|
ý
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
FOR THE QUARTERLY PERIOD ENDED JULY 29, 2017
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
DELAWARE
|
|
80-0808358
|
(State or Other Jurisdiction of Incorporation or Organization)
|
|
(I.R.S. Employer Identification No.)
|
|
|
|
5500 TRILLIUM BOULEVARD, SUITE 501 HOFFMAN ESTATES, ILLINOIS
|
|
60192
|
(Address of Principal Executive Offices)
|
|
(Zip Code)
|
Large accelerated filer
|
|
¨
|
|
Accelerated filer
|
|
ý
|
|
|
|
|
|||
Non-accelerated filer (Do not check if a smaller reporting company)
|
|
¨
|
|
Smaller reporting company
|
|
¨
|
|
|
|
|
|
|
|
|
|
|
|
Emerging growth company
|
|
¨
|
|
|
|
|
|
|
Page
|
|
|
|
PART I—FINANCIAL INFORMATION
|
|
|
|
|
|
Item 1.
|
|
|
|
|
|
|
||
|
||
|
||
|
||
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 3.
|
||
|
|
|
Item 4.
|
||
|
|
|
PART II—OTHER INFORMATION
|
|
|
|
|
|
Item 1.
|
||
|
|
|
Item 1A.
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 6.
|
Thousands
|
|
July 29, 2017
|
|
July 30, 2016
|
|
January 28, 2017
|
||||||
ASSETS
|
|
|
|
|
|
|
||||||
CURRENT ASSETS
|
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
|
$
|
18,287
|
|
|
$
|
18,690
|
|
|
$
|
14,104
|
|
Accounts and franchisee receivables, net
|
|
10,920
|
|
|
17,017
|
|
|
11,448
|
|
|||
Merchandise inventories
|
|
356,893
|
|
|
427,234
|
|
|
373,815
|
|
|||
Prepaid expenses and other current assets
|
|
9,995
|
|
|
18,562
|
|
|
9,370
|
|
|||
Total current assets
|
|
396,095
|
|
|
481,503
|
|
|
408,737
|
|
|||
PROPERTY AND EQUIPMENT, net
|
|
39,236
|
|
|
50,898
|
|
|
40,935
|
|
|||
LONG-TERM DEFERRED TAXES
|
|
—
|
|
|
74,984
|
|
|
—
|
|
|||
OTHER ASSETS, net
|
|
11,112
|
|
|
15,493
|
|
|
18,754
|
|
|||
TOTAL ASSETS
|
|
$
|
446,443
|
|
|
$
|
622,878
|
|
|
$
|
468,426
|
|
LIABILITIES
|
|
|
|
|
|
|
||||||
CURRENT LIABILITIES
|
|
|
|
|
|
|
||||||
Short-term borrowings
|
|
$
|
112,400
|
|
|
$
|
70,400
|
|
|
$
|
26,800
|
|
Payable to Sears Holdings Corporation
|
|
24,764
|
|
|
34,868
|
|
|
80,724
|
|
|||
Accounts payable
|
|
11,408
|
|
|
38,418
|
|
|
17,853
|
|
|||
Other current liabilities
|
|
75,777
|
|
|
66,667
|
|
|
70,377
|
|
|||
Total current liabilities
|
|
224,349
|
|
|
210,353
|
|
|
195,754
|
|
|||
OTHER LONG-TERM LIABILITIES
|
|
2,378
|
|
|
2,868
|
|
|
1,973
|
|
|||
TOTAL LIABILITIES
|
|
226,727
|
|
|
213,221
|
|
|
197,727
|
|
|||
COMMITMENTS AND CONTINGENCIES (Note 9)
|
|
|
|
|
|
|
||||||
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
||||||
TOTAL STOCKHOLDERS' EQUITY
|
|
219,716
|
|
|
409,657
|
|
|
270,699
|
|
|||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
446,443
|
|
|
$
|
622,878
|
|
|
$
|
468,426
|
|
|
|
26 Weeks Ended
|
||||||
Thousands
|
|
July 29, 2017
|
|
July 30, 2016
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
||||
Net (loss) income
|
|
$
|
(50,880
|
)
|
|
$
|
7,071
|
|
Adjustments to reconcile net (loss) income to net cash used in operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
6,908
|
|
|
6,550
|
|
||
Share-based compensation
|
|
(103
|
)
|
|
77
|
|
||
Deferred income taxes
|
|
—
|
|
|
4,158
|
|
||
Gain on sale of assets
|
|
—
|
|
|
(25,269
|
)
|
||
Provision for losses on franchisee receivables
|
|
5,701
|
|
|
(483
|
)
|
||
Change in operating assets and liabilities:
|
|
|
|
|
||||
Accounts and franchisee receivables
|
|
676
|
|
|
(4,165
|
)
|
||
Merchandise inventories
|
|
16,922
|
|
|
7,612
|
|
||
Payable to Sears Holdings Corporation
|
|
(55,960
|
)
|
|
(19,258
|
)
|
||
Accounts payable
|
|
(6,445
|
)
|
|
(1,344
|
)
|
||
Closing store accrual
|
|
1,714
|
|
|
105
|
|
||
Other operating assets and liabilities, net
|
|
4,781
|
|
|
3,725
|
|
||
Net cash used in operating activities
|
|
(76,686
|
)
|
|
(21,221
|
)
|
||
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
||||
Proceeds from the sale of assets
|
|
—
|
|
|
26,073
|
|
||
Purchases of property and equipment
|
|
(4,641
|
)
|
|
(6,838
|
)
|
||
Net cash (used in) provided by investing activities
|
|
(4,641
|
)
|
|
19,235
|
|
||
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
||||
Net short-term borrowings
|
|
85,600
|
|
|
2,100
|
|
||
Net (payments) borrowings of capital lease obligations
|
|
(90
|
)
|
|
332
|
|
||
Net cash provided by financing activities
|
|
85,510
|
|
|
2,432
|
|
||
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
|
4,183
|
|
|
446
|
|
||
CASH AND CASH EQUIVALENTS—Beginning of period
|
|
14,104
|
|
|
18,244
|
|
||
CASH AND CASH EQUIVALENTS—End of period
