Mixed results for Sears Hometown and Outlet Stores

The last quarter was a tale of two divisions for Hoffman Estates, Illinois-based Sears Hometown and Outlet Stores, Inc.

The company's Outlet division's comparable store sales jumped 9.3%. But the more hardware-oriented Hometown stores saw comp-store sales decline 6.2%.

Overall, the 1,257 locations of Sears Hometown and Outlet Stores saw comps decline 2.3% for the quarter, in which its operating loss was $173.6 million.

"While we were disappointed in our overall results, we are pleased that customers responded to our initiatives in Outlet, which generated 9.6% adjusted comparable store sales growth," said CEO Bruce Johnson. "These initiatives included strong execution by our employees and franchisees as well as improvements in product procurement, marketing and pricing. Our goal is to continue to build upon these improvements going forward."

Net sales in the third quarter of 2014 increased 0.7% to $565.1 million.

Hometown sales were restrained by what Johnson described as a "highly promotional environment."

Also, a complicated relationship with former owner Sears over sales of merchandise through Sears.com effectively reduced SHO metrics, even as more total sales were made.

In-store sales transacted by SHO and its independent dealers and franchisees through Sears.com, as well as recorded and fulfilled by Sears Holdings during the third quarter of 2014, were $14.3 million compared to $6.5 million in the third quarter of 2013. As a result, comparable store sales, which measure the increase in sales on transactions fulfilled and recorded by SHO, were unfavorably impacted.

"While our online commissions grew in the quarter, our rights to engage in our own online initiatives that would leverage Sears.com (which is owned and operated by Sears Holdings Corporation), and our rights to engage in our own online initiatives that would be independent of Sears.com, are constrained by our agreements with Sears Holdings Corporation that were entered into prior to our October 2012 separation."

The company describes the breakdown of its Hometown and Outlet stores this way: "Our Hometown stores are designed to provide our customers with in-store and online access to a wide selection of national brands of home appliances, tools, lawn and garden equipment, sporting goods and household goods, depending on the particular format. Our Outlet stores are designed to provide our customers with in-store and online access to new, one-of-a-kind, out-of-carton, discontinued, obsolete, used, reconditioned, overstocked, and scratched and dented products across a broad assortment of merchandise categories, including home appliances, lawn and garden equipment, apparel, mattresses, sporting goods and tools at prices that are significantly lower than manufacturers' list prices."

A total of 1,257 stores run by the company, its dealers and franchisees were in operation as of Nov. 1.