| 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 August 3, 2019 the Company or its dealers and franchisees operated a total of 438 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, a Delaware limited liability company ("Transform"), 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 and 26 weeks ended August 3, 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"). During the second quarter of 2019, we began to separately report the results of our Sears Outlet and Buddy’s Home Furnishing Stores businesses (together, the “Outlet Segment” or "Outlet"), including substantially all of the assets and liabilities comprising the Outlet Segment as discontinued operations. The Company is reporting the operating results and cash flows of the Outlet Segment as discontinued operations, and thus they have been excluded from continuing operations and segment results for all periods presented. Consequently, we now report our results of operations as a single segment that includes all of our continuing operations (the "Hometown segment" or "Hometown"). The assets and liabilities of the Outlet Segment are presented as current assets and liabilities of businesses held for sale in the Condensed Consolidated Balance Sheets. See Note 2 for additional information regarding the Company's discontinued operations. Unless otherwise noted, amounts presented in the Notes to Condensed Consolidated Financial Statements refer to our continuing operations. Our second fiscal-quarter end is the Saturday closest to July 31. For 2019 and 2018 , our second fiscal quarters ended as follows: Fiscal Year First Quarter Ended Weeks 2019 August 3, 2019 13 2018 August 4, 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 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. ESL Investments, Inc. and its investment affiliates, including Edward S. Lampert (together "ESL") control Transform and own more than 54% of the outstanding shares of the Company’s common stock. The Merger Agreement and the Equity and Asset Purchase Agreement In these Notes all references to "Merger Subsidiary” refer to Transform Merger Corporation, a Delaware corporation that is a wholly owned subsidiary of Transform; all references to the “Merger Agreement” refer to the Agreement and Plan of Merger, dated as of June 1, 2019, among Transform, Merger Subsidiary, and the Company (which was negotiated on behalf of the Company, and approved by, a special committee of the Board of Directors consisting of a director who is independent and disinterested, and approved by the Board of Directors), as it may be amended from time to time; all references to the “Merger” refer to the merger of Merger Subsidiary with and into the Company as contemplated by the Merger Agreement; all references to the “Board of Directors” refer to the Company’s Board of Directors; and all references to “the Company's common stock” refer to the Company’s common stock, par value $0.01 per share. The Merger Pursuant to the terms and subject to the conditions provided in the Merger Agreement, and in accordance with the General Corporation Law of the State of Delaware (the “DGCL”), at the effective time of the Merger, Merger Subsidiary will merge with and into the Company, with the Company continuing as the surviving corporation. Because the Merger Consideration (as defined below) will be paid in cash, after the effective time of the Merger the stockholders other than the Principal Stockholders (as defined below) will have no direct or indirect equity interest in the Company. As a result of the Merger, the Company will cease to be an independent, publicly traded company and will become wholly owned by Transform and ESL. Merger Consideration Upon completion of the Merger, each issued and outstanding share of the Company's common stock (except for shares (i) owned by the Company as treasury stock or by any subsidiary of either the Company or Transform, (ii) owned by Transform or ESL or (iii) held by stockholders who are entitled to demand and who properly demand appraisal under Section 262 of the DGCL for such shares) will automatically be canceled and will cease to exist and will be converted into the right to receive $2.25 in cash, without interest (the “Base Merger Consideration”), subject to an upward adjustment (as described in more detail below) in the event that a sale (an “Outlet Sale”) of the Outlet Segment that satisfies the criteria specified in the Merger Agreement is completed prior to the closing of the Merger (the “Merger Consideration”). The Base Merger Consideration will be increased if an Outlet Sale satisfying the criteria specified in the Merger Agreement is completed prior to the closing of the Merger and the Outlet Sale results in net proceeds (which will be calculated as the cash proceeds of the Outlet Sale after taking into account certain transaction costs, including all fees, out-of-pocket expenses and taxes (as such taxes may be reduced by any net operating losses or other applicable tax attributes of the Company) incurred by the Company in connection with the Outlet Sale, and any net working capital transferred to the buyer of the Outlet Segment in excess of $75,000,000 ) to the Company (the “Net Proceeds”), in excess of $97,500,000 . In that case, the Base Merger Consideration will be increased by an amount equal to the quotient of (i) the excess of the Net Proceeds over $97,500,000 divided by (ii) the sum of the aggregate number of shares of the Company's common stock and unvested Company stock units issued and outstanding as of the closing date of the Merger. The Outlet Sale On August 27, 2019 the Company entered into