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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED FEBRUARY 3, 2018
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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D
ELAWARE
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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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Title of Each Class
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Name of Exchange on Which Registered
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Common Stock, par value $0.01 per share
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The NASDAQ Stock Market
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Large accelerated filer
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¨
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Accelerated filer
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¨
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Non-accelerated filer
(Do not check if a smaller reporting company)
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ý
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Smaller reporting company
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¨
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Page
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PART I
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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PART II
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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PART III
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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PART IV
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Item 15.
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Item 16.
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•
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Hometown Stores
. Our Hometown Stores and website offer products and services across a wide selection of merchandise categories, including home appliances, lawn and garden equipment, tools, sporting goods, and household goods, with the majority of business driven by big-ticket home appliance and lawn and garden sales. Most of our Hometown Stores carry Sears-branded products, including products branded with the KENMORE
®
, CRAFTSMAN
®
, and DIEHARD
®
marks (the "KCD Marks"), and an assortment of other national brands. Primarily independently operated, predominantly located in smaller communities and averaging approximately 8,500 square feet, Hometown Stores are designed to serve trade areas that may not support a full-service big-box retailer. As of
February 3, 2018
, there were
713
Hometown Stores in all 50 states, Puerto Rico and Bermuda. Hometown Stores also sell products and services through our website www.searshometownstores.com. When a dealer exits a location, the Company may take over the operation of a store, generally on an interim basis, until the location can be transferred to another dealer. At any given time the Company is generally operating a number of stores that are in transition from one dealer to another dealer. Transition stores are not included in our count of Company-operated locations due to the expected short-term nature of transition operation. Dealers operated 706, and we operated
seven
, Hometown stores.
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•
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Hardware Stores
. Our Hardware Stores and website offer products and services across a wide selection of merchandise categories with sales primarily driven by home appliances, lawn and garden equipment, tools, and other home improvement products including products typically found in local hardware stores, such as fasteners, electrical supplies, and plumbing supplies. Our Hardware stores average approximately 24,000 square feet in size, are primarily located in suburban trade areas and are positioned as local stores designed to appeal to convenience-oriented customers These stores carry Craftsman brand tools and lawn and garden equipment, and a wide assortment of other national brands and other home improvement
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•
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Home Appliance Showrooms
. Our Home Appliance Showrooms and website offer home appliances and related services in stores primarily located in strip malls and lifestyle centers in metropolitan areas. Averaging 5,000 square feet with a simple, primarily appliance-showroom design, our Home Appliance Showrooms offer quality-focused customers a unique store shopping experience. Home Appliance Showroom sales are primarily driven by home appliances as well as, in certain stores, mattresses. These stores carry Kenmore and other national brands of home appliances. As of
February 3, 2018
, there were
36
Home Appliance Showrooms in 12 states. Home Appliance Showrooms also sell products and services through our website www.searshomeapplianceshowroom.com. Franchisees operated
23
of these stores, and we operated
13
stores.
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Inventory procurement from third-party vendors, including KCD Products and other products which collectively account for a majority of our revenue;
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Logistical, supply chain, and inventory support services;
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Accounting and financial reporting services;
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Risk management, tax, and insurance services;
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Online, computer and information technology infrastructure (including the point-of-sale system used by the Company and our dealers and franchisees) and support;
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Certain of our store leases and the leases for stores that we have subleased, or in the future may sublease, to franchisees or others are leased or subleased to us by subsidiaries of Sears Holdings until their expiration at which time we will be required to renegotiate with the landlords directly;
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Our stores continue to use the Sears brand name, and other intellectual property owned by Sears Holdings through our license agreements with Sears Holdings;
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Our stores continue to participate in the SYW program and rely on the customer data and other information provided by the SYW program; and
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Our stores continue to accept Sears-branded credit cards.
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Expansion into the suburban and rural trade areas in which many of our stores operate;
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Lower pricing, particularly with respect to new, in-box appliances (which, among other things, makes the pricing of our Outlet merchandise less compelling);
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Expanding the offering of free delivery and installation of merchandise and other consumer benefits;
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Expanding online sales;
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Extension of credit to customers on terms more favorable than we offer; and
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Larger store size, which may result in greater operational efficiencies, or innovative store formats, and use of disruptive technology.
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Actions by our competitors, including opening of new stores in our existing trade areas or changes to the way these competitors conduct business online;
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Increases to the level of discount on promotional pricing of new-in-box appliances in the industry, which could continue to adversely impact our sales of out-of-box appliances and associated margin;
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The extent to which we are able to generate profitable sales of merchandise and services on our transactional ecommerce websites in the amounts we have planned to generate;
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The availability on commercially reasonable terms of the various types of inventory that we need to sell for the profitable operation of our stores;
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Changes in our merchandise strategy and mix;
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Real estate and maintenance costs for our existing stores;
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Changes in population and other demographics;
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Timing and effectiveness of our promotional events;
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Weather conditions, including level of rainfall, particularly drought, level of snowfall, average temperature, major storms, and delays in, or advances to, the start of seasonal changes;
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The availability of locations for new stores that can be operated profitability by the Company and by our dealers and franchisees; and
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The growth of online shopping in which we may not be able to fully participate
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our ability to satisfy obligations to lenders may be impaired, resulting in possible defaults on and acceleration of our indebtedness;
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our ability to obtain additional financing for refinancing of existing indebtedness, working capital, capital expenditures, product and service development, acquisitions, general corporate purposes and other purposes may be impaired;
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a substantial portion of our cash flow from operations could be dedicated to the payment of the principal and interest on our debt;
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we may be increasingly vulnerable to economic downturns and increases in interest rates;
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our flexibility in planning for and reacting to changes in our business and the retail industry may be limited; and
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we may be placed at a competitive disadvantage relative to other companies in our industry.
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Our business profile and market capitalization may not continue to fit the investment objectives of some stockholders and, as a result, these stockholders may sell our shares;
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Actual or anticipated fluctuations in our operating results due to factors related to our business;
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Our ability to decrease our reliance on products and services provided by Sears Holdings and ability to diversify our supply chain;
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Success or failure of our business strategy;
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Sears Holdings' financial performance, condition, and prospects, including the risk of insolvency proceedings;
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Our relationship with Sears Holdings;
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Actual or anticipated changes in the U.S. economy or the retailing environment;
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Our quarterly or annual earnings, or those of other companies in our industry;
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Our ability to obtain third-party financing as needed;
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Announcements by us or our competitors of significant acquisitions or dispositions;
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The failure of securities analysts to cover our common stock;
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Changes in earnings estimates by securities analysts or our ability to meet those estimates;
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The operating and stock price performance of other comparable companies;
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Overall market fluctuations;
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Changes in laws and regulations affecting our business;
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Actual or anticipated sales or distributions of our capital stock by our officers, directors or significant stockholders;
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Terrorist acts or wars; and
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General economic conditions and other external factors.