|
|
$
|
18,287
|
|
|
$
|
18,690
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
|
|
|
|
|
||||
Cash paid for interest
|
|
$
|
3,480
|
|
|
$
|
1,678
|
|
Cash paid (refunded) for income taxes
|
|
$
|
572
|
|
|
$
|
(1,845
|
)
|
Thousands
|
Number of Shares of Common Stock
|
|
Common Stock/Par Value
|
|
Capital in Excess of Par Value
|
|
Accumulated Deficit
|
|
Total Stockholders' Equity
|
|||||||||
Balance at January 30, 2016
|
22,722
|
|
|
$
|
227
|
|
|
$
|
555,372
|
|
|
$
|
(153,090
|
)
|
|
$
|
402,509
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
7,071
|
|
|
7,071
|
|
||||
Share-based compensation
|
(6
|
)
|
|
—
|
|
|
77
|
|
|
—
|
|
|
77
|
|
||||
Balance at July 30, 2016
|
22,716
|
|
|
$
|
227
|
|
|
$
|
555,449
|
|
|
$
|
(146,019
|
)
|
|
$
|
409,657
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Balance at January 28, 2017
|
22,716
|
|
|
$
|
227
|
|
|
$
|
555,481
|
|
|
$
|
(285,009
|
)
|
|
$
|
270,699
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(50,880
|
)
|
|
(50,880
|
)
|
||||
Share-based compensation
|
(14
|
)
|
|
—
|
|
|
(103
|
)
|
|
—
|
|
|
(103
|
)
|
||||
Balance at July 29, 2017
|
22,702
|
|
|
$
|
227
|
|
|
$
|
555,378
|
|
|
$
|
(335,889
|
)
|
|
$
|
219,716
|
|
•
|
ASU 2016-08 "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)
|
•
|
ASU 2016-10 "Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing"
|
•
|
ASU 2016-12 "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients"
|
•
|
ASU 2016-20 "Revenue from Contracts with Customers (Topic 606): Technical Corrections and Improvements"
|
Thousands
|
|
July 29, 2017
|
|
July 30, 2016
|
|
January 28, 2017
|
||||||
Short-term franchisee receivables
|
|
$
|
1,584
|
|
|
$
|
2,262
|
|
|
$
|
1,920
|
|
Miscellaneous receivables
|
|
10,363
|
|
|
16,018
|
|
|
10,475
|
|
|||
Long-term franchisee receivables
|
|
11,260
|
|
|
20,971
|
|
|
18,406
|
|
|||
Other assets
|
|
5,851
|
|
|
3,822
|
|
|
7,643
|
|
|||
Allowance for losses on short-term franchisee receivables (1)
|
|
(1,027
|
)
|
|
(1,263
|
)
|
|
(947
|
)
|
|||
Allowance for losses on long-term franchisee receivables (1)
|
|
(5,999
|
)
|
|
(9,300
|
)
|
|
(7,295
|
)
|
|||
Net accounts and franchisee receivables and other assets
|
|
$
|
22,032
|
|
|
$
|
32,510
|
|
|
$
|
30,202
|
|
|
26 Weeks Ended
|
||||||
Thousands
|
July 29, 2017
|
|
July 30, 2016
|
||||
Allowance for losses on franchisee receivables, beginning of period
|
$
|
8,242
|
|
|
$
|
12,141
|
|
Provisions (recoveries) during the period
|
5,701
|
|
|
(483
|
)
|
||
Write off of franchisee receivables against the allowance
|
(6,917
|
)
|
|
(1,220
|
)
|
||
Other
|
—
|
|
|
125
|
|
||
Allowance for losses on franchisee receivables, end of period
|
$
|
7,026
|
|
|
$
|
10,563
|
|
Thousands
|
July 29, 2017
|
|
July 30, 2016
|
|
January 28, 2017
|
||||||
Customer deposits
|
$
|
19,645
|
|
|
$
|
25,350
|
|
|
$
|
19,943
|
|
Sales and other taxes
|
11,256
|
|
|
11,753
|
|
|
11,380
|
|
|||
Accrued expenses
|
30,923
|
|
|
26,335
|
|
|
27,602
|
|
|||
Payroll and related items
|
6,958
|
|
|
5,203
|
|
|
5,766
|
|
|||
Store closing costs
|
9,373
|
|
|
894
|
|
|
7,659
|
|
|||
Total Other current and long-term liabilities
|
$
|
78,155
|
|
|
$
|
69,535
|
|
|
$
|
72,350
|
|
•
|
SHO receives commissions from Sears Holdings for specified online sales, sales of extended service contracts, and sales of delivery and handling services, and commissions relating to the use in our stores of credit cards branded with the Sears name. For specified transactions SHO pays commissions to Sears Holdings.
|
•
|
We obtain a significant amount of our merchandise inventories from Sears Holdings.
|
•
|
We pay royalties related to our sale of products branded with the KENMORE®, CRAFTSMAN®, and DIEHARD® marks (which marks are owned by, or licensed to, subsidiaries of Sears Holdings, together the "KCD Marks"). The royalty rates vary but none exceeds
6%
.
|
•
|
We pay fees for participation in Sears Holdings' SHOP YOUR WAY REWARDS® program.
|
•
|
We pay fees to Sears Holdings for logistics, handling, warehouse, and transportation services, which fees are based generally on merchandise inventory units.
|
•
|
Sears Holdings provides the Company with specified corporate services. These services include accounting and finance, and information technology, among other services. Sears Holdings charges the Company for these corporate services based on actual usage or pro rata charges based upon sales or other measurements.
