Sears Hometown Q3 Loss Decreases Despite Holdings Shadow

Although spun off in 2012, Sears Hometown & Outlet stores still has operational ties to Sears Holdings and that organization’s bankruptcy has hit the business. However, financially, the company gained some traction in the third quarter as it pushes to reach profitability.

Net loss declined to $4.5 million, or 20 cents per diluted share, from $10.9 million, or 48 cents per diluted share, in the year-previous quarter. The company noted that adjusted EBITDA increased to $7.4 million from $3.8 million in last year’s quarter.

Comparable store sales declined 0.2% after coming in negative in the third quarter of the previous fiscal year. Hometown comps decreased 3.4% in the quarter year over year. Outlet comps advanced 5.7% with the home appliances, tools, mattress and furniture segments outperforming the average.

Net sales were $339.1 million versus $386 million in the year-prior quarter, impacted by store closings. Operating loss declined to $1.6 million from $9.4 million in the year-before period.

Will Powell, Sears Hometown president and CEO, said, “The $7.4 million in adjusted EBITDA we posted for the third quarter represented our best third quarter adjusted EBITDA results since our separation from Sears Holdings Corp. in 2012. The quarter was also our third consecutive quarter, and our fifth in the last six quarters, with positive and improved adjusted EBITDA compared to the same period in the prior year.  We were able to post these positive adjusted EBITDA results despite the distractions and headwinds associated with Sears Holdings Corp.’s Chapter 11 bankruptcy filing on October 15, which had a negative impact on our results. Specific negative impacts totaling $1.7 million were included in our reported adjusted EBITDA for the quarter. Our comparable store sales were positive for the quarter through September but turned negative in October as product availability in our Hometown segment was significantly below normal levels leading up to and following the Sears Holdings bankruptcy filing. In addition, bankruptcy-related issues with some of Sears Holdings’s transportation providers delayed getting product to customers. Since the initial impact from the Sears Holdings bankruptcy filing, transportation of product has returned to normal and inventory availability has improved but remains below normal levels. These improvements resulted from both Sears Holdings’s post-filing efforts and our activities.”