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Fiscal Year
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2015
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2016
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2017
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Beginning Store Count
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1,260
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1,160
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1,020
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Store Openings
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37
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20
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7
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Store Closures
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(137
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)
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(160
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)
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(127
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)
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Ending Store Count
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1,160
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1,020
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900
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Hometown
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Outlet
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Company Operated
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Dealer/Franchise
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Company Operated
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Franchise
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BR
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Bermuda
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—
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1
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—
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—
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AK
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Alaska
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—
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1
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—
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—
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AL
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Alabama
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—
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21
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1
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—
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AR
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Arkansas
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—
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32
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—
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—
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AZ
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Arizona
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—
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15
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—
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5
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CA
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California
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3
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31
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19
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—
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CO
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Colorado
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—
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15
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2
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—
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CT
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Connecticut
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—
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2
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2
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—
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DE
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Delaware
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—
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3
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1
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—
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FL
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Florida
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—
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18
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10
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—
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GA
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Georgia
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—
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27
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4
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—
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HI
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Hawaii
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—
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1
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1
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—
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IA
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Iowa
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—
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15
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—
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—
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ID
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Idaho
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—
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8
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—
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1
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IL
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Illinois
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2
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22
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8
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—
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IN
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Indiana
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1
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20
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2
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—
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KS
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Kansas
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—
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19
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2
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—
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KY
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Kentucky
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—
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16
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1
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—
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LA
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Louisiana
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—
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18
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1
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—
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MA
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Massachusetts
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—
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3
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3
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—
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MD
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Maryland
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1
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4
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3
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—
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ME
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Maine
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—
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7
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—
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—
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MI
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Michigan
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—
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29
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4
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1
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MN
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Minnesota
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—
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17
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1
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—
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MO
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Missouri
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1
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28
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2
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—
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MS
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Mississippi
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—
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21
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—
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—
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MT
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Montana
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—
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10
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—
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—
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NC
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North Carolina
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—
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24
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4
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—
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ND
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North Dakota
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—
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3
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—
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—
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NE
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Nebraska
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—
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9
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—
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—
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NH
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New Hampshire
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1
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7
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—
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—
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NJ
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New Jersey
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3
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1
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5
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—
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NM
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New Mexico
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—
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7
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—
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—
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NV
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Nevada
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1
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5
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3
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—
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NY
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New York
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—
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15
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2
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—
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OH
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Ohio
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3
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19
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7
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—
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OK
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Oklahoma
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—
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22
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—
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—
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OR
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Oregon
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—
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23
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2
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—
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PA
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Pennsylvania
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7
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13
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4
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—
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PR
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Puerto Rico
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—
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8
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1
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—
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RI
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Rhode Island
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—
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2
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—
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—
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SC
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South Carolina
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—
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13
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2
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—
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SD
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South Dakota
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—
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5
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—
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—
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TN
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Tennessee
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—
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15
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3
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—
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TX
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Texas
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4
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74
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12
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4
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UT
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Utah
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—
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3
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—
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—
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VA
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Virginia
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—
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9
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3
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—
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VT
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Vermont
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—
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7
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—
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—
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WA
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Washington
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1
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16
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3
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—
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WV
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West Virginia
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—
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6
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—
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—
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WI
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Wisconsin
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1
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24
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3
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—
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WY
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Wyoming
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—
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5
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—
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—
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Total
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29
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739
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121
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11
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Hometown
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Outlet
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Company operated stores:
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Owned
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—
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2
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Leased
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29
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119
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Total company operated
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29
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121
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Independently owned and operated
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739
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11
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Total store count as of February 3, 2018
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768
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132
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2017
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High
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Low
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First Quarter
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$
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4.00
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$
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3.35
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Second Quarter
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3.45
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2.15
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Third Quarter
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2.60
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1.70
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Fourth Quarter
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2.90
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1.48
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2016
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High
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Low
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First Quarter
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$
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7.04
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$
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5.30
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Second Quarter
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7.14
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5.38
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Third Quarter
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6.88
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4.75
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Fourth Quarter
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7.25
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3.70
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January 31, 2014
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January 30, 2015
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January 29, 2016
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January 27, 2017
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February 3, 2018
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SHOS
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$
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52.55
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$
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28.42
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$
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17.43
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$
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9.51
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$
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5.76
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S&P 500 INDEX
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$
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119.18
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$
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133.38
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$
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129.72
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$
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152.50
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$
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177.10
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S&P 500 RETAILING INDEX
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$
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129.60
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$
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153.90
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$
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177.84
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$
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208.59
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$
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281.55
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Fiscal years and thousands except for per share amounts and number of stores
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2017
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2016
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2015
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2014
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2013
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||||||||||
Consolidated Statement of Operations Data (1)
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Net sales
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1,719,951
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2,070,056
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2,287,788
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2,356,033
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2,421,562
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||||||||||
Net (loss) income
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(95,057
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)
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(131,919
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)
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(27,261
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)
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(168,805
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)
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35,550
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|
|||||
Per Common Share Data
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||||||||||
Basic
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(4.19
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)
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|
(5.81
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)
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|
(1.20
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)
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(7.45
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)
|
|
1.55
|
|
|||||
Diluted
|
|
(4.19
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)
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|
(5.81
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)
|
|
(1.20
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)
|
|
(7.45
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)
|
|
1.55
|
|
|||||
Consolidated Balance Sheet Data
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|
|
|
|
|
|
|
|
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||||||||||
Total assets
|
|
412,688
|
|
|
468,426
|
|
|
633,833
|
|
|
645,722
|
|
|
847,185
|
|
|||||
Long-term debt
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Long-term capital lease obligations
|
|
$
|
346
|
|
|
$
|
274
|
|
|
$
|
382
|
|
|
$
|
176
|
|
|
$
|
95
|
|
Other Financial and Operational Data
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Adjusted EBITDA (2)
|
|
$
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(14,525
|
)
|
|
$
|
(18,521
|
)
|
|
$
|
9,386
|
|
|
$
|
2,047
|
|
|
$
|
45,907
|
|
Number of stores
|
|
900
|
|
|
1,020
|
|
|
1,160
|
|
|
1,260
|
|
|
1,260
|
|
|||||
Sears Outlet - Comparable Store Sales %
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|
(9.1
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)%
|
|
(5.1
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)%
|
|
(4.1
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)%
|
|
(1.2
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)%
|
|
1.2
|
%
|
|||||
Sears Hometown and Hardware - Comparable Store Sales %
|
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(8.1
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)%
|
|
(4.2
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)%
|
|
(0.1
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)%
|
|
(7.1
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)%
|
|
(3.2
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)%
|
(1)
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Our fiscal year end is the Saturday closest to January 31 each year. Fiscal year 2017 was a 53-week year and fiscal years 2016, 2015, 2014, 2013, were 52-week years.