an Equity and Asset Purchase Agreement (the “Liberty Purchase Agreement”) with Franchise Group Newco S, LLC (the “Outlet Purchaser”) and, solely for purposes of a performance and payment guarantee on behalf of the Outlet Purchaser, Liberty Tax, Inc. (“Liberty”), to effect an Outlet Sale to the Outlet Purchaser (the “Liberty Sale”) for aggregate consideration (the “Liberty Purchase Price”) equal to the sum of $121,000,000 in cash, subject to a customary working capital adjustment, plus an additional amount of up to $11,900,000 (the “Cap”) to reimburse the Company for certain costs it incurs in connection with the Liberty Sale (“Liberty Sale Costs”) and certain employee payments and insurance costs incurred by the Company in connection with the Merger (the “Merger Costs”) that, if not reimbursed by the Outlet Purchaser, would otherwise reduce the calculation under the Merger Agreement of Net Proceeds received by the Company as a result of the Liberty Sale. If the Liberty Sale is consummated prior to the closing of the Merger, it is currently estimated to result in Net Proceeds to the Company of approximately $121,000,000 and, pursuant to the Merger Agreement, a corresponding increase in the Base Merger Consideration of approximately $1.00 per share of the Company's common stock (being the quotient of (i) Net Proceeds of $121,000,000 minus $97,500,000 , divided by (ii) the sum of 22,702,132 shares of the Company's common stock and 781,618 stock units expected to be issued and outstanding as of the closing date of the Merger), resulting in Merger Consideration of approximately $3.25 per share of the Company's common stock, although such amount could be lower under certain circumstances, as described more fully in the subsection above in this Note entitled “ Merger Consideration .” Under no circumstances can the Liberty Sale result in Net Proceeds of more than $121,000,000 or Merger Consideration of more than $3.25 per share of the Company's common stock. If the Liberty Sale is not consummated prior to the closing of the Merger or if the Liberty Sale is consummated prior to the closing of the Merger but the Net Proceeds are less than or equal to $97,500,000 , the Base Merger Consideration of $2.25 per share of the Company's common stock will not be increased. The Liberty Purchase Agreement includes customary representations, warranties and covenants, including the agreement of the Company to conduct the business of the Outlet Segment in the ordinary course between the execution of the Liberty Purchase Agreement and the closing of the Liberty Sale. The Liberty Purchase Agreement provides that, except in the case of fraud or under certain ancillary agreements entered into in connection with the Liberty Sale, the Company will have no liability after the closing of the Liberty Sale with respect to any of its representations or warranties, or covenants to be performed prior to the closing of the Liberty Sale. The employees of the Company that are primarily dedicated to the Outlet Segment are expected to transfer with the Outlet Segment in connection with the Liberty Sale, as are Will Powell, Chief Executive Officer of the Company, E.J. Bird, Chief Financial Officer of the Company, and Michael A. Gray, Chief Operating Officer of the Company. Closing and Effective Time of the Merger Concurrently with the execution of the Liberty Purchase Agreement, the Company, Transform and Merger Subsidiary entered into a letter agreement (the “Liberty Sale Letter Agreement’), which provides, among other things, that the Merger will, subject to satisfaction of certain conditions, close substantially concurrently with the closing of the Liberty Sale. Pursuant to the terms of the Liberty Purchase Agreement and the Liberty Sale Letter Agreement, the concurrent closings of the Merger and the Liberty Sale will not occur prior to October 11, 2019. In addition, Transform has the right under the Liberty Sale Letter Agreement to defer the closing of the Merger by up to 7 business days upon written notice to the Company, in which case the Company must exercise its right under the Liberty Purchase Agreement to defer the closing of the Liberty Sale by the same number of business days. If the Liberty Purchase Agreement is terminated, the closing of the Merger will occur no earlier than the later of (i) 45 days after Transform is notified of such termination and (ii) three business days following the date on which Transform receives certain financing information from the Company as further described in the Merger Agreement. At the closing of the Merger, Transform and the Company will cause a certificate of merger to be executed and filed with the Secretary of State of the State of Delaware in accordance with the relevant provisions of the DGCL and will make all other filings or recordings required under the DGCL. The Merger will become effective at the time the certificate of merger is duly filed with the Secretary of State of the State of Delaware or on such later date and time as may be agreed upon by the parties and specified in the certificate of merger. ESL Letter Agreement Concurrently with the execution of the Merger Agreement, the Company entered into a letter agreement with Edward S. Lampert (the “ESL Letter Agreement”). Pursuant to the ESL Letter Agreement, Mr. Lampert has agreed, among other things, not to, and to cause ESL not to, effect any amendment of the Company’s Amended and Restated Bylaws or take any other stockholder action that is inconsistent with the terms of the Merger Agreement or that would reasonably be expected to frustrate the transactions contemplated thereby, any