Let Congress Know

Repeal the Tax on Social Security Benefits
(December 30, 2008)

Since “change” and the “reduction of taxes” were the buzzwords for the 2008 presidential election, NARSE wants Congress and President-elect Obama to support the repeal of ALL FEDERAL TAXES ON SOCIAL SECURITY BENEFITS.

With the economic turmoil we now face, Social Security benefits have never been more important to retirees. Drug costs for seniors are growing daily. Retirees in the Medicare prescription drug plans with the largest enrollments will pay 43% more on average in monthly premiums in 2009 than when the drug program began in 2006, and some enrollees will see increases of as much as 329%, two analyses show.

Social Security provides monthly benefits to qualified retirees disabled workers, and their spouses and dependents. We have already paid a tax on the Social Security benefits we are now receiving. When we were working, the amount we paid into the Social Security system in FICA taxes WAS NOT SUBTRACTED to determine income subject to the federal income tax, and was therefore taxed. So why is Congress so insistent on taxing us again?! And, taxing those folks least likely to afford it!

Social Security benefits are meant for the general welfare of the population and subjecting these benefits to income taxation is contrary to the original purposes of our Social Security system. In fact, our benefits were not taxed until 1984. For a complete review of the federal taxation history of Social Security benefits see the current Winter 2009 issue of NARSE’s newsletter, STRAIGHT TALK.

All we are asking Congress to do is to return to treating our Social Security benefits as certain types of government transfer payments (such as Aid to Families with Dependent Children, Supplemental Security Income, and black lung benefits) and exempt these benefits from the federal income tax.

President-elect Obama’s team is putting together a new economic stimulus package containing more than $500 billion in federal spending cuts over the next two years. A very small portion of these tax cuts should include the REPEAL OF THE TAX ON SOCIAL SECURITY BENEFITS. This is an extraordinary time, and extraordinary responses are now needed to address the needs of all seniors and retirees throughout the country.

Congress has bailed out the elitists who have royally screwed up our economy. Now please let Congress know who help the common folk!!

CONTACT CONGRESS TODAY!

Time is of the essence so please contact your Congressmen and Senators TODAY and express your extreme displeasure with the taxation of your Social Security benefits. Such taxation is not only unfair and contrary to the original purpose of the Social Security system, but also a form of double taxation.

Suggest to your Congressional representatives that they SPONSOR A BILL TO REPEAL ALL OF THE TAXES ON SOCIAL SECURITY BENEFITS.

If you do not know the names and addresses of your Congressional representatives, go to NARSE’s Home Page at www.narse.org and in the left column under the heading “Learn what Congress is doing and how your officials are voting!” click on “Find Elected Officials.”

These are difficult times for all of us. Let your Congressional representatives know not to make these times more difficult by turning their backs on their senior constituents. The following letters are suggestions that can be included in your own personal letters to your Congressmen and Senators.

SUGGESTED LETTER 1

Date

The Honorable (Senator or Representative)
(Washington address)

Dear (Congressman/Senator:)

I am a retiree residing in (name of city and state). I am writing you on behalf of all retirees to sponsor a bill to repeal the taxes on Social Security benefits, which were imposed by the 1983 Social Security Amendments and the Omnibus Reconciliation Act of 1993.

As a retiree (with a spouse, pension, IRA withdrawals, dividends, as applicable), our (my) taxable income exceeds $44,000.00 thus requiring us (me) to pay income taxes on 85% of our (my) Social Security income. Social Security benefits were not subject to income tax prior to 1983. Furthermore this threshold of $44,000.00 has not been adjusted for inflation over the years. These arbitrary tax penalties on earning additional retirement income tend to discourage saving for retirement and older citizens working. Working enables seniors to earn needed income, and the effectiveness of the workplace is minimized with the loss of these experienced and productive workers.

With more and more companies eliminating defined-benefit pension plans, it is becoming increasingly important for working Americans to contribute to a retirement account. Consequently, we are becoming more dependent on our investments to provide for our needs. With both spouses mandated to make Required Mandatory Distribution at age 701/2, more of us are exceeding the $44,000.00 threshold each year.

Additionally, more retirees are forced to work in their retirement in order to pay for rising health care costs. Elimination of the taxation on Social Security benefits would be a large assist to the economic security of our seniors.

I will appreciate your support in opposing the taxation of Social Security benefits, and urge you to sponsor a bill to accomplish this tax rule change now.

Sincerely,

Name
Address
Phone & E-mail

SUGGESTED LETTER 2

Date

The Honorable (Senator or Representative)
Washington Address

Dear (Congressman/Senator):

I am writing as a concerned constituent regarding the tax on Social Security income. This tax has not been adjusted for inflation since it was enacted 25 years ago. Since 1983, inflation adjustments have more than doubled the standard deduction and write-offs for personal exemptions. The threshold at which other income makes 85% of Social Security benefits taxable has remained constant with no inflation adjustment.

Social Security benefits in and of themselves are not sufficient income to meet the needs of seniors today. Many seniors, including me, have to have other retirement income in order to pay for rising health care costs and utility costs. In my view, the Social Security benefit income tax tends to discourage saving for retirement and working longer.

I would like to ask you to sponsor a bill to eliminate Social Security taxes altogether and support the repeal of the 1983 Social Security Amendments and the Omnibus Budget Reconciliation Act of 1993, which will greatly improve the quality of retirement life for constituents in our state.

Thank you for taking the time to read of my concerns regarding the taxation of Social Security benefits.

Sincerely,
 

Name
Address
Phone & E-mail

SUGGESTED LETTER 3

Date

The Honorable (Senator or Representative)
Washington Address

Dear (Congressman/Senator):

I am writing you as a concerned senior aged (insert your age) who was fortunate enough to contribute some of my earnings during my working days towards other retirement income. With rising health care costs and utility costs, my Social Security benefits have to be supplemented with that retirement income in order to meet my financial needs.

As a retiree with a spouse, our taxable income exceeds $44,000.00 thus requiring us to pay income taxes on 85% of our Social Security income additionally. Social Security benefits were not subject to income tax prior to the 1983 Social Security Amendments and the 1993 Omnibus Budget Reconciliation Act. Furthermore, this threshold of $44,000.00 has not been adjusted for inflation since enactment, while the standard deduction and personal exemptions amounts have been increased over that same time frame.

Needless to say, the taxation of 85% of our Social Security income impedes our ability to maintain our buying power and preserve our quality of life in our retirement years. Even with our other retirement income we find ourselves struggling to afford the things that we enjoyed while working.

I would like to ask you to sponsor a bill to eliminate Social Security income taxes altogether and support the repeal of the 1983 Social Security Amendments and the Omnibus Budget Reconciliation Act of 1993, which will greatly improve the quality of retirement life for all senior constituents in our state.

Thank you for taking the time to read of my concerns regarding the taxation of Social Security benefits.

Sincerely,

Name
Address
Phone & E-mail

FEEDBACK

We would certainly be interested in any feedback you receive from your elected federal officials. You can e-mail NARSE’s chairman, Ron Olbrysh, at cro922@comcast.net; or send us a copy of your representative’s response to: N.A.R.S.E., 8700 W. Bryn Mawr, S-800 South, Chicago, IL 60631-3507.

 

If 25% Of American Retailers Go Bankrupt,
Which Companies Make The List?
Douglas A. McIntyre - 24/7 Wall Street.com
December 28, 2008

24/7 Wall St. has already provided a list of retailers who may well not make it through 2009. According to The Wall Street Journal, "AlixPartners LLP, a Michigan-based turnaround consulting firm, estimates that 25.8% of 182 large retailers it tracks are at significant risk of filing for bankruptcy or facing financial distress in 2009 or 2010."

So, which chains are at risk as the year draws to a close, especially now that holiday numbers are even worse than expected?

The "easy" list that many analysts come up with includes Bon-Ton (BONT), Talbots (TLB), and Saks (SKS). These chains were mentioned in both the 24/7 Wall St. and Wall Street Journal articles.

One of the most pressing issues for the industry is whether a very large retail operation will go into Chapter 11 or be sold, putting tens of thousands of people out of work with one stroke. Six months ago, that seemed very unlikely. With 2008 being the worst holiday sales period in decades and 2009 shaping up to be even worse, the number of jobs at risk has become significantly more considerable.

Wal-Mart to Settle 63 Suits Over Wages
By Miguel Bustillo - Wall Street Journal
December 24, 2008

Wal-Mart Stores Inc. agreed Tuesday to pay up to $640 million to settle 63 suits alleging it routinely underpaid employees around the country, ending years of embarrassing legal battles over its treatment of workers.

As a result of the agreements, each of which must be approved by a trial judge, the world's largest retailer said it would take a $250 million after-tax charge during its fiscal fourth quarter ending Jan. 31.

If approved, the settlements would close the majority of the long- running cases Wal-Mart faces on allegations that it did not provide its workers with proper rest and meal breaks, violating state laws. The company disclosed in a regulatory filing earlier this year that it had 76 such cases; resolving 63 in one fell swoop would leave just 12 remaining cases. Wal-Mart settled a case in Minnesota earlier this month.

The total amount Wal-Mart will pay to settle the 63 cases will depend on how many current and former employees submit claims under the individual cases, but Wal-Mart has agreed to pay at least $352 million, and as much as $640 million. The Bentonville, Ark.-based company also agreed to continue using electronic systems to document its compliance with state and federal labor laws. The company would not discuss whether it would formally admit wrongdoing in any of the settlements.

"Resolving this litigation is in the best interest of our company, our shareholders and our associates," Wal-Mart general counsel Tom Mars said in a statement. "Many of these lawsuits were filed years ago and are not representative of the company we are today."

The allegations in the cases have translated to terrible publicity at a time when Wal-Mart has been working hard to repair its public image. The company is in the process of remodeling most of its U.S. stores and has adopted a soft, sunny new logo.

Paul M. Secunda, an associate professor at Marquette University Law School, suggested Wal-Mart wanted to settle the lawsuits not just to avoid potentially more costly defeats in the courtroom, but to resolve issues that might be used to argue for passage of the Employee Free Choice Act. The legislation, expected to be considered by Congress next year, is fiercely opposed by Wal-Mart because the company worries it will make it easier for workers to unionize.

"This is part of their overall strategy to get their labor house in order, and compared to what unionization might cost them, I think they probably realized it was a small price to pay," Mr. Secunda said.

Wal-Mart lost similar cases in California in 2005 and Pennsylvania in 2006 and was ordered to pay $172 million and $187 million, respectively, for denying breaks to thousands of employees. The company has appealed both cases and they are not part of the settlement.

Wal-Mart declined to comment further on the agreements, which also forbid all involved attorneys from commenting beyond written statements.

"We are pleased with this settlement and believe it is fair and reasonable for our clients," attorney Frank Azar, whose firm was co- lead counsel on cases in 14 states, said in a statement.

"After many years of hard-fought litigation, the parties have reached an agreement that values the hard work of Wal-Mart's employees by providing both economic and injunctive relief," Carolyn Burton of the Mills Law Firm, which was co-lead counsel in a group of 35 cases that were consolidated in Nevada, said in a statement.

Wal-Mart also faces a federal gender discrimination case in California, Dukes v. Wal-Mart Stores Inc. that could expose the company to billions of dollars in damages. It is the largest civil rights class action lawsuit in U.S. history.

Some legal experts had suggested that the recent Minnesota settlement could serve as a template to settle others around the country, paying pennies on the dollar for what it might have been forced to dole out if it lost the cases at trial.

In the Minnesota case, a judge ruled against Wal-Mart in July, finding that the company had violated state law an estimated two million times -- a violation that carried fines of up to $2 billion. The company and plaintiffs agreed to settle the case for $54.25 million after Wal-Mart threatened to appeal.

At trial, co-lead plaintiff Nancy Braun testified she had soiled herself while cooking food at an in-store Wal-Mart restaurant because she wasn't allowed to take a break. Later, a company official advised her to buy replacement clothes from the store with her own money, the suit alleged.

"She spoke to Kevin Miller, her district manager, but his sarcastic 'solution' that he would relieve her when she needed to use the bathroom was totally implausible considering that he was in Hudson, Wisconsin, and she was located in Apple Valley, Minnesota," Dakota County Judge Robert King stated in his ruling.

Wal-Mart Settles 63 Lawsuits Over Wages
By Steven Greenhouse and Stephanie Rosenbloom - New York Times
December 24, 2008

Wal-Mart said on Tuesday that it would pay at least $352 million, and possibly far more, to settle lawsuits across the country claiming that it forced employees to work off the clock. Several lawyers described it as the largest settlement ever for lawsuits over wage violations.

After years of being embarrassed by lawsuits over its wage practices, the company agreed to settle 63 cases pending in federal and state courts in 42 states.

The workers and their lawyers will receive at least $352 million, and the payments could reach $640 million, depending on how many claims affected workers submit.

Union critics of Wal-Mart, the world’s largest retailer, saw the settlement as proof of their view that the company achieves its low prices in part by cheating workers. But the company rejected that characterization, saying it had already corrected wage practices that it has long attributed to local managers acting without authority.

“Many of these lawsuits were filed years ago, and the allegations are not representative of the company we are today,” Tom Mars, general counsel and executive vice president at Wal-Mart Stores, said.

