Sears Hometown & Outlet Continues Turnaround Initiatives In Q2

For the second quarter ended August 1, Sears Hometown & Outlet Stores posted net income of $1.5 million, or seven cents per diluted share, versus $3.4 million, or 15 cents per diluted share, in the prior-year period. Comparable store sales slipped 1.4% versus the quarter a year ago.

Net sales were $619.6 million in the quarter versus $638.7 million in the year-earlier quarter.

Will Powell, Sears Hometown & Outlet president and CEO, said, “During the second quarter, the profitability of our core operations continued to show improvement over last year. Adjusted EBITDA increased by $2.5 million for the second quarter and increased by $3.9 million, or 51%, year-to-date compared to last year. Improved merchandise gross margin rate and good expense control drove the increase.”

He added, “Overall sales trends showed moderate progress in the second quarter of 2015 as adjusted comparable store sales continued to improve sequentially each quarter since the fourth quarter of 2014.  Hometown posted positive adjusted comparable store sales increases in June and July, although May was a challenging month due to a highly competitive environment during the Memorial Day promotional period.”

The company also upgraded its home appliances shopping experience in the Hometown segment. “We expanded our America’s Appliance Experts program with 59 remodels completed in the second quarter,” Powell noted. “As of the end of the second quarter, we had converted 111 stores to our AAE program. We plan to convert another 75 locations by October 2015 and another 300 locations in 2016.”

Sales trends improved at the Outlet operation in the second quarter as compared to the first quarter, Powell said.

He noted, “While lower home appliance inventory availability during the quarter adversely affected sales, we finished the second quarter with a better inventory position than at the beginning of the quarter.  We increased our sourcing volume of out-of-box and discontinued home appliances and diversified our direct vendor relationships, and we believe we are better positioned for the back-half of the year.”

Powell said that, in the second quarter, Sears Hometown & Outlets had accelerated several initiatives to reduce selling and administrative expenses and increase the effectiveness of company spending, including:

  • Aligning operating costs with recent performance and improving the quality and speed of plan execution by restructuring the executive team and reducing overall payroll and benefits costs incurred at the company’s support center and in field organization. 
  • Transforming marketing to focus more on localized digital platforms and less on mass print.
  • Closing under-performing stores, 62 in Hometown and one in Outlet year to date as part of a plan to improve overall profit performance, reduce expenses and free up working capital.

“During the remainder of 2015, we expect to close 40 to 50 additional under-performing locations,” Powell said. “Work also continued during the quarter on our business process outsourcing and the migration of the current information technology systems and processes provided by Sears Holdings to new, state-of-art business and technology infrastructure and systems.”