|
•
|
Sears Holdings leases stores and distribution/repair facilities to the Company, for which the Company pays rent and related occupancy charges to Sears Holdings.
|
|
|
13 Weeks Ended
|
|
26 Weeks Ended
|
||||||||||||
|
|
July 29, 2017
|
|
July 30, 2016
|
|
July 29, 2017
|
|
July 30, 2016
|
||||||||
Thousands
|
|
|
|
|
|
|
|
|
||||||||
Net Commissions from Sears Holdings
|
|
$
|
18,448
|
|
|
$
|
22,818
|
|
|
$
|
35,485
|
|
|
$
|
44,392
|
|
Purchases related to cost of sales and occupancy
|
|
268,584
|
|
|
302,554
|
|
|
533,114
|
|
|
616,088
|
|
||||
Services included in selling and administrative expense
|
|
17,370
|
|
|
18,864
|
|
|
33,903
|
|
|
40,312
|
|
|
|
13 Weeks Ended July 29, 2017
|
||||||||||
Thousands
|
|
Hometown
|
|
Outlet
|
|
Total
|
||||||
Net sales
|
|
|
|
|
|
|
||||||
Appliances
|
|
$
|
222,513
|
|
|
$
|
116,655
|
|
|
$
|
339,168
|
|
Lawn and garden
|
|
81,237
|
|
|
5,697
|
|
|
86,934
|
|
|||
Tools and paint
|
|
24,536
|
|
|
3,386
|
|
|
27,922
|
|
|||
Other
|
|
19,354
|
|
|
16,607
|
|
|
35,961
|
|
|||
Total
|
|
347,640
|
|
|
142,345
|
|
|
489,985
|
|
|||
Costs and expenses
|
|
|
|
|
|
|
||||||
Cost of sales and occupancy
|
|
280,126
|
|
|
117,511
|
|
|
397,637
|
|
|||
Selling and administrative
|
|
75,759
|
|
|
39,449
|
|
|
115,208
|
|
|||
Depreciation and amortization
|
|
1,890
|
|
|
2,814
|
|
|
4,704
|
|
|||
Total
|
|
357,775
|
|
|
159,774
|
|
|
517,549
|
|
|||
Operating loss
|
|
$
|
(10,135
|
)
|
|
$
|
(17,429
|
)
|
|
$
|
(27,564
|
)
|
Total assets
|
|
$
|
297,553
|
|
|
$
|
148,890
|
|
|
$
|
446,443
|
|
Capital expenditures
|
|
$
|
1,096
|
|
|
$
|
1,469
|
|
|
$
|
2,565
|
|
|
|
13 Weeks Ended July 30, 2016
|
||||||||||
Thousands
|
|
Hometown
|
|
Outlet
|
|
Total
|
||||||
Net sales
|
|
|
|
|
|
|
||||||
Appliances
|
|
$
|
259,446
|
|
|
$
|
129,719
|
|
|
$
|
389,165
|
|
Lawn and garden
|
|
91,196
|
|
|
6,871
|
|
|
98,067
|
|
|||
Tools and paint
|
|
31,369
|
|
|
4,355
|
|
|
35,724
|
|
|||
Other
|
|
14,603
|
|
|
18,829
|
|
|
33,432
|
|
|||
Total
|
|
396,614
|
|
|
159,774
|
|
|
556,388
|
|
|||
Costs and expenses
|
|
|
|
|
|
|
||||||
Cost of sales and occupancy
|
|
313,231
|
|
|
128,277
|
|
|
441,508
|
|
|||
Selling and administrative
|
|
83,554
|
|
|
35,254
|
|
|
118,808
|
|
|||
Depreciation and amortization
|
|
1,507
|
|
|
1,786
|
|
|
3,293
|
|
|||
Gain on sale of asset
|
|
—
|
|
|
(25,269
|
)
|
|
(25,269
|
)
|
|||
Total
|
|
398,292
|
|
|
140,048
|
|
|
538,340
|
|
|||
Operating income (loss)
|
|
$
|
(1,678
|
)
|
|
$
|
19,726
|
|
|
$
|
18,048
|
|
Total assets
|
|
$
|
415,501
|
|
|
$
|
207,377
|
|
|
$
|
622,878
|
|
Capital expenditures
|
|
$
|
3,268
|
|
|
$
|
1,280
|
|
|
$
|
4,548
|
|
|
|
26 Weeks Ended July 29, 2017
|
||||||||||
Thousands
|
|
Hometown
|
|
Outlet
|
|
Total
|
||||||
Net sales
|
|
|
|
|
|
|
||||||
Appliances
|
|
$
|
420,239
|
|
|
$
|
242,520
|
|
|
662,759
|
|
|
Lawn and garden
|
|
144,800
|
|
|
11,292
|
|
|
156,092
|
|
|||
Tools and paint
|
|
49,823
|
|
|
7,266
|
|
|
57,089
|
|
|||
Other
|
|
29,992
|
|
|
32,286
|
|
|
62,278
|
|
|||
Total
|
|
644,854
|
|
|
293,364
|
|
|
938,218
|
|
|||
Costs and expenses
|
|
|
|
|
|
|
||||||
Cost of sales and occupancy
|
|
510,000
|
|
|
242,115
|
|
|
752,115
|
|
|||
Selling and administrative
|
|
150,176
|
|
|
75,913
|
|
|
226,089
|
|
|||
Depreciation and amortization
|
|
2,745
|
|
|
4,163
|
|
|
6,908
|
|
|||
Total
|
|
662,921
|
|
|
322,191
|
|
|
985,112
|
|
|||
Operating loss
|
|
$
|
(18,067
|
)
|
|
$
|
(28,827
|
)
|
|
$
|
(46,894
|
)
|
Total assets
|
|
$
|
297,553
|
|
|
$
|
148,890
|
|
|
$
|
446,443
|
|
Capital expenditures
|
|
$
|
2,351
|
|
|
$
|
2,290
|
|
|
$
|
4,641
|
|
|
|
26 Weeks Ended July 30, 2016