The newly settled cases involved hundreds of thousands of current and former hourly employees. It is unclear how much the average employee will receive, but the sum could be several hundred dollars.

Several lawyers said that Wal-Mart had reached the settlement to help end an embarrassing chapter as its chief executive, H. Lee Scott Jr., turns his position over to Michael T. Duke in February.

The dozens of wage-and-hour suits against Wal-Mart accused the company and its managers of various illegal tactics. Those included forcing employees to work unpaid off the clock, erasing hours from time cards and preventing workers from taking lunch and other breaks that were promised by the company or guaranteed by state laws.

The settlement — which wipes out all but 12 pending wage-and-hour lawsuits against Wal-Mart — also gives the company a cleaner slate as a new administration enters the White House. President-elect Barack Obama has indicated he will make wage-and-hour enforcement a priority, and groups critical of Wal-Mart suggested that the company had reached the settlement to avoid becoming a target of stepped-up enforcement.

“Wal-Mart is scared with what they’re going to face in an Obama administration,” said David Nassar, of Wal-Mart Watch, a union- financed advocacy group. “You clean up your house before the in-laws come over. That’s what they’re trying to do.”

Mr. Nassar said that settling the suits would also aid Wal-Mart in battling any renewed drive toward unionization at its stores.

With labor leaders and Congressional Democrats pushing for legislation that would make it far easier for unions to organize workers, union supporters see Wal-Mart, with 1.4 million workers in the United States, as a prime target of their efforts.

Frank Azar, a lead lawyer representing workers in lawsuits in 14 states, said in a statement on Tuesday that he was pleased with the settlement and thought it was fair for his clients.

“We are equally pleased that Wal-Mart has made tremendous strides in wage-and-hour compliance,” he said, “and that it has implemented and agreed to continue to follow state-of-the-art compliance programs so that these improvements will continue into the future.”

Wal-Mart announced the settlement less than two weeks after it reached a $54.25 million settlement covering a group of 100,000 current and former employees in Minnesota who asserted they were owed money over missed breaks and off-the-clock work.

In a case still pending, Wal-Mart has appealed a 2005 verdict in which a California jury ordered it to pay $172 million for making employees miss meal breaks.

In 2006, a jury in Pennsylvania awarded $78 million against Wal-Mart in a lawsuit over rest breaks and off-the-clock work. Last year, a judge increased that award to $188 million to include damages, interest and lawyers’ fees. Wal-Mart has also appealed that ruling.

Brad Seligman, the lead lawyer in a large sex discrimination lawsuit against Wal-Mart — one involving some two million current and former female employees — said that the verdicts in California and Pennsylvania had hurt Wal-Mart’s image and bottom line. He said the company was also worried by the unsympathetic language in a recent ruling by the Massachusetts Supreme Judicial Court in a wage lawsuit there.

“They saw the way the wind was blowing,” Mr. Seligman said.

The lawyers in the sex discrimination lawsuit, who are said to be seeking several billion dollars, have held intermittent settlement talks with Wal-Mart, as the company seeks to put that lawsuit behind it as well.

The settlement announced on Tuesday is subject to approval by scores of judges overseeing the individual cases. Lawyers representing the Wal-Mart employees are expected to receive tens of millions of dollars, though the amount has not been determined.

Several lawyers who had brought wage-and-hour lawsuits against Wal- Mart acknowledged that the total value of the newly announced settlement might seem modest in light of the California and Pennsylvania verdicts. But those lawyers also said that in some states, the wage lawsuits have not gone their way, with judges refusing to allow them to proceed as class actions.

Wal-Mart officials say that in recent years, they have taken strong steps to reduce wage violations, ordering managers not to demand off- the-clock work and threatening to fire employees who work off the clock or do not take their designated lunch and rest breaks. Wal-Mart has even programmed its cash registers and other equipment to stop working when employees are not on the clock.

Robert Bonsignore, co-counsel in nearly 40 of the cases, said that as a result of the settlement, “Wal-Mart can now say that it has taken action to make its stores a great place to shop and work.” Wal-Mart said it would take a charge of $250 million, or 6 cents a share, in this quarter to help finance the settlement

Ernst & Young to leave Sears Tower for 155 N. Wacker
By: Alby Gallun - Chicago Business
December 22, 2008

(Crain’s) — In one of the largest downtown office leases of the year, Ernst & Young U.S. LLP has decided to move out of the Sears Tower and into a new Wacker Drive office building being developed by John Buck Co. The accounting firm has signed a lease for nearly 204,000 square feet in the high-rise under construction at 155 N. Wacker Drive, according to Chicago-based John Buck. Ernst & Young, the area’s second-largest accounting firm, with nearly 1,800 professionals here, will be the largest tenant in the 46-story building, occupying floors
19 through 26.

The lease is a coup for John Buck, which has signed up tenants for more than 72% of the 1.1-million-square-foot tower. The developer also is in advanced negotiations with four more tenants that would occupy about 50,000 square feet in the building, says John Buck Principal Drew Nieman.

The loss of Ernst & Young will leave a gaping hole in the 110-story Sears Tower. The firm accounts for 19% of the landmark skyscraper’s annual rental revenue, and it is the tower's biggest tenant, with a lease for 387,000 square feet that expires in 2012.

Ernst & Young occupies about 237,000 square feet, subleasing the rest of the space to other tenants, according to a spokesman for U.S. Equities Asset Management LLC, the building's management and leasing agent.

"We are very confident that over the next three and a half years we will lease the vacated space and retain these subtenants," the spokesman says in an e-mail.

The Sears Tower is owned by Skokie-based American Landmark Properties Ltd. and New York investors Joseph Chetrit and Joseph Moinian.

Designed by Chicago-based Goettsch Partners, 155 North Wacker is owned by a joint venture including the two John Buck investment funds, Morgan Stanley’s Prime Property Fund and Chicago-based investor Brijus Properties. Tenants are expected to start moving into the building next summer.

Real estate firm Jones Lang LaSalle Inc. represented Ernst & Young in the transaction. Jones Lang is also representing another big Sears Tower tenant, law firm Sonnenschein Nath & Rosenthal LLP, that is considering moving out of the building.

Discover Wins Federal Reserve Approval to Become Bank
By Ari Levy and David Mildenberg - Bloomberg
December 19, 2008

Discover Financial Services, the fourth-largest credit-card network, won approval to become a bank holding company, joining American Express Co. and other financial firms in a rush for government funds and retail deposits.

The Federal Reserve approved the credit-card company’s conversion, according to a regulatory filing today. The change may make Riverwoods, Illinois-based Discover eligible for funds from the Treasury’s rescue plan to bolster financial firms.

American Express, the biggest U.S. credit-card issuer by sales, became a bank holding company last month, leaving Discover as the last stand-alone consumer card company in the country. That business model no longer works because it’s too dependent on the capital markets, said David Robertson, publisher of the Nilson Report.

“The decision to opt-in for some of this cash will help them over the crunch, partially, and then open up some deposit account activity,” said Robertson, whose trade publication is based in Carpinteria, California. That will help “solidify revenues going forward with less volatility,” he said.

Discover rose 7 cents to $9.33 at 4 p.m. in New York Stock Exchange composite trading. The shares have tumbled 38 percent this year, compared with the 58 percent decline in the 84-company Standard & Poor’s 500 Financials Index.

TARP Funds

Discover expects $400 million to $1.2 billion in funds from the Treasury’s Troubled Asset Relief Program and is considering buying a bank to add to its $29 billion in deposits, Chief Executive Officer David Nelms said yesterday. After New York- based American Express made the conversion, Nelms said Discover was “unlikely” to become a bank.

While American Express has yet to tap TARP funds, the company said last week that it had raised $4.6 billion selling certificates of deposit, which was helping to repay long-term debt. Discover and American Express have been unable to securitize credit-card loans, a market that Nelms said yesterday may not be available through next year.

Discover spokesman Matthew Towson didn’t immediately return a call for comment.

Morgan Stanley, the securities firm that spun off Discover in June 2007, and Goldman Sachs Group Inc. both converted to bank holding companies in September following the collapse of Lehman Brothers Holdings Inc. Firms including insurer Hartford Financial Services Group Inc., commercial finance company CIT Group Inc. and auto and home lender GMAC LLC are seeking bank status.

Retailers Drop Prices to Avert a Flop Last Weekend Before Christmas to Feature Huge Discounts as Stores Race to Liquidate Excess Inventory
By Miguel Bustillo and Jennifer Saranow - Wall Street Journal
December 19, 2008

Retailers are gearing up to offer massive discounts this weekend to lure last-minute shoppers and try to salvage a so-far disastrous holiday season. In a mad dash to liquidate excess inventories, chains are rolling out deeper and broader price cuts than last year, extending hours and offering even more generous promotions to their most loyal customers. The markdowns are particularly steep in clothing, which has been hit hardest by a consumer-spending downturn.

Barneys New York on Thursday began offering up to 75% off some clothes, reductions usually reserved for after-Christmas sales, when retailers make way for spring goods. Neiman Marcus Group Inc. also rolled out new sales Thursday offering as much as 65% off cashmere sweaters.

The sales were "a little deeper" than what was offered on Black Friday and "definitely more promotional" than those from last year, said Neiman spokeswoman Ginger Reeder. "It's not the way we tend to do business, but we need to move merchandise."

J.C. Penney Co. is planning about 300 "doorbuster" discounts on various items, up 80% from last year, and will keep stores open to midnight, one hour later than on Black Friday. Sears Holdings Corp. will offer up to 70% off on fine jewelry at its Sears stores, which will stay open this weekend until 11 p.m. However, many retail experts believe the efforts will fall short, noting that it would take an extraordinary surge to make up for weeks of slumping sales this year.

Retail sales for the six weeks to December 13 are off 2% from a year ago.

Some consumers said they won't be part of any surge. Carol Akpan- Garza, 52 years old, a teacher and real estate broker in Round Lake Beach, Ill., said she finished holiday shopping last weekend and doesn't plan to go again until the day after Christmas. "Hopefully, the discounts will be even deeper then," she said.

Making matters worse, winter storms are bearing down on the Northeast this weekend that could keep some willing shoppers at home. "If this happens, even the grim reaper will look bullish," said Barclays Capital retail analyst Bob Durbl. "You cannot make those sales up."

Procrastinators have become more important to retailers' December revenue, making the importance of the Saturday before Christmas second only to the Friday after Thanksgiving. Retailers expect to see more foot draggers this holiday season, since there have been only 27 shopping days between Thanksgiving and Christmas, compared with 32 last year.

Circuit City Stores Inc. is planning a rash of unadvertised specials on flat-screen televisions and other electronics to appeal to last- minute shoppers. "Like every retailer these days, we have fewer people coming in the door, and we are trying to make sure we do as well as possible with each one," said Jeff Maynard, the retailer's head of marketing.

In some cases, the promotions this weekend will be better than those offered on Black Friday, said Todd Slater, a retail analyst with Lazard Capital Markets. A number of retailers already have been offering lower prices on some items than they did during Black Friday, he said.

A survey conducted for the National Retail Federation found that on average, shoppers had completed only 47% of their holiday shopping by the second week of December this year, compared with nearly 53% last year. It found that 19% of consumers had not even started holiday shopping, up from 16.5% last year. A similar survey released this week from America's Research Group found that 43.3% of consumers expected to finish holiday shopping this weekend, up from 33.9% last year.

"I expect it to be very, very busy" this weekend, with sales "better on a relative basis than prior weeks" this year, said Bill Taubman, chief operating officer of Taubman Centers Inc., which is extending hours at some of its malls to pull in as many shoppers as possible.

Of course, not ever retailer believes in chopping prices just before Christmas. Best Buy Co. Chief Executive Officer Brad Anderson said he is not a fan of late-year discounts. "When it comes to that last minute, before Christmas, you can't really alter shopping patterns," Mr. Anderson said this week.

As dour as retail sales outlook have been, some analysts said the results could be even worse. "It's hard to determine whether sales have been off because of procrastinators, or whether people are just not going to get out there and shop" at all, said Bill Martin, co- founder of ShopperTrak RCT Corp., which estimates sales and store traffic during the holidays.

ShopperTrak had predicted that holiday sales would increase a bare 0.1% this year. Now, "it will have to be a dramatic few days to even make that goal," Mr. Martin said.

—Rachel Dodes contributed to this article.

Discover shares spike on healthy fourth-quarter earnings
Chicago Tribune
December 19, 2008

Shares of Discover Financial Services jumped after it turned in hefty fourth-quarter earnings, buoyed by a half-billion dollars received from a legal settlement that helped offset the drag of mounting losses from consumers defaulting on their credit card debt.

The Riverwoods-based credit card company also disclosed that it has applied to federal banking authorities to become a bank holding company, a move that would allow Discover to tap the government's $700 billion in financial rescue funds.

During the quarter ended Nov. 30, Discover won out-of-court settlements from industry rivals Visa and MasterCard, which it had sued for alleged antitrust violations.

With that boost, Discover reported net income of $432 million, or 89 cents a share. In the year-earlier quarter, an after-tax $279 million charge linked to the sale of its troubled British credit card operation left Discover with a net loss of $56 million, or 12 cents a share.

Shares jumped 8 percent, to $9.26.