Outlet Sale conducted in accordance with the terms of the Merger Agreement, or the sale process related thereto. Written Consents of Stockholders Under the DGCL and the applicable provisions of the Company’s Certificate of Incorporation (as amended) and the Company's Amended and Restated Bylaws, the adoption of the Merger Agreement by the Company’s stockholders may be provided without a meeting by written consent of the stockholders holding a majority of the voting power of the outstanding shares of the Company's common stock. On June 1, 2019 the record date for determining stockholders of the Company entitled to act by written consent with respect to the adoption of the Merger Agreement and approval of any Outlet Sale to the extent such Outlet Sale would constitute a sale of substantially all of the Company’s property and assets and be subject to the stockholder approval requirements of Section 271(a) of the DGCL (a “Section 271 Sale”), there were 22,702,132 shares of the Company's common stock outstanding and entitled to vote. On June 1, 2019 immediately following execution of the Merger Agreement Edward S. Lampert and his investment affiliate ESL Partners, L.P. (together, the “Principal Stockholders”) caused to be delivered to the Company an irrevocable written consent (the “Written Consent”) adopting and approving the Merger Agreement, the terms and conditions set forth therein and the transactions contemplated thereby, including the Merger, and approving any Outlet Sale to the extent such Outlet Sale would constitute a Section 271 Sale. On August 27, 2019 concurrently with the execution of the Liberty Purchase Agreement the Principal Stockholders caused to be delivered to the Company an irrevocable written consent (the “Liberty Consent”) confirming the Principal Stockholders’ approval of an Outlet Sale consummated in all material respects in accordance with the terms set forth in the Liberty Purchase Agreement, to the extent such sale constitutes a Section 271 Sale. On August 27, 2019, the record date for determining stockholders of the Company entitled to act by written consent with respect to the adoption of the Liberty Sale to the extent such sale would constitute a Section 271 Sale, there were 22,702,132 shares of the Company's common stock outstanding and entitled to vote. As of June 1, 2019 the Principal Stockholders held shares of the Company's common stock representing approximately 58.3% of the voting power of the shares of the Company's common stock entitled to vote on the adoption of the Merger Agreement. Accordingly, the adoption and approval of the Merger Agreement by the Company’s stockholders was effected in accordance with Sections 228 and 251 of the DGCL and the approval of any Outlet Sale was effected, to the extent applicable, in accordance with Sections 228 and 271(a) of the DGCL on June 1, 2019. As of August 27, 2019, the Principal Stockholders held shares of the Company's common stock representing approximately 55.2% of the outstanding shares of Common Stock entitled to act by written consent with respect to the adoption of the Liberty Sale, to the extent such sale constitutes a Section 271 Sale. Accordingly, the approval of the Liberty Sale was confirmed, to the extent applicable, in accordance with Sections 228 and 271(a) of the DGCL on August 27, 2019. No additional approval of the stockholders of the Company is required to adopt or approve the Merger Agreement or the transactions contemplated thereby, including the Merger, or the Liberty Sale. Federal securities laws state that neither the Merger nor any Outlet Sale that is required to be approved by the Company’s stockholders under Section 271(a) of the DGCL may be completed until 20 days after the date of mailing of a Schedule 14C information statement to the Company’s stockholders. Therefore, notwithstanding the execution and delivery of the Written Consent and the Liberty Consent, neither the Merger nor the Liberty Sale will occur until that time has elapsed. We expect the Merger and the Liberty Sale to be completed in October 2019, subject to the satisfaction of other conditions to closing set forth in the Merger Agreement and the Liberty Purchase Agreement. However, there can be no assurance that the Merger or the Liberty Sale will be completed at that time, or at all. Conditions to the Merger The obligation of the Company, Transform and Merger Subsidiary to effect the Merger are subject to the satisfaction or, if permissible by applicable law and the Merger Agreement, waiver of the following conditions as of the closing of the Merger: the adoption of the Merger Agreement by the holders of a majority of the outstanding shares of Company Common Stock entitled to vote on such matters, which condition was satisfied upon the Principal Stockholders’ delivery of the Written Consent; the absence of any law or injunction by any governmental authority which renders illegal or otherwise restrains or prohibits the Merger, and the absence of any proceeding by any governmental authority that seeks to render illegal or otherwise restrain or prohibit the Merger; either (i) an Outlet Sale has been consummated and the procedure set forth in the Merger Agreement for determining the Merger Consideration in such a circumstance has been satisfied, (ii) the period designated for an Outlet Sale has expired and no definitive agreement with respect thereto has been entered into, or (iii) the period designated for the closing of an Outlet Sale has expired and any definitive agreement entered into with respect thereto has been terminated and neither the Company nor any of its subsidiaries is subject