This question is quite outdated, so I’m pretty sure no one is looking at it. However, should anyone end up here, this question isn’t really a WordPress question.
Your problem is that on a locally hosted system, you actually have to configure your stack to be able to send email. And if you look in the outbound mail queue (XAMPP/mailoutput/), you’ll probably see that emails are generated and waiting to be sent.
“sendmail” comes packaged in XAMPP, but you need to configure it. Ideally, you’ll have an SMTP server you can connect it to. Take a look at the XAMPP FAQ under the heading How do I send email with XAMPP? That tells you exactly what you need to do.
All of this has nothing to do with WordPress – it’s stack configuration, which means it’s really outside the scope of the WPSE site.
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