | |
2023 | 13,198 | |
Thereafter | 4,541 | |
Total lease payments | 138,863 | |
Less imputed interest | 22,466 | |
Net Minimum Lease Payments | $ 116,397 | |
Capital Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | ||
2019 | $ 259 | |
2020 | 359 | |
2021 | 21 | |
2022 | 14 | |
2023 | 5 | |
Thereafter | 0 | |
Total lease payments | 658 | |
Less sublease income on leased properties | 0 | |
Capital lease obligations | 658 | |
Less Current Portion of Capital Lease Obligations | (259) | |
Long-term Capital Lease Obligations | 399 | |
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | ||
2019 | 39,292 | |
2020 | 33,666 | |
2021 | 26,523 | |
2022 | 19,037 | |
2023 | 9,486 | |
Thereafter | 4,374 | |
Total lease payments | 132,378 | |
Less sublease income on leased properties | (3,036) | |
Net Minimum Lease Payments | $ 129,342 |
Accounts and Franchisee Recei_3
Accounts and Franchisee Receivables and Other Assets (Details) - USD ($) $ in Thousands | May 04, 2019 | Feb. 02, 2019 | May 05, 2018 |
Receivables [Abstract] | |||
Short-term franchisee receivables | $ 574 | $ 584 | $ 1,147 |
Miscellaneous receivables | 10,803 | 11,916 | 12,484 |
Long-term franchisee receivables | 1,305 | 1,422 | 7,366 |
Other assets | 1,972 | 2,277 | 4,486 |
Allowance for losses on short-term franchisee receivables | (574) | (584) | (837) |
Allowance for losses on long-term franchisee receivables | (1,305) | (1,422) | (4,620) |
Net accounts and franchisee receivables and other assets | $ 12,775 | $ 14,193 | $ 20,026 |
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 | 3 Months Ended | |
May 04, 2019 | May 05, 2018 | |
Provision for Losses on Franchisee Receivables [Roll Forward] | ||
Allowance for losses on franchisee receivables, beginning of period | $ 2,006 | $ 5,775 |
(Recoveries) provisions during the period | (63) | 42 |
Write off of franchisee receivables | (64) | (360) |
Allowance for losses on franchisee receivables, end of period | $ 1,879 | $ 5,457 |
Other Current and Long-Term L_3
Other Current and Long-Term Liabilities (Details) - USD ($) $ in Thousands | May 04, 2019 | Feb. 02, 2019 | May 05, 2018 |
Payables and Accruals [Abstract] | |||
Customer deposits | $ 15,025 | $ 12,826 | $ 15,396 |
Sales and other taxes | 3,908 | 7,165 | 7,195 |
Accrued expenses | 18,020 | 23,097 | 21,931 |
Payroll and related items | 5,528 | 12,115 | 5,342 |
Store closing and severance costs | 2,318 | 2,645 | 2,841 |
Total other current and long-term liabilities | $ 44,799 | $ 57,848 | $ 52,705 |
Related Party Agreements and _3
Related Party Agreements and Transactions - Narrative (Details) $ in Millions | 3 Months Ended | |
May 04, 2019USD ($)renewal | May 05, 2018USD ($) | |
Affiliated Entity | ||
Related Party Transactions and Concentration of Risk [Line Items] | ||
Invoice payment term | 10 days | |
Affiliated Entity | Seritage Growth Properties | ||
Related Party Transactions and Concentration of Risk [Line Items] | ||
Rent expense | $ | $ 0.1 | $ 0.2 |
Affiliated Entity | Minimum | ||
Related Party Transactions and Concentration of Risk [Line Items] | ||
Invoice payment term | 2 days | |
Affiliated Entity | Maximum | ||
Related Party Transactions and Concentration of Risk [Line Items] | ||
Invoice payment term | 3 days | |
Affiliated Entity | Cost of Inventory | Supplier Concentration Risk | ||
Related Party Transactions and Concentration of Risk [Line Items] | ||
