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Related Party Transactions
 3 Months Ended
Apr. 30, 2021
Related Party Transactions [Abstract]  
Related Party Transactions

NOTE 10. RELATED PARTY TRANSACTIONS

 

At the time of the Separation, ESL beneficially owned significant portions of both the Company's and Sears Holdings’ outstanding shares of common stock and therefore, Sears Holdings, the Company's former parent company, is considered a related party.

 

On February 11, 2019, Transform Holdco acquired from Sears Holdings substantially all of the go-forward retail footprint and other assets and component businesses of Sears Holdings as a going concern. The Company believes that ESL holds a significant portion of the membership interest of Transform Holdco and therefore considers that entity to be a related party as well.

 

Sourcing

 

The Company contracted with a subsidiary of Sears Holdings, which became a subsidiary of Transform Holdco, to provide agreed upon buying agency services, on a non-exclusive basis, in foreign territories from where the Company purchases merchandise.  These sourcing services, primarily based upon quantities purchased, included quality-control functions, regulatory compliance, product claims management and new vendor selection and setup assistance.

 

The Company’s contract for these services expired on June 30, 2020, therefore there was no expense from these sourcing services in First Quarter 2021 compared to $1.4 million in First Quarter 2020. 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 Condensed Consolidated Statements of Operations.