‘Hyper-Competitive’ Appliance Market Sank Sears Hometown’s Q3 Results

Net loss mushrooms to $93M
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Fierce appliance promotions and “the hyper-competitive environment” took a major toll on Sears Hometown and Outlet Stores’ (SHO’s) performance in the third quarter, president/CEO Will Powell reported.

Fierce appliance promotions and “the hyper-competitive environment” took a major toll on Sears Hometown and Outlet Stores’ (SHO’s) performance in the third quarter, president/CEO Will Powell reported.

Powell said “the increase in industry promotional activity” led to a 6 percent decline in the average unit price of big-ticket majaps at SHO, while marketplace price wars contributed to a 5.5 percent decline in its white-goods comp sales for the three months ended Oct. 29.

Sales at the Sears Holdings spin-off were also impacted by 44 net store closures year-to-date, leaving a total of about 1,115 locations nationwide, and by the increase in online appliance purchases — a channel where Hometown had been disadvantaged until Oct. 27, when its websites became transactional for the first time.

All told, net sales fell 10.8 percent to $487.8 million; comp sales declined 6 percent; and net loss burgeoned to $93.2 million from a $5.5 million net loss in the year-ago fiscal quarter.

Earnings also suffered from a $75.6 million non-cash valuation allowance on the company’s deferred tax assets, reducing the balance to zero.

In the meantime, the company is proceeding with its nearly two-year-old majap department remodeling program, dubbed America’s Appliance Experts (AAE). Another 137 stores received the new format during the quarter for a total of 483 locations, and 150 to 200 more are targeted for next year. SHO said that converted stores have outperformed non-AAE stores by 335 basis points in majap comps and 417 basis points in store-wide comps.

The appliance, lawn-and-garden, hardware, and outlet chain was spun off four years ago from Sears Holdings.

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