Percentage of total purchases of inventory | 52.00% | 64.00% |
Merchandising Agreement | Affiliated Entity | ||
Related Party Transactions and Concentration of Risk [Line Items] | ||
Number of renewal terms | renewal | 1 | |
Length of renewal terms | 3 years | |
Payments for Merchandise Inventory to Related Party | Affiliated Entity | Minimum | ||
Related Party Transactions and Concentration of Risk [Line Items] | ||
Early payment discount percentage | 0.37% | |
Payments for Merchandise Inventory to Related Party | Affiliated Entity | Maximum | ||
Related Party Transactions and Concentration of Risk [Line Items] | ||
Early payment discount percentage | 0.43% | |
Sears Hometown & Outlet Stores, Inc. | ESL | ||
Related Party Transactions and Concentration of Risk [Line Items] | ||
Beneficial interest acquired by related party, percentage (more than 50%) | 58.00% |
Related Party Agreements and _4
Related Party Agreements and Transactions - Schedule of Related Party Transactions (Details) - Affiliated Entity - USD ($) $ in Thousands | 3 Months Ended | |
May 04, 2019 | May 05, 2018 | |
Related Party Transaction [Line Items] | ||
Net commissions | $ 10,569 | $ 15,139 |
Purchases related to cost of sales and occupancy | 105,869 | 191,652 |
Services included in selling and administrative expense | $ 2,211 | $ 13,529 |
Financing Arrangements (Details
Financing Arrangements (Details) | May 03, 2019USD ($) | Feb. 16, 2018USD ($)subsidiary | Oct. 31, 2012USD ($) | May 04, 2019USD ($) | Nov. 01, 2016USD ($) |
Debt Instrument [Line Items] | |||||
Unamortized debt costs | $ 900,000 | ||||
Common stock ownership percentage that defines a Change of Control | 75.00% | ||||
Threshold for excess cash, where it must be applied to outstanding credit agreement amounts | $ 2,000,000 | ||||
Number of operating subsidiaries | subsidiary | 3 | ||||
Senior ABL Facility | |||||
Debt Instrument [Line Items] | |||||
Aggregate maximum borrowings | $ 250,000,000 | $ 250,000,000 | |||
Permitted increase in aggregate principal | $ 100,000,000 | 100,000,000 | |||
Short-term debt outstanding under the Senior ABL Facility | 94,600,000 | ||||
Remaining borrowing capacity | $ 21,900,000 | ||||
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 | 7.00% | ||||
Extended Revolving Credit Commitments | Base Rate | |||||
Debt Instrument [Line Items] | |||||
Blended interest rate | 9.00% | ||||
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 | $ 600,000 | ||||
Minimum percentage of loan cap | 10.00% | ||||
Term Loan | LIBOR | |||||
Debt Instrument [Line Items] | |||||
Basis spread on variable rate | 8.50% | ||||
Blended interest rate | 2.56% | ||||
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 | ||
May 04, 2019USD ($)segment | May 05, 2018USD ($) | Feb. 02, 2019USD ($) | |
Segment Reporting Information [Line Items] | |||
Number of reportable segments | segment | 2 | ||
Net sales | $ 291,072 | $ 381,281 | |
Cost of sales and occupancy | 229,042 | 293,803 | |
Selling and administrative | 67,543 | 90,479 | |
Depreciation and amortization | 2,260 | 2,608 | |
Loss on sale of assets | 52 | 0 | |
Total costs and expenses | 298,897 | 386,890 | |
Operating loss | (7,825) | (5,609) | |
Total assets | 435,140 | 410,694 | $ 343,771 |
Capital expenditures | 575 | 2,270 | |
Appliances | |||
Segment Reporting Information [Line Items] | |||
