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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE QUARTERLY PERIOD ENDED MAY 3, 2014
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¨
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T
RANSITION
R
EPORT
P
URSUANT
T
O
S
ECTION
13
O
R
15(d)
O
F
T
HE SECURITIES EXCHANGE ACT OF 1934
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DELAWARE
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80-0808358
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(State or Other Jurisdiction of Incorporation or Organization)
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(I.R.S. Employer Identification No.)
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5500 TRILLIUM BOULEVARD, SUITE 501 HOFFMAN ESTATES, ILLINOIS
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60192
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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¨
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Accelerated filer
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ý
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Non-accelerated filer (Do not check if a smaller reporting company)
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¨
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Smaller reporting company
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¨
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Page
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PART I—FINANCIAL INFORMATION
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Item 1.
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Financial Statements (Unaudited)
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||
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Item 2.
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Item 3.
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Item 4.
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PART II—OTHER INFORMATION
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Item 1.
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Item 1A.
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Item 2.
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Item 6.
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Thousands
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May 3,
2014 |
|
May 4,
2013 |
|
February 1,
2014 |
||||||
ASSETS
|
|
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||||||
CURRENT ASSETS
|
|
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||||||
Cash and cash equivalents
|
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$
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23,145
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$
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27,465
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|
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$
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23,475
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Accounts receivable
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23,233
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14,105
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|
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19,252
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|||
Merchandise inventories
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493,203
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464,576
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482,107
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|||
Prepaid expenses and other current assets
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13,146
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11,013
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13,216
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|||
Total current assets
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552,727
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517,159
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538,050
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|||
PROPERTY AND EQUIPMENT, net
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50,303
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50,782
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48,973
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|||
GOODWILL
|
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167,000
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167,000
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167,000
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LONG-TERM DEFERRED TAXES
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50,489
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67,534
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52,672
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|
|||
OTHER ASSETS
|
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42,668
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25,818
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40,490
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|||
TOTAL ASSETS
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$
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863,187
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$
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828,293
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$
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847,185
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LIABILITIES
|
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||||||
CURRENT LIABILITIES
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||||||
Short-term borrowings
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$
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98,100
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$
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47,300
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$
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99,100
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Payable to Sears Holdings Corporation
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86,170
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88,794
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68,396
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Accounts payable
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21,038
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25,424
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|
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24,129
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Other current liabilities
|
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59,090
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80,404
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60,319
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Current portion of capital lease obligations
|
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490
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1,257
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662
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Total current liabilities
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264,888
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243,179
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252,606
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CAPITAL LEASE OBLIGATIONS
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62
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516
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95
|
|
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OTHER LONG-TERM LIABILITIES
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4,047
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3,314
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4,259
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TOTAL LIABILITIES
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268,997
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247,009
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256,960
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COMMITMENTS AND CONTINGENCIES (Note 7)
