Sears Hometown and Outlet Stores Inc.'s profit plunged by 55% in its latest quarter amid sales declines, while the retailer outlined plans to cut its expenses.

The Illinois-based retailer was spun off from Sears Holdings Corp. in 2012 and sells home appliances, hardware and lawn equipment, among other items. The company operates in two segments—Sears Hometown and Sears Outlet. It has been struggling with a highly promotional retail environment lately.

Chief Executive Will Powell said the company saw "moderate progress" in sales trends in the quarter, although May was highly competitive due to the Memorial Day period. Sales at stores open at least 12 months slipped 1.4%. At the hometown segment, same-store sales fell 1.1%, while outlet sales fell 2.2% amid low availability of home appliance inventory. Mr. Powell said the company accelerated cost-cutting initiatives in the quarter by restructuring its executive team and reducing payroll and benefits costs at its support center and field organization—moves expected to save $2 million this year and $6 million in 2016.

The retailer has also closed 63 underperforming stores this year and plans to close 40 to 50 more.

Overall, for the period ended Aug. 1, the company reported a profit of $1.51 million, or 7 cents a share, down from $3.36 million, or 15 cents a share, a year earlier.

Sales fell 3% to $619.6 million, amid declines in same-store sales, lower online commissions from Sears Holdings, and fewer stores.

Commission sales from Sears Holding, which aren't included in the comparable-store sales figures, fell to $10.4 million from $18.7 million a year earlier. The prior-year figure was helped by promotions.

Gross margin slipped to 22.8% from 23% a year earlier.

Sears Hometown's results come a day after Lands' End Inc., which was spun out of Sears in 2014, reported a drop in sales for its second quarter as its spring and summer apparel lines didn't resonate with customers, resulting in declines across all its major markets and products.

Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com

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(END) Dow Jones Newswires

September 04, 2015 07:45 ET (11:45 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.
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