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Sears Holdings' other spinoff offers update

Sears Holdings' plan to spin off Lands' End may have gotten all the attention on Friday, but the retailer’s former hometown and outlet stores division shared results showing how it has fared after receiving similar treatment a year earlier.

Last October, Sears Holdings spun off the Sears Hometown and Outlet Stores business, which operates 1,239 stores nationwide focused on home appliances, hardware, tools and lawn and garden equipment. On Friday, the company shared financial results for its third quarter ended Nov. 2, which are not necessarily indicative of how Lands' End will fare as a stand-alone company.

Sales during the period increased by 0.7% to $561 million, mainly due to higher upfront fees charged to franchisees, while same-store sales declined 2%. The comp decline was made up of a 1.5% decline at the Hometown division and a 3.4% decline at the Outlet division. The company cited lower major appliance and apparel sales as drivers of the decline at the Outlet division while the lawn and garden tools categories were the culprits behind the comp decline at the Hometown division. Also negatively affecting sales was the planned exit from the consumer electronics business that was only partially offset by higher major appliance sales.

The uneven sales performance caused profits to decline 12% to $7.7 million, or 33 cents a share, compared to $8.8 million, or 38 cents a share, the prior year.

"Sales of home appliances increased during the quarter, while sales of lawn and garden, consumer electronics, and apparel, which is only sold in Outlet Stores, declined,” said Bruce Johnson, CEO of Sears Hometown and Outlet Stores. “The fourth quarter of 2013 will be the last quarter where we will have a significant negative comparable store sales impact due to our exit from consumer electronics in most stores in our Hometown segment.”

According to Johnson, the company has begun rolling out a franchise model in its Outlet segment which generates higher initial fees and continues a transition to an asset light, franchised operation.

“We also completed a successful test of furniture sales in our Outlet stores and have a limited selection of furniture inventory in place across the format for the holiday season,” Johnson said. “This continues our strategy of shifting our product mix toward higher margin categories, which began last fall with reductions in consumer electronics and expansion in mattresses and tools."