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||||||
STOCKHOLDERS' EQUITY
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||||||
TOTAL STOCKHOLDERS' EQUITY
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594,190
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581,284
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590,225
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
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$
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863,187
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$
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828,293
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$
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847,185
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13 Weeks Ended
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||||||
Thousands
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May 3,
2014 |
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May 4,
2013 |
||||
CASH FLOWS FROM OPERATING ACTIVITIES
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|
|
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||||
Net income
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$
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3,679
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$
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14,997
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Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
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|
|
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||||
Depreciation
|
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2,288
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|
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2,341
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Share-based compensation
|
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286
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|
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—
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Change in operating assets and liabilities:
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|
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||||
Accounts receivable
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(6,340
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)
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(6,478
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)
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Merchandise inventories
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(11,096
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)
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(36,139
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)
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Payable to Sears Holdings Corporation
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17,774
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9,303
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Accounts payable
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(3,091
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)
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(6,406
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)
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Customer deposits
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(1,685
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)
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5,030
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Deferred income taxes
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2,440
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4,843
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Other operating assets
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317
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|
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1,347
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Other operating liabilities
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210
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(7,316
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)
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Net cash provided by (used in) operating activities
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4,782
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(18,478
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)
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CASH FLOWS FROM INVESTING ACTIVITIES
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Purchases of property and equipment
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(3,940
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)
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(1,009
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)
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Net cash used in investing activities
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(3,940
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)
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(1,009
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)
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CASH FLOWS FROM FINANCING ACTIVITIES
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||||
Payments of capital lease obligations
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(172
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)
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(416
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)
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Net short-term borrowings (payments)
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(1,000
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)
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27,300
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Net cash provided by (used in) financing activities
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(1,172
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)
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26,884
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NET CHANGE IN CASH AND CASH EQUIVALENTS
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(330
|
)
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7,397
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CASH AND CASH EQUIVALENTS—Beginning of period
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23,475
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20,068
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||
CASH AND CASH EQUIVALENTS—End of period
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$
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23,145
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|
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$
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27,465
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
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|
||||
Cash paid for interest
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$
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822
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$
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589
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Cash paid for income taxes
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$
|
105
|
|
|
$
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3,595
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Thousands
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Number of Shares of Common Stock
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Common Stock
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Capital in Excess of Par Value
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Retained Earnings
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Total Stockholders' Equity
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|||||||||
Balance at February 2, 2013
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23,100
|
|
$
|
231
|
|
$
|
556,575
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|
$
|
9,481
|
|
$
|
566,287
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|
|
|
|