Sears Holding Corporation Slapped with 'Sell' Rating
Retailer stumbles on extremely bearish brokerage outlook
by Jocelynn Drake - Schaeffer's Research
December 18, 2008

It's been a rough day for Sears Holdings Corporation (SHLD:
sentiment, chart, options), as one brokerage firm took a rather bearish stance on the shares. Before the open, UBS initiated coverage of the security with a "sell" rating, while establishing a price target of $30. This price target marks a 23.7% discount to the stock's current trading price.

Overall, Wall Street is extremely pessimistic when it comes to the retailer. Sears has earned 1 "strong buy" rating and 3 "sells." While there is ample room for upgrades, the security has yet to provide analysts with any positive news or significant technical strength.

What's more, the average 12-month price target for SHLD stands at $27.50, according to Thomson Financial. This price-target estimate implies that brokerage firms are expecting the shares to plummet roughly 30% during the next 12 months.

Short sellers have also taken an extremely bearish stance on the retailer, as more than 19 million SHLD shares have been sold short. This accumulation of bearish bets accounts for 17.6% of the company's total float, and is 8.5 times the stock's average daily trading volume. Should the equity continue its downtrend, these bears could add to their winning short positions, pushing SHLD even lower.

Speaking of downtrends, the equity has been in a steep decline since it reached a peak of $195.18 in April 2007, resulting in a loss of more than 79%. The shares are down 60% since the start of 2008.

Taking a closer look at the security, we find that SHLD bounced off its November low of $26.80, and managed to rally more than 85% into resistance at the 50 level. The stock's short-term uptrend was halted by resistance at its declining 10-week moving average -- a trendline SHLD has not closed a week above since the beginning of October.

The one group that hasn't completely abandoned the shares is options traders. The Schaeffer's put/call open interest ratio for SHLD stands at 0.74, which is lower than 78% of all those taken during the past year. In other words, short-term options players have been more optimistically aligned only 22% of the time during the past year.

However, it appears that pessimism may be on the rise among options players. The International Securities Exchange has seen an average of 3.1 puts purchased to open for every 1 call purchased to open during the past 10 trading sessions. This ratio of puts to calls is higher than 94.5% of all those taken during the past year, indicating a growing preference for puts.

Overall, with the stock locked in a steep downtrend, this pessimism is to be expected. While there is ample money waiting on the sidelines that could boost the shares higher, the bears have little reason to abandon their short positions. In fact, a shift among options players to the bears' camp could result in an increase in selling pressure for the security.

 

Retailers Can Expect 2009 To Be As Tough, If Not Even Worse
By Karen Talley - of Dow Jones Newswires
December 18, 2008

NEW YORK (Dow Jones)--Next year will be as bad, if not worse, for most retailers, analysts say.

Despite lower energy and commodity prices, a still very weak housing market, tighter credit and consumers' increased desire to save are expected to weigh on retail spending until at least the second half of 2009, and in some cases into the following year.

The conditions will produce a slide in earnings from 2008's poor levels for department stores, apparel companies, consumer electronics stores, luxury goods purveyors and home improvement chains, Barclays Capital said.

Discounters including Wal-Mart Stores Inc. (WMT) will be among the retailers to show profit growth for a second straight year, while warehouse clubs, which had been experiencing a solid 2008, will see their earnings flatten, Barclays said.

On top of the soft economy, consumers will be more austere, said Barclays retail analyst Bob Drbul. "Companies and people will be selling off assets to pay down debt. The unwinding will lead to a longer economic slowdown and a not-as-quick recovery."

Year-over-year sales will slide for many retailers in 2009 - including department stores, apparel companies and home furnishing providers, Barclays said.

The groups that are projected to show revenue growth include consumer electronics, warehouse clubs and discounters, but their gains will largely be modest, with the advances weaker than their 2008 sales performance.

Retail stocks as a group could outperform in anticipation of an economic recovery, although Barclays is recommending caution because it sees significant volatility for the shares next year.

For trading purposes, investors could play the bounces that the stocks have been experiencing, understanding that the rallies and pullbacks are likely to continue for some time.

Investors wanting to buy and hold can consider Wal-Mart, Target Corp. (TGT), Kohl's Corp. (KSS), J.C. Penney Co. Inc. (JCP) and Tiffany Inc. (TIF). The companies are well-managed and "financially strong enough to outlast weakened competitors and survive in this tough economic environment," Drbul said.

Retail sales will remain weak through 2009 and not experience a clear rebound until 2010, said TNS Retail Forward. In 2009, sales growth for the year, excluding automobiles and gasoline, will approach 2%, TNS said. The figure compares with Commerce Department data in which sales experienced 2.3% average growth through November.

TNS Retail Forward anticipates a rebound will begin in 2010 and gain momentum through 2013, when annual increases in sales will again approach the 5% average rate of the past 10 years. But adjusting for inflation, growth is forecast to remain below average.

While inflation has eased from its highs of early 2008, Frank Badillo, senior economist at TNS Retail Forward, expects price pressures to resume and persist in categories such as fuel and food.

Director dumps nearly half of Sears holdings
By James P. Miller - reporter - Chicago Tribune
December 17, 2008

A director of retail giant Sears Holdings Corp. has dumped $51.8 million in Sears stock this week – almost half of his holding, according to regulatory filings.

Hedge-fund operator Richard C. Perry, a Sears director since September 2005, disclosed in a Securities and Exchange Commission filing Tuesday that he had sold 530,000 Sears shares Monday at a blended price of $41.09 apiece, for a total of $21.8 million.

Wednesday, Perry told the SEC in a separate filing that he had sold an additional 767,000 Sears shares at $39.08 each, for a total of $30 million.

Perry, a onetime trader with investment banker Goldman Sachs, has since 1988 headed a private-investment firm now known as Perry Capital, which controls Perry Partners International. Perry Partners is formally listed in the two SEC filings as seller of the Sears shares.

After this week's sale of 1.3 million shares, Wednesday's filing says, Perry still owns 1,397,952 Sears shares.

The filing, known as an SEC Form 4, is used to disclose share transactions by company insiders. Perry's filings don't provide any reason for the sale.

Retail tracker raises holiday view on Wal-Mart
Reuters
December 17, 2008

SAN FRANCISCO (Reuters) - A leading consumer research firm raised its holiday retail sales outlook on Wednesday, due to what it called Wal-Mart's "domination" of the retail industry with its bargain-basement deals.

America's Research Group said it now expects retail sales to drop by 2.8 percent, compared with its earlier expectation of a decline of 3.5 percent.

The group's chief executive, Britt Beemer, said the revised outlook was due to "Wal-Mart's extraordinary domination of Christmas shopping this season."

America's Research Group surveyed 1,002 U.S. consumers by telephone last weekend.

"Wal-Mart had as many shoppers this weekend as J.C. Penney, Sears, Target and Toys "R" Us combined," said Beemer in a statement.

"The unheard-of domination of the retail industry this Christmas coupled with the fact that consumers are seeing and taking advantage of 60 percent - to 70 percent-off sales leads me to raise my forecast," he said.

Wal-Mart Stores Inc, the world's largest retailer, attracted approximately two-thirds of U.S. shoppers this past weekend, the survey found.

The nearest competitors were Sears Holdings Corp, with 19.6 percent, J.C. Penney Co Inc at 18.1 percent and Target Corp at 17.9 percent.

Toys "R" Us Inc attracted 12.1 percent of shoppers last weekend.

Last year, Wal-Mart attracted 41.3 percent of shoppers during the same time frame, according to the survey.

Retailers are facing what some have warned could be the weakest holiday shopping season in nearly two decades. Struggling to combat lowered consumer spending amid a recession, rising unemployment and high food costs, store chains have had to slash prices to attract cash-strapped shoppers.

The weakened shopping environment has hurt most retailers' sales.

But discounter Wal-Mart has managed to buck the trend while gaining market share as consumers have gravitated to its low prices, contributing to a higher-than-expected sales rise in November.

The survey also found that more consumers were delaying purchases this holiday, with some 43.3 percent expecting to finish their shopping next weekend, compared with 33.9 percent a year earlier.

Some 40.9 percent said they were waiting for even more half-off sales to finish their holiday shopping, while 36.6 percent said they were waiting for promotions at more than 60 percent off normal prices.

As expected, toys, children's clothing and electronics were the top three sales categories.

Perianne Grignon Leaves Sears
Media-Services Exec Departing After 10 Years
By Natalie Zmuda and Michael Bush - Advertising Age
December 16, 2008

NEW YORK (AdAge.com) -- Sears just can't seem to keep marketing talent these days.

The company, which operates Sears and Kmart, has become a revolving door for marketers. Chief marketing officers at Sears Holdings and Kmart departed this summer, leading to a reshuffling of the ranks. Now Perianne Grignon, VP-media services, is leaving the company, Sears confirmed. Ms. Grignon has been with the retailer for nearly a decade. She was named an Ad Age Media Maven this year.

An executive close to the situation said Ms. Grignon has long been contemplating a change and perhaps a return to the agency side of the business, but added that the move was not a result of changes in the management ranks at Sears. Ms. Grignon has worked with a number of chief marketers during her tenure.

Sears sent a memo, obtained by Ad Age, to media partners earlier today saying Ms. Grignon would depart in January. The memo said that she would spend the next few weeks ensuring a smooth transition, although it did not name a replacement.

Before joining Sears, Ms. Grignon worked with marketers including AT&T and Nabisco and spent time on the agency side at Bates Worldwide.

Broader media mix

During Ms. Grignon's tenure at Sears, the retailer moved from being heavily dependent on newspaper inserts to thinking more broadly about its media mix. She orchestrated successful integration deals with properties such as ABC's "Extreme Makeover" and Bravo's "Top Chef."

She also pushed the retailer to embark on a more aggressive digital push. During the back-to-school season, for example, Sears partnered with an array of youth-focused social, virtual and entertainment networks in a far-reaching digital campaign.

Other notable media deals on Ms. Grignon's watch include this year's "Reimagine you" program. That included a significant partnership with Hearst Corp. in which the media company created a site for the campaign and a booklet that was distributed in 13 of its publications.

Sears chairman's investment funds fined
By Sandra Guy - Staff Reporter - Chicago Sun-Times
December 15, 2008

Investment vehicles controlled by Sears Holdings Corp. Chairman Edward S. Lampert have been ordered to pay $800,000 in civil penalties for allegedly failing to tell federal officials of plans to buy shares in auto-parts retailer AutoZone.

The U.S. Justice Department said ESL Partners and ZAM Holdings violated an antitrust law when they each bought more than $50 million in AutoZone shares four years ago. ESL, based in Greenwich, Conn., agreed to pay $525,000, and New York-based ZAM will pay $275,000, the Justice Department said Monday.

The Federal Trade Commission "will not hesitate to take action when companies or individuals shirk their filing responsibilities," David Wales, head of the FTC's competition bureau, said in a statement. The Justice Department handled the case at the FTC's request. The Hart-Scott-Rodino Act imposes civil penalties of $11,000 for each day a company or investor fails to tell antitrust agencies of stock purchases.

RBS Partners LP, a Greenwich, Conn.-based investment company that the Justice Department said made investment decisions for both ESL and ZAP, is the largest shareholder of Memphis-based AutoZone. It holds 40.3 percent of the auto-parts retailer.

In a statement, ESL said it "takes our filing obligations with the utmost seriousness." "ESL reported these 2004 purchases of AutoZone contemporaneously in the required section 13 and Form 4 filings," an ESL spokesman said.

"At the time of the purchases, ESL was already AutoZone's largest holder, at 25.3 percent, and had been an investor in the company since 1997," the spokesman said. "Although its (antitrust law) filing was ultimately approved by the FTC, ESL regrets that these filings were not made on time."

Sears Still Standing Strong
Correction to earlier report
WMAQ-TV Chicago
December 15, 2008

We want to make a correction on a story we reported about Sears.

Crains Chicago Business is reporting that rising debt and dwindling cash flows threaten to make this the last Christmas season for Sears. The company faces a short term debt of $1.9 billion.

We incorrectly quoted Sears Chairman Edward Lampert as saying this could be the last holiday season for Sears. Lampert did not make the statement and it was Crains, not Lampert, who drew this conclusion.

Sears says it has more than adequate liquidity and currently expects to completely repay this short-term debt by the end of the month.

We regret the error.

COMMENT I am disappointed that such an error has even occurred. It appears that the news is so quick to report negatives and downfalls in the economy yet completely ignore or report good news. Why not report how great it is that Sears is sponsoring the Heroes at Home Wish Registry and is helping over 30,000 military families? http:// www.sears.com/militarywishes That does not sound like a company that is ready to shut it’s doors. Have Faith in Sears, I do. ... comeback_kid

COMMENT Sears is a strong American brand with very sound fundamentals. The stock has a price to book of 0.57 and 1.27 B of cash on its balance sheet with D/E of 0.48 People who say this stock is leveraged don't know what they're talking about! Couple the stock's value with such flagship brands such as Craftsman , Kenmore and Diehard and you got a winner that is waiting to be "discovered".

Sears is a strong American brand with very sound fundamentals. The stock has a price to book of 0.57 and 1.27 B of cash on its balance sheet with D/E of 0.48 People who say this stock is leveraged don't know what they're talking about! Couple the stock's value with such flagship brands such as Craftsman , Kenmore and Diehard and you got a winner that is waiting to be "discovered". bduh

COMMENT wow kind of a big error! I found it a little hard to believe that Ed Lampert would say something so irresponsible! wow kind of a big error!