|
||||||||||
Thousands
|
|
Hometown
|
|
Outlet
|
|
Total
|
||||||
Net sales
|
|
|
|
|
|
|
||||||
Appliances
|
|
$
|
490,380
|
|
|
$
|
271,767
|
|
|
$
|
762,147
|
|
Lawn and garden
|
|
169,613
|
|
|
11,559
|
|
|
181,172
|
|
|||
Tools and paint
|
|
67,486
|
|
|
8,969
|
|
|
76,455
|
|
|||
Other
|
|
35,714
|
|
|
37,881
|
|
|
73,595
|
|
|||
Total
|
|
763,193
|
|
|
330,176
|
|
|
1,093,369
|
|
|||
Costs and expenses
|
|
|
|
|
|
|
||||||
Cost of sales and occupancy
|
|
597,369
|
|
|
264,929
|
|
|
862,298
|
|
|||
Selling and administrative
|
|
164,407
|
|
|
72,393
|
|
|
236,800
|
|
|||
Depreciation and amortization
|
|
3,076
|
|
|
3,474
|
|
|
6,550
|
|
|||
Gain on the sale of assets
|
|
—
|
|
|
(25,269
|
)
|
|
(25,269
|
)
|
|||
Total
|
|
764,852
|
|
|
315,527
|
|
|
1,080,379
|
|
|||
Operating income (loss)
|
|
$
|
(1,659
|
)
|
|
$
|
14,649
|
|
|
$
|
12,990
|
|
Total assets
|
|
$
|
415,501
|
|
|
$
|
207,377
|
|
|
$
|
622,878
|
|
Capital expenditures
|
|
$
|
4,574
|
|
|
$
|
2,264
|
|
|
$
|
6,838
|
|
|
13 Weeks Ended
|
|
26 Weeks Ended
|
||||||||||||
|
July 29, 2017
|
|
July 30, 2016
|
|
July 29, 2017
|
|
July 30, 2016
|
||||||||
Thousands except income per common share
|
|
|
|
|
|
|
|
||||||||
Basic weighted average shares
|
22,702
|
|
|
22,696
|
|
|
22,702
|
|
|
22,681
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Diluted weighted average shares
|
22,702
|
|
|
22,699
|
|
|
22,702
|
|
|
22,682
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net (loss) income
|
$
|
(29,446
|
)
|
|
$
|
10,642
|
|
|
$
|
(50,880
|
)
|
|
$
|
7,071
|
|
|
|
|
|
|
|
|
|
||||||||
(Loss) income per common share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(1.30
|
)
|
|
$
|
0.47
|
|
|
$
|
(2.24
|
)
|
|
$
|
0.31
|
|
Diluted
|
$
|
(1.30
|
)
|
|
$
|
0.47
|
|
|
$
|
(2.24
|
)
|
|
$
|
0.31
|
|
|
|
26 Weeks Ended July 29, 2017
|
|||||
(Shares in Thousands)
|
|
Shares
|
|
Weighted-Average Fair Value Per Share on Date of Grant
|
|||
Balance at January 28, 2017
|
|
14
|
|
|
$
|
9.38
|
|
Granted
|
|
—
|
|
|
—
|
|
|
Vested
|
|
—
|
|
|
—
|
|
|
Forfeited
|
|
(14
|
)
|
|
9.38
|
|
|
Balance at July 29, 2017
|
|
—
|
|
|
$
|
—
|
|
Thousands
|
Lease Termination Costs (1)
|
|
Inventory Related (1)
|
|
Impairment and Accelerated Depreciation (2)
|
|
Other Charges (3)
|
|
Total Store Closing Costs
|
||||||||||
13 weeks ended July 29, 2017
|
$
|
9,397
|
|
|
$
|
1,796
|
|
|
$
|
979
|
|
|
$
|
386
|
|
|
$
|
12,558
|
|
Thousands
|
Lease Termination Costs (1)
|
|
Inventory Related (1)
|
|
Impairment and Accelerated Depreciation (2)
|
|
Other Charges (3)
|
|
Total Store Closing Costs
|
||||||||||
26 weeks ended July 29, 2017
|
$
|
8,447
|
|
|
$
|
1,796
|
|
|
$
|
979
|
|
|
$
|
386
|
|
|
$
|
11,608
|
|
(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.
|
Thousands
|
|
Total
|
||
Balance at January 28, 2017
|
|
$
|
7,659
|
|
Store closing benefit
|
|
(950
|
)
|
|
Payments/utilization
|
|
(2,490
|
)
|
|
Balance at April 29, 2017
|
|
$
|
11,878
|
|
Store closing costs
|
|
9,783
|
|
|
Payments/utilization
|
|
(4,629
|
)
|
|
Balance at July 29, 2017
|
|
$
|
17,032
|
|
•
|
731 Sears Hometown Stores—Primarily independently operated stores, predominantly located in smaller communities and offering appliances, lawn and garden equipment, and hardware. Most of our Sears Hometown Stores carry Kenmore, Craftsman, and DieHard brand products as well as a wide assortment of other national brand products.
|
•
|
25 Sears Hardware Stores—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.
|
•
|
39 Sears Home Appliance Showrooms—Stores that have a simple, primarily appliance showroom design that are positioned in metropolitan areas.
