Sales, margins hit Sears Hometown Q1 net income

Hoffman Estates, Ill. — Sears Hometown and Outlet Stores Inc. had a difficult first quarter of fiscal 2014, reporting a substantial decline in net income as well as drops in net sales and same-store sales. Net income declined 75% to $3.7 million from $15 million.



Lower net sales, lower gross margin rate, and higher selling and administrative expenses all contributed to the steep drop in net income. Net sales in the quarter decreased 1.9% to $589.9 million from $601.1 million in the first quarter of 2013. This decrease was driven primarily by a 6.2% decrease in same-store sales, which was partially caused by growing online sales. Lower initial franchise revenues and lower liquidation revenues on end-of-season markout apparel merchandise received from Sears Holdings also negatively impacted net sales.



Bruce Johnson, CEO and president of Sears Hometown and Outlet, also cited weather and promotions as factors affecting the retailer’s first quarter results.



"First quarter results were affected by three main factors: weather,” said Johnson. “For the second year in a row, lawn and garden sales were negatively impacted by an unseasonably cold spring in many of our trade areas that dampened sales in March and April, following a very cold February that reduced overall store traffic and sales; continued lower margins in Outlet due to insufficient quantities of higher-margin, 'as-is' appliances; and a heavily promotional appliance retail environment where appliance retailers layered free delivery on top of discounted pricing."



Repeat visits decreased 1% year-over-year but bounced back from a low in April. Euclid analysis indicates this rebound is another positive sign for sales. The best day of the month was Thursday, May 29, with outperformance across all metrics. The worst day of the month was Sunday, May 4, which saw significant underperformance in traffic. In addition, fewer than expected repeat shoppers were seen on this day.