Congress OKs bill to help retirees protect savings plans
By Sandra Block, USA TODAY
December 12, 2008

Congress approved legislation that would provide relief to retirees who want to avoid inflicting further damage on their battered retirement savings plans.

The bill, which President Bush is expected to sign, allows retirees to defer withdrawals from their 401(k) plans and individual retirement accounts in 2009 without triggering a penalty. Separately, it would temporarily ease funding rules for traditional pension plans.

Ordinarily, seniors age 70½ and older are required to withdraw a minimum amount from their tax-deferred retirement savings plans every year and pay taxes on the money. The amount is based on a life expectancy factor calculated by the IRS and the value of their retirement plans at the end of the previous year. Seniors who ignore the requirement face a penalty equal to 50% of the amount they should have withdrawn.

This year, the rule has created considerable angst among retirees who have seen the value of their retirement plans shrink dramatically since Dec. 31, 2007. Unlike younger retirees, they don't have the option of postponing their withdrawals until their investments recover. Many have postponed taking minimum withdrawals in hopes that Congress or the Treasury Department will provide some relief.

The legislation won't help seniors who were hoping to avoid taking a withdrawal this year, or have already taken a withdrawal. But it will give seniors more time to recoup some of the losses in their retirement plans, says David Certner, legislative policy director of the AARP.

There's still a chance that the Treasury could use its regulatory authority to help retirees this year, says Clint Stretch, managing principal of tax policy for Deloitte Tax. One possibility, he says, is that the Treasury could allow retirees to calculate their withdrawals based on the value of their IRAs at the end of 2008, instead of the end of 2007. For most seniors, that would result in smaller withdrawals.

The Treasury is studying its regulatory options, spokesman Andrew DeSouza said in an e-mail.

Also, the pension provisions in the legislation would roll back funding requirements contained in the 2006 Pension Protection Act, which was designed to strengthen the financial security of traditional pension plans. Stock market volatility has increased pension funding obligations at a time when companies need money to maintain their business operations, James Klein, president of the American Benefits Council, said in a statement.

The Center for Retirement Research at Boston College estimates that investments held by pension plans lost about $900 billion in the 12-month period ended Oct. 9.

2-Star Stocks Poised to Plunge: Sears Holdings
By Brian D. Pacampara - The Motley Fool.com
December 11, 2008

Based on the aggregated intelligence of 120,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, Sears Holdings (Nasdaq: SHLD) has received a distressing two-star ranking. While one-star stocks have been the worst performers, our data has shown that two-star stocks still lag the market by a significant margin and should be approached with caution; conversely, highly rated stocks have outperformed the S&P.

With that in mind, let's take a closer look at Sears Holdings'
business and see what CAPS investors are saying about the stock right now.

Sears Holdings facts

Headquarters (Founded)
Hoffman Estates, Ill. (1899)

Market Cap
$5.76 Billion

Industry
Department Stores

Trailing-12-Month Revenue
$48.56 Billion

Management
Chairman Edward Lampert

Interim CEO W. Bruce Johnson

Return on Equity (Average, Past Five Years and TTM)
15.8% and 2.8%

Competitors
Wal-Mart (NYSE: WMT)
Target (NYSE: TGT)

CAPS Members Bearish on Sears Holdings Also Bearish on:
Citigroup (NYSE: C),
General Motors (NYSE: GM)

CAPS Members Bullish on Sears Also Bullish on:
Goldman Sachs (NYSE: GS),
Google (Nasdaq: GOOG)

Sources: Capital IQ (a division of Standard & Poor's), Sears Holdings, and Motley Fool CAPS.

On CAPS, 148 of the 390 All-Star members who have rated Sears Holdings -- some 38% -- believe the stock will underperform the S&P 500 going forward. These bears include dexion10 and Tastylunch, both of whom are ranked in the top 7% of our community.

Last week, dexion10 noted the difficulty in the stock's value
proposition: "[Too] much debt and declining earnings as far as the eye can see. [Replacement] cost of their leases is higher than market cap but you'd have to find a buyer."

In a pitch just one day earlier, Tastylunch shared that bearishness and updated our community on Sears Holdings' most recent quarter:

Did they or did they not have a big earnings miss yesterday? Sure they are closing underperforming stores and hiring new execs but common their problems go way beyond that.

Seriously [Sears Holdings] has some issues, imagine Wal-Mart-ish appearance stores with no pricing advantage, poor inventory controls, unfocused brand, little marketing and management that isn't retail focused (Buffet wanna-be Eddie Lampert).

That is Sears and it ain't so great. I doubt they will go chapter 11 unless things get really really bad, but they certainly could fall further especially after yesterday's bounce.

Allstate Financial CEO out after two years
By Darla Mercado - Investment News
December 10, 2008

The Allstate Corp. of Northbrook, Ill., has announced the departure of James E. Hohmann, president and chief executive of Allstate Financial LLC, who is leaving on Jan. 5.

George Ruebenson, president of Allstate Protection, will take Mr. Hohmann’s place while the company searches for a replacement.

The departure comes nearly two years to the day when Mr. Hohmann first joined the company on Jan. 1, 2007.

Last month, Allstate booked a $923 million loss during the third quarter, down from a $978 million profit during the same period in 2007.

Catastrophe losses — primarily coming from hurricanes — totaled $1.82 billion during the third quarter, compared to $343 million in the year-ago period.

Net investment income also fell by 15.5% to $136 billion in the period, down from $1.6 billion from the third quarter of 2007.

Wal-Mart to Pay $54 Million to Settle Suit Over Wages
By Steven Greenhouse - New York Times
December 10, 2008

Wal-Mart Stores announced a $54.25 million settlement on Tuesday of a lawsuit accusing it of wage violations in Minnesota — far less than the $2 billion in fines that it was threatened with when a judge ruled against it last July.

The settlement covers about 100,000 current and former hourly workers at Wal-Mart and Sam’s Club stores in Minnesota from September 1998 through last month.

In July, a state judge in Dakota County, Minn., ruled that Wal-Mart had violated state laws on rest breaks and other wage matters more than two million times and could as a result face more than $2 billion in fines. The judge, Robert R. King Jr., threatened a $1,000 penalty for each violation.

Judge King also ruled that Wal-Mart owed $6.5 million to 56,000 employees because of contractual violations, including a failure to give promised rest breaks at least 1.5 million times.

The settlement includes a substantial payment to the State of Minnesota, the two sides said. As part of the settlement, Wal-Mart agreed to maintain various electronic systems, surveys and notices that would help ensure compliance with state law and its own wage and hour policies.

Justin Perl, a lawyer for the plaintiffs, said, “We are satisfied with this settlement, gratified that these hourly workers will now be paid after seven years of litigation.”

In his July decision, Judge King ruled in Wal-Mart’s favor on several issues, concluding that it did not routinely make cashiers and stockers work off the clock. But he did find that Wal-Mart managers broke state law by making employees work off the clock while taking computerized in-house training courses.

Employing Wal-Mart’s use of the term associates for its workers, David Tovar, a company spokesman, said: “Our policies are to pay every associate for every hour worked and to make rest and meal breaks available for associates. Any manager who violates these policies is subject to discipline, up to and including termination.”

Wal-Mart maintained that some workers had voluntarily missed breaks for meals, but Judge King concluded that the company knew about that practice and allowed it. He noted that Wal-Mart executives did little to redress the problem of missed breaks even after audits had repeatedly highlighted the practice.

“They put their heads in the sand,” Judge King wrote.

Wal-Mart has faced more than 70 lawsuits across the country in which workers have accused it of making them miss required breaks or work off the clock. In a 2005 verdict in California, the retailer was ordered to pay $172 million for making employees miss meal breaks.

In 2006, a jury in Pennsylvania awarded $78 million against Wal-Mart in a lawsuit over rest breaks and off-the-clock work. Last year, a judge increased that award to $188 million to include damages, interest and lawyers’ fees. The company has appealed both verdicts.

Nancy Braun, one of the four original plaintiffs in the Minnesota lawsuit, complained that managers at her store in Apple Valley repeatedly failed to find substitute workers so that she could take breaks, including bathroom breaks, when she was the sole cook and waitress at the in-store restaurant. Judge King noted that Ms. Braun, as a result, ended up soiling herself several times.

Ms. Braun testified that the store was understaffed and the managers were under great pressure to minimize spending on payroll.

Dark Days for Mall Dynasty
By Robert Frank and Kris Hudson - Wall Street Journal
December 9, 2008

Two board members of General Growth Properties Inc. marched into CEO John Bucksbaum's office to deliver a blunt message: It was time for him to resign.

An internal investigation showed that Mr. Bucksbaum's family trust had violated company policy by making private loans to two company officers and failing to inform the board. The departure of Mr. Bucksbaum -- whose father and uncle founded the giant mall owner 54 years ago -- would mark an end to the family's management control of the company.

"I accept the decision," Mr. Bucksbaum said, according to people briefed on the Oct. 24 meeting. "I'll do what's in the best interest of the company and its shareholders."

Yet the harm to the legacy and the fortune of the Bucksbaum family -- one of the richest and oldest real-estate dynasties in America -- had already been done.

Aside from the loans, made to prevent a massive stock selloff by executives, Mr. Bucksbaum and his deputies in recent years loaded the company with debts totaling more than $27 billion. General Growth's stock has plunged more than 97% in the past year, dragging down the Bucksbaum family fortunes with it. The Bucksbaums' 25% ownership stake, worth $3.2 billion just six months ago, is now worth $116 million.

The family could lose General Growth altogether, along with three generations of hard work that began with a grocery store in Iowa. If the company can't negotiate new terms with lenders by midnight Friday, and those banks declare the company in default, General Growth has told investors it could file for Chapter 11 -- creating one of the largest bankruptcies ever in real estate.

The Bucksbaum's losses show how the 2008 financial crisis is hitting not just risk-loving Wall Street firms and leveraged upstarts but also long-established, family-run companies with histories of conservative growth. The crisis has sparked the most rapid and severe destruction of wealth in recent history, rivaled only by the Great Depression, when the number of millionaires plunged by an estimated 75%.

The fallen fortunes span the globe, from Sheldon Adelson, the Las Vegas casino king whose paper fortune has dropped by more than $25 billion in the past year, to Germany's old-money Merckle family and Indian steel magnate Lakshmi Mittal. Even Bill Gates and Warren Buffett, the dynamic duo at the top of the global billionaire ranks, have seen the value of their corporate shares shrink by $12 billion and $15 billion, respectively.

Many got caught in an unavoidable downdraft. But others have themselves to blame for making things worse. The crisis has been particularly hard on executives who gambled badly with their business -- they got into the wrong industry at the wrong time, took on risky investments, piled too much debt on their companies, or leveraged their own finances to a catastrophic degree.

The decline of General Growth is as much a matter of pride as it is money, since the Bucksbaums are still wealthy by any standard. They've collected roughly $590 million in dividends from the company since 1997. Martin and Matthew Bucksbaum, the company's founding brothers, were astute financial investors who also made more than $1 billion from early investments with hedge-funder Edward Lampert, investor Jack Nash and Goldman Sachs, according to two financial advisers to the family. And the company's malls are still among the strongest in the U.S., with an overall occupancy rate of about 93%.

Matthew Bucksbaum declined to be interviewed regarding his personal finances or General Growth's struggles. John Bucksbaum says he remains "actively involved" in the company as chairman of the board, adding, "We have great assets, great employees. Our issues are not with the operations of these properties, it's with the balance sheet. We'll be able to restore the value that these properties hold."

Short of cash and unable to make debt payments, General Growth is struggling to sell off some of its prized malls and properties, including three on the Las Vegas Strip. It has $900 million in loans due on Friday, another $3.1 billion due next year and, in a leftover from its acquisition of competitor Rouse Co. in 2004, the company could owe up to $1 billion to the heirs of legendary tycoon Howard Hughes. The company has hired law firm Sidley Austin LLP to advise it in the event of a bankruptcy filing.

"This family worked so hard for so long to get where they are," says Morris Mark, president of Mark Asset Management and a former board member and friend of the family's. "It's sad to see the company in such difficulty."

A Grocery Fortune

The Bucksbaums, rooted in the mom-and-pop grocery business of Iowa, are a tightknit, driven and intensely private family. Martin and Matthew Bucksbaum started in 1954 with a small shopping center in Cedar Rapids, which they built to house one of the family's grocery stores. They installed trampolines in the parking lot on opening day for visiting children and opened a Kinney Shoes and a Woolworth.

The project's success led them to open more shopping centers. As America's suburbs started to boom, they started building large indoor malls, a strategy known among mall builders as "following the rooftops."

Martin, known as the more commanding of the two brothers, was obsessed with financial details, spending late nights in the office poring over leasing statements or depreciation schedules, and rarely taking vacations. He was a strategic visionary, credited by some urban planners -- and blamed by others -- for the early malling of America. He had few hobbies and died in his sleep from a heart attack in 1995.

"What was Martin's hobby? Work," says Leon Cooperman, the billionaire hedge-fund investor and longtime friend of the Bucksbaum family. Interactive Timeline: General Growth

Matthew, now 82 and retired, is more shy and has more outside interests than his brother. He and his wife, Kay, are avid art collectors and music supporters.