|
|
|
13 Weeks Ended
|
|
26 Weeks Ended
|
||||||||||||
Thousands
|
|
July 29, 2017
|
|
July 30, 2016
|
|
July 29, 2017
|
|
July 30, 2016
|
||||||||
NET SALES
|
|
$
|
489,985
|
|
|
$
|
556,388
|
|
|
$
|
938,218
|
|
|
$
|
1,093,369
|
|
COSTS AND EXPENSES
|
|
|
|
|
|
|
|
|
||||||||
Cost of sales and occupancy
|
|
397,637
|
|
|
441,508
|
|
|
752,115
|
|
|
862,298
|
|
||||
Selling and administrative
|
|
115,208
|
|
|
118,808
|
|
|
226,089
|
|
|
236,800
|
|
||||
Selling and administrative expense as a percentage of net sales
|
|
23.5
|
%
|
|
21.4
|
%
|
|
24.1
|
%
|
|
21.7
|
%
|
||||
Depreciation and amortization
|
|
4,704
|
|
|
3,293
|
|
|
6,908
|
|
|
6,550
|
|
||||
Gain on the sale of assets
|
|
—
|
|
|
(25,269
|
)
|
|
—
|
|
|
(25,269
|
)
|
||||
Total costs and expenses
|
|
517,549
|
|
|
538,340
|
|
|
985,112
|
|
|
1,080,379
|
|
||||
Operating (loss) income
|
|
(27,564
|
)
|
|
18,048
|
|
|
(46,894
|
)
|
|
12,990
|
|
||||
Interest expense
|
|
(1,874
|
)
|
|
(886
|
)
|
|
(3,465
|
)
|
|
(1,652
|
)
|
||||
Other income
|
|
231
|
|
|
378
|
|
|
550
|
|
|
775
|
|
||||
(Loss) income before income taxes
|
|
(29,207
|
)
|
|
17,540
|
|
|
(49,809
|
)
|
|
12,113
|
|
||||
Income tax expense
|
|
(239
|
)
|
|
(6,898
|
)
|
|
(1,071
|
)
|
|
(5,042
|
)
|
||||
NET (LOSS) INCOME
|
|
$
|
(29,446
|
)
|
|
$
|
10,642
|
|
|
$
|
(50,880
|
)
|
|
$
|
7,071
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gross Margin
|
|
$
|
92,348
|
|
|
$
|
114,880
|
|
|
$
|
186,103
|
|
|
$
|
231,071
|
|
Margin rate
|
|
18.8
|
%
|
|
20.6
|
%
|
|
19.8
|
%
|
|
21.1
|
%
|
•
|
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. These items may also include cash charges such as severance and executive transition costs and IT transformation investments that make it difficult for investors to assess the Company's core operating performance.
|
|
|
13 Weeks Ended
|
|
26 Weeks Ended
|
||||||||||||
Thousands
|
|
July 29, 2017
|
|
July 30, 2016
|
|
July 29, 2017
|
|
July 30, 2016
|
||||||||
Net (loss) income
|
|
$
|
(29,446
|
)
|
|
$
|
10,642
|
|
|
$
|
(50,880
|
)
|
|
$
|
7,071
|
|
Income tax expense
|
|
239
|
|
|
6,898
|
|
|
1,071
|
|
|
5,042
|
|
||||
Other income
|
|
(231
|
)
|
|
(378
|
)
|
|
(550
|
)
|
|
(775
|
)
|
||||
Interest expense
|
|
1,874
|
|
|
886
|
|
|
3,465
|
|
|
1,652
|
|
||||
Operating (loss) income
|
|
(27,564
|
)
|
|
18,048
|
|
|
(46,894
|
)
|
|
12,990
|
|
||||
Depreciation and amortization
|
|
4,704
|
|
|
3,293
|
|
|
6,908
|
|
|
6,550
|
|
||||
Gain on the sale of assets
|
|
—
|
|
|
(25,269
|
)
|
|
—
|
|
|
(25,269
|
)
|
||||
Provision for franchisee note losses, net of recoveries
|
|
5,585
|
|
|
(251
|
)
|
|
5,701
|
|
|
(283
|
)
|
||||
IT transformation investments
|
|
8,463
|
|
|
3,323
|
|
|
17,718
|
|
|
6,473
|
|
||||
Accelerated closure of under-performing stores
|
|
11,579
|
|
|
—
|
|
|
10,629
|
|
|
—
|
|
||||
Adjusted EBITDA
|
|
$
|
2,767
|
|
|
$
|
(856
|
)
|
|
$
|
(5,938
|
)
|
|
$
|
461
|
|
|
13 Weeks Ended
|
|
26 Weeks Ended
|
||||||||||||
Thousands, except for number of stores
|
July 29, 2017
|
|
July 30, 2016
|
|
July 29, 2017
|
|
July 30, 2016
|
||||||||
NET SALES
|
$
|
347,640
|
|
|
$
|
396,614
|
|
|
$
|
644,854
|
|
|
$
|
763,193
|
|
Comparable store sales %
|
(0.9
|
)%
|
|
(6.5
|
)%
|
|
(4.6
|
)%
|
|
(4.6
|
)%
|
||||
COSTS AND EXPENSES
|
|
|
|
|
|
|
|
||||||||
Cost of sales and occupancy
|
280,126
|
|
|
313,231
|
|
|
510,000
|
|
|
597,369
|
|
||||
Selling and administrative
|
75,759
|
|
|
83,554
|
|
|
150,176
|
|
|
164,407
|
|
||||
Selling and administrative expense as a percentage of net sales
|
21.8
|
%
|
|
21.1
|
%
|
|
23.3
|
%
|
|
21.5
|
%
|
||||
Depreciation and amortization
|
1,890
|
|
|
1,507
|
|
|
2,745
|
|
|
3,076
|
|
||||
Total costs and expenses
|
357,775
|
|
|
398,292
|
|
|
662,921
|
|
|
764,852
|
|
||||
Operating loss
|
$
|
(10,135
|
)
|
|
$
|
(1,678
|
)
|
|
$
|
(18,067
|
)
|
|
$
|
(1,659
|
)
|
|
|
|
|
|
|
|
|
||||||||
Gross margin dollars
|
67,514
|
|
|
83,383
|
|
|
134,854
|
|
|
165,824
|
|
||||
Margin rate
|
19.4
|
%
|
|
21.0
|
%
|
|
20.9
|
%
|
|
21.7
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
Total Hometown stores
|
|
|
|
|
795
|
|
|
964
|
|
|
|
13 Weeks Ended
|
|
26 Weeks Ended
|
||||||||||||
Thousands, except for number of stores
|
|
July 29, 2017
|
|
July 30, 2016
|
|
July 29, 2017
|
|
July 30, 2016
|
||||||||
