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Related Party Agreements and Transactions | 12 Months Ended
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Feb. 02, 2018
Related Party Transactions [Abstract] |
Related Party Agreements and Transactions | RELATED PARTY AGREEMENTS AND TRANSACTIONS According to statements on form Schedule 13D filed with the SEC by ESL, ESL beneficially owns significant portions of both the Company's and Sears Holdings Corporation's outstanding shares of common stock. Therefore Sears Holdings Corporation, the Company's former parent company, is considered a related party. In Fiscal 2017, ESL purchased approximately $4.0 million of the Company's outstanding debt at a discount of approximately $1.0 million. Due to the related party relationship, this discount was considered a cancellation of debt under Section 108 of the Internal Revenue Code, triggering additional income tax payments due in the current period for the Company. As of May 4, 2017, ESL had divested itself of all of the Company's outstanding debt to an unrelated third party. In connection with, and subsequent to, the Separation, the Company entered into various agreements with Sears Holdings which, among other things, (i) govern specified aspects of the Company's relationship following the Separation, especially with regards to the Lands' End Shops at Sears, and (ii) establish terms pursuant to which subsidiaries of Sears Holdings Corporation are providing services to the Company. References to and descriptions of the agreements below represent certain agreements entered into in connection with, and subsequent to, the Separation, where applicable. The components of the transactions between the Company and Sears Holdings, which exclude pass-through payments to third parties, are as follows: Lands' End Shops at Sears Related party costs charged by Sears Holdings to the Company related to Lands' End Shops at Sears are as follows:
(in thousands) |  | Fiscal 2017 |  | Fiscal 2016 |  | Fiscal 2015
Retail services, store labor |  | $ | 21,934 |  |  | $ | 24,052 |  |  | $ | 26,773 |
Rent, CAM and occupancy costs |  | 22,084 |  |  | 24,727 |  |  | 25,239 |
Financial services and payment processing |  | 2,455 |  |  | 2,834 |  |  | 2,792 |
Supply chain costs |  | 741 |  |  | 979 |  |  | 985 |
Total expenses |  | $ | 47,214 |  |  | $ | 52,592 |  |  | $ | 55,789 |
Number of Lands' End Shops at Sears at period end(1) |  | 174 |  |  | 216 |  |  | 227 |
(1) During Fiscal 2017, Fiscal 2016 and Fiscal 2015, 42, 11 and 9 Lands' End Shops at Sears were closed, respectively. Retail Services, Store Labor The Company contracts with Sears Roebuck to provide hourly labor and required systems and tools to service customers in the Lands' End Shops at Sears. This includes dedicated staff to directly engage with customers and allocated overhead. The dedicated staff undergoes specific Lands' End brand training. Required tools include point-of-sale, price lookup and labor scheduling systems. Rent, CAM and Occupancy Costs The Company rents space in store locations owned or leased by Sears Roebuck. The agreements include a cost per square foot for rent, CAM and occupancy costs. The lease terms for the individual store locations generally terminate effective January 31, 2019, or 2020. Financial Services and Payment Processing The Company contracts with SHMC to provide retail financing and payment solutions, primarily based upon customer credit card activity, including third-party payment acceptance, credit cards and gift cards. Supply Chain Costs The Company contracts with Sears Roebuck to provide logistics, handling, transportation and other services, primarily based upon inventory units processed, to assist in the flow of merchandise from vendors to the Lands' End Shops at Sears locations. General Corporate Services Related party costs charged by Sears Holdings to the Company for general corporate services are as follows:
(in thousands) |  | Fiscal 2017 |  | Fiscal 2016 |  | Fiscal 2015
Sourcing |  | $ | 10,243 |  |  | $ | 10,878 |  |  | $ | 9,609 |
Shop Your Way |  | 1,119 |  |  | 2,301 |  |  | 2,896 |
Shared services |  | 176 |  |  | 192 |  |  | 484 |
Total expenses |  | $ | 11,538 |  |  | $ | 13,371 |  |  | $ | 12,989 |