|
|
|
|||||||||
Net income
|
—
|
|
—
|
|
—
|
|
14,997
|
|
14,997
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|
||||
|
|
|
|
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|
|||||||||
Balance at May 4, 2013
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23,100
|
|
$
|
231
|
|
$
|
556,575
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$
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24,478
|
|
$
|
581,284
|
|
|
|
|
|
|
|
|||||||||
Balance at February 1, 2014
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22,753
|
|
228
|
|
547,021
|
|
42,976
|
|
590,225
|
|
||||
|
|
|
|
|
|
|||||||||
Net income
|
|
—
|
|
—
|
|
3,679
|
|
3,679
|
|
|||||
|
|
|
|
|
|
|||||||||
Share-based compensation
|
(3
|
)
|
(1
|
)
|
287
|
|
—
|
|
286
|
|
||||
|
|
|
|
|
|
|||||||||
Balance at May 3, 2014
|
22,750
|
|
$
|
227
|
|
$
|
547,308
|
|
$
|
46,655
|
|
$
|
594,190
|
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Thousands
|
|
May 3,
2014 |
|
May 4,
2013 |
|
February 1,
2014 |
||||||
Customer deposits
|
|
33,862
|
|
|
39,945
|
|
|
35,547
|
|
|||
Sales and other taxes
|
|
13,690
|
|
|
15,142
|
|
|
11,403
|
|
|||
Accrued expenses
|
|
8,551
|
|
|
23,068
|
|
|
9,523
|
|
|||
Payroll and related items
|
|
7,034
|
|
|
5,563
|
|
|
8,105
|
|
|||
Total Other current and long-term liabilities
|
|
$
|
63,137
|
|
|
$
|
83,718
|
|
|
$
|
64,578
|
|
•
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SHO receives commissions from Sears Holdings for specified sales of merchandise made through www.sears.com and www.searsoutlet.com, the sale of extended service contracts, 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 Sears Holdings.
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•
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We obtain a significant amount of our merchandise inventories from Sears Holdings, leveraging the benefit of the Sears Holdings purchasing activities. We have a retailer's customary rights to return to Sears Holdings merchandise that is defective (except with respect to agreed-upon amounts of defective apparel that we purchase and then liquidate) or otherwise does not meet contract requirements. In addition, we may determine that an item of Outlet merchandise (usually merchandise that is not new in-box) we have received from Sears Holdings cannot be refurbished or reconditioned or is otherwise not in a physical condition to offer for sale to our customers. We and Sears Holdings (and our Outlet vendors generally) refer to an item of merchandise in this condition as “not saleable” or "non-saleable," and in the normal course we can return the item to Sears Holdings. We generally have comparable return rights with our other Outlet vendors.
|
•
|
We pay royalties related to our sale of products branded with the KENMORE®, CRAFTSMAN®, and DIEHARD® marks (which marks are owned by subsidiaries of Sears Holdings).
|
•
|
We pay fees for participation in Sears Holdings' SHOP YOUR WAY REWARDS® program.
|
•
|
We have also entered into agreements with Sears Holdings for logistics, handling, warehouse, and transportation services, the charges for which are based on merchandise inventory units.
|
•
|
Sears Holdings provides the Company with specified corporate services. These services include accounting and finance, human resources, information technology, and real estate. Sears Holdings charges the Company for these corporate services based on actual usage or a pro rata charge based upon sales, head count, or square footage.
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|
|
13 Weeks Ended
|
||||||
|
|
May 3,
2014 |
|
May 4,
2013 |
||||
Thousands
|
|
|
||||||
|
|
|
|
|
||||
Net Commissions from Sears Holdings Corporation (1)
|
|
$
|
28,169
|
|
|
$
|
22,766
|
|
Purchases related to cost of sales and occupancy
|
|
407,510
|
|
|
428,496
|
|
||
Services
|
|
5,415
|
|
|
5,126
|
|
|
|
13 Weeks Ended May 3, 2014
|
||||||||||
Thousands
|
|
Hometown
|
|
Outlet
|
|
Total
|
||||||
Net sales
|
|
|
|
|
|
|
||||||
Appliances
|
|
$
|
245,526
|
|
|
$
|
137,528
|
|
|
$
|
383,054
|
|
Lawn and garden
|
|
95,340
|
|
|
4,891
|
|
|
100,231
|
|
|||
Tools and paint
|
|
46,137
|
|
|
4,491
|
|
|
50,628
|
|
|||
Other
|
|
31,533
|
|
|
24,408
|
|
|
55,941
|
|
|||
Total
|
|
418,536
|
|
|
171,318
|
|
|
589,854
|
|
|||
Costs and expenses
|
|
|
|
|
|
|
||||||
Cost of sales and occupancy
|
|
312,154
|
|
|
133,801
|
|
|
445,955
|
|
|||
Selling and administrative
|
|
98,837
|
|
|
36,442
|
|
|
135,279
|
|
|||
Depreciation
|
|
651
|
|
|
1,637
|
|
|
2,288
|
|
|||
Total
|
|
411,642
|
|
|
171,880
|
|
|
583,522
|
|
|||
Operating income (loss)
|
|
$
|
6,894
|
|
|
$
|
(562
|
)
|
|
$
|
6,332
|
|
Total assets
|
|
$
|
658,267
|
|
|
$
|
204,920
|
|
|
$
|
863,187
|
|
Capital expenditures
|
|
$
|
679
|
|
|
$
|
3,261
|
|
|
$
|
3,940
|
|
|
|
13 Weeks Ended May 4, 2013
|
||||||||||
Thousands
|
|
Hometown
|
|
Outlet
|
|
Total
|
||||||
Net sales
|
|
|
|
|
|
|
||||||
Appliances
|
|
$
|
275,407
|
|
|
$
|
124,263
|
|
|
$
|
399,670
|
|
Lawn and garden
|
|
96,008
|
|
|
5,946
|
|
|
101,954
|
|
|||
Tools and paint
|
|
47,691
|
|
|
3,443
|
|
|
51,134
|
|
|||
Other
|
|
25,697
|
|
|
22,662
|
|
|
48,359
|
|
|||
Total
|
|
444,803
|
|
|
156,314
|
|
|
601,117
|
|
|||
Costs and expenses
|
|
|
|
|
|
|
||||||
Cost of sales and occupancy
|
|
333,884
|
|
|
112,985
|
|
|
446,869
|
|
|||
Selling and administrative
|
|
100,141
|
|
|
27,047
|
|
|
127,188
|
|
|||
Depreciation
|
|
866
|
|
|
1,475
|
|
|
2,341
|
|
|||
Total
|
|
434,891
|
|
|
141,507
|
|
|
576,398
|
|
|||
Operating income
|
|
$
|
9,912
|
|
|
$
|
14,807
|
|
|
$
|
24,719
|
|
Total assets
|
|
$
|
666,132
|
|
|
$
|
162,161
|
|
|
$
|
828,293
|
|
Capital expenditures
|
|
$
|
624
|
|
|
$
|
385
|
|
|
$
|
1,009
|
|
|
13 Weeks Ended
|
|
13 Weeks Ended
|
||||
|
May 3, 2014
|
|
May 4, 2013
|
||||
Thousands except income per common share
|
|
|
|
||||
Basic weighted average shares
|
22,666
|
|
|
23,100
|
|
||
Dilutive effect of restricted stock
|
—
|
|
|
—
|
|
||
Diluted weighted average shares
|
22,666
|
|
|
23,100
|
|
||
|
|
|
|
||||
Net income
|
$
|
3,679
|
|
|
$
|
14,997
|
|
|
|
|
|
||||
Income per common share:
|
|
|
|
||||
|
|
|
|
||||
Basic
|
$
|
0.16
|
|
|
$
|
0.65
|
|
Diluted
|
$
|
0.16
|
|
|
$
|
0.65
|
|
|
|
13 Weeks Ended May 3, 2014
|
|||||
(Shares in Thousands)
|
|
Shares
|
|
Weighted-Average Fair Value on Date of Grant
|
|||
Beginning of year balance
|
|
87
|
|
|
44.45
|
|
|
Granted
|
|
—
|
|
|
$
|
—
|
|
Vested
|
|
—
|
|
|
—
|
|
|
Forfeited
|
|
(3
|
)
|
|
44.45
|
|
|
Balance at 5/3/2014
|
|
84
|
|
|
$
|
44.45
|
|
|
|
|
|
|
•
|
921 Sears Hometown Stores—Primarily independently owned stores, predominantly located in smaller communities and offering appliances, lawn and garden equipment, and hardware. Most of our Sears Hometown Stores carry proprietary Sears brand products, such as Kenmore, Craftsman, and DieHard, as well as a wide assortment of other national brands.
|
•
|
84 Sears Hardware Stores—Hardware stores that carry Craftsman brand tools and lawn and garden equipment, DieHard brand batteries and a wide assortment of other national brands and other home improvement products along with a selection of Kenmore and other national brands of home appliances.
|
•
|
100 Sears Home Appliance Showrooms—Stores that have a simple, primarily appliance showroom design that are positioned in metropolitan areas.
|
|
|
13 Weeks Ended
|
||||||
Thousands
|
|
May 3, 2014
|
|
May 4, 2013
|
||||
NET SALES
|
|
$
|
589,854
|
|
|
$
|
601,117
|
|
COSTS AND EXPENSES
|
|
|
|
|
||||
Cost of sales and occupancy
|
|
445,955
|
|
|
446,869
|
|
||
Gross margin dollars
|
|
143,899
|
|
|
154,248
|
|
||
Margin rate
|
|
24.4
|
%
|
|
25.7
|
%
|
||
Selling and administrative
|
|
135,279
|
|
|
127,188
|
|
||
Selling and administrative expense as a percentage of net sales
|
|
22.9
|
%
|
|
21.2
|
%
|
||
Depreciation
|
|
2,288
|
|
|
2,341
|
|
||
Total costs and expenses
|
|
583,522
|
|
|
576,398
|
|
||
Operating income
|
|
6,332
|
|
|
24,719
|
|
||
Interest income (expense)
|
|
(934
|
)
|
|
(589
|
)
|
||
Other income
|
|
680
|
|
|
415
|
|
||
Income before income taxes
|
|
6,078
|
|
|
24,545
|
|
||
Income tax expense
|
|
(2,399
|
)
|
|
(9,548
|
)
|
||
NET INCOME
|
|
$
|
3,679
|
|
|
$
|
14,997
|
|
•
|
SHO receives commissions on all in-store sales that were transacted by SHO through www.sears.com and that were fulfilled and recorded by Sears Holdings.