NET SALES
|
|
$
|
142,345
|
|
|
$
|
159,774
|
|
|
$
|
293,364
|
|
|
$
|
330,176
|
|
Comparable store sales %
|
|
(5.0
|
)%
|
|
(0.5
|
)%
|
|
(6.8
|
)%
|
|
(1.9
|
)%
|
||||
COSTS AND EXPENSES
|
|
|
|
|
|
|
|
|
||||||||
Cost of sales and occupancy
|
|
117,511
|
|
|
128,277
|
|
|
242,115
|
|
|
264,929
|
|
||||
Selling and administrative
|
|
39,449
|
|
|
35,254
|
|
|
75,913
|
|
|
72,393
|
|
||||
Selling and administrative expense as a percentage of net sales
|
|
27.7
|
%
|
|
22.1
|
%
|
|
25.9
|
%
|
|
21.9
|
%
|
||||
Depreciation and amortization
|
|
2,814
|
|
|
1,786
|
|
|
4,163
|
|
|
3,474
|
|
||||
Gain on the sale of assets
|
|
—
|
|
|
(25,269
|
)
|
|
—
|
|
|
(25,269
|
)
|
||||
Total costs and expenses
|
|
159,774
|
|
|
140,048
|
|
|
322,191
|
|
|
315,527
|
|
||||
Operating (loss) income
|
|
$
|
(17,429
|
)
|
|
$
|
19,726
|
|
|
$
|
(28,827
|
)
|
|
$
|
14,649
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gross margin dollars
|
|
24,834
|
|
|
31,497
|
|
|
51,249
|
|
|
65,247
|
|
||||
Margin rate
|
|
17.4
|
%
|
|
19.7
|
%
|
|
17.5
|
%
|
|
19.8
|
%
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Total Outlet stores
|
|
|
|
|
|
137
|
|
|
159
|
|
|
|
|
Sears Hometown and Outlet Stores, Inc.
|
||
|
|
|
By:
|
|
/
S
/ E. J. BIRD
|
Name:
|
|
E. J. Bird
|
Title:
|
|
Senior Vice President and Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
|
|
||
Date:
|
|
September 5, 2017
|
|
|
|
|
Exhibit Number
|
Exhibit Description
|
3.1
|
|
3.2
|
|
3.3
|
|
10.1(1)
|
|
10.2(1)
|
|
10.3(1)(2)
|
|
10.4(1)
|
|
10.5
|
.
|
31.1(1)
|
|
31.2(1)
|
|
32(1)
|
|
101(3)
|
The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended July 29, 2017, formatted in XBRL (eXtensible Business Reporting Language) and furnished electronically herewith: (i) the Condensed Consolidated Statements of Operations (Unaudited) for the 13 and 26 Weeks Ended July 29, 2017 and July 30, 2016; (ii) the Condensed Consolidated Balance Sheets (Unaudited) at July 29, 2017, July 30, 2016, and January 28, 2017; (iii) the Condensed Consolidated Statements of Cash Flows (Unaudited) for the 26 Weeks Ended July 29, 2017 and July 30, 2016; (iv) the Condensed Combined Statements of Stockholders' Equity (Unaudited) for the 26 Weeks Ended July 29, 2017 and July 30, 2016; and (v) the Notes to the Condensed Consolidated Financial Statements (Unaudited).
|
1.
|
Amendments
. The following amendments to Appendix 1.01-C of the Services Agreement will take effect on the Effective Date.
|
A.
|
In Paragraph 7, “Domestic Transportation,” under “Transportation” in Table I to Attachment II, the first paragraph in the right-hand column (“Fees”) is deleted and replaced with:
|
B.
|
Paragraphs 1, 3, and 8 of “Billing Methodology” of Table I to Attachment II are amended and restated in their entirety as follows:
|
◦
|
Rates for the RRCs are by flow path and by product size (Small, Medium, Large and Extra Large). Each Div-Line is placed into a size group at the beginning of the year based on prior year’s average inbound carton cube for that Div-Line.
|
◦
|
Rates for the DDCs are by flow path and division.
|
◦
|
SHO will be billed based on disbursement volume out of the distribution centers.
|
◦
|
Fixed handling expense represents the portion of logistics costs (excluding storage costs) that does not vary with volume.
|
◦
|
Subject to the next sentence, fixed handling expense will be allocated to SHO based on SHO’s percentage of SHC total variable handling expense (determined by SHC in the ordinary course of business consistent with its past accounting practices) for the prior fiscal year and Service Provider and SHO will work together in Good Faith to minimize fixed handling expense. SHO’s fixed handling expense for the remainder of fiscal year 2017 determined in accordance with the preceding sentence will be billed monthly and will not exceed the amount of $938,589 per month .
|
◦
|
Cost is based on usage of DC inventory space.
|
◦
|
SHO will be billed based on cubic feet of RRC inventory space and square feet of DDC inventory space.
|
◦
|
Cubic feet of RRC space is allocated to SHO based on SHO percentage of total line-level disbursements from the RRC.
|
◦
|
Square foot space of DDC usage is allocated to SHO based on SHO percentage of total division-level disbursements from the DDC
|
3.