|
(2)
|
Adjusted EBITDA
—In addition to our net income (loss) determined in accordance with GAAP, for purposes of evaluating operating performance, we use Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization, or "adjusted EBITDA," which is adjusted to exclude certain significant items as set forth below. Our management uses adjusted EBITDA, among other metrics, to evaluate the operating performance of our business for comparable periods. Adjusted EBITDA should not be used by investors or other third parties as the sole basis for formulating investment decisions as it excludes a number of important cash and non-cash recurring items, and may not be comparable to similarly titled measures reported by other companies. Adjusted EBITDA should not be considered as a substitute for GAAP measurements.
|
•
|
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.
|
|
|
Fiscal
|
||||||||||
thousands
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net loss
|
|
$
|
(95,057
|
)
|
|
$
|
(131,919
|
)
|
|
$
|
(27,261
|
)
|
Income tax expense (benefit)
|
|
504
|
|
|
81,491
|
|
|
(15,152
|
)
|
|||
Other income
|
|
(925
|
)
|
|
(1,490
|
)
|
|
(2,585
|
)
|
|||
Interest expense
|
|
8,058
|
|
|
4,263
|
|
|
2,826
|
|
|||
Operating loss
|
|
(87,420
|
)
|
|
(47,655
|
)
|
|
(42,172
|
)
|
|||
Depreciation and amortization
|
|
13,039
|
|
|
13,458
|
|
|
10,562
|
|
|||
Gain on the sale of assets
|
|
—
|
|
|
(25,203
|
)
|
|
—
|
|
|||
Impairment of property and equipment
|
|
3,357
|
|
|
9,356
|
|
|
3,984
|
|
|||
Severance and executive transition costs
|
|
348
|
|
|
—
|
|
|
1,066
|
|
|||
Provision for loan losses, net of franchise revenues
|
|
7,361
|
|
|
(552
|
)
|
|
25,086
|
|
|||
IT transformation investments
|
|
34,374
|
|
|
14,974
|
|
|
10,860
|
|
|||
Accelerated closure of under-performing stores
|
|
14,416
|
|
|
17,101
|
|
|
—
|
|
|||
Adjusted EBITDA
|
|
$
|
(14,525
|
)
|
|
$
|
(18,521
|
)
|
|
$
|
9,386
|
|
•
|
713
Hometown Stores—Primarily independently operated stores, predominantly located in smaller communities, and offering home appliances, lawn and garden equipment, tools, sporting goods, and household goods. All of our Hometown Stores carry proprietary Sears-branded products, such as Kenmore, Craftsman, and DieHard, as well as a wide assortment of other national brands.
|
•
|
19
Hardware Stores—Hardware stores that offer primarily home appliances, lawn and garden equipment, tools, and other home improvement products, and featuring Kenmore, Craftsman, and DieHard, as well as a wide assortment of other national brands.
|
•
|
36
Home Appliance Showrooms—Stores that have a simple, primarily appliance showroom design that are located in metropolitan areas.
|
Fiscal year
|
|
Ended
|
|
Weeks
|
2017
|
|
February 3, 2018
|
|
53
|
2016
|
|
January 28, 2017
|
|
52
|
2015
|
|
January 30, 2016
|
|
52
|
|
|
Fiscal
|
||||||||||
thousands
|
|
2017
|
|
2016
|
|
2015
|
||||||
NET SALES
|
|
$
|
1,719,951
|
|
|
$
|
2,070,056
|
|
|
$
|
2,287,788
|
|
COSTS AND EXPENSES
|
|
|
|
|
|
|
||||||
Cost of sales and occupancy
|
|
1,371,408
|
|
|
1,661,314
|
|
|
1,769,286
|
|
|||
Gross margin
|
|
348,543
|
|
|
408,742
|
|
|
518,502
|
|
|||
Margin rate
|
|
20.3
|
%
|
|
19.7
|
%
|
|
22.7
|
%
|
|||
Selling and administrative
|
|
419,567
|
|
|
458,786
|
|
|
546,128
|
|
|||
Selling and administrative expense as a percentage of net sales
|
|
24.4
|
%
|
|
22.2
|
%
|
|
23.9
|
%
|
|||
Impairment of property and equipment
|
|
3,357
|
|
|
9,356
|
|
|
3,984
|
|
|||
Depreciation and amortization
|
|
13,039
|
|
|
13,458
|
|
|
10,562
|
|
|||
Gain on the sale of assets
|
|
—
|
|
|
(25,203
|
)
|
|
—
|
|
|||
Total costs and expenses
|
|
1,807,371
|
|
|
2,117,711
|
|
|
2,329,960
|
|
|||
Operating loss
|
|
(87,420
|
)
|
|
(47,655
|
)
|
|
(42,172
|
)
|
|||
Interest expense
|
|
(8,058
|
)
|
|
(4,263
|
)
|
|
(2,826
|
)
|
|||
Other income
|
|
925
|
|
|
1,490
|
|
|
2,585
|
|
|||
Loss before income taxes
|
|
(94,553
|
)
|
|
(50,428
|
)
|
|
(42,413
|
)
|
|||
Income tax (expense) benefit
|
|
(504
|
)
|
|
(81,491
|
)
|
|
15,152
|
|
|||
NET LOSS
|
|
$
|
(95,057
|
)
|
|
$
|
(131,919
|
)
|
|
$
|
(27,261
|
)
|
•
|
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.
