HOFFMAN ESTATES, Ill.-Weak sales and reduced gross margin resulted in a 12.2 percent drop in net income for Sears Hometown and Outlet stores in its fiscal third quarter ending on Nov. 2.
Total net sales edged up 0.7 percent to $561.1 million, but included a 2 percent decline in same-store sales. Bruce Johnson, president and CEO, said sales of lawn and garden products, consumer electronics and apparel were down in the quarter, declines that were only partially offset by a gain in sales of home appliances.
Gross margin fell 71 basis points to 24.1 percent. Selling, general and administrative expenses decreased 0.3 percent in dollars and 23 basis points as a percentage of sales, to 21.7 percent.
Johnson said the fourth quarter will be the last quarter in which Sears Hometown and Outlet Stores will feel a negative impact from its exit from consumer electronics in most of its Hometown stores. In its Outlet segment, the company has completed an initial test of franchising and has begun to roll out this model, generating more franchise revenues and allowing it to transition to an asset-light, franchised operation.
In addition, the company completed what Johnson characterized as a “successful test” of furniture sales in the Outlet stores, which now have a limited selection for the holiday shopping season. “This continues our strategy of shifting our product mix toward higher-margin categories, which began last fall with reductions in consumer electronics and expansion in mattress and tools,” he said.