Their condo on the 70th floor of a luxury high-rise in downtown Chicago is filled with modern art and hand-crafted furniture. At their stone-and-timber vacation compound in Aspen, Colo., on Red Mountain and assessed by county officials at $20 million, the Bucksbaums frequently host dinners for famous musicians like cellist Yo-Yo Ma and violinist Joshua Bell. Their annual New Year's party has become one of Aspen's most coveted invites, attracting Madeleine Albright and other dignitaries.

From Iowa to Los Angeles

General Growth's debt troubles date back to the mid-1990s, when Martin's health began to weaken. The family had been conservative managers, building the dominant shopping venues in secondary and tertiary towns like Bettendorf, Iowa, Hutchinson, Kan., and Fayetteville, Ark.

But after emerging in 1993 for a second stint as a public company, the Bucksbaums decided to grow through acquisitions.

In 1994, General Growth bought a 40% stake in CenterMark Properties, which owned 16 regional malls in major cities such as Los Angeles and Washington. A year later, it nearly doubled its size, teaming with four investment partners to buy Sears, Roebuck & Co.'s Homart development division to take over 40 malls. Martin Bucksbaum died, at 74, as the Homart deal was being completed.

Matthew, president at the time, was then named CEO and chairman. There were no other candidates considered for the job, since he and Martin were such a close team, board members say. Matthew moved the company headquarters to Chicago.

He also groomed his son, John Bucksbaum, to take the company's helm. Reserved, solitary and competitive in and out of the office, John Bucksbaum, now 52, is a dedicated mogul skier and cyclist. He logs thousands of miles each year on his bike, sometimes riding with Lance Armstrong. In 1999, Matthew and the board named John as CEO and, once again, there were no competing candidates.

"John was extremely well-trained by both his father and uncle," says Mr. Mark, who was a board member during the transition. "It was a natural evolution for a family-controlled business."

Yet John proved to be a different kind of manager than his late uncle. Like his father, he focused more on General Growth's internal operations, leaving many aspects of finance and acquisitions mostly to his lieutenants, primarily chief financial officer Bernie Freibaum. It was a role that for decades had been played by Martin.

A lawyer and CPA known for his hardball negotiating tactics, Mr. Freibaum, now 56, became the company's finance architect. His tenure coincided with a broader shift in the way some real-estate companies were financing their operations. Rather than apply for bank loans, General Growth began taking out short-term mortgages on its malls. As the mortgages came due, the company would replace them with even larger mortgages to provide cash for additional acquisitions.

The strategy picked up steam with the emergence of new debt-trading markets. In the mid-1990s, lenders started slicing up commercial mortgages and selling them to multiple investors as bonds. The boom in trading made mortgage-backed debt much cheaper and more plentiful -- as long as investors were willing to buy.

General Growth was soon at the forefront of this market. And because the company was borrowing mostly against its individual properties, lenders didn't place restrictions on its overall debt load, allowing it to accumulate more and more debt.

General Growth's ratio of its debt as a percentage of its asset value has soared to 83%, compared to 63% for mall owner Macerich Co., 54% for Simon Property and 48% for Taubman Centers, according to Green Street Advisors.

"We never had any more leverage than we thought was necessary," Mr. Freibaum said in an interview last March. "It just so happens that the biggest names in the mall sector had a different strategy."

Mr. Freibaum declined to comment for this article.

A $20 Billion Debt Load

In August 2004, General Growth made its biggest acquisition to date: $12 billion for Rouse Co. Rouse owned three dozen upscale malls in the Midwest and Northeast, including Chicago's Water Tower Place, Boston's Faneuil Hall and Washington, D.C.'s Columbia Town Center. The deal instantly transformed General Growth from a small-town, industry stalwart to one of the leading lights of marquee retailing.

It also marked a turning point in General Growth's fortunes, more than doubling its debt load to $20 billion. Most of the borrowing was backed through mortgages rather than more traditional corporate borrowings.

The company inherited an unusual obligation from Rouse. In buying thousands of acres outside of Las Vegas from the Howard Hughes estate in 1994, Rouse had negotiated to pay half the appraised value of the land in early 2010. With that bill soon coming due, General Growth as Rouse's successor faces paying several dozen Hughes heirs, scattered around the country, up to $1 billion in cash or stock. Even if the appraised value of the land falls, the company could still owe millions, according to analysts' estimates.

“We have great assets, great employees. Our issues are not with the operations of these properties, it's with the balance sheet. We'll be able to restore the value that these properties hold.”

John Bucksbaum

After the Rouse deal, John Bucksbaum and Mr. Freibaum made other acquisitions, including buying out General Growth's partners in the Homart malls for $2 billion last year, pushing the company's debt load to more than $27 billion.

That didn't appear to be a problem until August 2007, when the credit markets froze on concerns about subprime mortgages. The commercial- mortgage market that General Growth relied on essentially vanished. Unable to refinance mortgages, Mr. Freibaum spoke publicly about selling stakes in several malls, but he didn't strike a deal. By September 2008, the stock was down 60% from its 2007 high of $67 a share.

The stock plunge set off a second crisis: Top executives had to dump millions of their General Growth shares to cover margin calls. Many executives had borrowed heavily to buy General Growth stock. Mr. Freibaum bought 7.6 million shares -- more than 3% of General Growth's total -- mostly on margin. The Bucksbaum family's trust loaned Mr. Freibaum $90 million and President and Chief Operating Officer Bob Michaels $10 million to meet the margin requirements without dumping stock. Any executive sale of stocks would have had to be publicly disclosed, which could have spooked investors and led to more selloffs. The board said it had no knowledge of the loans.

Yet by August and September, the stock had fallen so far that General Growth executives couldn't avoid selling roughly 8.5 million shares to cover margin calls.

By early October, the board's patience with Mr. Freibaum had run out, and it voted to dismiss him.

It wasn't until later that month that the board heard rumors about the Bucksbaum trust's loans and confronted John Bucksbaum, who acknowledged the loans, according to people familiar with the matter. While not illegal, the loans violated company policy, since they could pose a conflict of interest. Mr. Bucksbaum, for instance, might be less likely to discipline or fire Mr. Freibaum or Mr. Michaels because of their financial ties.

Following a weeklong investigation by Chicago law firm Winston & Strawn LLP, board members Adam Metz and Thomas Nolan, both commercial- real-estate veterans, went to Mr. Bucksbaum's office and told him the board would seek his resignation.

Mr. Bucksbaum remains chairman, but Mr. Metz now serves as interim CEO, the first nonfamily member to hold the post. Mr. Nolan became president, replacing Mr. Michaels, who remains operations chief. Mr. Michaels, who repaid his loan, didn't return calls seeking comment.

During the board talks, Mr. Bucksbaum said there was no ill intent by the family trust in making the loans. But he said he had made an error in judgment in not informing the board, according to people familiar with the matter.

In an interview, John Bucksbaum said he remains "very involved" at General Growth and his removal as CEO was a mutual decision.

The Bucksbaums, meanwhile, have seen their personal fortunes fall with the company's. According to friends, Matthew and Kay have decided to cancel their annual holiday party in Aspen.

Sears Holdings To Pay New CFO $600,000 Salary
Dow Jones Newswires
December 9, 2008

Sears Holdings Corp. (SHLD) said Tuesday that newly appointed Chief Financial Officer Michael D. Collins will earn an annual base salary of $600,000.

Collins, who is currently Sears' senior vice president for financial planning and analysis, will also receive a $200,000 sign-on bonus, subject to the relocation of his residence to the Chicago area, according to a filing with the Securities and Exchange Commission.

He will be eligible for a 2008 target award of 75% of his base salary, depending on the company's financial performance in relation to performance goals, and will continue to participate in the company's long-term incentive program, with a 2008 target award of 150% of his base salary, depending on the company's financial performance in relation to its three-year performance goals, according to the filing.

Collins received a stock grant of 18,278 shares of restricted stock, which will vest in full on Nov. 3, 2011.

Shares of Hoffman Estates, Ill.-based Sears Holding Corp. closed Tuesday at $47.13, down 14 cents.

Cramer's 'Stop Trading!': Buy Sears
The Street.com Staff - The Street.com
December 4, 2008

Some retail stocks, such as Wal-Mart(WMT Quote - Cramer on WMT - Stock Picks), are faring better than others, said Jim Cramer on Thursday's "Stop Trading!" segment on CNBC.

"Others I regard as simply not going out of business," he said. "That's the action I see in Sears(SHLD Quote - Cramer on SHLD - Stock Picks)." Cramer said that Chairman Eddie Lampert has been receiving a disproportionate amount of bad press lately. "There's probably 51 negative articles about Eddie," he said. "News isn't that bad there. Look at the stock!"

"In the end, if you think housing's going to bottom, Lowe's(LOW Quote - Cramer on LOW - Stock Picks), Home Depot (HD Quote - Cramer on HD - Stock Picks) and, yes, even Sears(SHLF Quote - Cramer on SHLF - Stock Picks) are buys."

Wal-Mart Sales Strong in November,
but Most Retailers Slumped
By Kevin Kingsbury - Dow Jones Newswire
December 4, 2008

Retailers reported some of the weakest sales figures in years for November, with many missing downbeat expectations, but Wal-Mart Stores Inc. continued its recent outperformance as it topped estimates on increased store traffic and transaction size.

The dour numbers, in part due to there being one fewer week of post- Thanksgiving days in the November reporting period this year compared with 2007, comes as the country's recession enters its second year amid falling demand. Consumer spending dropped by the biggest amount in the third quarter in 28 years and the woes are expected to continue this holiday season, making it one of the worst in years.

Wal-Mart has been seeing stout results compared with its retail brethren, and that continued for November. Its U.S. same-store-sales, excluding gasoline, grew 3.4% as sales were up 3.4% at its namesake chain and 3.5% at Sam's Club. Vice Chairman Eduardo Castro-Wright said the company, which last month projected a 1% to 3% increase for November, had strong Black Friday sales.

The company sees December same-store sales at the higher end of its fiscal fourth-quarter forecast, which calls for 1% to 3% growth. Wal- Mart's stock rose 2.1% in recent premarket action to $55.50.

Sam's Club rival Costco Wholesale Corp. reported a 5% decrease, twice the drop analysts expected, according to Thomson Reuters. Assuming no change in currency values and excluding gasoline sales, Costco said it would have recorded 3% growth -- 1% domestically and 6% internationally. That U.S. performance bettered the small decline analysts predicted.

Smaller BJ's Wholesale Club Inc. continued its string of strong results, reporting a 4.1% same-store-sales increase that more than doubled estimates. Falling gas prices cut that figure by two percentage points.

Thomson Reuters noted discounters as a whole were the only retail segment expected to post same-store-sales growth for November, thanks to Wal-Mart. In contrast, department stores and apparel chains -- both of which have been struggling for some times -- were seen reporting double-digit declines. Both segments met those expectations.

Gap Inc's results weren't as bad as feared, with the company noting it was more aggressive with its offers than last year. Still, the company has a whole reported a 10% drop in same-store sales; analysts were expecting a 17% slide.

Target Corp., which has been struggling for a year now, reported a 10% drop, worse than expected, though President and Chief Executive Gregg Steinhafel said Black Friday same-store sales were stronger than the rest of the month.

Off-price retailer TJX Cos. reported a 12% drop, half of which it attributed to the dollar's recent gains. CEO Carol Meyrowitz declined to give a December forecast, citing retail's "unprecedented volatility."

Despite the sorry consumer-spending climate and Thanksgiving shift, high-flier Buckle Inc. continued its streak of reporting double-digit growth. November same-store sales increased 15%, nearly double analysts' estimates and extending the streak to 16 months.

Discounters, Monitors Face Battle on Minimum Pricing
By Joseph Pereira - Wall Street Journal
December 4, 2008

PHOENIX -- A group of major discounters, including eBay Inc. and Costco Wholesale Corp., is expected Thursday to call for new laws blocking manufacturers from setting minimum prices on everything from flat-screen TVs to power drills. That move could ratchet up a battle between retailers and a little-known but powerful industry that's taken off in just the past year.

Tiny firms like NetEnforcers Inc. -- with only 56 staffers jammed into a dim, spare cubicle farm here in Arizona -- wield economic power far beyond their size. These companies scour hundreds of thousands of Web sites daily, looking for retailers offering bargains below the "minimum advertised price," or MAP, set by manufacturers on an array of consumer goods.

When NetEnforcers finds goods like cameras, handbags or ovens for sale at too-low prices, as it claims to do 5,000 to 10,000 times a day, it alerts its clients, including Sony Corp., Black & Decker Corp., Cisco Systems Inc., JVC Kenwood Holdings Inc. and Samsung Inc.

For discounters, the consequences of not respecting MAP are usually speedy and decisive. If the seller is an authorized dealer of the product in question (which means it is bound to honor a MAP agreement), it gets a notice from the manufacturer or NetEnforcers and typically brings its price into line within hours, the company says.

In October, for instance, NetEnforcers found that discounter Buy.com Inc. and AceToolonline.com Inc. a seller of power tools, were offering goods at below the MAP. Both sites said they raised their prices to MAP levels.