|
|
|
Fiscal
|
||||||||||
thousands
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net loss
|
|
$
|
(95,057
|
)
|
|
$
|
(131,919
|
)
|
|
$
|
(27,261
|
)
|
Income tax (benefit) expense
|
|
504
|
|
|
81,491
|
|
|
(15,152
|
)
|
|||
Other income
|
|
(925
|
)
|
|
(1,490
|
)
|
|
(2,585
|
)
|
|||
Interest expense
|
|
8,058
|
|
|
4,263
|
|
|
2,826
|
|
|||
Operating loss
|
|
(87,420
|
)
|
|
(47,655
|
)
|
|
(42,172
|
)
|
|||
Depreciation and amortization
|
|
13,039
|
|
|
13,458
|
|
|
10,562
|
|
|||
Gain on the sale of assets
|
|
—
|
|
|
(25,203
|
)
|
|
—
|
|
|||
Impairment of property and equipment
|
|
3,357
|
|
|
9,356
|
|
|
3,984
|
|
|||
Severance and executive transition costs
|
|
348
|
|
|
—
|
|
|
1,066
|
|
|||
Provision for loan losses, net of franchise revenues
|
|
7,361
|
|
|
(552
|
)
|
|
25,086
|
|
|||
IT transformation investments
|
|
34,374
|
|
|
14,974
|
|
|
10,860
|
|
|||
Costs associated with accelerated store closings
|
|
14,416
|
|
|
17,101
|
|
|
—
|
|
|||
Adjusted EBITDA
|
|
$
|
(14,525
|
)
|
|
$
|
(18,521
|
)
|
|
$
|
9,386
|
|
|
|
Fiscal
|
||||||||||
thousands, except for number of stores
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net sales
|
|
$
|
1,177,222
|
|
|
$
|
1,439,563
|
|
|
$
|
1,630,276
|
|
Comparable store sales %
|
|
(8.1
|
)%
|
|
(4.2
|
)%
|
|
(0.1
|
)%
|
|||
Cost of sales and occupancy
|
|
931,078
|
|
|
1,145,678
|
|
|
1,262,215
|
|
|||
Gross margin
|
|
246,144
|
|
|
293,885
|
|
|
368,061
|
|
|||
Margin rate
|
|
20.9
|
%
|
|
20.4
|
%
|
|
22.6
|
%
|
|||
Selling and administrative
|
|
283,294
|
|
|
318,589
|
|
|
378,141
|
|
|||
Selling and administrative expense as a percentage of net sales
|
|
24.1
|
%
|
|
22.1
|
%
|
|
23.2
|
%
|
|||
Impairment of property and equipment
|
|
2,581
|
|
|
4,536
|
|
|
1,983
|
|
|||
Depreciation and amortization
|
|
5,378
|
|
|
6,032
|
|
|
3,585
|
|
|||
Loss on the sale of assets
|
|
—
|
|
|
69
|
|
|
—
|
|
|||
Total costs and expenses
|
|
1,222,331
|
|
|
1,474,904
|
|
|
1,645,924
|
|
|||
Operating loss
|
|
$
|
(45,109
|
)
|
|
$
|
(35,341
|
)
|
|
$
|
(15,648
|
)
|
Total Sears Hometown and Hardware stores
|
|
768
|
|
|
871
|
|
|
1,001
|
|
|
|
Fiscal
|
||||||||||
thousands, except for number of stores
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net sales
|
|
$
|
542,729
|
|
|
$
|
630,493
|
|
|
$
|
657,512
|
|
Comparable store sales %
|
|
(9.1
|
)%
|
|
(4.9
|
)%
|
|
(4.1
|
)%
|
|||
Cost of sales and occupancy
|
|
440,330
|
|
|
515,636
|
|
|
507,071
|
|
|||
Gross margin
|
|
102,399
|
|
|
114,857
|
|
|
150,441
|
|
|||
Margin rate
|
|
18.9
|
%
|
|
18.2
|
%
|
|
22.9
|
%
|
|||
Selling and administrative
|
|
136,273
|
|
|
140,197
|
|
|
167,987
|
|
|||
Selling and administrative expense as a percentage of net sales
|
|
25.1
|
%
|
|
22.2
|
%
|
|
25.5
|
%
|
|||
Impairment of property and equipment
|
|
776
|
|
|
4,820
|
|
|
2,001
|
|
|||
Depreciation and amortization
|
|
7,661
|
|
|
7,426
|
|
|
6,977
|
|
|||
Gain on the sale of assets
|
|
—
|
|
|
(25,272
|
)
|
|
—
|
|
|||
Total costs and expenses
|
|
585,040
|
|
|
642,807
|
|
|
684,036
|
|
|||
Operating loss
|
|
$
|
(42,311
|
)
|
|
$
|
(12,314
|
)
|
|
$
|
(26,524
|
)
|
Total Sears Outlet stores
|
|
132
|
|
|
149
|
|
|
159
|
|
thousands
|
|
Total
|
|
Within
1 Year |
|
1-3
Years |
|
4-5
Years |
|
After 5
Years |
||||||||||
Short-term borrowings
|
|
$
|
137,900
|
|
|
$
|
137,900
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Capital leases
|
|
613
|
|
|
267
|
|
|
336
|
|
|
10
|
|
|
—
|
|
|||||
Operating leases
|
|
148,197
|
|
|
44,076
|
|
|
81,036
|
|
|
14,264
|
|
|
8,821
|
|
|||||
Total Contractual Obligations
|
|
$
|
286,710
|
|
|
$
|
182,243
|
|
|
$
|
81,372
|
|
|
$
|
14,274
|
|
|
$
|
8,821
|
|
•
|
it requires assumptions to be made about matters that were highly uncertain at the time the estimate was made, and
|
•
|
changes in the estimate that are reasonably likely to occur from period to period or different estimates that could have been selected would have a material effect on our financial condition, cash flows or results of operations.
|
|
Page
|
|
|
Consolidated Statements of
Operations
|
|
|
|
|
|
|
|
|
|
|
|
Report of Independent
Registered Public Accounting Firm
|
|
|
|
thousands
|
Number of Shares of Common Stock
|
Common Stock/Par Value
|
Capital in Excess of Par Value
|
Retained Earnings (Deficit)
|
Total Stockholders' Equity
|
|||||||||
Balance at January 31, 2015
|
22,736
|
|
$
|
227
|
|
$
|
547,888
|
|
$
|
(125,829
|
)
|
$
|
422,286
|
|
Net loss
|
—
|
|
—
|
|
—
|
|
(27,261
|
)
|
(27,261
|
)
|
||||
Share-based compensation
|
(14
|
)
|
—
|
|
(70
|
)
|
—
|
|
(70
|
)
|
||||
Tax adjustment related to the separation
|
—
|
|
—
|
|
7,554
|
|
—
|
|
7,554
|
|
||||
Balance at January 30, 2016
|
22,722
|
|
$
|
227
|
|
555,372
|
|
(153,090
|
)
|
402,509
|
|
|||
Net loss
|
—
|
|
—
|
|
—
|
|
(131,919
|
)
|
(131,919
|
)
|
||||
Share-based compensation
|
(6
|
)
|
—
|
|
109
|
|
—
|
|
109
|
|
||||
Balance at January 28, 2017
|
22,716
|
|
$
|
227
|
|
$
|
555,481
|
|
$
|
(285,009
|
)
|
$
|
270,699
|
|
Net loss
|
—
|
|
—
|
|
—
|
|
(95,057
|
)
|
(95,057
|
)
|
||||
Share-based compensation
|
(14
|
)
|
—
|
|
(103
|
)
|
—
|
|
(103
|
)
|
||||
Balance at February 3, 2018
|
22,702
|
|
$
|
227
|
|
$
|
555,378
|
|
$
|
(380,066
|
)
|
$
|
175,539
|
|
Fiscal Year
|
Ended
|
Weeks
|
2017
|
February 3, 2018
|
53
|
2016
|
January 28, 2017
|
52
|
2015
|
January 30, 2016
|
52
|
thousands
|
|
February 3, 2018
|
|
January 28, 2017
|
||||
Land
|
|
$
|
1,741
|
|
|
$
|
1,741
|
|
Buildings and improvements
|
|
35,065
|
|
|
41,071
|
|
||
Furniture, fixtures and equipment
|
|
37,303
|
|
|
37,174
|
|
||
Capitalized leases
|
|
1,276
|
|
|
1,175
|
|
||
Total property and equipment
|