|
•
|
During the first quarter of 2014, these sales fulfilled and recorded by Sears Holdings increased significantly to $29.4 million compared to $7.7 million in the first quarter of 2013.
|
•
|
Unadjusted comparable store sales, which do not include in-store sales that were transacted by SHO through www.sears.com and that were fulfilled and recorded by Sears Holding, understates what SHO believes to be its effective comparable store sales performance.
|
|
13 Weeks Ended May 3, 2014
|
||||||||||
Thousands
|
Hometown
|
|
Outlet
|
|
Total
|
||||||
Net sales
|
$
|
418,536
|
|
|
$
|
171,318
|
|
|
$
|
589,854
|
|
Less: Non-comparable store sales
|
(48,416
|
)
|
|
(36,921
|
)
|
|
(85,337
|
)
|
|||
Comparable store sales recorded by SHO
|
370,120
|
|
|
134,397
|
|
|
504,517
|
|
|||
SHO in-store sales through www.sears.com fulfilled and recorded by Sears Holdings (1)
|
22,692
|
|
|
4,015
|
|
|
26,707
|
|
|||
Adjusted comparable store sales
|
$
|
392,812
|
|
|
$
|
138,412
|
|
|
$
|
531,224
|
|
|
|
|
|
|
|
||||||
|
13 Weeks Ended May 4, 2013
|
||||||||||
Thousands
|
Hometown
|
|
Outlet
|
|
Total
|
||||||
Net sales
|
$
|
444,803
|
|
|
$
|
156,314
|
|
|
$
|
601,117
|
|
Less: Non-comparable store sales
|
(44,811
|
)
|
|
(18,325
|
)
|
|
(63,136
|
)
|
|||
Comparable store sales recorded by SHO
|
399,992
|
|
|
137,989
|
|
|
537,981
|
|
|||
SHO in-store sales through www.sears.com recorded by Sears Holdings (1)
|
6,815
|
|
|
662
|
|
|
7,477
|
|
|||
Adjusted comparable store sales
|
$
|
406,807
|
|
|
$
|
138,651
|
|
|
$
|
545,458
|
|
|
|
|
|
|
|
||||||
|
13 Weeks Ended May 3, 2014 vs. 13 Weeks Ended May 4, 2013
|
||||||||||
|
Hometown
|
|
Outlet
|
|
Total
|
||||||
Comparable store sales recorded by SHO
|
(7.5
|
)%
|
|
(2.6
|
)%
|
|
(6.2
|
)%
|
|||
Adjusted comparable store sales
|
(3.4
|
)%
|
|
(0.2
|
)%
|
|
(2.6
|
)%
|
•
|
EBITDA excludes the effects of financing and investing activities by eliminating the effects of interest and depreciation costs; and
|
•
|
Other significant items, while periodically affecting our results, may vary significantly from period to period and may have a disproportionate effect in a given period, which affects comparability of results.
|
|
|
13 Weeks Ended
|
||||||
Thousands
|
|
May 3, 2014
|
|
May 4, 2013
|
||||
Net income
|
|
$
|
3,679
|
|
|
$
|
14,997
|
|
Income tax expense
|
|
2,399
|
|
|
9,548
|
|
||
Other income
|
|
(680
|
)
|
|
(415
|
)
|
||
Interest expense
|
|
934
|
|
|
589
|
|
||
Operating income
|
|
6,332
|
|
|
24,719
|
|
||
Depreciation
|
|
2,288
|
|
|
2,341
|
|
||
Adjusted EBITDA
|
|
$
|
8,620
|
|
|
$
|
27,060
|
|
|
|
13 Weeks Ended
|
||||||
Thousands, except for number of stores
|
|
May 3, 2014
|
|
May 4, 2013
|
||||
Net sales
|
|
$
|
418,536
|
|
|
$
|
444,803
|
|
Comparable store sales % (1)
|
|
(7.5
|
)%
|
|
(6.9
|
)%
|
||
Cost of sales and occupancy
|
|
312,154
|
|
|
333,884
|
|
||
Gross margin dollars
|
|
106,382
|
|
|
110,919
|
|
||
Margin rate
|
|
25.4
|
%
|
|
24.9
|
%
|
||
Selling and administrative
|
|
98,837
|
|
|
100,141
|
|
||
Selling and administrative expense as a percentage of net sales
|
|
23.6
|
%
|
|
22.5
|
%
|
||
Depreciation
|
|
651
|
|
|
866
|
|
||
Total costs and expenses
|
|
411,642
|
|
|
434,891
|
|
||
Operating income
|
|
$
|
6,894
|
|
|
$
|
9,912
|
|
Total Hometown stores
|
|
1,105
|
|
|
1,126
|
|
|
|
13 Weeks Ended
|
||||||
Thousands, except for number of stores
|
|
May 3, 2014
|
|
May 4, 2013
|
||||
Net sales
|
|
$
|
171,318
|
|
|
$
|
156,314
|
|
Comparable store sales % (1)
|
|
(2.6
|
)%
|
|
1.2
|
%
|
||
Cost of sales and occupancy
|
|
133,801
|
|
|
112,985
|
|
||
Gross margin dollars
|
|
37,517
|
|
|
43,329
|
|
||
Margin rate
|
|
21.9
|
%
|
|
27.7
|
%
|
||
Selling and administrative
|
|
36,442
|
|
|
27,047
|
|
||
Selling and administrative expense as a percentage of net sales
|
|
21.3
|
%
|
|
17.3
|
%
|
||
Depreciation
|
|
1,637
|
|
|
1,475
|
|
||
Total costs and expenses
|
|
171,880
|
|
|
141,507
|
|
||
Operating income (loss)
|
|
$
|
(562
|
)
|
|
$
|
14,807
|
|
Total Outlet stores
|
|
145
|
|
|
127
|
|
•
|
our continued reliance on Sears Holdings for most products and services that are important to the successful operation of our business;
|
•
|
our continuing dependence on Sears Holdings subsequent to the Separation, and our potential need to depend on Sears Holdings beyond the expiration or earlier termination by Sears Holdings of certain of our agreements with Sears Holdings;
|
•
|
our ability to offer merchandise and services that our customers want, including those under the Kenmore, Craftsman, and DieHard brands, which brands are owned by Sears Holdings (the "KCD Marks:");