If the seller isn't an authorized dealer -- for instance, a discounter that acquired the goods via a distributor -- NetEnforcers says other tactics are used to try to force a lowball price off the Internet. In these cases, they can allege that the discounter's use of the product's name or image constitutes trademark or copyright infringement, in an effort to force the seller to stop listing the discount.

Manufacturers have been racing to enforce minimum-pricing policies since last year, when the Supreme Court ruled them to be legal, and not a violation of antitrust law. EBay and a group of other retailers and antitrust advocates are meeting Thursday in Washington to craft a strategy to overturn that ruling.

Manufacturers say minimum-pricing requirements are good because they protect a brand's image from being tarnished by discounting, while helping retailers make enough profit to pay for customer service. Consumer advocates argue that minimum-pricing deals hurt shoppers by keeping prices high and diminishing consumer choice.

The FTC is investigating musical-instrument and audio-gear makers for possible MAP-related antitrust violations. And online retailers BabyAge.com Inc. and HomeCenter.com have sued seven manufacturers with MAP or similar price-maintenance policies, alleging antitrust violations.

Discounting, of course, remains a fixture on the retail landscape -- particularly in this year's holiday shopping season, due to the weak economy. MAP agreements don't cover all products and sometimes manufacturers grant exceptions. Typically the agreements apply to high-end goods, electronics and new product lines that manufacturers don't want to see tarnished by immediate discounting.

MAP's proliferation has boosted business for NetEnforcers, a unit of Intersections Inc., of Chantilly, Va., and similar companies. Stuart Bennett, NetEnforcers' head of sales, says the Supreme Court ruling helped him land 40 new clients the past year, bringing the total to about 140.

Rival firms include MAPtrackers Inc., Cyveillance Inc. and Brand Protection Agency.

Klipsch Audio Technologies Inc., an Indianapolis audio-equipment maker, says in the past it prevented discounting by unauthorized dealers by suing them and terminating contracts with authorized dealer that provided the discounters without Klipsch's consent. Over the past three years, Klipsch broke off its relationship with nearly 20 authorized dealers following lawsuits like these.

But Mike Klipsch, the company's president, says he now uses NetEnforcers because it is a less expensive way to go.

Mr. Klipsch says so far this year NetEnforcers succeeded in eliminating 1,420 instances of sellers' listing below MAP online.

"It's one thing to establish a MAP policy," Mr. Klipsch says, "but when you go after the bad guys with a company like NetEnforcers you're showing your retail partners a zero-tolerance policy for any price violations."

NetEnforcers says that this year through Oct. 13, it helped shut down
1.2 million seller pages on eBay, due to either MAP violations or trademark and copyright-infringement claims. NetEnforcers says the majority of violations it sees are on eBay, the immense auction and online-retailing marketplace.

'Aggressive Policing'

Tod Cohen, eBay's vice-president of global government relations, says "manufacturers and agencies like NetEnforcers are increasingly getting more aggressive policing the prices of our sellers." They routinely use trademark-violation claims when asking eBay to take down sellers' pages, "but it's a bit unfairly enforced," he says. "They take down the Web sites only of the unauthorized resellers that are selling at discounts," but don't bother other unauthorized sellers if they're selling at MAP. This suggests manufacturers are mainly interested in keeping prices up, not preventing trademark violations. Mr. Cohen says.

Nichola Sharpe, an eBay spokeswoman, declined to comment on NetEnforcers' numbers. She said eBay pages taken down at the request of NetEnforcers' clients would have been removed under eBay's "verified rights owner," or VERO, program. That program was established partly to prevent the sale of counterfeit goods, and to crack down on unauthorized resellers: A manufacturer owning trademarks and copyright on a product for sale on eBay can request a listing's removal.

But Ms. Sharpe said eBay believes some manufacturers are "trying to abuse the VERO program" by using it to force legitimate discounters to stop selling at low prices.

"We are very much looking more closely at the issue," Ms. Sharpe said. "We feel that consumers will ultimately suffer, and we feel that they do deserve the best and most competitive price they can get."

NetEnforcers acknowledges that it uses the VERO program to remove violators of minimum-pricing terms, arguing that it's an appropriate under the Digital Millennium Copyright Act, a 1998 law designed to help copyright-holders control access to digital copies of their works.

NetEnforcers would discuss violation totals at only two other sites with significant numbers of below-MAP deals or unauthorized dealers -- iOffer.com and Craigslist.com. It said the two sites totaled 51,280 individual pricing violations this year through Oct. 13.

iOffer, based in San Francisco, says it wastes little time removing listings when notified. The removals are generally made "within 12 to 24 hours following receipt of take-down notices," says Chief Executive Ryan Boyce.

Jim Buckmaster, Craigslist's chief executive, says the site has implemented its own protections against intellectual-property violations and also "removes postings ... when they come to our attention."

Joseph Loomis, the 32-year-old founder and chief executive of NetEnforcers, says clients pay it $1,500 to $100,000 per month, depending on the number of products being monitored. Mr. Loomis says sometimes the company must make purchases from Web sites, and track the serial numbers of the products, so the manufacturer can figure out which warehouse or retailer the products originated from to determine how the goods reached an unauthorized dealer.

Mr. Loomis, a former Naval intelligence agent, says the idea for NetEnforcers was conceived about six years ago while he was working as an electrical engineer for a car-stereo manufacturer. Annoyed by a growing number of unauthorized dealers discounting its products, company executives asked Mr. Loomis to devise a way to catch them.

He developed software to track the company's authorized dealers and prices. From there, he devised companion software to identify online sales that were discounted.

This put the stereo discounting to an end, Mr. Loomis says. In 2003, he launched NetEnforcers using similar software.

Staffers Scour

Every business day, about 20 NetEnforcer staffers scour the Web from cubicles in Phoenix and another site in Gainesville, Fla. Using computers pre-loaded with information on the products and prices clients want checked, the staffers, dubbed "enforcers," type in names and model numbers, one product at a time.

In Phoenix one October afternoon, Web pages listing clients' products at below MAP were popping up often on enforcers' screens. Sites containing apparent violations would get forwarded to Danielle DiDio, a customer-service representative, whose job it is to notify the manufacturers. The manufacturers or NetEnforcers then contact the retailer to ask it to raise its prices.

By day's end, NetEnforcers had spotted a Panasonic home-theater projector listed by Buy.com at $43,208.99, well below the MAP price of $49,000. It also found discrepancies in two Black & Decker products listed by AceToolonline: a table saw with a MAP price of
$169 listed at $162.24, and a heavy-duty battery pack for $129, $20 below MAP.

Jeff Wisot, vice president of marketing for Buy.com, which is an authorized Panasonic dealer, says his company quickly increased the price to MAP. He called the discounted price "an oversight and nothing deliberate on our part." He said the company "can't afford to be deauthorized as a dealer" and could also lose manufacturers' support for advertising if it violates MAP.

Panasonic declined to comment.

AceToolonline also says it raised its prices to match MAP. The online retailer's president, Maria Polidoro, said her company was punished by Black & Decker for the violations. She says AceTool must forfeit some advertising funds from Black & Decker. As another part of the penalty, Black & Decker will also stop routing customers from its own Web site to AceToolonline for 30 days, Ms. Polidoro says.

"I am for having MAP; it makes it easier to sell my products at a profit. I just wish that the competition also followed MAP," she says.

A Black & Decker spokesman said the company sets MAPs on certain of its high-end brands.

NetEnforcers also found a 47-inch LG Electronics Co. television advertised by Circuit City Stores Inc. at $1,529, as compared to LG's MAP price of $1,699. Bill Cimino, a Circuit City spokesman, declined to comment on NetEnforcers' finding, saying the retailer "makes its own pricing decisions."

Getting around MAP

Some retailers try to circumvent pricing restrictions by listing a product at the MAP price but telling shoppers to click an additional button -- or to add the product to their shopping cart -- to see a discount price.

Indeed, Circuit City's online price for the TV moved up to the $1,699 MAP level soon after NetEnforcers noticed the lower price. But more recently, the item had a "see price in cart" notice next to it. Clicking on that opened another window displaying a discounted price of $1,439.99.

Circuit City declined to comment on the use of the "see price in cart" button.

In July, Samsung sued Broadway Photo LLC alleging copyright and trademark infringement on grounds that the company wasn't an authorized dealer. The suit, in U.S. District Court in Manhattan, seeks an injunction to stop Broadway Photo from selling Samsung products.

Broadway Photo declined to comment for this article. The company denied any wrongdoing in its courtroom reply, but agreed it wasn't authorized to sell Samsung.

NetEnforcers collected evidence for the Korean manufacturer, say people familiar with the matter. These people say the company traced Samsung sales to 16 Web sites with names like bananaboatcamera.com and infinitycamera.com that, according to the allegations in the lawsuit, are operated by Brooklyn-based Broadway Photo.

Asim Kahn, a lawyer for Samsung's U.S. unit, declined to comment on the case. Samsung's lawsuit states that sales of its products by Broadway Photo "reduces the prices that Samsung can obtain" for that merchandise.

Seers Miss Projections for Sears
By Peter Eavis - Heard on the Street - Wall Street Journal
December 4, 2008

Giving earnings guidance is tough at the best of times. But when a struggling retailer tries it against a rocky economic backdrop, it can look reckless.

Take Sears Holdings. In May, months after taking over as interim chief executive, Bruce Johnson surprised investors by predicting the retailer would increase earnings before interest, taxes, depreciation and amortization for the year ending in February 2009.

The market was taken aback, partly because Sears rarely gave profit projections. But the bigger jolt came from the view that Ebitda, already under pressure, would rise for the year.

Given that Ebitda had plunged 65% from the year-earlier period in the first quarter, analysts immediately expressed doubt that such an annual increase was feasible.

That skepticism was vindicated in August, when Sears announced second- quarter earnings. Mr. Johnson stepped back from his forecast, saying Sears now expected 12-month Ebitda would be "comparable" to the previous year.

That forecast was then withdrawn by Sears in its third-quarter earnings release Tuesday. This time the company didn't offer a new projection. For the first three quarters, it is down 52%.

Sears defenders might argue that other retailers have had to reduce guidance and that few expected the economy to weaken as much as it has. But Sears' performance has long trailed that of other large retailers, and it lacks a credible turnaround plan.

Sears' stock is down 66% this year. Much needs to be done to spark a lasting recovery in its shares.

Step one for management is to improve how it communicates with the market.

Sears finance exec Collins becomes CFO
Reuters
December 4, 2008

NEW YORK, Dec 4 (Reuters) - Sears Holdings Corp (SHLD.O: Quote, Profile, Research, Stock Buzz) said on Thursday that Michael Collins, previously its senior vice president of finance, is taking over as chief financial officer, effective immediately.

The retailer controlled by hedge fund manager Edward Lampert named Collins to the post in October to succeed J. Miles Reidy, who will be leaving the company before the end of the fiscal year.

Sears also said that Fred Jasser has been named vice president and treasurer.
(Reporting by Martinne Geller; Editing by Derek Caney)

Sears Holding names new CFO
By James P. Miller - Staff Reporter - Chicago Tribune.com
December 4, 2008

Sears Holdings Corp., which operates Sears and Kmart stores, said Thursday Michael D. Collins has been named chief financial officer as expected, effective immediately.

Collins joined the company in October as senior vice president of finance and was expected to succeed J. Miles Reidy by the end of the fiscal year.

Fred Jasser has been named vice president and treasurer. He was previously vice president in the investment banking division at Goldman Sachs & Co.

Sears Holdings has been struggling with falling sales, as consumers cut back amid an economic recession. Earlier this month, the company reported a fiscal third-quarter loss as revenue dropped more than 8 percent to $10.66 billion.

Before joining Sears, Collins was the senior vice president of planning and analysis at General Electric Corp.'s NBC Universal Division.

Sears posts $146 million loss
Sales sag; worst quarterly result in Lampert era
By Sandra M. Jones - Reporter - Chicago Tribune
December 3, 2008

Scrooge came early for Sears Holding Corp.

The Hoffman Estates-based parent of Sears and Kmart lost $146 million in its fiscal third quarter, its biggest quarterly loss since investor Edward Lampert took control of the company more than three years ago. Sales at its U.S. stores open at least one year plummeted 9 percent; sales fell 11 percent at Sears and 7 percent at Kmart. The results were worse than Wall Street had forecast.

In a sign of how quickly the economy has taken its toll on retailers, Sears disowned the earnings guidance it provided in August, saying that forecast "is no longer relevant." Its cash position is shrinking, its borrowings rising and the market for raising funds by selling its mall real estate has ground to a halt.

"Sears Holdings is one of the weaker retailers on the scene, and, unfortunately from a consumer perspective, the value proposition is making increasingly less sense," said Sean Egan, managing director at Egan-Jones Ratings Co., an independent credit-rating agency. "If there wasn't heavy discounting, their sales probably would have been down much more."

Sears also said it will buy back up to 500,000 shares. While investors generally like buybacks because it gives them a bigger stake in the company, the strategy has sparked criticism. Lampert has spent far more on buybacks than on investing in the stores, which has left some looking old and tired. Sears closed 14 stores in the quarter and plans to close at least another eight in the current quarter.

The shares rose 13 percent, to $36.09. The stock traded at more than $110 a year ago.

Sears' sales have been hurt for several quarters by the housing market's decline, which has weakened demand for appliances and many of its home-related offerings. Comparable-store sales, a key retail barometer, worsened noticeably in October, Sears said, as consumers reduced discretionary spending on apparel and other goods.