Net sales | 215,025 | 277,935 | |
Lawn and garden | |||
Segment Reporting Information [Line Items] | |||
Net sales | 36,868 | 53,251 | |
Tools | |||
Segment Reporting Information [Line Items] | |||
Net sales | 16,588 | 22,302 | |
Other | |||
Segment Reporting Information [Line Items] | |||
Net sales | 22,591 | 27,793 | |
Hometown | |||
Segment Reporting Information [Line Items] | |||
Net sales | 169,476 | 253,704 | |
Cost of sales and occupancy | 141,253 | 198,728 | |
Selling and administrative | 41,126 | 65,010 | |
Depreciation and amortization | 1,161 | 1,324 | |
Loss on sale of assets | 0 | ||
Total costs and expenses | 183,540 | 265,062 | |
Operating loss | (14,064) | (11,358) | |
Total assets | 225,612 | 289,035 | |
Capital expenditures | 482 | 1,918 | |
Hometown | Appliances | |||
Segment Reporting Information [Line Items] | |||
Net sales | 116,554 | 172,560 | |
Hometown | Lawn and garden | |||
Segment Reporting Information [Line Items] | |||
Net sales | 31,625 | 48,465 | |
Hometown | Tools | |||
Segment Reporting Information [Line Items] | |||
Net sales | 13,460 | 19,153 | |
Hometown | Other | |||
Segment Reporting Information [Line Items] | |||
Net sales | 7,837 | 13,526 | |
Outlet | |||
Segment Reporting Information [Line Items] | |||
Net sales | 121,596 | 127,577 | |
Cost of sales and occupancy | 87,789 | 95,075 | |
Selling and administrative | 26,417 | 25,469 | |
Depreciation and amortization | 1,099 | 1,284 | |
Loss on sale of assets | 52 | ||
Total costs and expenses | 115,357 | 121,828 | |
Operating loss | 6,239 | 5,749 | |
Total assets | 209,528 | 121,659 | |
Capital expenditures | 93 | 352 | |
Outlet | Appliances | |||
Segment Reporting Information [Line Items] | |||
Net sales | 98,471 | 105,375 | |
Outlet | Lawn and garden | |||
Segment Reporting Information [Line Items] | |||
Net sales | 5,243 | 4,786 | |
Outlet | Tools | |||
Segment Reporting Information [Line Items] | |||
Net sales | 3,128 | 3,149 | |
Outlet | Other | |||
Segment Reporting Information [Line Items] | |||
Net sales | $ 14,754 | $ 14,267 |
Loss Per Common Share (Details)
Loss Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
May 04, 2019 | May 05, 2018 | |
Earnings Per Share [Abstract] | ||
Basic weighted average shares (in shares) | 22,702 | 22,702 |
Diluted weighted average shares (in shares) | 22,702 | 22,702 |
Net loss | $ (12,054) | $ (9,369) |
Loss per common share: | ||
Basic (in dollars per share) | $ (0.53) | $ (0.41) |
Diluted (in dollars per share) | $ (0.53) | $ (0.41) |
Equity (Details)
Equity (Details) - USD ($) | Feb. 20, 2019 | Jan. 18, 2018 | May 04, 2019 | May 04, 2019 | May 05, 2018 | Feb. 03, 2018 | May 04, 2019 | May 04, 2019 | Feb. 01, 2014 |
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 | ||||||||
Share Repurchase Program | |||||||||
Authorized amount | $ 25,000,000 | ||||||||
Remaining authorized repurchase amount | $ 12,500,000 | $ 12,500,000 | $ 12,500,000 | $ 12,500,000 | |||||
Restricted Stock Units (RSUs) | |||||||||
Stock-based Compensation | |||||||||
Unvested (in shares) | 65,235 | 65,235 | 65,235 | 65,235 | |||||
Stock-based compensation cost | $ 300,000 | $ 200,000 | |||||||
Total unrecognized compensation cost | $ 1,200,000 | $ 1,200,000 | $ 1,200,000 | $ 1,200,000 | |||||
Compensation to be recognized term | 2 years 9 months | ||||||||
Amended and Restated 2012 Stock Plan (the 'Plan') | Restricted Stock Units (RSUs) | |||||||||