|
Billing of Overhead Expenses
|
•
|
SHO will be billed 5.12% of the total SHC logistics overhead expenses (determined by SHC in the ordinary course of business consistent with its past accounting practices), which, for the remainder of fiscal year 2017 will be billed monthly and will not exceed the amount of $82,033 per month .
|
C.
|
Paragraph 1 of “Billing Methodology” of Table II to Attachment II is amended and restated in its entirety as follows:
|
1.
|
Logistics Billing Methodology
|
•
|
Variable handling expense billing
|
◦
|
Rates for the RRCs are by flow path and by product size (Small, Medium, Large and Extra Large). Each Div-Line is placed into a size group at the beginning of the year based on prior year’s average inbound carton cube for that Div-Line.
|
◦
|
Rates for the DDCs are by flow path and division.
|
◦
|
SHO will be billed based on disbursement volume out of the distribution centers.
|
•
|
Fixed handling expense billing
|
◦
|
Fixed handling expense represents the portion of logistics costs (excluding storage costs) that does not vary with volume.
|
◦
|
Fixed handling expense will be allocated to SHO based on SHO’s percentage of SHC total variable handling expense (determined by SHC in the ordinary course of business consistent with its past accounting practices) for the prior fiscal year and SHO will work together in Good Faith to minimize fixed handling expense.
|
•
|
Storage billing
|
◦
|
Cost is based on usage of DC inventory space.
|
◦
|
SHO will be billed based on cubic feet of RRC inventory space and square feet of DDC inventory space.
|
◦
|
Cubic feet of RRC space is allocated to SHO based on SHO percentage of total line-level disbursements from the RRC.
|
◦
|
Square foot space of DDC usage is allocated to SHO based on SHO percentage of total division-level disbursements from the DDC.
|
D.
|
The table entitled
“Fixed Handling Billing” of Exhibit 2 to Attachment II is deleted in its entirety.
|
E.
|
The table entitled “Logistics Overhead Billing Rate” of Exhibit 2 to Attachment II is deleted in its entirety.
|
F.
|
Exhibit A to this Amendment is added as Exhibit A to Attachment II.
|
2.
|
No Other Amendments, Etc
. Except as expressly amended herein, the Services 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 6.19(a) of the Services Agreement), which also applies to this Amendment.
|
Sears Holdings Management Corporation
By:
/s/ROBERT PHELAN
Robert Phelan
Senior Vice President
|
Sears Hometown and Outlet Stores, Inc.
By:
/s/WILL POWELL
Will Powell
Chief Executive Officer and President
|
1.
|
Amendments
. The Agreement shall be amended to add at the end of
Section 19
of the Agreement the following:
|
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 law (pursuant to
Section 22(t)
of the Agreement) which also applies to this Amendment.
|
SEARS, ROEBUCK AND CO.
|
|
|||
|
|
|
|
|
By:
|
/s/ ROBERT J. PHELAN
|
|
||
|
Senior Vice President-Finance
|
|
||
|
|
|
|
|
KMART CORPORATION
|
|
|||
|
|
|
|
|
By:
|
/s/ ROBERT J. PHELAN
|
|
||
|
Senior Vice President-Finance
|
|
||
|
|
|
|
|
SEARS HOLDINGS CORPORATION
|
|
|||
|
|
|
|
|
By:
|
s/ ROBERT J. PHELAN
|
|
||
|
Senior Vice President-Finance
|
|
||
|
|
|
|
|
SEARS HOMETOWN AND OUTLET STORES, INC.
|
||||
|
|
|
||
By:
|
/s/ WILL POWELL
|
|
||
|
Chief Executive Officer and President
|
|||
|
|
|||
SEARS AUTHORIZED HOMETOWN STORES, LLC
|
||||
|
|
|
||
By:
|
/s/ WILL POWELL
|
|
||
|
President
|
|||
|
|
|||
SEARS OUTLET STORES, L.L.C.
|
||||
|
|
|
||
By:
|
/s/ WILL POWELL
|
|
||
|
President
|
1.
|
Purchases
. For each purchase, Purchaser shall issue a purchase order reasonably describing the Product to be purchased, the place and date of delivery, and the price. All Product shall be sold to Purchaser at a price equal to [***]% of the MSRP (or [***]% off of the MSRP) of the Product.
|
2.
|
Payment terms
. Innovel shall invoice Purchaser for the Product in each shipment, at the time the shipment is received by Purchaser at Purchaser’s designated delivery point. Purchaser shall pay all undisputed amounts invoiced for Products delivered to Purchaser within ten (10) days of Purchaser’s receipt of the invoice. Purchaser shall make all payments for the Product to "Innovel Solutions, Inc." by wire transfer or intercompany transfer. The party raising a dispute relating to an amount on an invoice must do so within thirty (30) days of receipt of the invoice and the parties will use good faith efforts to resolve any such disputes promptly.
|
3.
|
All Sales “As Is”
. Innovel sells the Product “as is” and “where is.” Innovel disclaims all warranties associated with all Product, express or implied, of any nature or type whatsoever, including any warranties of merchantability and fitness for a particular purpose, except warranty of title. Furthermore, Innovel disclaims any liability for any indirect, incidental, or consequential damages, resulting from the use, sale, or purchase of any of the Product or from the refusal of Innovel to sell to Purchaser under this Agreement.