|
•
|
our merchandising agreement with Sears Holdings provides that (1) if a third party that is not an affiliate of Sears Holdings acquires the rights to one or more (but less than all of) the KCD Marks Sears Holdings may terminate our rights to buy merchandise branded with any of the acquired KCD Marks and (2) if a third party that is not an affiliate of Sears Holdings acquires the rights to all of the KCD Marks Sears Holdings may terminate the merchandising agreement in its entirety, over which events we have no control and the occurrence of which could have a material adverse effect on our ability to operate our business and a material adverse effect on our results of operations and financial condition;
|
•
|
the possible material adverse effects on us if Sears Holdings’ financial condition were perceived to significantly deteriorate, including if as a consequence Sears Holdings were to choose to seek the protection of the U.S. bankruptcy laws;
|
•
|
the sale by Sears Holdings and its subsidiaries to other retailers that compete with us of major home appliances and other products branded with one of the KCD Marks;
|
•
|
our ability to successfully manage our inventory levels and implement initiatives to improve inventory management and other capabilities;
|
•
|
competitive conditions in the retail industry;
|
•
|
worldwide economic conditions and business uncertainty, the availability of consumer and commercial credit, changes in consumer confidence, tastes, preferences and spending, and changes in vendor relationships;
|
•
|
the fact that our past performance generally, as reflected on our historical financial statements, may not be indicative of our future performance as a result of, among other things, the consolidation of Hometown and Outlet into a single business entity, the Separation, and operating as a standalone business entity;
|
•
|
the impact of increased costs due to a decrease in our purchasing power following the Separation and other losses of benefits that were associated with having been wholly owned by Sears Holdings and its subsidiaries;
|
•
|
our agreements related to the Separation and our continuing relationship with Sears Holdings were negotiated while we were a subsidiary of Sears Holdings and we may have received different terms from unaffiliated third parties (including with respect to merchandise-vendor and service-provider
|
•
|
our reliance on Sears Holdings to provide computer systems to process transactions with our customers (including the point-of-sale system for the stores we operate and the stores that our independent dealers and franchisees operate, which point-of-sale system captures, among other things, credit-card information supplied by our customers) and others, quantify our results of operations, and manage our business ("SHO's SHC-Supplied Systems");
|
•
|
SHO's SHC-Supplied Systems may be subject to disruptions and data/security breaches for which Sears Holdings may be unwilling or unable to indemnify and defend us against third-party claims and other losses resulting from such disruptions and data/security breaches, which could have one or more material adverse effects on us;
|
•
|
the ability and willingness of Sears Holdings to perform its contractual obligations to us;
|
•
|
our ability to successfully resolve existing and, if any arise, future contractual disputes with Sears Holdings;
|
•
|
limitations and restrictions in the Senior ABL Facility and our ability to service our indebtedness;
|
•
|
our ability to obtain additional financing on acceptable terms;
|
•
|
our dependence on independent dealers and franchisees to operate their stores profitably and in a manner consistent with our concepts and standards;
|
•
|
our dependence on sources outside the U.S. for significant amounts of our merchandise;
|
•
|
impairment charges for goodwill or fixed-asset impairment for long-lived assets;
|
•
|
our ability to attract, motivate, and retain key executives and other employees;
|
•
|
the impact of increased costs associated with being an independent company;
|
•
|
our ability to maintain effective internal controls as a public company;
|
•
|
our ability to realize the benefits that we expect to achieve from the Separation;
|
•
|
low trading volume of our common stock due to limited liquidity or a lack of analyst coverage; and
|
•
|
the impact on our common stock and our overall performance as a result of our principal stockholders’ ability to exert control over us.
