Sears Hometown & Outlet Reports Q1 Loss

Sears Hometown & Outlet Stores reported a net loss and declining sales and comps in its first quarter, as the retailer continues to revamp its home appliance program. 

For the first quarter ended April 30, Sears Hometown & Outlet Stores posted a net loss of $3.57 million, or 16 cents per diluted share, versus net income of $1.29 million, or six cents per diluted share, in the period a year previous.

Comparable store sales declined 2.8% with Hometown comps down 2.6% and Outlet comps down 3.1%. Net sales were $537 million versus $582.8 million in the 2015 first quarter.

Sears Hometown & Outlet Stores president and CEO Will Powell said Hometown comps were hit by a decline in home appliance revenues and soft lawn and garden sales activity due to unfavorable weather conditions in key markets. “We did achieve positive comparable sales increases in mattresses and tools, which were the third and second consecutive quarterly increases in these key categories, respectively,” he added.

During the first quarter, Powell said, “We converted another 78 Hometown stores to our America’s Appliance Experts program, which we believe improves our home appliances shopping experience. The AAE store locations outperformed non-AAE locations in total and home appliance comparable store sales by 224 basis points and 572 basis points, respectively. At the end of the first quarter of 2016, we had 255 AAE locations and plan to convert over 200 additional locations in 2016. In the first quarter of 2016 in our Hometown segment, we opened two new stores and closed 17 under-performing stores. These closures should enable us to reduce expenses, improve future profit performance, and free up net working capital of over $9 million.”

At Outlet stores, Powell said, home appliance comps suffered from “continued competitive pricing pressure on new, in-box products, which made out-of-box product price comparisons less compelling. During the quarter, we initiated a highly competitive pricing test in a group of Outlet stores that resulted in a 640 basis points improvement in comparable store sales compared to stores on the existing promotional plan. Due to the success of the test, we plan to roll out our highly competitive pricing nationally in the second quarter of 2016.”

In Outlet stores, a decline in mattress inventory received from Sears Holdings versus the year prior hurt sales comparisons. “Through a relationship with another key vendor, we are adding more mattress inventory to fill the gap,” Powell noted, “which has resulted in improved results as new product arrives. The furniture category delivered a 23.3% comparable store sales increase, the second consecutive quarterly increase for this strategic growth category. Also, we achieved comparable store sales increases in the lawn and garden and tools categories as a result of better inventory positions compared to the prior year. We have also continued to improve our inventory position in out-of-box home appliances since the first quarter of 2015 as a result of new supply agreements with key vendors.”

Sears Hometown & Outlet Stores operates a total of 1,145 stores.