Sourcing The Company contracts with a subsidiary of Sears Holdings to provide agreed upon buying agency services, on a non-exclusive basis, in foreign territories from where the Company purchases merchandise. These services, primarily based upon quantities purchased, include quality-control functions, regulatory compliance, product claims management and new vendor selection and setup assistance. During Second Quarter 2016 the Company entered into a new buying agency services agreement with a subsidiary of Sears Holding and terminated the agreement that was entered into at the time of the Separation. The new agreement provided for a higher commission rate and a higher annual commission minimum, as well as enhanced sourcing services, including for product development, costing analyses, vendor communications, vendor strategy and quality assurance. During Third Quarter 2017, the Company extended the contract under which it receives sourcing services through June 30, 2020 and amended the contract to contain lower commission rates while retaining the same level of services to be provided. These amounts are capitalized into inventory and are expensed through cost of goods sold over the course of inventory turns and included in Cost of sales in the Consolidated Statements of Operations. Shop Your Way The Company contracts with SHMC to participate in Sears Holdings' SYW program. Customers earn points issued by SHMC on purchases which may be redeemed to pay for future purchases. The Company pays SHMC an agreed-upon fee for points issued in connection with purchases from the Company. Depending on the ratio of points redeemed in Lands' End formats to points issued in Lands' End formats in the previous 12 months, the Company generally either pays additional fees or is reimbursed fees by SHMC. All SYW program expenses are recorded in Cost of sales in the Consolidated Statements of Operations. During the Third Quarter 2017, the Company extended the contract governing its participation in the Shop Your Way program through April 4, 2018. Shared Services The Company contracts with SHMC to provide certain shared corporate services. These shared services include compliance. Use of Intellectual Property or Services Related party revenue charged by the Company to Sears Holdings for the use of intellectual property or services is as follows:
(in thousands) |  | Fiscal 2017 |  | Fiscal 2016 |  | Fiscal 2015
Call center services |  | $ | 1,160 |  |  | $ | 8,207 |  |  | $ | 8,564 |
Lands' End business outfitters revenue |  | 1,045 |  |  | 1,574 |  |  | 1,398 |
Credit card revenue |  | 980 |  |  | 1,147 |  |  | 1,274 |
Royalty income |  | 213 |  |  | 221 |  |  | 220 |
Gift card revenue (expense) |  | (32 | ) |  | (32 | ) |  | (33 | )
Total |  | $ | 3,366 |  |  | $ | 11,117 |  |  | $ | 11,423 |
Call Center Services The Company has entered into a contract with SHMC to provide call center services in support of Sears Holdings' SYW program. The income is included in Net revenue and costs are included in Selling and administrative expenses in the Consolidated Statements of Operations. The contract for call center services expired on April 30, 2017. Lands' End Business Outfitters Revenue The Company sells store uniforms and other company apparel to Sears Holdings from time to time. Revenue related to these sales is included in Net revenue in the Consolidated Statements of Operations. Credit Card Revenue The Company has entered into a contract with SHMC to provide credit cards for customer sales transactions. The Company earns revenue based on the dollar volume of revenue and receives a fee based on the generation of new credit card accounts. This income is included in Net revenue in the Consolidated Statements of Operations. Royalty Income The Company entered into a licensing agreement with SHMC whereby royalties are paid in consideration for sharing or use of intellectual property. Royalties received under this agreement are included in Net revenue in the Consolidated Statements of Operations. Gift Card Revenue (Expense) The Company has entered into a contract with SHCP to provide gift cards for use by the Company. The Company offers gift cards for sale on behalf of SHCP and redeems such items on the Company's internet websites, retail stores and other retail outlets for merchandise. The Company receives a commission fee on the face value for each gift card it sells, and a payment from Sears Holdings for certain Lands' End-branded gift cards that are redeemed by Sears Holdings for non-Lands' End merchandise. The Company pays a transaction/redemption fee to SHCP for each gift card the Company redeems. The income, net of associated expenses, is included in Net revenue in the Consolidated Statements of Operations. Additional Related Party Balance Sheet Information At February 2, 2018 and January 27, 2017, the Company included $2.0 million and $3.7 million in Accounts Receivable, net, respectively, and $2.9 million and $3.1 million in Accounts payable, respectively, in the Consolidated Balance Sheets to reflect amounts due from and owed to Sears Holdings. At February 2, 2018 and January 27, 2017, a $7.4 million and $11.4 million receivable, respectively, was recorded by the Company in Other assets in the Consolidated Balance Sheets to reflect the indemnification by Sears Holdings Corporation of the pre-Separation uncertain tax positions (including penalties and interest) for which Sears Holdings Corporation is responsible.

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- Definition The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -URI http://asc.fasb.org/topic&trid=2122745 + Details
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