At the end of the fiscal quarter, Sears' cash or cash equivalents were $1.2 billion, down from $1.5 billion a year ago. The company borrowed $1.9 billion, primarily through its $4 billion revolving credit facility that matures in March 2010. Sears said it plans to repay that money in December, yet expects to borrow again on the revolver in January.

Liquidity will be "paramount" for Sears next year, Morgan Stanley analyst Gregory Melich said in a Tuesday report.

In September, Melich estimated Sears and Kmart real estate was worth $7.5 billion and put the combined value of its Lands' End, Kenmore and Craftsman brands at $3.9 billion.

"We do not believe the brands or real estate have much value in the current environment and would likely be sold at distressed prices should [Sears] make a sale in the near term," said Melich.

The company also hired a veteran executive from Lehman Brothers Holdings Inc., the investment bank that collapsed in the fall, to the new post of executive vice president of operating and support businesses. Scott Freidheim, 43, starts in January after 17 years at Lehman Brothers, where he was chief administrative assistant reporting to Lehman's chairman and chief executive and the go-to person for cutting costs. Lehman advised Lampert on the deal to combine Kmart and Sears in 2005.

Freidheim will report to Sears interim CEO W. Bruce Johnson and oversee such areas as marketing, human resources and procurement.

"I spent a lot of time looking at Sears and think it's an incredibly attractive platform on so many dimensions," Freidheim said via e-mail.

An affiliate of Lehman Brothers has a $207 million commitment in Sears' $4 billion credit facility, but has not funded its share since Sept. 17, Sears said.

The company, which is controlled by hedge-fund investor Lampert, noted that it spent a relatively modest $81 million on share repurchases in the latest quarter, bringing the total spent on buybacks through the fiscal year's first nine months to $588 million. In the same period, Sears' capital expenditures were $395 million, which includes spending on its stores.

In 2007, Sears spent $2.4 billion on stock buybacks and $405 million on its stores and other capital expenditures.

Given the "difficult retail environment and its effect on our free cash flow," Sears has restrained its buyback activity, but it is now picking up the pace, Johnson said. In the four weeks ended Saturday, Sears spent $53 million buying back its shares.

Over the past three years, Sears has spent $4.9 billion in stock repurchases. That's more than the company's value today. Its market capitalization at the end of trading Tuesday was $4.55 billion.

Tribune reporter James P. Miller contributed to this report.

Standard & Poor's downgrades Sears Holdings
Associated Press
December 4, 2008

NEW YORK (Associated Press) - Standard & Poor's Ratings Services on Thursday downgraded Sears Holdings Corp., saying it expects earnings for the operator of Sears and Kmart stores will remain under pressure amid the recession.

The ratings agency lowered its ratings on the Hoffman, Ill.-based company and said its outlook on the retailer is negative.

It lowered Sears' corporate credit rating to "BB-" from "BB" and its bank loan rating to "BB+" from "BBB-."

Ratings on Sears Roebuck Acceptance Corp. and Sears DC Corp. and Sears Canada Inc., all senior unsecured, were lowered to "BB-" from "BB." S&P said the short-term and commercial paper ratings on Sears Roebuck Acceptance Corp. remain at "B-2."

The company on Tuesday posted a $146 million third-quarter loss, worse than had been expected, and its second quarterly loss in the past year. The loss was due mainly to hefty charges related to store closures and disappointing U.S. sales.

The company withdrew its operating profit outlook because of the country's economic woes, which is seeing consumers tighten their spending.

S&P credit analyst Ana Lai wrote that the agency doesn't anticipate the situation for Sears will improve.

She wrote it was S&P's "expectation that sales and earnings will remain under pressure in the important fourth quarter and into 2009 given the current difficult economic environment."

Shares of Sears rose $3.36, or 8.9 percent, to close at $41.04 on Thursday.

Sears revenue down 8.3%, but stock up on 'bravado'
By Sandra Guy - Chicago Sun-Times
December 3, 2008

Sears Holdings Corp. withdrew its earnings forecast for the year as it swung to a fiscal third-quarter loss and sales worsened at Sears and Kmart stores.

Yet the retailer showed what one analyst called "bravado" by announcing a $500 million addition to its stock buyback plan, and again raised investors' hopes that it could close more unprofitable stores while investing in store remodels. Its stock soared, rising 13 percent.

Analyst Gary Balter of Credit Suisse wrote to investors that the results would have been much weaker without a strong showing by Sears Canada.

In the quarter ended Nov. 1, the retailer posted a net loss of $146 million, or $1.16 a share, compared with a year-earlier net income of $4 million, or 3 cents a share.

Revenue fell 8.3 percent to $10.7 billion as same-store sales dropped 9 percent. Sales at Sears stores plunged 10.6 percent, and dropped 7 percent at Kmart from a year ago.

Sears ended the quarter with $1.2 billion in cash compared to $1.5 billion a year ago.

Sears shares are down 65 percent this year. They ended Tuesday up $4.25 at $36.09.

No light ahead for Sears as third quarter revenue falls
By Robert McCoppin and Deborah Donovan Daily Herald Staff - Suburban Chicago
December 3, 2008

The outlook for Sears Holding Corp. looked gloomy Tuesday after the suburban retail giant announced a continued drop in sales.

Revenue fell 8 percent in the third quarter, to $10.7 billion, leading to a loss of $146 million that was larger than expected.

Analysts like Morningstar's Kim Picciola agreed this will be a rough holiday season and new year that may lead to more store closures for the Hoffman Estates-based retailer.

"We expect continued attrition in sales and pressure on profitability," she said. "We don't see any light at the end of the tunnel."

The problem for Sears, analysts said, was that it depends heavily on discretionary spending on items such as clothes, which consumers are cutting back. Combined with the loss of home appliance and furniture sales because of the crippled housing market, Sears is losing money.

In its earnings announcement, Sears conceded it will have to consider more store closings beyond the 22 already planned, including The Great Indoors in Schaumburg, scheduled to go under in February.

Analyst George Rosenbaum, co-founder of Leo J. Shapiro & Associates in Chicago, a consumer research firm, anticipated Sears will probably have to close 20 percent of its stores at the start of the new year.

"It would disproportionately affect the Chicago area," he said, "because they are concentrated in this area."

Sears interim CEO Bruce Johnson maintained the company is doing well under the circumstances. With reduced costs and inventory, and the reintroduction of layaway payment plans, he said, "We believe we have positioned ourselves well for a difficult holiday season."

The recent blitz of shopping on Black Friday raised hopes for the holiday shopping season, but analysts noted that consumers are responding most to promotional sales, which means retailers won't be making as big a profit.

Retailers that sell daily staples such as food and toiletries, such as Wal-Mart and Target, are faring better.

Sears abandoned its earnings forecast for the remainder of the year and said it would repurchase as much as $500 million in additional shares and close more stores.

The results come as shrinking housing and stock values and climbing unemployment helped send the U.S. economy into a recession. Losses continued to mount at Kmart, which merged with Sears in 2005.

"It's an unmitigated disaster," Bill Dreher, director and senior retail analyst at Deutsche Bank Securities Inc. in New York, said. "It doesn't appear that they can control their business. They are woefully unprepared to navigate this incredibly difficult environment." He recommends investors sell the shares.

The loss of $146 million, or $1.16 a share, for the three months ended Nov. 1 compared with net income of $4 million, or 3 cents, a year earlier. Excluding store closings and a gain from hedging, Sears said it lost 90 cents.

U.S. sales at stores open at least a year fell 9 percent in the quarter, Sears said. Chairman Edward Lampert hasn't posted a same- store sales increase in the three years since he combined the chains.

"Sears is in the Bermuda Triangle of retailing," Dreher said. "They're selling large-ticket merchandise, they're selling home- and apparel-related merchandise. They are selling it to a low-income customer and they're selling it without a unique selling proposition."

Nevertheless, the additional stock buyback helped assuage investors. Sears stock surged $4.25, or 13 percent, to $36.09 at 4 p.m. in Nasdaq Stock Market composite trading. The shares have plunged 65 percent this year.

The company continues to search for a permanent CEO.

Bloomberg wire service contributed to this report.

Home Appliances to Soothe the Aches of Aging Boomers
By Paul Glader - Wall Street Journal
December 3, 2008

With the stock market in turmoil and housing in a slump, appliance manufacturers are taking the long view and retooling their offerings for aging baby boomers.

In the kitchen, General Electric Co. is designing ovens with easier- to-open doors and automatic shut-off burners. Germany's Siemens AG has introduced a glass cook top for its premium Thermador brand designed to prevent boil-overs. In the bathroom, Moen is trumpeting new grab bars that can support a 350-pound person, and Kohler is devising easier-to-handle faucet levers. Minnesota-based Truth Hardware reports booming sales for its remote-controlled window motors.

The offerings are largely geared for the roughly 76 million baby boomers -- born between 1946 and 1964 -- who control the biggest share of purchasing power for the roughly $25 billion U.S. appliance market. And many of these people are demanding appliances that help them cope with the aches, pains and other infirmities they confront as they grow older. In addition, more than half of Americans are expected to have elder-care responsibilities within 10 years, and many will likely want their homes to be senior-friendly.

"This population is far more demanding and will refocus designers" on individual consumers, says Joe Coughlin, director of the Massachusetts Institute of Technology's AgeLab, which studies design and engineering for an aging population.

Beyond appliances, makers of autos, cellphones and other consumer electronics also are studying boomers' evolving needs and tastes. To test cars, Nissan Motor Co. has employees wear an "aging suit" that simulates stiff joints, poor balance and impaired vision. In the U.S., Ford Motor Co. employs software to simulate the motions of an older person using a vehicle.

Among appliance makers, Whirlpool Corp. has long tested products with potential customers who are deaf, blind or arthritic. The testing with arthritis patients helped prod the Benton Harbor, Mich., appliance maker to offer pedestals that raise the height of washing machines and clothes dryers for customers with back problems.

Whirlpool

Whirlpool also offers washing machines with large knobs that make louder-than-usual noise when they're set, for customers with limited vision or arthritis. "It's not one of those little prissy knobs," says spokeswoman Audrey Reed-Granger. One model introduced last year plays musical chimes to indicate washing temperature or other features.

At GE's consumer and industrial headquarters in Louisville, Ky., designers use "empathy sessions" to help develop new refrigerators, stoves and dishwashers. Industrial-design intern Joanie Jochamowitz, 22, wraps her knuckles with athletic tape and wears blue rubber gloves to simulate arthritis. She shoves cotton balls in her ears to simulate hearing loss, dons special glasses to simulate macular degeneration and puts dried corn kernels in her loafers to simulate aches and pains. She grabs a walker. Then she tries to peel potatoes.

"I don't want to get old," she says, as she hobbles around the kitchen, fumbling with potato peelers and stove controls, and nearly spilling a pot of boiling water. GE began the empathy sessions last year so its young designers could better appreciate how consumers use appliances. "When you've got designers that are 25 or 30 years old, it's very hard for them to understand what someone in their 60s or 70s experiences," says Kim Freeman, a spokeswoman for GE Appliances.

The company also arranges focus groups where consumers cook a meal in a GE model kitchen while staffers watch through cameras and one-way mirrors. And GE videotapes appliance users in their homes. The summaries from these tapes are used in brainstorming sessions about design changes.

"We note what they are doing. We see if those behaviors happen more than once and why," says Marc Hottenroth, industrial design leader for GE's Consumer and Industrial unit.

These efforts have prompted several changes in GE product designs, including brighter LED lighting that improves visibility inside new models, such as one with a French-door refrigerator atop a bottom freezer. This year, GE introduced a single-wall oven with two cooking spaces that can operate at different temperatures. Its research shows boomers cook and entertain more frequently and like the two-ovens-in- one concept. Some models can be raised off the ground for easier access. "You don't have to reach in as far," says Ms. Freeman. She says it prevents people from stooping awkwardly, losing their balance and burning themselves on the hot stove.

GE has new dishwashers and washing machines that allow users to put in an entire bottle of detergent a few times a year rather than a smaller amount for every load. The machines are designed to reduce confusion and make housework less of a chore, particularly for older consumers.

GE

At an 'empathy session,' members of a GE product-development team tape their knuckles to simulate impaired dexterity. Nancy Hursey considered such features when she and her husband Francis recently shopped for appliances for a $72,000 kitchen remodel of their West Hartford, Conn., home. Mrs. Hursey, 61 years old, wanted appliances that would be easy on her arthritis and back problems. "I played with all the doors [on the ovens] to make sure they weren't going to be a problem for me," she says. She chose a double-convection oven that GE had redesigned so the doors could be opened more easily.

The Hurseys also chose a redesigned GE refrigerator that offers additional lighting, following advice from their interior designer, Laura Bordeaux. Ms. Bordeaux says she has been recommending that older clients avoid buying gas cooktops since an older client lit a shirt on fire when leaning over a burner.

Appliances traditionally were built in standard sizes so they could be manufactured more easily and fit into any kitchen floor plan. But the increased wealth of baby boomers in the U.S. led to a demand for more stylish and functional products.