|
75,385
|
|
|
81,161
|
|
||
Less: accumulated depreciation
|
|
(39,336
|
)
|
|
(40,226
|
)
|
||
Total property and equipment, net
|
|
$
|
36,049
|
|
|
$
|
40,935
|
|
thousands
|
|
February 3, 2018
|
|
January 28, 2017
|
||||
Reacquisition rights
|
|
$
|
6,100
|
|
|
$
|
6,100
|
|
Less: accumulated amortization
|
|
(5,845
|
)
|
|
(4,573
|
)
|
||
Total intangible assets, net
|
|
$
|
255
|
|
|
$
|
1,527
|
|
|
|
Fiscal Year
|
|||||||
thousands
|
|
2017
|
|
2016
|
|
2015
|
|||
Minimum rentals
|
|
59,533
|
|
|
69,111
|
|
|
63,336
|
|
Less-Sublease rentals
|
|
(7,399
|
)
|
|
(13,181
|
)
|
|
(25,505
|
)
|
Total
|
|
52,134
|
|
|
55,930
|
|
|
37,831
|
|
Fiscal Year
(thousands)
|
|
Capital Leases
|
|
Operating Leases
|
||||
2018
|
|
$
|
267
|
|
|
$
|
44,076
|
|
2019
|
|
308
|
|
|
32,697
|
|
||
2020
|
|
17
|
|
|
27,422
|
|
||
2021
|
|
11
|
|
|
20,917
|
|
||
2022
|
|
10
|
|
|
14,264
|
|
||
Thereafter
|
|
—
|
|
|
8,821
|
|
||
Total Minimum Lease Payments
|
|
613
|
|
|
148,197
|
|
||
Less - Sublease Income on Leased Properties
|
|
—
|
|
|
(7,308
|
)
|
||
Net Minimum Lease Payments
|
|
$
|
613
|
|
|
$
|
140,889
|
|
|
|
|
|
|
||||
Capital lease obligations
|
|
613
|
|
|
|
|||
Less Current Portion of Capital Lease Obligations
|
(267
|
)
|
|
|
||||
Long-term Capital Lease Obligations
|
|
$
|
346
|
|
|
|
thousands
|
|
February 3, 2018
|
|
January 28, 2017
|
||||
Short-term franchisee receivables
|
|
$
|
1,205
|
|
|
$
|
1,920
|
|
Miscellaneous receivables
|
|
14,314
|
|
|
10,475
|
|
||
Long-term franchisee receivables
|
|
7,962
|
|
|
18,406
|
|
||
Other assets
|
|
5,106
|
|
|
7,643
|
|
||
Allowance for losses on short-term franchisee receivables (1)
|
|
(847
|
)
|
|
(947
|
)
|
||
Allowance for losses on long-term franchisee receivables (1)
|
|
(4,928
|
)
|
|
(7,295
|
)
|
||
Total Accounts and franchisee receivables and other assets
|
|
$
|
22,812
|
|
|
$
|
30,202
|
|
thousands
|
|
February 3, 2018
|
|
January 28, 2017
|
||||
Allowance for losses on franchisee receivables, beginning of period
|
|
$
|
8,242
|
|
|
$
|
12,141
|
|
Expense (benefit) during the period
|
|
7,361
|
|
|
(791
|
)
|
||
Write off of franchisee receivables
|
|
(9,828
|
)
|
|
(3,383
|
)
|
||
Other
|
|
—
|
|
|
275
|
|
||
Allowance for losses on franchisee receivables, end of period
|
|
$
|
5,775
|
|
|
$
|
8,242
|
|
thousands
|
|
February 3, 2018
|
|
January 28, 2017
|
||||
Customer deposits
|
|
$
|
16,655
|
|
|
$
|
19,943
|
|
Sales and other taxes
|
|
9,221
|
|
|
11,380
|
|
||
Accrued expenses
|
|
17,755
|
|
|
27,602
|
|
||
Payroll and related items
|
|
7,140
|
|
|
5,766
|
|
||
Store closing and severance costs
|
|
4,655
|
|
|
7,659
|
|
||
Total Other current and long-term liabilities
|
|
$
|
55,426
|
|
|
$
|
72,350
|
|
|
|
|
|
Fiscal Year Ended
|
||||||||||
thousands
|
|
2017
|
|
2016
|
|
2015
|
||||||||
Loss before income taxes:
|
|
|
|
|
|
|
||||||||
U.S.
|
|
$
|
(96,166
|
)
|
|
$
|
(51,588
|
)
|
|
$
|
(41,643
|
)
|
||
Foreign
|
|
1,613
|
|
|
1,160
|
|
|
(770
|
)
|
|||||
Total
|
|
$
|
(94,553
|
)
|
|
$
|
(50,428
|
)
|
|
$
|
(42,413
|
)
|
||
Income tax expense (benefit):
|
|
|
|
|
|
|
||||||||
Current:
|
|
|
|
|
|
|
|
|||||||
Federal
|
|
$
|
2
|
|
|
$
|
(155
|
)
|
|
$
|
(9,758
|
)
|
||
State
|
|
215
|
|
|
1,001
|
|
|
605
|
|
|||||
Foreign
|
|
1,046
|
|
|
542
|
|
|
432
|
|
|||||
Total
|
|
1,263
|
|
|
1,388
|
|
|
(8,721
|
)
|
|||||
Deferred:
|
|
|
|
|
|
|
||||||||
Federal
|
|
(759
|
)
|
|
67,463
|
|
|
(4,666
|
)
|
|||||
State
|
|
—
|
|
|
12,640
|
|
|
(1,765
|
)
|
|||||
Total
|
|
$
|
(759
|
)
|
|
$
|
80,103
|
|
|
$
|
(6,431
|
)
|
||
|
|
|
|
|
|
|
|
|
||||||
Income tax expense (benefit)
|
|
$
|
504
|
|
|
$
|
81,491
|
|
|
$
|
(15,152
|
)
|
|
|
Fiscal Year Ended
|
|||||||
|
|
2017
|
|
2016
|
|
2015
|
|||
Federal tax rate
|
|
33.7
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State income tax (net of federal benefit)
|
|
(0.2
|
)%
|
|
1.7
|
%
|
|
1.8
|
%
|
Federal tax rate change
|
|
(37.2
|
)%
|
|
—
|
%
|
|
—
|
%
|
Valuation allowance
|
|
4.4
|
%
|
|
(198.5
|
)%
|
|
(1.6
|
)%
|
Foreign taxes
|
|
(1.1
|
)%
|
|
—
|
%
|
|
0.5
|
%
|
Other
|
|
(0.1
|
)%
|
|
0.2
|
%
|
|
—
|
%
|
Effective tax rate
|
|
(0.5
|
)%
|
|
(161.6
|
)%
|
|
35.7
|
%
|
|
|
|
Fiscal Year Ended
|
||||||
thousands
|
February 3, 2018
|
|
January 28, 2017
|
||||||
Deferred tax assets
|
|
||||||||
Bad debts
|
$
|
1,543
|
|
|
$
|
3,487
|
|
||
Deferred compensation
|
756
|
|
|
468
|
|
||||
Inventory
|
—
|
|
|
3,159
|
|
||||
Net operating loss
|
54,580
|
|
|
39,169
|
|
||||
Property
|
2,598
|
|
|
296
|
|
||||
Royalty-free license
|
26,451
|
|
|
44,280
|
|
||||
Other
|
7,803
|
|
|
11,230
|
|
||||
Sub-total deferred tax assets
|
$
|
93,731
|
|
|
$
|
102,089
|
|
||
Valuation allowance
|
(92,362
|
)
|
|
(100,906
|
)
|
||||
Total deferred tax assets
|
$
|
1,369
|
|
|
$
|
1,183
|
|
||
Deferred tax liabilities
|
|
|
|
||||||
Property
|
(730
|
)
|
|
—
|
|
||||
Other
|
(639
|
)
|
|
(1,183
|
)
|
||||
Total deferred tax liabilities
|
(1,369
|
)
|
|
(1,183
|
)
|
||||
Net deferred tax assets
|
—
|
|
|
—
|
|
•
|
We are party to a Separation Agreement with Sears Holdings pursuant to which Sears Holdings consummated the Separation. The Separation Agreement, among other things, provided for the allocation and transfer, through a series of intercompany transactions, of the assets and the liabilities comprising the Sears Hometown and Hardware and Sears Outlet businesses of Sears Holdings. In the Separation Agreement SHO and Sears Holdings agree to release each other from all pre-separation claims (other than with respect to the agreements executed in connection with the Separation) and each agrees to defend and indemnify the other with respect to its post-separation business.