|
|
|
|
Sears Hometown and Outlet Stores, Inc.
|
||
|
|
|
By:
|
|
/
S
/ S
TEVEN
D. B
ARNHART
|
Name:
|
|
Steven D. Barnhart
|
Title:
|
|
Senior Vice President and Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
|
|
||
Date:
|
|
June 5, 2014
|
|
|
Exhibit Number
|
Document Description
|
*10
|
Amendment No. 2 to Services Agreement dated April 23, 2014 between Sears Holdings Management Corporation and Sears Hometown and Outlet Stores, Inc.
|
*31.1
|
Certification of Chief Executive Officer Required Under Rule 13a-14(a) and 15(d)-14(a) of the Securities Exchange Act of 1934, as amended.
|
*31.2
|
Certification of Chief Financial Officer Required Under Rule 13a-14(a) and 15(d)-14(a) of the Securities Exchange Act of 1934, as amended.
|
*32
|
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished only).
|
**101
|
The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended May 3, 2014, formatted in XBRL (eXtensible Business Reporting Language) and furnished electronically herewith: (i) the Condensed Consolidated Statements of Income (Unaudited) for the 13 Weeks Ended May 3, 2014 and May 4, 2013; (ii) the Condensed Consolidated Balance Sheets (Unaudited) at May 3, 2014, May 4, 2013, and February 1, 2014; (iii) the Condensed Consolidated Statements of Cash Flows (Unaudited) for the 13 Weeks Ended May 3, 2014 and May 4, 2013; (iv) the Condensed Combined Statements of Stockholders' Equity (Unaudited) for the 13 Weeks Ended May 3, 2014 and May 4, 2013; and (v) the Notes to the Condensed Consolidated Financial Statements (Unaudited).
|
1.
|
Amendments
. The Agreement shall be modified as of the Amendment Date as set forth below:
|
2.
|
No Other Amendments
. Except as expressly amended herein, the Agreement shall continue in full force and effect, in accordance with its terms, without any waiver, amendment or other modification of any provision thereof, including the parties’ choice of Illinois law (pursuant to
Section 12.14
of the Agreement) which also applies to this Amendment.
|
3.
|
|
SEARS, HOLDINGS MANAGEMENT
CORPORATION
By:
/s/ Kris Eyunni
DVP, Home Delivery and Installation
4/23/14
|
SEARS HOMETOWN AND OUTLET STORES, INC.
By:
/s/ W. Bruce Johnson
Chief Executive Officer and President
4/14/14
|
Type of Store
|
Store #
|
MDO
|
2014 Rate
(Absent Cap)
|
2014 Effective Rate*
|
Outlet
|
5264
|
45573
|
88.57
|
69.99
|
Outlet
|
7661
|
45120
|
95.45
|
69.99
|
Outlet
|
7633
|
45062
|
76.70
|
69.99
|
Outlet
|
7424
|
45065
|
69.99
|
69.99
|
Outlet
|
4324
|
45065
|
69.99
|
69.99
|
Outlet
|
7564
|
45070
|
92.39
|
69.99
|
Outlet
|
9974
|
45070
|
84.14
|
69.99
|
Outlet
|
9888
|
45076
|
69.99
|
69.99
|
Outlet
|
5397
|
45076
|
69.99
|
69.99
|
Outlet
|
4620
|
45081
|
99.50
|
69.99
|
Outlet
|
7592
|
45081
|
99.50
|
69.99
|
Outlet
|
5060
|
45081
|
99.50
|
69.99
|
Outlet
|
7601
|
45083
|
74.39
|
69.99
|
Outlet
|
7611
|
45083
|
74.39
|
69.99
|
Outlet
|
9603
|
45083
|
74.39
|
69.99
|
Outlet
|
7562
|
45572
|
80.46
|
69.99
|
Outlet
|
4583
|
45572
|
80.46
|
69.99
|
Outlet
|
7237
|
45105
|
84.74
|
69.99
|
Outlet
|
9849
|
45106
|
77.09
|
69.99
|
Outlet
|
4619
|
45109
|
79.11
|
69.99
|
Outlet
|
4696
|
45109
|
79.11
|
69.99
|
Outlet
|
8279
|
45116
|
97.32
|
69.99
|
Outlet
|
7533
|
45129
|
88.23
|
69.99
|
Outlet
