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Appliance Promotional Environment Hurts 1Q results for Sears Hometown and Outlet Stores
Jun 11, 2014
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Sears Hometown and Outlet Stores said a heavy appliance promotional environment along with bad weather hurt its results in the first quarter of its 2014 fiscal year. Sears Hometown and Outlet Stores said comparable store sales decreased 6.2% in the quarter that ended May 3, 2014. Operating income was down 74.4% to $6.3 million. Net sales in the first quarter of 2014 were down $11.3 million, or 1.9%, to $589.9 million from the first quarter of 2013.

"First quarter results were affected by three main factors," said CEO and President Bruce Johnson. "Weather--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."

He said the company expects the balance-of-year impact of these factors to diminish. "In
particular, we do not expect that weather will play a major role during the remainder of the fiscal year with respect to seasonal lawn and garden as this product category shrinks as a percentage of our total sales after June, and we saw more moderate weather in May."

Johnson said the company does not expect its appliance inventory mix to hurt merchandise margins significantly for the rest of the fiscal year.

"The on-going effects of the more promotional environment for appliances are harder to predict," he said. "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."

Net sales in the first quarter of 2014 were down $11.3 million, or 1.9%, to $589.9 million from the first quarter of 2013.

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