Sears Hometown closing in Porterville
Smaller version of appliance stores are being purchased by private company that already owns full-line Sears and Kmart stores
By Reggie Ellis @Reggie_SGN
PORTERVILLE – Sears Hometown in Porterville is expected to close soon, despite the brand being positioned for a rebound under a new nationwide merger.
Earlier this month, the Porterville location put up signs announcing a “Store Closing Blowout Sale.” It is expected the location will close by the end of the month, but calls to management were not returned as of press time. Hometown stores (which include Sears Hometown, Sears Hardware, and Sears Appliance Showrooms) focused on in-store and online access to a wide selection of national brands of home appliances, tools, lawn and garden equipment, sporting goods and household goods, depending on the particular format. More than 90% of Hometown Stores are operated by independent local dealers or franchisees.
The news in Porterville comes a month after Transform Holdco LLC, the company that owns the Sears and Kmart stores, announced it will reunite the smaller Sears Hometown and Sears Outlet stores with its Sears’ full-line stores, such as the one at the Sequoia Mall in Visalia. The Hometown and Outlet version of Sears spun off into a separate, publicly traded company (traded under the ticker symbol SHOS on the NASDAQ) from the larger, more traditional Sears and Kmart stores (formerly traded under the ticker symbol SHLD) in 2012. The merger would bring all of Sears stores both big and small under the umbrella of ESL Investment, Inc., a hedge-fund chaired by Edward S. Lampert, meaning Sears would no longer be a publicly traded brand. ESL Investment completed its purchase of the parent company of Sears and Kmart brands (Sears Holding Corporation) on Feb. 11 for approximately $5.2 billion under the affiliate business name of Transform Holdco LLC.
In a June 3 released statement, Lampert said having these businesses under common ownership will accelerate Transform’s strategy of growing its smaller store format by adding Sears Hometown stores. He said it will also expand the company’s footprint as a multi-channel business that can serve customers through a variety of shopping experiences to meet their needs, provide growth for Transform’s marquee brands, including Kenmore and DieHard, and increase opportunities for Sears Home Services and Financial Services businesses, as well as the Shop Your Way social shopping destination and rewards program.
“We are excited to bring Sears Hometown, its associates and network of independent dealers and franchisees back into the Sears and Kmart family,” Lampert said. “Our investment demonstrates our commitment to growing Transform for the benefit of our members and customers, associates, vendors and communities across the country. While, initially, the companies will operate independently, we see many opportunities where we can partner to serve our customers better and enjoy efficiencies of scale once these businesses are under one roof.”
Sears Hometown and Outlet currently operates a network of 491 Hometown stores and 126 Outlet stores located in 49 states, Puerto Rico and Bermuda and generated $1.4 billion in net sales in 2018, an 8.9% drop from the first quarter of 2018. Sears Hometown and Outlet also announced a net loss of $12.1 million for the first quarter of 2019 in its earnings report on June 21, despite promising news for the possible sale its Outlet stores.
Will Powell, chief executive officer and president of Sears Hometown and Outlet Stores, said the spin-off company is concerned with the performance of the Hometown stores due to inventory availability issues for Kenmore and Craftsman, which represent more than half of its sales. Both brands are owned by Transform Holdco and ESL Investment, and cited as the primary reason for the merger.
“I believe this is the best path forward for Sears Hometown and serves the interests of all our constituents, including our customers, associates, dealers, franchisees and stockholders,” Powell said. “We believe that reuniting our Sears Hometown segment stores with Transform’s Sears full-line stores will result in a more consistent customer experience across Sears branded storefronts, generate higher total revenues and leverage efficiencies of scale to improve costs and margins, all of which could lead to improved profitability for Sears Hometown’s dealers and franchisees.”
The Porterville location is one of 45 under-performing stores that will close sometime this year. Twelve closed in the first quarter and 33 others were expected to close this summer.
When the two companies are combined, they will rank as the third largest appliance retailer in the United States in terms of sales. ESL Investments, Inc. and its affiliates, the majority owners of Transform, presently hold 58% of the outstanding shares of Sears Hometown. At the completion of the acquisition, each share of Sears Hometown stock not owned by ESL Investments and Transform will be cashed out at $2.25 per share. If the Outlet brand is sold by August 24, 2019 and completed by October 23, 2019, Transform will have the opportunity to match the terms of any proposed sale but would only result in net proceeds of $120 million to Sears Hometown. Outlet stores, such as the one located on Shaw Avenue in Fresno, are designed to provide customers with in-store and online access to new, one-of-a kind, out-of-carton, discontinued, reconditioned, overstocked, and scratched and dented products across a broad assortment of merchandise categories, including home appliances, lawn and garden equipment, apparel, mattresses, sporting goods and tools at prices that are significantly lower than list prices.
“As we have been publicly reporting, the Outlet business is profitable and has a unique business strategy which should enable further growth,” Powell said. “We are now beginning the Outlet Segment sale process with interested parties, while continuing to operate the Outlet stores without any business interruption.”