Weather, Competition Hit Sears Hometown Q3 Results

Sears Hometown & Outlet Stores, for the third quarter ended October 31, posted a net loss of $3.8 million, or 17 cents per share, versus a net loss of $171.2 million, or $7.55 cents per diluted share, in the period a year earlier. Comparable store sales declined by 1.6%.

Adjusted EBITDA was a loss of $5.1 billion versus a gain of $327,000 in the quarter a year previous. Net sales in the third quarter of 2015 decreased $18 million, or 3.2%, to $547.1 million from the third quarter of 2014.

“Our comparable store sales decrease of 1.6% in the third quarter of 2015 was similar to the 1.4% decrease in the second quarter of 2015,” said Will Powell, Sears Hometown & Outlets president and CEO. “However, our merchandise margin rate declined due to an increasingly competitive promotional environment. We reduced selling and administrative expenses on both a dollar basis and a rate basis in the quarter. Also, Adjusted EBITDA was negatively impacted by our previously announced store-closing initiative, which resulted in 53 closings during the quarter.”

Powell continued, “Hometown posted an overall adjusted comparable store sales decline of 0.2%, but we achieved a positive adjusted comparable sales increase of 2.7% in home appliances, which was the first quarterly increase this year in this key category for our business. Adjusted comparable store sales were up in mattresses, a strategic growth category. Sales were down in lawn and garden, we believe due to unseasonably warm weather that delayed fall cleanup and snow thrower sales in several parts of the country. Outlet adjusted comparable store sales declined 7.5% in the third quarter of 2015 as we lapped a 9.6% increase in the third quarter of 2014. While our inventory position improved during the quarter, the increasingly competitive promotional environment impacted the value proposition of ‘as-is’ home appliances as competitors reduced prices for new in-box appliances.”

Also in the quarter, Powell said, “We completed the conversion of another 57 store locations to our America’s Appliance Experts program that is intended to improve our home appliances shopping experience in the Hometown segment. In total, all AAE store locations achieved positive total and home appliance comparable store sales, which outperformed non-AAE locations on both measures. While all of our AAE stores represent less than 10% of total sales, we are encouraged by these results. Currently, we have 180 AAE locations with 108 locations converted through the first three quarters of 2015 and another 72 converted at the beginning of the fourth quarter 2015. In 2016, we plan to convert another 300 locations.”

The company operates a total of 1,172 stores across all 50 states as well as in Puerto Rico and Bermuda