Sears Hometown & Outlet Struggles In Q1 As Ownership Shifts

Just weeks after the announcement that ESL Holding was pursuing the shares of the company it didn’t yet own, Sears Hometown & Outlet Stores reported lower quarterly comps and earnings.

For the first quarter, Sears Hometown & Outlets posted a net loss of $12.1 million, or 53 cents per diluted share, versus $9.4 million, or 41 cents per diluted share, in the period a year earlier.

Comparable sales in the quarter slipped 8.9% versus the period a year before. Net sales for the quarter were $291.1 million versus $381.3 million in the period a year prior. Operating loss in the period increased to $7.8 million from $5.6 million year over year.

Will Powell, Sears Hometown & Outlets president and CEO, said, “Our announcement on June 3 that we had entered into a definitive merger agreement with Transform marked a major milestone for us. We have begun discussions with Transform about how we can, after we complete the merger, leverage the brands, services, online capabilities and cost synergies to improve the future profitability of the Hometown segment.”

Powell noted, “For the first quarter, our adjusted EBITDA increased by $1.3 million from the same quarter last year. We achieved these adjusted EBITDA results despite the significant time and other resources that we devoted during the quarter to a potential transaction with Transform Holdco LLC as well as advisory fees related to the Sears Holdings Corp. bankruptcy proceedings and our announced merger transaction with Transform. These fees were reflected in our adjusted EBITDA for the quarter. When these fees are excluded, adjusted EBITDA would have been $4.8 million for the first quarter, an increase of $1.9 million compared to the same quarter last year taking into account the same exclusion from adjusted EBITDA.”

On June 3, Transform Holdco, current home to Sears and Kmart, as well as Sears Hometown & Outlet Stores, entered into a definitive merger agreement to acquire the outstanding shares of Sears Hometown not held by the company’s majority owner ESL Investments, which is controlled by Sears Holdings former chairman Edward Lampert.