HOFFMAN ESTATES, Ill.-Lagging sales, especially for comparable stores, led to a 75.5 percent dropoff in first-quarter net income for Sears Hometown and Outlet Stores, to $3.7 million.
Net sales in the quarter, which ended on May 3, were down 1.9 percent to $589.9 million. Same-store sales for the company as a whole fell 6.2 percent, which included a 7.5 percent decline in Sears Hometown same-store sales and a 2.6 percent drop for the Outlet portion.
Bruce Johnson, president and CEO of Sears Hometown and Outlet, cited the weather as a key factor in the poor sales performance. Johnson noted that February, which brought very cold weather, affected overall store traffic and sales. Then the unseasonably cold spring hurt sales, especially in lawn and garden products, during March and April, he said.
Gross margin lost 126 basis points to 24.4 percent, the result of low margins on product sales, higher inventory shrinkage at Outlet stores, a drop in initial franchise revenues, additional costs at Outlet distribution centers and lower apparel liquidation income at Outlet. Selling and administrative expenses rose 6.4 percent in dollars and 177 basis points as a percentage of sales, to 22.9 percent.
Johnson said the factors that affected the first-quarter performance—the weather, in particular—should diminish as the year moves along. “We have modified our pricing and promotional plans for the second quarter, and possibly for succeeding quarters, including the addition of free-delivery options in most trade areas,” he said. “We expect these changes will improve our pricing and promotional effectiveness.”