SHOS discusses third-quarter declines

Sears Hometown and Outlet Stores, Inc. played a game of defense in the third quarter, recording declines across the board.

Net sales for the quarter ended Oct. 31 were down 3.2% to $547.1 million. The company attributed the decrease to a 1.6% decrease in comparable store sales, lower initial franchise revenues, the impact of closed stores, and lower online commissions from Sears Holdings.

SHOS did manage to narrow its loss from $171.2 million to a loss of $3.8 million. The company also posted an operating loss of $7.5 million.

"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 president and CEO Will Powell. "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."

Within the company, Hometown posted an adjusted comparable store sales decline of 0.2%, but experienced an increase of 2.7% in home appliances. Outlet's adjusted comparable store sales declined 7.5%.

Things were moving somewhat on the store conversion front. Another 57 locations were converted to the America's Appliance Experts program in the quarter, and 10 new stores were opened, though not enough to balance out the store closings.

"Thus far in 2015, we have taken steps to better align operating costs with recent performance and to improve the quality and speed of execution of our plans by restructuring the executive team and reducing overall payroll and benefits costs at our support center and in our field organization," added Powell. "These changes resulted in savings of over $1 million in the third quarter of 2015, and we expect to achieve savings of $2 million for the full year 2015."