|
7588
|
45134
|
83.45
|
69.99
|
Outlet
|
8487
|
45134
|
83.45
|
69.99
|
Outlet
|
7820
|
45135
|
89.13
|
69.99
|
Outlet
|
4994
|
45164
|
78.09
|
69.99
|
Outlet
|
7593
|
45165
|
76.21
|
69.99
|
Outlet
|
9983
|
45165
|
76.21
|
69.99
|
Outlet
|
7507
|
45599
|
86.47
|
69.99
|
Outlet
|
4823
|
45067
|
69.99
|
69.99
|
Outlet
|
8286
|
45067
|
69.99
|
69.99
|
Outlet
|
9892
|
45068
|
97.45
|
69.99
|
Outlet
|
4599
|
45073
|
71.86
|
69.99
|
Outlet
|
9876
|
45577
|
89.11
|
69.99
|
Outlet
|
4606
|
45581
|
79.78
|
69.99
|
Outlet
|
1916
|
45581
|
79.78
|
69.99
|
Outlet
|
9670
|
45581
|
79.78
|
69.99
|
Outlet
|
4790
|
45581
|
79.78
|
69.99
|
Outlet
|
9756
|
45581
|
79.78
|
69.99
|
Outlet
|
7538
|
45574
|
85.96
|
69.99
|
Outlet
|
4119
|
45574
|
85.96
|
69.99
|
Outlet
|
9788
|
45574
|
85.96
|
69.99
|
Outlet
|
9850
|
45084
|
69.99
|
69.99
|
Outlet
|
5230
|
45084
|
69.99
|
69.99
|
Outlet
|
7911
|
45084
|
69.99
|
69.99
|
Outlet
|
9986
|
45084
|
69.99
|
69.99
|
Outlet
|
7561
|
45084
|
69.99
|
69.99
|
Outlet
|
9696
|
45089
|
67.23
|
67.23
|
Outlet
|
5361
|
45089
|
67.23
|
67.23
|
Outlet
|
4585
|
45090
|
69.99
|
69.99
|
Type of Store
|
Store #
|
MDO
|
2014 Rate
(Absent Cap)
|
2014 Effective Rate*
|
Outlet
|
7577
|
45091
|
70.70
|
69.99
|
Outlet
|
7159
|
45091
|
70.70
|
69.99
|
Outlet
|
9251
|
45091
|
70.70
|
69.99
|
Outlet
|
7590
|
45091
|
70.70
|
69.99
|
Outlet
|
8496
|
45091
|
70.70
|
69.99
|
Outlet
|
5207
|
45091
|
70.70
|
69.99
|
Outlet
|
5640
|
45091
|
70.70
|
69.99
|
Outlet
|
9785
|
45091
|
70.70
|
69.99
|
Outlet
|
7704
|
45091
|
70.70
|
69.99
|
Outlet
|
7540
|
45091
|
70.70
|
69.99
|
Outlet
|
9981
|
45091
|
70.70
|
69.99
|
Outlet
|
9870
|
45091
|
70.70
|
69.99
|
Outlet
|
8246
|
45099
|
69.99
|
69.99
|
Outlet
|
9764
|
45099
|
69.99
|
69.99
|
Outlet
|
7541
|
45099
|
69.99
|
69.99
|
Outlet
|
7529
|
45101
|
69.99
|
69.99
|
Outlet
|
4099
|
45103
|
63.58
|
63.58
|
Outlet
|
5298
|
45103
|
63.58
|
63.58
|
Outlet
|
4958
|
45103
|
63.58
|
63.58
|
Outlet
|
5282
|
45103
|
63.58
|
63.58
|
Outlet
|
7349
|
45104
|
71.81
|
69.99
|
Outlet
|
7089
|
45104
|
71.81
|
69.99
|
Outlet
|
4598
|
45104
|
71.81
|
69.99
|
Outlet
|
7359
|
45107
|
63.29
|
63.29
|
Outlet
|
4328
|
45107
|
63.29
|
63.29
|
Outlet
|
4001
|
45111
|
92.20
|
69.99
|
Outlet
|
9112
|
45111
|
92.20
|
69.99
|
Outlet
|
4611
|
45115
|
70.30
|
69.99
|
Outlet
|
7652
|
45115
|
70.30
|
69.99
|
Outlet
|
7612
|
45122
|
72.89
|
69.99
|
Outlet
|
7556
|
45122
|
72.89
|
69.99
|
Outlet
|
8470
|
45122
|
72.89
|
69.99
|
Outlet
|
7438
|
45140
|
56.00
|
56.00
|
Outlet
|
4049
|
45140
|
56.00
|
56.00
|
Outlet
|
7659
|
45140
|
56.00
|
56.00
|
Outlet
|
4618
|
45142
|
71.72
|
69.99
|
Outlet
|
9229
|
45142
|
71.72
|
69.99
|
Outlet
|
9486
|
45143
|
95.24
|
69.99
|
Outlet
|
8346
|
45145
|
67.08
|
67.08
|
Outlet
|
9497
|
45146
|
66.19
|
66.19
|
Outlet
|
4697
|
45146
|
66.19
|
66.19
|
Outlet
|
7238
|
45146
|
66.19
|
66.19
|
Outlet
|
9688
|
45146
|
66.19
|
66.19
|
Outlet
|
7586
|
45149
|
74.50
|
69.99
|
Outlet
|
8495
|
45149
|
74.50
|
69.99
|
Outlet
|
7546
|
45149
|
74.50
|
69.99
|
Outlet
|
7450
|
45151
|
69.99
|
69.99
|
Outlet
|
7440
|
45151
|
69.99
|
69.99
|
Outlet
|
4333
|
45153
|
74.21
|
69.99
|
Outlet
|
9671
|
45153
|
74.21
|
69.99
|
Outlet
|
4689
|
45153
|
74.21
|
69.99
|
Outlet
|
9796