|
•
|
We obtain a significant amount of our merchandise inventories from Sears Holdings. This enables us to take advantage of the amount and scope of Sears Holdings' purchasing activities. The SHO-Sears Holdings Agreements include an Amended and Restated Merchandising Agreement with Sears Holdings, Kmart and SRC (the "Merchandising Agreement") pursuant to which Kmart and SRC (1) sell to us, with respect to certain specified product categories, Sears-branded products including KCD Products and vendor-branded products obtained from Kmart’s and SRC’s vendors and suppliers and (2) grant us licenses to use the trademarks owned by Kmart, SRC or other subsidiaries of Sears Holdings, or the "Sears marks," including the KCD Marks in connection with the marketing and sale of products sold under the Sears marks. The initial term of the Merchandising Agreement will expire on February 1, 2020, subject to
one
three
-year renewal term with respect to the KCD Products. We pay, on a weekly basis, a royalty determined by multiplying our net sales of the KCD Products by specified fixed royalties rates for each brand’s licensed products, subject to adjustments based on the extent to which we feature Kenmore brand products in certain of our advertising and the extent to which we pay specified minimum commissions to our franchisees and Hometown Store owners. The SHO-Sears Holdings Agreements also provide for related logistics, handling, warehouse and transportation services, the charges for which are based generally on merchandise inventory units. We also pay fees for participation in Sears Holdings' SYW program.
|
•
|
We obtain our merchandise from Sears Holdings and other vendors. Products which we acquired from Sears Holdings, including KCD Products and other products, accounted for approximately
78%
,
80%
, and
82%
of our total purchases of inventory from all vendors for
2017
,
2016
, and
2015
, respectively. The loss of or a reduction in the amount of merchandise made available to us by Sears Holdings could have a material adverse effect on our business and results of operations.
|
•
|
Sears Holdings provides the Company with specified corporate services pursuant to the SHO-Sears Holdings Agreements. These services include tax, accounting, procurement, risk management and insurance, advertising and marketing, loss prevention, environmental, product and human safety, facilities, logistics and distribution, information technology (including the point-of-sale system used by the Company and our dealers and franchisees), online, payment clearing, and other financial, real estate management, merchandise-related and other support services. Sears Holdings charges the Company for these corporate services generally based on actual usage, a pro rata charge based upon sales, head count, or square footage, or a fixed fee or commission as agreed between the parties.
|
•
|
Sears Holdings has licensed the Company until October 11, 2029, on a royalty-free basis, to use under specified conditions (1) the name "Sears" in our corporate name and to promote our businesses and (2) the www.searsoutlet.com (our license to use "searsoutlet.com" on a web platform not operated by Sears Holdings will expire on February 1, 2020), www.searshomeapplianceshowroom.com, www.searshometownstores.com, and www.searshardwarestores.com domain names to promote our businesses. Also, Sears Holdings has licensed the Company until October 11, 2029, on an exclusive, royalty-free basis, under specified conditions to use for the purpose of operating our stores the names "Sears Appliance & Hardware," "Sears Authorized Hometown Stores," "Sears Hometown Store," "Sears Home Appliance Showroom," "Sears Hardware," and "Sears Outlet Store."
|
•
|
Sears Holdings has assigned to us leases for, or has subleased to us, many of the stores that we operate or that we have, in turn, subleased to franchisees. Generally, the terms of the subleases match the terms, including the payment of rent and expiration date, of the existing leases between Sears Holdings (or one of its subsidiaries) and the landlord. In addition, a small number of our stores are in locations where Sears Holdings currently operates one of its stores or a distribution facility. In such cases we have entered into a lease or sublease with Sears Holdings (or one of its subsidiaries) for the portion of the space in which our store will operate, and we pay rent directly to Sears Holdings on the terms negotiated in connection with the Separation. We also lease from Sears Holdings office space for our corporate headquarters.
|
•
|
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 plans, delivery and handling services and relating to the use in our stores of credit cards branded with the Sears name. For certain transactions SHO pays a commission to Sears Holdings.