to any material liability for any breaches thereof by the Company; if a notification and report form pursuant to the HSR Act is required to be filed in connection with the transactions contemplated by the Merger Agreement, the applicable waiting period (and any extension thereof) applicable to the Merger under the HSR Act will have expired or been terminated; an information statement has been mailed to the Company’s stockholders at least 20 days prior to the closing date and the Merger is permitted under Regulation 14C of the Exchange Act; and all obligations, letters of credit and commitments under the Company’s credit agreements have been paid in full or terminated, except, in each case, as waived by the applicable counterparties. The obligation of Transform and Merger Subsidiary to consummate the Merger are subject to the satisfaction or, if permissible by applicable law and the Merger Agreement, waiver of the following additional conditions as of the closing of the Merger: the representations and warranties of the Company in the Merger Agreement being true and correct subject to a material adverse effect standard, with exceptions for certain representations and warranties (including in relation to the Company’s capitalization, existence, good standing and authority to act), which are instead subject to a de minimis or materiality standard or which in certain cases must be true and correct as written, with certain of the Company’s representations and warranties being disregarded for purposes of this condition (i) to the extent related to the Outlet Segment, if an Outlet Sale has been consummated, and (ii) where any failure of a representation or warranty of the Company to be true and correct as of the closing results from any action or change regarding the operations of the Hometown segment proposed by Transform as permitted by the Merger Agreement; the absence of any event of default under the Company’s credit agreements other than any event of default arising solely from actions taken by Transform in violation of the Merger Agreement or the ESL Letter Agreement; the Company having performed in all material respects each of the obligations under the Merger Agreement at or prior to the closing date, provided that the Company’s obligation to provide finance cooperation to Transform will not constitute a failure of this condition except where the Company has acted with bad faith or gross negligence or has willfully breached such obligations and, if capable of being cured, is not cured by the Company within five business days of delivery of written notice of such breach or failure to perform from Transform; since the date of the Merger Agreement, a Company material adverse effect has not occurred, provided that no Company material adverse effect will be deemed to have occurred as a result of any action or change by the Company regarding the operations of the Hometown segment proposed by Transform in accordance with the Merger Agreement; and Transform having received a certificate from the Company certifying that the above closing conditions of the Company have been satisfied. The obligation of the Company to consummate the Merger are subject to the satisfaction or, if permissible by applicable law and the Merger Agreement, waiver of the following additional conditions as of the closing of the Merger: the representations and warranties of Transform and Merger Subsidiary being true and correct on the date of the Merger Agreement and on the closing date, except where the failure of such representations and warranties to be so true and correct (disregarding all qualifications or limitations as to “materiality” or words of similar import) would not, individually or in the aggregate, prevent, materially delay or materially impair Transform’s or Merger Subsidiary’s ability to consummate the transactions contemplated by the Merger Agreement; each of Transform and Merger Subsidiary having performed in all material respects each of its obligations, and complied in all material respects with each of its agreements and covenants under the Merger Agreement at or prior to the closing date; and the Company having received a certificate from Transform certifying that the foregoing conditions have been satisfied. 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 10-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. With respect to the Senior ABL Facility and the Term Loan Agreement, the Merger Agreement requires as a closing condition that all obligations under these agreements shall have been repaid, all commitments of the lenders thereto shall have been terminated and, with respect to the Senior ABL Facility, all related letters of credit shall have been terminated or cash collateralized, except, in each case, as waived by the applicable counterparties to these financing agreements. Transform is, subject to conditions, obligated in accordance with the Merger Agreement to cause the repayment of the outstanding obligations under the aforementioned agreements and the termination or cash collateralization of all outstanding letters of credit under the Senior ABL Facility. In addition, there is a condition to the closing of the Merger that no event of default shall have occurred and be continuing under the Senior ABL Facility or the Term Loan Agreement, subject to exceptions. 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 $11.5 million and $10.6 million at August 3, 2019 and February 2, 2019 , respectively. The change in deferred revenue represents additional revenue deferred during the first and second 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 |