|
45158
|
75.95
|
69.99
|
Outlet
|
7631
|
45158
|
75.95
|
69.99
|
Outlet
|
4617
|
45158
|
75.95
|
69.99
|
Outlet
|
7920
|
45158
|
75.95
|
69.99
|
Outlet
|
4486
|
45158
|
75.95
|
69.99
|
Type of Store
|
Store #
|
MDO
|
2014 Rate
(Absent Cap)
|
2014 Effective Rate*
|
Outlet
|
4650
|
45158
|
75.95
|
69.99
|
Outlet
|
9897
|
45160
|
78.93
|
69.99
|
Outlet
|
9411
|
45162
|
70.89
|
69.99
|
Outlet
|
8234
|
45162
|
70.89
|
69.99
|
Outlet
|
7818
|
45162
|
70.89
|
69.99
|
Outlet
|
9284
|
45579
|
89.92
|
69.99
|
Outlet
|
8412
|
45051
|
87.36
|
69.99
|
Outlet
|
7457
|
45051
|
87.36
|
69.99
|
Outlet
|
5342
|
45576
|
69.99
|
69.99
|
Outlet
|
4044
|
45576
|
69.99
|
69.99
|
Outlet
|
9114
|
45576
|
69.99
|
69.99
|
Outlet
|
4621
|
45576
|
69.99
|
69.99
|
Outlet
|
4601
|
45576
|
69.99
|
69.99
|
Outlet
|
9944
|
45163
|
67.54
|
67.54
|
Outlet
|
8482
|
45163
|
67.54
|
67.54
|
Outlet
|
9282
|
45163
|
67.54
|
67.54
|
Outlet
|
8461
|
45167
|
156.06
|
69.99
|
Outlet
|
5365
|
45168
|
75.45
|
69.99
|
Outlet
|
4345
|
45168
|
75.45
|
69.99
|
Outlet
|
4185
|
45171
|
73.54
|
69.99
|
Outlet
|
4335
|
45171
|
73.54
|
69.99
|
Outlet
|
6052
|
45171
|
73.54
|
69.99
|
Outlet
|
4015
|
45168
|
75.45
|
69.99
|
Outlet
|
4032
|
45088
|
78.22
|
69.99
|
Outlet
|
4057
|
45162
|
70.89
|
69.99
|
Outlet
|
4071
|
45099
|
69.99
|
69.99
|
Outlet
|
4100
|
45116
|
97.32
|
69.99
|
Outlet
|
4113
|
45067
|
69.99
|
69.99
|
Outlet
|
4121
|
45153
|
74.21
|
69.99
|
Outlet
|
4124
|
45599
|
86.47
|
69.99
|
Outlet
|
4132
|
45094
|
82.06
|
69.99
|
Outlet
|
4134
|
45064
|
82.06
|
69.99
|
Outlet
|
4158
|
45145
|
67.08
|
67.08
|
Outlet
|
4205
|
45051
|
87.36
|
69.99
|
Outlet
|
4248
|
45167
|
156.06
|
69.99
|
Outlet
|
4275
|
45122
|
72.89
|
69.99
|
Outlet
|
4330
|
45163
|
67.54
|
67.54
|
Outlet
|
4356
|
45134
|
83.45
|
69.99
|
Outlet
|
4481
|
45149
|
74.50
|
69.99
|
Outlet
|
4482
|
45091
|
70.70
|
69.99
|
Outlet
|
4526
|
45149
|
74.50
|
69.99
|
Outlet
|
4989
|
45106
|
77.09
|
69.99
|
Outlet
|
9062
|
45084
|
69.99
|
69.99
|
Outlet
|
9111
|
45122
|
72.89
|
69.99
|
Outlet
|
9200
|
45091
|
70.70
|
69.99
|
Outlet
|
9281
|
45099
|
69.99
|
69.99
|
Outlet
|
9405
|
45107
|
63.29
|
63.29
|
Outlet
|
9481
|
45158
|
75.95
|
69.99
|
Outlet
|
9963
|
45576
|
69.99
|
69.99
|
Type of Store
|
Store #
|
MDO
|
2014 Rate
|
Hometown
|
3439
|
45078
|
89.08
|
Hometown
|
3409
|
45078
|
89.08
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Sears Hometown and Outlet Stores, Inc.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
June 5, 2014
|
|
|
|
|
/s/ W. Bruce Johnson
|
|
|
W. Bruce Johnson
|
|
|
|
|
|
Chief Executive Officer and President
|
|
|
Sears Hometown and Outlet Stores, Inc.
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Sears Hometown and Outlet Stores, Inc.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
June 5, 2014
|
|
|
|
|
/s/ Steven D. Barnhart
|
|
|
Steven D. Barnhart
|
|
|
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
Sears Hometown and Outlet Stores, Inc.
|
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
June 5, 2014
|
|
|
|
|
|
|
|
|
/s/ W. Bruce Johnson
|
|
|
W. Bruce Johnson
|
|
|
Chief Executive Officer and President
|
|
/s/ Steven D. Barnhart
|
|
Steven D. Barnhart
|
|
Senior Vice President and
|
|
Chief Financial Officer
|