|
|
|
Fiscal Year Ended
|
||||||||||
thousands
|
|
February 3, 2018
|
|
January 28, 2017
|
|
January 30, 2016
|
||||||
Net Commissions from Sears Holdings
|
|
$
|
66,557
|
|
|
$
|
82,447
|
|
|
$
|
91,291
|
|
Purchases related to cost of sales and occupancy
|
|
958,560
|
|
|
1,153,739
|
|
|
1,386,414
|
|
|||
Services included in selling and administrative
|
|
60,822
|
|
|
77,134
|
|
|
88,486
|
|
|
|
2017
|
||||||||||
thousands
|
|
Hometown
|
|
Outlet
|
|
Total
|
||||||
Net sales
|
|
|
|
|
|
|
||||||
Appliances
|
|
$
|
805,490
|
|
|
$
|
446,118
|
|
|
$
|
1,251,608
|
|
Lawn and garden
|
|
204,371
|
|
|
19,024
|
|
|
223,395
|
|
|||
Tools and paint
|
|
103,706
|
|
|
14,289
|
|
|
117,995
|
|
|||
Other
|
|
63,655
|
|
|
63,298
|
|
|
126,953
|
|
|||
Total
|
|
1,177,222
|
|
|
542,729
|
|
|
1,719,951
|
|
|||
Costs and expenses
|
|
|
|
|
|
|
||||||
Cost of sales and occupancy
|
|
931,078
|
|
|
440,330
|
|
|
1,371,408
|
|
|||
Selling and administrative
|
|
283,294
|
|
|
136,273
|
|
|
419,567
|
|
|||
Impairment of property and equipment
|
|
2,581
|
|
|
776
|
|
|
3,357
|
|
|||
Depreciation and amortization
|
|
5,378
|
|
|
7,661
|
|
|
13,039
|
|
|||
Total
|
|
1,222,331
|
|
|
585,040
|
|
|
1,807,371
|
|
|||
Operating loss
|
|
$
|
(45,109
|
)
|
|
$
|
(42,311
|
)
|
|
$
|
(87,420
|
)
|
Total assets
|
|
$
|
281,805
|
|
|
$
|
130,883
|
|
|
$
|
412,688
|
|
Capital expenditures
|
|
$
|
4,156
|
|
|
$
|
5,072
|
|
|
$
|
9,228
|
|
|
|
2016
|
||||||||||
thousands
|
|
Hometown
|
|
Outlet
|
|
Total
|
||||||
Net sales
|
|
|
|
|
|
|
||||||
Appliances
|
|
$
|
963,391
|
|
|
$
|
517,625
|
|
|
$
|
1,481,016
|
|
Lawn and garden
|
|
247,157
|
|
|
20,454
|
|
|
267,611
|
|
|||
Tools and paint
|
|
150,520
|
|
|
17,856
|
|
|
168,376
|
|
|||
Other
|
|
78,495
|
|
|
74,558
|
|
|
153,053
|
|
|||
Total
|
|
1,439,563
|
|
|
630,493
|
|
|
2,070,056
|
|
|||
Costs and expenses
|
|
|
|
|
|
|
||||||
Cost of sales and occupancy
|
|
1,145,678
|
|
|
515,636
|
|
|
1,661,314
|
|
|||
Selling and administrative
|
|
318,589
|
|
|
140,197
|
|
|
458,786
|
|
|||
Impairment of property and equipment
|
|
4,536
|
|
|
4,820
|
|
|
9,356
|
|
|||
Depreciation and amortization
|
|
6,032
|
|
|
7,426
|
|
|
13,458
|
|
|||
Loss (gain) on the sale of assets
|
|
69
|
|
|
(25,272
|
)
|
|
(25,203
|
)
|
|||
Total
|
|
1,474,904
|
|
|
642,807
|
|
|
2,117,711
|
|
|||
Operating loss
|
|
$
|
(35,341
|
)
|
|
$
|
(12,314
|
)
|
|
$
|
(47,655
|
)
|
Total assets
|
|
$
|
303,166
|
|
|
$
|
165,260
|
|
|
$
|
468,426
|
|
Capital expenditures
|
|
$
|
7,377
|
|
|
$
|
4,821
|
|
|
$
|
12,198
|
|
|
|
2015
|
||||||||||
thousands
|
|
Hometown
|
|
Outlet
|
|
Total
|
||||||
Net sales
|
|
|
|
|
|
|
||||||
Appliances
|
|
$
|
1,056,175
|
|
|
$
|
529,083
|
|
|
$
|
1,585,258
|
|
Lawn and garden
|
|
286,222
|
|
|
22,166
|
|
|
308,388
|
|
|||
Tools and paint
|
|
183,591
|
|
|
17,850
|
|
|
201,441
|
|
|||
Other
|
|
104,288
|
|
|
88,413
|
|
|
192,701
|
|
|||
Total
|
|
1,630,276
|
|
|
657,512
|
|
|
2,287,788
|
|
|||
Costs and expenses
|
|
|
|
|
|
|
||||||
Cost of sales and occupancy
|
|
1,262,215
|
|
|
507,071
|
|
|
1,769,286
|
|
|||
Selling and administrative
|
|
378,141
|
|
|
167,987
|
|
|
546,128
|
|
|||
Impairment of property and equipment
|
|
1,983
|
|
|
2,001
|
|
|
3,984
|
|
|||
Depreciation and amortization
|
|
3,585
|
|
|
6,977
|
|
|
10,562
|
|
|||
Total Costs and expenses
|
|
1,645,924
|
|
|
684,036
|
|
|
2,329,960
|
|
|||
Operating loss
|
|
$
|
(15,648
|
)
|
|
$
|
(26,524
|
)
|
|
$
|
(42,172
|
)
|
Total assets
|
|
$
|
421,615
|
|
|
$
|
212,218
|
|
|
$
|
633,833
|
|
Capital expenditures
|
|
$
|
4,563
|
|
|
$
|
6,867
|
|
|
$
|
11,430
|
|
|
Fiscal Year Ended
|
||||||||||
thousands except income per common share
|
February 3, 2018
|
|
January 28, 2017
|
|
January 30, 2016
|
||||||
Basic weighted average shares
|
22,702
|
|
|
22,691
|
|
|
22,666
|
|
|||
Dilutive effect of restricted stock
|
—
|
|
|
—
|
|
|
—
|
|
|||
Diluted weighted average shares
|
22,702
|
|
|
22,691
|
|
|
22,666
|
|
|||
|
|
|
|
|
|
||||||
Net loss
|
$
|
(95,057
|
)
|
|
$
|
(131,919
|
)
|
|
$
|
(27,261
|
)
|
|
|
|
|
|
|
||||||
Loss per common share:
|
|
|
|
|
|
||||||
Basic
|
$
|
(4.19
|
)
|
|
$
|
(5.81
|
)
|
|
$
|
(1.20
|
)
|
Diluted
|
$
|
(4.19
|
)
|
|
$
|
(5.81
|
)
|
|
$
|
(1.20
|
)
|
(Shares in thousands)
|
|
Restricted Stock
|
|
Weighted-Average Fair Value on Date of Grant
|
|||
Balance at January 28, 2017
|
|
14
|
|
|
$
|
9.38
|
|
Granted
|
|
—
|
|
|
—
|
|
|
Vested
|
|
—
|
|
|
—
|
|
|
Forfeited
|
|
(14
|
)
|
|
9.38
|
|
|
Balance at February 3, 2018
|
|
—
|
|
|
$
|
—
|
|
thousands
|
|
2017
|
|
2016
|
|
2015
|
||||||
401(k) Savings Plan
|
|
$
|
1,056
|
|
|
$
|
957
|
|
|
$
|
905
|
|
Thousands
|
Lease Termination Costs (1)
|
|
Inventory Related (1)
|
|
Accelerated Depreciation (2)
|
|
Other Charges (3)
|
|
Total Store Closing Costs
|
||||||||||
Fiscal year ended February 3, 2018
|
$
|
9,665
|
|
|
$
|
4,527
|
|
|
$
|
979
|
|
|
$
|
224
|
|
|
$
|
15,395
|
|
Thousands
|
Lease Termination Costs (1)
|
|
Inventory Related (1)
|
|
Accelerated Depreciation (2)
|
|
Other Charges (3)
|
|
Total Store Closing Costs
|
||||||||||
Fiscal year ended January 28, 2017
|
$
|
8,477
|
|
|
$
|
7,224
|
|
|
$
|
565
|
|
|
$
|
1,400
|
|
|
$
|
17,666
|
|
(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 30, 2016
|
$
|
—
|
|
Store closing costs
|
9,877
|
|
|
Payments/utilization
|
(2,218
|
)
|
|
Balance at January 28, 2017
|
$
|
7,659
|
|
Store closing costs
|
9,889
|
|
|
Payments/utilization
|
(12,893
|
)
|
|
Balance at February 3, 2018
|
$
|
4,655
|
|
Plan Category
|
|
(a)
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1)
|
|
(b)
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (1)
|
|
(c)
Number of Securities Remaining Available for Future Issuances Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
|
||
Equity Compensation Plans Approved by Security Holders
|
|
—
|
|
—
|
|
3,253,418
|
|
(2)
|
Equity Compensation Plans Not Approved by Security Holders
|
|
—
|
|
—
|
|
—
|
|
|
Total
|
|
—
|
|
—
|
|
3,253,418
|
|
(2)
|
(1)
|
Financial Statements
|
Sears Hometown and Outlet Stores, Inc.
