Sears Hometown and Outlet Stores (NASDAQ:SHOS) reported a 48.7 percent drop in operating income for the second quarter. However, CEO and President Will Powell said that profitability in the company's core operations continue to show improvements due to "improved merchandise gross margin rate and good expense control."
"Overall sales trends showed moderate progress in the second quarter of 2015 as adjusted comparable store sales continued to improve sequentially each quarter since the fourth quarter of 2014," Powell said. "Hometown posted positive adjusted comparable store sales increases in June and July, although May was a challenging month due to a highly competitive environment during the Memorial Day promotional period."
The retailer expanded the America's Appliance Experts program in the quarter with 59 remodels, totaling 11 store remodels. SHOS plans to convert an additional 75 locations by October and another 300 locations in 2016.
Although lower home appliance inventory affected sales for the quarter, the company finished with an improved inventory position and is better positioned overall for the second half of the year.
Earlier this year, SHOS announced a two-phase revamp of 51 storefronts, which included a shakeup of product assortment, redesigned merchandising, new fixtures and signage, and training for floor associates. SHOS made other adjustments, including restructuring the executive team and reducing overall payroll and benefits costs at the support center and field organization. SHOS expects these changes to result in $2 million in savings this year and $6 million in 2016.
The retailer has also turned its focus to more local, digital platforms and away from mass print. "The results of our initial tests have been positive," Powell said. "We will roll out this new focus more broadly in the third quarter, which will reduce our marketing costs per store while increasing overall impressions and customer draw."
In addition, the company is in the midst of migrating from its current information technology systems to a new technology infrastructure, which is expected to increase operational flexibility and allow better control of systems and processes. The new plan and system should be fully operational by the end of 2016.
Lastly, SHOS recently announced the launch of eReceipts, a way for customers to provide feedback in an effort to improve the customer experience.
The company is hoping to boost revenue during the second half of the year as sales have declined since the company was sold off by Sears Holdings (NASDAQ:SHLD) two years ago.
-See this Sears Hometown and Outlet Stores press release
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