Stock-based Compensation | |||||||||
Stock granted (in shares) | 492,758 | 361,393 | 262,788 | ||||||
Forfeited in period (in shares) | 5,170 | 25,074 | 47,805 | ||||||
2017 Grant | Amended and Restated 2012 Stock Plan (the 'Plan') | Restricted Stock Units (RSUs) | |||||||||
Stock-based Compensation | |||||||||
Vested (in shares) | 149,748 | ||||||||
2018 Grant | Share-based Compensation Award, Tranche One | Restricted Stock Units (RSUs) | |||||||||
Stock-based Compensation | |||||||||
Vesting installment percentage | 50.00% | ||||||||
2018 Grant | Share-based Compensation Award, Tranche Two | Restricted Stock Units (RSUs) | |||||||||
Stock-based Compensation | |||||||||
Vesting installment percentage | 50.00% | ||||||||
2018 Grant | Amended and Restated 2012 Stock Plan (the 'Plan') | Restricted Stock Units (RSUs) | |||||||||
Stock-based Compensation | |||||||||
Vested (in shares) | 116,224 | ||||||||
Unvested (in shares) | 220,095 | 220,095 | 220,095 | 220,095 | |||||
2019 Grant | Share-based Compensation Award, Tranche One | Restricted Stock Units (RSUs) | |||||||||
Stock-based Compensation | |||||||||
Vesting installment percentage | 33.00% | ||||||||
2019 Grant | Share-based Compensation Award, Tranche Two | Restricted Stock Units (RSUs) | |||||||||
Stock-based Compensation | |||||||||
Vesting installment percentage | 33.00% | ||||||||
2019 Grant | Share-based Compensation Award, Tranche Three | Restricted Stock Units (RSUs) | |||||||||
Stock-based Compensation | |||||||||
Vesting installment percentage | 33.00% | ||||||||
2019 Grant | Amended and Restated 2012 Stock Plan (the 'Plan') | Restricted Stock Units (RSUs) | |||||||||
Stock-based Compensation | |||||||||
Unvested (in shares) | 487,588 | 487,588 | 487,588 | 487,588 |
Store Closing Charges - Schedul
Store Closing Charges - Schedule of Store Closing Costs (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 04, 2019 | May 05, 2018 | |
Restructuring Cost and Reserve [Line Items] | ||
Total Store Closing Costs | $ 2,145 | $ 79 |
Facility Closing | ||
Restructuring Cost and Reserve [Line Items] | ||
Total Store Closing Costs | 5,562 | 79 |
Cost of Sales and Occupancy | Facility Closing | ||
Restructuring Cost and Reserve [Line Items] | ||
Lease Termination Costs | 76 | 79 |
Inventory Related | 5,146 | 0 |
Depreciation and Amortization | Facility Closing | ||
Restructuring Cost and Reserve [Line Items] | ||
Impairment and Accelerated Depreciation | 0 | 0 |
Other Charges | Facility Closing | ||
Restructuring Cost and Reserve [Line Items] | ||
Other Charges | $ 340 | $ 0 |
Store Closing Charges - Sched_2
Store Closing Charges - Schedule of Store Closing Reserves (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 04, 2019 | May 05, 2018 | |
Restructuring Reserve [Roll Forward] | ||
Store closing and severance costs reserve, beginning of period | $ 2,633 | $ 4,655 |
Store closing costs | 2,145 | 79 |
Payments/utilization | (2,460) | (1,893) |
Store closing and severance costs reserve, end of period | $ 2,318 | $ 2,841 |
Uncategorized Items - sho-20190
Label | Element | Value |
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (2,119,000) |
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | (2,441,000) |
Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | (2,119,000) |
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (2,441,000) |