|
||
|
|
|
By:
|
|
/S/ E. J. BIRD
|
Name:
|
|
E. J. Bird
|
Title:
|
|
Senior Vice President and Chief Financial Officer
|
|
||
Date:
|
|
April 18, 2018
|
Exhibit
Number
|
|
Document Description
|
3.1
|
|
|
3.2
|
|
|
3.3
|
|
|
4.1
|
|
|
10.1
|
|
|
10.2
|
|
|
10.3
|
|
|
10.4
|
|
|
10.5
|
|
|
10.6
|
|
|
10.7
|
|
|
10.8
|
|
|
10.9
|
|
|
10.10(1)
|
|
|
10.11(1)
|
|
|
10.12
|
|
|
10.13
|
|
10.14(1)
|
|
|
10.15
|
|
|
10.16
|
|
|
10.17
|
|
|
10.18
|
|
|
10.19(1)
|
|
|
10.20
|
|
|
10.21
|
|
|
10.22
|
|
|
10.23(3)
|
|
|
10.24(1)
|
|
|
10.25
|
|
|
10.26(1)
|
|
|
10.27
|
|
|
10.21
|
|
|
10.22
|
|
|
10.23
|
|
|
10.24
|
|
10.25
|
|
|
10.26(2)
|
|
|
10.27(2)
|
|
|
10.28(2)
|
|
|
10.29(2)
|
|
|
10.30(2)
|
|
|
10.31(2)
|
|
|
10.32(2)
|
|
|
10.33(2)
|
|
|
10.34(2)
|
|
|
10.35(2)
|
|
|
10.36(2)
|
|
|
10.37(2)
|
|
|
10.38(2)
|
|
|
10.39(2)
|
|
|
10.40(2)
|
|
|
10.41(2)
|
|
|
10.42(2)
|
|
|
10.43(2)
|
|
|
10.44(2)(3)
|
|
|
10.45(2)
|
|
|
10.46(2)
|
|
|
10.47(2)
|
|
|
10.48
|
|
10.49
|
|
|
10.50
|
|
|
10.51
|
|
|
21(3)
|
|
|
23(3)
|
|
|
24(3)
|
|
|
31.1(3)
|
|
|
31.2(3)
|
|
|
32.1(3)
|
|
|
101(4)
|
|
(1)
|
The Securities and Exchange Commission granted the registrant's request for confidential treatment for the omitted portions of this Exhibit. The registrant has separately filed the omitted portions with the Securities and Exchange Commission.
|
(2)
|
A management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K pursuant to Item 15(b) of Form 10-K.
|
(3)
|
Filed herewith.
|
(4)
|
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
|
1.
|
Amendments
. The following amendments to the Services Agreement are effective as of the date of this Amendment (“
Amendment No. 9 Effective Date
”).
|
A.
|
Table II to Attachment A to Appendix 1.01-D eCommerce Services to the Services Agreement, SHO/W2H, is amended and restated as follows:
|
SHO/W2H
|
SHO pays SHMC 1% except that SHO pays SHMC 15% if the sale is to a customer who is located in a zip code outside of the Web Territories and who found the offer through eCommerce Marketing, excluding Google’s Local Inventory ads.
SHMC has the right to inspect all eCommerce Marketing and its targeting, at any time, to ensure e-Commerce Marketing is only to customers located in Web Territories.
|
Amendment No. 9 Effective Date
|
End of eCommerce Services Period
|
B.
|
Table II to Attachment A to Appendix 1.01-D eCommerce Services to the Services Agreement, SHO/S2H, is amended and restated as follows:
|
SHO/S2H
|
SHO pays SHMC 1%
|
Amendment No. 9 Effective Date
|
End of eCommerce Services Period
|
2.
|
SHMC’s Right to Terminate the Amendments
. SHMC may terminate the Amendments on 30-days’ prior notice to SHO, in which event the Amendments will be void and the language amended and restated by Amendments will again be in effect.
|
3.
|
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 J. PHELAN
Robert J. Phelan
Senior Vice President-Finance and Treasurer
|
Sears Hometown and Outlet Stores, Inc.
By:
/S/ WILL POWELL
Will Powell
Chief Executive Officer and President
|
Agreed to and accepted:
/S/ MICHAEL A. GRAY
Michael A. Gray
|
Very truly yours,
SEARS HOMETOWN AND OUTLET STORES, INC.
By:
/S/ WILL POWELL
Will Powell
Chief Executive Officer and President
|
|
Jurisdiction of Formation
|
Sears Authorized Hometown Stores, LLC
|
Delaware
|
Sears Home Appliance Showrooms, LLC
|
Delaware
|
Sears Outlet Stores, L.L.C.
|
Delaware
|
Signature:
|
|
/S/ WILL POWELL
Will Powell
|
Title: Director and Chief Executive Officer and President
|
Signature:
|
|
/S/ E. J. BIRD
E.J. Bird
|
Title: Director and Senior Vice President and Chief Financial Officer
|
Signature:
|
|
/S/ JAMES F. GOOCH
James F. Gooch
|
Title: Director
|
Signature:
|
|
/S/ JOSEPHINE LINDEN
Josephine Linden
|
Title: Director
|
Signature:
|
|
/S/ KEVIN LONGINO
Kevin Longino
|
Title: Director
|
Signature:
|
|
/S/ WILLIAM K. PHELAN
William K. Phelan
|
Title: Director
|
Signature:
|
|
/S/ DAVID ROBBINS
David Robbins
|
Title: Director
|
1.
|
I have reviewed this Annual Report on Form 10-K 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 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 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:
|
April 18, 2018
|
|
|
|
|
/s/ WILL POWELL
|
|
|
Will Powell
|
|
|
|
|
|
Chief Executive Officer and President
|
|
|
Sears Hometown and Outlet Stores, Inc.
|
|
1.
|
I have reviewed this Annual Report on Form 10-K 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 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 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.
|
April 12, 2018
|
|
|
|
/s/ E.J. BIRD
|
|
E.J. BIRD
|
|
Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting 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.
|
April 18, 2018
|
|
|
|
/s/ WILL POWELL
|
|
Will Powell
|
|
Chief Executive Officer and President
|
/s/ E.J. BIRD
|
|
E.J. BIRD
|
|
Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
|