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SEARS HOMETOWN AND OUTLET STORES, INC. REPORTS 3Q RESULTS
Source: Sears Hometown and Outlet Stores, Inc. news release

Hoffman Estates, Illinois - Sears Hometown and Outlet Stores, Inc. has reported results for the quarter ended October 28, 2017.

Overview of Unaudited Results

Results for the third fiscal quarter of 2017 compared to the third fiscal quarter of 2016 included:

Net loss decreased $82.3 million to $10.9 million from $93.2 million;
Loss per share decreased $3.63 to $0.48 from $4.11;
Adjusted EBITDA increased $13.8 million to $3.8 million from a $10.0 million loss;
Comparable store sales decreased 9.1%.

Will Powell, Chief Executive Officer and President, said, "Our year-over-year adjusted EBITDA improvement is a reflection of our progress during the quarter to transform our business. This is the first time since 2013 that we achieved positive adjusted EBITDA in the third fiscal quarter, historically our lowest volume quarter of the year. Our associates, dealers, and franchisees positively impacted our progress during the quarter as evidenced by the continued strong customer satisfaction results across all of our internal and external measurements, including meaningful improvement in our customer ratings through on-line feedback channels."

"Last year during the third quarter we made promotional and pricing decisions that proved to be unprofitable. We did not repeat those actions during this year's third quarter, but as a result comparable store sales suffered. Comparable store sales were also negatively impacted by Hurricanes Harvey, Irma, and Maria (the "Hurricanes"), which together resulted during the quarter in lost selling days from temporary closures in 102 stores and negatively impacted comp sales performance by 91 basis points."

Segment Performance Highlights

Comparable store sales in our Hometown segment decreased 9.9%, however there were thirty days in the quarter where we did not repeat unproductive deeper discount promotional events from the prior year. The reduction in promotional depth positively contributed to Hometown's year-over-year third quarter margin improvement of 200 basis points. Additionally, the Hurricanes had a negative comp sales impact of 96 basis points in our Hometown segment.

Comparable store sales for the home appliances and tools categories were slightly below the average, but less promotional pricing in the home appliances category led to higher gross margin in the quarter. The lawn and garden category achieved comparable store sales performance better than the average.

In the Outlet segment, comp store sales were down 7.4% for the quarter. The Hurricanes had a negative impact of 81 basis points in our Outlet segment. This was the first full quarter since the implementation of our new pricing strategy for our Outlet business. The new strategy employs technology to determine the price of as-is appliances at the individual item level, applying a defined discount to competitors' prices for comparable new-in-box models in the marketplace. This led to significant reductions in promotional markdowns and, combined with improved merchandise costs from our product sourcing agreements, led to a year-over-year third quarter margin improvement of 500 basis points in the Outlet Segment. The home appliances category comparable store sales were below the average, however, gross margin improved due to our implementation of the new pricing strategy, which yielded a 4.4% increase in home appliances average ticket. The furniture category in Outlet experienced double-digit comp sales increases as we further leveraged our direct-purchasing agreement with Ashley Furniture to feature expanded assortments of higher-quality products. The lawn and garden category also achieved positive comp sales in the quarter.