Kenmore And Craftsman Can't Help Sears

March 14, 2014

Sears Hometown and Outlet Stores said Fourth-quarter same-store sales declined 3.4% as two of the company's best known brands had disappointing results. 

Sales in the fourth quarter declined 4.5% to $602.4 million due to the combination of a 3.4% same-store sales decline and an extra week in the fourth quarter the prior year, which added sales of $36.5 million.  The same-store sales decline was made up of a 4% decline at the Hometown division and a 1.5% decline at the Outlet division.

The comp decline was primarily driven by lower consumer electronics sales following a planned exit from the category in most Hometown stores, lower sales in the tool category in both segments, lower apparel sales in Outlet stores and lower major appliance sales in Hometown.  The decreases were partially offset by higher lawn and garden sales in Hometown and higher major appliance and furniture sales in Outlet.  If consumer electronics are excluded from the comp calculations, the total decline was only 1.1% overall, consisting of a 1% decrease at Hometown stores and a 1.3% decrease at Outlet stores.

"Fourth quarter results were disappointing, especially in the Hometown and Hardware segment where holiday sales and margins of our important Kenmore appliances and Craftsman tools significantly underperformed management's expectations," said president and CEO Bruce Johnson.  "In the Outlet segment, increased holiday promotional spending did not drive the expected sales increases.  Total company January sales were negatively impacted by the unusually severe winter weather in many of our trade areas." 

That said, Johnson noted that the company made significant progress on four key strategic fronts during the quarter that leave it favorably positioned for 2014.  For starters, Johnson said 30 new stores were opened during the past fiscal year with half of those coming in January.  "Total sales from these 30 new stores during the first quarter of 2014 to date have met our expectations, with particularly strong sales from the new Outlet Stores, which accounted for 13 of the 30," Johnson said. 

The company also continued its transition to a model whereby stores are operated primarily by independent dealers and franchises.  After 19 conversions in the fourth quarter, 1,115 of the company's 1,260 stores are now operated by dealers and franchisees.  Johnson also said the company achieved double-digit year-on-year growth in both online and multichannel sales, particularly at Searsoutlet.com, where sales for the quarter grew nearly 80% from the prior year to approximately $11 million.

Finally, new Outlet sourcing initiatives began to shift inventory positions in furniture, apparel and out-of-box appliances, to products Johnson said he is confident will deliver higher overall merchandise margins than in the fourth quarter of 2013.

Source: Retailing Today