Related Party Transactions

6 Months Ended

Jul. 28, 2012

Related Party Transactions [Abstract]

Related Party Transactions

RELATED-PARTY TRANSACTIONS

Glenn, Stephen and Arlene Nussdorf owned an aggregate 7,742,282 shares or approximately 50.6%, of the total number of shares of the Company’s common stock as of July 28, 2012, excluding shares issuable upon conversion of certain warrants and not assuming the exercise of any outstanding options. Stephen Nussdorf has served as the Chairman of the Company’s Board of Directors since February 2004 and Executive Chairman of the Board since April 2011.

The Nussdorfs are officers and principals of Quality King, which distributes pharmaceuticals and health and beauty care products, and the Company’s President and Chief Executive Officer, Michael W. Katz is also an executive of Quality King.

See Note 6 for a discussion of notes payable to affiliates.

Transactions With Affiliated Companies

Prior to the acquisition of Parlux, Glenn Nussdorf beneficially owned approximately 9.9% of the outstanding common stock of Parlux. Perfumania had purchased merchandise from Parlux for about 20 years and was one of Parlux's largest customers. Perfumania primarily purchased certain brands, for which Parlux is the exclusive licensee, for distribution through the Company's wholesale and retail segments. 

Glenn Nussdorf has an ownership interest in Lighthouse Beauty Marketing, LLC, Lighthouse Beauty, LLC and Lighthouse Beauty KLO, LLC (collectively "Lighthouse Companies"), all of which are manufacturers and distributors of prestige fragrances. In fiscal 2010, the Company began purchasing merchandise from the Lighthouse Companies. Glenn Nussdorf also has an ownership interest in Ricky's, a retailer specializing in fashion accessories, cosmetics and beauty supplies. During the last two quarters of fiscal 2011, the Company purchased various beauty accessories from Ricky's. In fiscal 2009 and fiscal 2010, the Company also purchased merchandise from Quality King.

Our wholly owned subsidiary, Parlux, LLC, sold a number of its products to Jacavi Beauty Supply, LLC (“Jacavi”), a fragrance distributor. Jacavi's managing member is Rene Garcia. Rene Garcia, his family trusts and related entities are members of a group that owned an aggregate 2,211,269 shares, or approximately 14.5%, of the total number of shares of the Company's common stock as of July 28, 2012, excluding shares issuable upon conversion of certain warrants. There were no sales to Jacavi from April 18, 2012, the date Parlux was acquired, through July 28, 2012. There was no accounts receivable balance from Jacavi as of July 28, 2012. In addition, during the twenty-six weeks ended July 28, 2012, Perfumania purchased merchandise from Jacavi. See disclosure of merchandise purchases in the table below.

The amounts due to these related companies are non-interest bearing and are included in accounts payable-affiliates in the accompanying condensed consolidated balance sheets. Transactions for merchandise purchases with these related companies during the thirteen and twenty-six weeks ended July 28, 2012 and July 30, 2011 were as follows:

	Total Purchases Thirteen Weeks Ended July 28, 2012		Total Purchases Thirteen Weeks Ended July 30, 2011		Total Purchases Twenty-six Weeks Ended July 28, 2012			Total Purchases Twenty-six Weeks Ended July 30, 2011		Balance Due July 28,  2012			Balance Due January 28, 2012
					(in thousands)
Parlux	$	—	$	6,466	$	6,771	(1)	$	16,501	$	—	(2)	$	10,476
Lighthouse Companies	2,225		1,187		3,188			2,065		227			128
Jacavi Beauty Supply, LLC	789		—		2,757			—		—			—
Ricky's	—		—		—			—		—			11
	$	3,014	$	7,653	$	12,716		$	18,566	$	227		$	10,615

(1)Represents purchases from Parlux prior to April 18, 2012, when the Company acquired Parlux.

(2) Since the Company acquired Parlux on April 18, 2012, the balance due to Parlux was eliminated in consolidation as of July 28, 2012.

Glenn, Stephen and Arlene Nussdorf own GSN Trucking, Inc. (“GSN”) which provides general transportation and freight services. The Company periodically utilizes GSN to transport both inbound purchases of merchandise and outbound shipments to wholesale customers. During the twenty-six weeks ended July 28, 2012 and July 30, 2011, total payments to GSN for transportation services provided were less than $0.1 million. There was no balance due to GSN at July 28, 2012 or January 28, 2012.

Quality King occupies a leased 560,000 square foot facility in Bellport, NY. The Company began occupying approximately half of this facility in December 2007 under a sublease that terminates on September 30, 2027 and this location serves as the Company’s principal offices. As of July 28, 2012, the monthly current sublease payments are approximately $218,000 and increase by 3% annually. Total payments by the Company to Quality King were approximately $0.7 million and $0.6 million during the thirteen weeks ended July 28, 2012 and July 30, 2011, respectively, and $1.4 million and $1.3 million during the twenty-six weeks ended July 28, 2012 and July 30, 2011, respectively, for this sublease.

The Company and Quality King are parties to a Services Agreement providing for the Company’s participation in certain third party arrangements at the Company’s respective share of Quality King’s cost, including allocated overhead, plus a 2% administrative fee, and the provision of legal services. The Company also shares with Quality King the economic benefit of the bulk rate contract that the Company has with UPS to ship Quality King’s merchandise and related items. The Services Agreement will terminate on thirty days’ written notice from either party. The expenses charged under these arrangements to the Company were $0.2 million during both thirteen weeks ended July 28, 2012 and July 30, 2011 and $0.5 million and $0.3 million during the twenty-six weeks ended July 28, 2012 and July 30, 2011, respectively. The balance due to Quality King for expenses charged under the Services Agreement was less than 0.1 million and $0.3 million at July 28, 2012 and January 28, 2012, respectively.