For the avoidance of doubt, the foregoing does not limit or waive Purchaser’s rights to separately seek warranty coverage for Products for itself and/or its customers from the manufacturers of such Products.
|
4.
|
Term and Termination
. The term of this Agreement starts on the Effective Date stated below and ends one year thereafter. This Agreement may be terminated immediately by Innovel or Purchaser with or without cause by providing 90 days prior written notice to the other. This Agreement will, if not terminated under this preceding sentence, automatically renew for successive one year periods until terminated.
|
5.
|
Taxes
. Purchaser shall pay all taxes, tariffs, duties and expenses that result from any sales transactions occurring under this Agreement (excluding taxes on Innovel’s income).
|
6.
|
Title and risk of loss
. Title and risk of loss will pass to Purchaser upon receipt by Purchaser or its carrier at Innovel’s dock. Purchaser shall at its own expense arrange for shipping and transportation and any further sale of all Product, including, without limitation, payment of all transportation and related costs, shipping document preparation, proper packaging and labeling, and compliance with all laws, rules and regulations, including, without limitation, those relating to export of goods. Purchaser must assert any claim for shortage of Product to Innovel no more than 30 days after delivery (or scheduled delivery, if delivery was not made) of the Product to Purchaser. Innovel will have no liability for any such claims received after such 30 day period.
|
7.
|
Unsaleable Product
. Purchaser is not required to purchase any Product that it deems “unsaleable.” If Purchaser receives Product that it deems unsaleable, it will notify Innovel promptly (but in no event more than three (3) business days after receipt of the Products at Purchaser’s designated point of delivery). If Purchaser deems Product to be unsaleable, Purchaser shall keep the unsaleable Product (without paying for such Product) and arrange for the local disposition of the Product.
|
8.
|
Sale of Product
. Except for any manufacturer’s warranty that Purchaser has been authorized by the Product manufacturer to provide to a buyer upon Purchaser’s resale of the Product, Purchaser will clearly communicate to buyers that the Product is not subject to a manufacturer’s warranty. Purchaser shall not identify Innovel as its source of the Product, except in response to disclosure ordered by a court of competent jurisdiction or a request by a governmental body.
|
9.
|
Non-exclusive
. Purchaser acknowledges and agrees that any purchase of Product is on a nonexclusive basis and subject to availability. Purchaser acknowledges that Innovel is not required to sell any minimum quantities of Product to Purchaser and Purchaser is not required to purchase any minimum quantities of Product from Innovel. Nothing in the Agreement creates any obligation or liability upon Innovel to offer any particular kinds, quantities, or quality of merchandise for sale to Purchaser. Consideration for this Agreement is in Innovel’s promise to offer to sell at least $100 worth of Product to Purchaser, and Purchaser’s promise to offer to purchase at least $100 worth of Product from Innovel.
|
10.
|
Attorneys Fees
. If either party violates these terms and conditions and initiates a legal action to enforce its rights under this Agreement, the substantially prevailing party will be entitled to recover its reasonable attorneys' fees, costs and expenses from such action.
|
a.
|
Purchaser shall maintain in strict confidence and not disclose to any third parties, any information relating to the price and other terms related to the purchase of Product.
|
b.
|
This Agreement and all sales made under this Agreement are governed by Illinois law, without regard to conflict of law or other legal principles (of Illinois or any other jurisdiction) that would apply the laws of any jurisdiction other than Illinois. Purchaser may not assign this agreement without the express, written permission of Innovel, and any attempted assignment in violation of this provision is void.
|
c.
|
Innovel will not be liable for any delay in or the impairment of performance resulting in whole or in part from Acts of God, labor disruptions, shortages, inability to produce product, supplies of raw materials, weather conditions, war or any other circumstances or causes beyond the control of Innovel.
|
d.
|
The parties agree that this is an arms-length Agreement, and that its terms are to be construed with equal bearing on each party.
|
By:
/s/ CHARLES THOMAS ROSE
|
By:
/s/ WILL POWELL
|
Vice President
|
Chief Executive Officer and President
|
July 10, 2017
|
July 17, 2017
|
1.
|
Transfer of Domain Name
. SAHS sells, transfers, and assigns to Sears all of SAHS’s right, title, and interest in and to the Domain Name and its associated domain-name registration. Sears will not make, and SAHS will not receive, any separate payment with respect to the sale and purchase of the Domain Name. Sears will be responsible for the payment of all costs and fees for the execution and the recording of the Domain Name transfer and will promptly take all actions to register Sears as the owner of the Domain Name.
|
2.
|
Amendments
. The Agreement shall be modified as of the Amendment Date as follows:
|
a.
|
|
a.
|
Addition of Domain Name
. Exhibit C of the Agreement is amended to add the Domain Name.
|
b.
|
Defense and Indemnification
.
|
i.
|
Section 5.1 of the Agreement is amended to delete clause h. thereof and replace it with the following:
|
3.
|
Other Agreements
. The Domain Name shall constitute a Licensed Domain Name as defined in clause (d) of Part I of Appendix 1.01-D (eCommerce Services) to the Services Agreement, dated August 8, 2012, between Sears Holdings Management Corporation and Sears Hometown and Outlet Stores, Inc. (“SHO”), as amended.
|
4.
|
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 law (pursuant to
Section 29.(a)
of the Agreement) which also applies to this Amendment. For clarity, SAHS acknowledges that it is subject to the terms of the Amended and Restated Merchandising Agreement, dated as of May 1, 2016, between (1) Sears, Kmart Corporation, Sears Holdings Corporation and (2) SAHS, SHO and Sears Outlet Stores, L.L.C., as amended, including without limitation the terms of Section 12(iii)(B) thereof and the Stanley License (as defined therein), and nothing in this Amendment shall be deemed to waive, amend or otherwise modify such terms.
|
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:
|
September 5, 2017
|
|
|
|
|
/s/ WILL POWELL
|
|
|
Will Powell
|
|
|
|
|
|
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:
|
September 5, 2017
|
|
|
|
|
/s/ E. J. BIRD
|
|
|
E. J. Bird
|
|
|
|
|
|
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.
|
September 5, 2017
|
|
|
|
|
|
|
|
|
/s/ WILL POWELL
|
|
|
Will Powell
|
|
|
Chief Executive Officer and President
|
|
/s/ E. J. BIRD
|
|
E. J. Bird
|
|
Senior Vice President and Chief Financial Officer
|
|