Appliance manufacturers hope these design changes will buoy revenue. Sales and profits in the U.S. appliance industry are down this year because of the housing bust, the stock-market slide and the economic slowdown. GE reported third-quarter profit fell 82% in its unit that sells appliances. Sweden's AB Electrolux saw operating income drop 50% for the first nine months, and Whirlpool saw operating profits down 31.8% for the first nine months. GE is planning to sell or spin off its appliance division.

But for the long term, the appliance industry expects big returns because of baby boomers and hopes of a housing rebound. Freedonia Group Inc. in Cleveland projects major-appliance unit sales in the U.S. will grow to 77.2 million in 2016, from 63.4 million in 2006.

Bob Hanna and his wife Sharon shopped for ease-of-use features last year when replacing their avocado-green kitchen appliances in their Rock Island, Ill., house. They bought all Whirlpool appliances and were mostly pleased.

But Mr. Hanna, a 71-year-old retired mechanical engineer, says he doesn't like a dishwasher that Whirlpool had redesigned with baby boomers in mind. Mr. Hanna says he's confused by the 11 push buttons and lights on his Whirlpool washer with Quiet Partner III features. "I don't like a lot of buttons on the dishwasher," he says. For now, his wife has taken over the task of using the dishwasher.

Ms. Granger of Whirlpool says the company tried its best to make dishwasher controls of several styles for different consumers. "One product won't meet the needs of every individual," she says. "You can't expect the same dishwasher you would use for your parents would work for your grandparents."

Sears Reports Loss, Considers New Store Closings Worse-Than-Expected
Result Poses Threat to Turnaround Plans;
Housing Downturn Hurts Appliance Business
Article By Miguel Bustillo - Wall Street Journal
December 3, 2008

Sears Holdings Corp. said it may close more stores to reduce costs as a steeper-than-expected quarterly loss threatened its turnaround plans.

Sears Holdings, the marriage of Sears and Kmart arranged by Wall Street hedge fund billionaire Edward S. Lampert three years ago, posted a net loss of $146 million, or $1.16 a share -- more than twice the loss analysts had predicted. It earned $4 million, or three cents a share, a year ago.

Blaming the depressed housing market for a drop in its appliance business, and slowing consumer spending for declining purchases of household goods, the Hoffman Estates, Ill.-based retailer reported that sales for the fiscal third-quarter quarter ended Nov. 1 declined 7.8% to $10.7 billion, from $11.6 billion a year ago. U.S. same-store sales, or sales at stores open at least a year, dropped 9% from a year earlier, a larger decline than many other retailers have suffered.

Sears Holdings raised the possibility of closing more Sears and Kmart stores in the months to come, on top of the 22 store closings it recently confirmed. Citing "severe conditions in the economy," it withdrew an earlier estimate that earnings for the second half of the fiscal year ending Jan. 31 would top results of the same period last year.

The forecast is no longer valid because it was based on store sales remaining flat or declining modestly compared with a year ago, W. Bruce Johnson, Sears's interim chief executive, said in a statement.

Mr. Johnson has been running the company, which operates roughly 3,900 Sears and Kmart stores in the U.S. and Canada, since former CEO Aylwin Lewis stepped down in January and Mr. Lampert launched a restructuring plan.

Sears Holdings has started aggressively promoting its wares online this year, and said it has seen a sales boost this holiday season because of its layaway plans, which have been popular with credit- strapped consumers. Most layaway sales won't be officially counted until this month, when consumers pay off purchases closer to Christmas, company officials noted.

The company also continues to rebuild its management ranks. It announced Tuesday that it had hired Scott Freidheim, formerly a chief administrative officer at Lehman Brothers Holdings Inc., as executive vice president for operations and support.

"From my perspective, the reality [of Sears] is very different than the public perception," Mr. Freidheim said in an interview. He said he was excited about Sears' platform for growth, but declined to elaborate when asked what that platform was.

Nick Coe, a former senior president of merchandising at Gap Inc.'s Banana Republic, was named to head its Lands' End wing; and Mark de Bruin, most recently an executive vice president at Rite Aid Corp., to lead its pharmacy division.

Still, Tuesday's dismal earnings report prompted retail analysts and consultants to criticize the lack of a growth strategy for Sears Holdings under Mr. Lampert, its chairman. Some questioned how much longer the venerable retailer can survive when its loss of market share to nimbler rivals such as Wal-Mart Stores Inc., Home Depot Inc. and Kohl's Corp. appears to be accelerating.

Under Mr. Lampert, Sears Holdings has slashed capital spending to reduce costs, leaving some stores in poor repair. Mr. Lampert has played down the importance of improving same-store sales, which experts consider an indicator of retailer health, and aggressively spent the company's cash on repurchasing stock.

Sears stock, which peaked near $192 a share in April 2007, has been on a precipitous slide, losing more than half of its value this year. Tuesday it rose 13%, or $4.25, to $36.09 in 4 p.m. Nasdaq Stock Market composite trading.

Sears Tuesday said its board had approved plans to repurchase up to $500 million in additional shares. Since the third quarter of fiscal 2005, Sears Holdings has repurchased 41.9 million shares for roughly $4.9 billion.

One of Sears's harshest critics, Howard Davidowitz, chairman of Davidowitz & Associates Inc., a retail consultancy, charged Mr. Lampert with making strategic blunders that have undermined the company. "Their prices have become noncompetitive," said Mr.Davidowitz. "He is simply milking the company for cash."

Mr. Lampert, who has long denied that those were his intentions, declined to comment beyond the earnings release, a spokesman said. While a chorus of analysts has questioned the long term sustainability of Sears Holdings, many agree that the company can continue operating for at least another year, thanks to a relatively healthy balance sheet. Sears Holdings reported cash and equivalents of $1.2 billion on Tuesday and said it was in position to repay roughly $2 billion this month that it had tapped from a $4 billion line of credit to help fund holiday inventories.

Sears Corp. appoints three new executives
By Sandra Guy - Chicago Sun-Times
December 3, 2008

Struggling firm names new chief for Lands' End, creates 2 posts

Sears Holdings Corp. appointed three executives Tuesday, including a new president of the preppy Lands' End apparel business and a new president of the pharmacy business.

Nick Coe, 46, who has 25 years of marketing and merchandising experience at Banana Republic, Levi's, Dockers and Gillette, will become president of Lands' End, succeeding David McCreight who left in July for apparel maker Under Armour.

Mark de Bruin, 50, most recently an executive vice president of pharmacy for drugstore chain Rite Aid Corp., becomes president of pharmacy, a new position at Sears Holdings.

Scott Freidheim, 43, who oversaw the corporate division of Lehman Brothers Holding Corp. as chief administrative officer and executive vice president, joins Hoffman Estates-based Sears as executive vice president, operating and support businesses, and as a member of the internal holding company business unit board of directors.

Freidheim, whose job is also new to Sears, is the son of Cyrus Freidheim Jr., chief executive of Sun-Times Media Group Inc.

Freidheim will focus on Sears' operating and support businesses, including the entire range of business units such as appliances, tools, apparel and electronics, as well as marketing, human resources and corporate communications.

He will also serve on Sears Holdings' business unit board of directors, which oversees the boards of each of the businesses.

"I've been following the Sears story for quite some time and from my perspective, the reality is very different than the public perception," Freidheim said.

Freidheim said he believes Sears is misunderstood in the marketplace, and that the retailer has a strong balance sheet; a variety of options for liquidity; an exciting platform for growth, and a leader who is the star investor of his generation.

Freidheim, a former resident of Deerfield and Winnetka, received his MBA from Northwestern University Kellogg School of Management and his B.A. from Northwestern University.

He will move to Chicago from Greenwich, Conn., later this month.

From White Collar to Blue-Light Special:
Lehman Exec Takes Sears Post
Deal Journal - WSJ.com
December 2, 2008

Posted by Heidi N. Moore

It pays to have friends in high places.

Scott Freidheim, a senior adviser to former Lehman Brothers Chief Richard Fuld Jr., has found employment at another troubled company, Sears Holdings, as a consigliere to another powerful CEO, Edward S. Lampert. Mr. Freidheim, will become an executive vice president of operating and support businesses at Sears, the firm said Tuesday. At Sears, Mr. Freidheim will oversee the corporate division which houses functions like human resources.

Mr. Freidheim and Mr. Lampert are close friends. Mr. Lampert even attended Mr. Freidheim’s wedding this summer to Isabelle Dufour.

Despite the travails of Lehman Brothers, Mr Freidheim must still have some appetite for risk. Both Lehman and Sears have an abiding interest in commercial real estate, a sector has been under serious pressure. Mr. Lampert was first interested in Sears because of its valuable retail properties. But, like Lehman, Sears has suffered more than a few dashed hopes. Sears recently announced it lost $146 million for the third quarter because of slow retail sales.

Mr. Lampert likes to keep his friends — and executives — close. While it’s not clear whether Mr. Freidheim will relocate for the new job, his 12,000 square foot “French Country Estate” in Greenwich, Conn. is already for sale for $13.75 million, according to a listing at Sotheby’s realty.

 

Sears joins list of clients of accused Deloitte partner
By Moneè Fields-White and David Sterrett - Chicago Business
December 2, 2008

(Crain’s) – Sears Holdings Corp. Tuesday confirmed that Deloitte LLP notified the Hoffman Estates-based retailer about improper trading of the retailer’s securities by a “former advisory partner.”

In its regulatory filing with the U.S. Securities and Exchange Commission, Sears Holdings didn’t disclose the name of the “former advisory partner” but stated that he allegedly traded Sears’ shares in 2006 and 2008.

The news came Tuesday as Sears reported a larger-than-expected quarterly loss and confirmed it will close eight stores.

According to earlier reports by Crain’s, Sears was among a long list of clients of Thomas P. Flanagan, a former vice-chairman of Deloitte LLP in Chicago who is being sued by Deloitte for allegedly trading in the securities of at least 12 clients between 2005 and 2008. Mr. Flanagan served as an advisory partner for seven of those clients.

Based on an investigation by the audit committee, the audit “had not been compromised” and “Deloitte’s independence was not impaired,” the filing said.

Also, “the audit committee concluded that the former advisory partner had functioned in a client relationship role and had not been substantively involved in the audit or influenced any substantive portion of any audit or review of our financial statements,” Sears said in its SEC filing.

Sears stated that Deloitte concluded that the former advisory partner, who served on Deloitte’s audit team for Sears from 2002 “ until his resignation from Deloitte in September 2008,” violated the SEC’s auditor independence rules.

Mr. Flanagan, a 30-year Deloitte partner, resigned in September after the firm confronted him with its allegations.

His clients included Warren Buffett’s Berkshire Hathaway Inc., the Archdiocese of Chicago, Allstate Corp., Best Buy Co., Illinois Tool Works Inc., Middlesby Corp., USG Corp. and Walgreen Co.

Deloitte’s suit accuses Mr. Flanagan of “numerous trades of put and call options” related to securities of the 12 client companies between 2005 and 2008. The suit doesn’t name the clients, but Walgreen, Allstate and USG disclosed in recent filings that Deloitte notified them of the trading in their securities by a “former advisory partner.”

Also in its lawsuit, Deloitte says it was approached by a “regulatory agency” in August and asked to provide names of all staffers working on the audit of a specific client between January and June of 2007.

Chris Gair, a partner with Jenner & Block in Chicago, Tuesday confirmed that he and his firm will represent Mr. Flanagan in the litigation with Deloitte.

Mr. Gair says the court granted his client an extension until early January to respond to Deloitte’s complaint, filed on Oct. 29 in the Court of Chancery of the State of Delaware.

He declined to comment further on the case or his client.

Mr. Gair’s biography on Jenner & Block’s Web site notes he has “broad experience in white collar criminal defense,” including defending a Fortune 500 company in a major SEC investigation in the last few years.

Separately, Sears Holdings reported a wider-than-expected quarterly loss on Tuesday as sales fell at its U.S. Kmart and Sears Roebuck divisions. The company confirmed it would close eight stores.

The loss was $146 million, or $1.16 a share, for the third quarter ended Nov. 1, compared with profit of $4 million, or 3 cents a share, a year earlier.

Sears Holdings took a charge of 49 cents a share in the quarter tied to the closure of 14 underperforming stores and said it planned to close the additional eight stores and take charges in the current quarter. The results also included a gain of 23 cents a share on Sears Canada hedge transactions.

Excluding the special items, the loss was 90 cents a share, compared with a loss of 49 cents expected by analysts on average, according to Reuters Estimates.

Revenue fell 8% to $10.7 billion. Sales at stores open at least a year, or same-store sales, fell 10.6% at U.S. Sears stores and were down 7% at Kmart, bringing total U.S. same-store sales down 9%.

The drop in sales was driven by housing-related departments such as appliances, a pullback in consumer spending and a shift in its promotional strategy for certain goods.

The retailer, controlled by hedge fund manager Edward Lampert, also approved the buyback of up to an additional $500 million of common shares and said a previous earnings forecast was no longer relevant.

Sears named three executives to join the company: Nick Coe, formerly with Banana Republic and Levi Strauss & Co., was named senior vice- president and president of Lands’ End. Lehman Bros. Holdings Inc. veteran Scott Freidheim was named executive vice-president/operating and support businesses, and Mark de Bruin was named senior vice- president and president of pharmacy.

Sears stock closed up $4.25, or 13 percent, on Tuesday to $36.09.

Sears Holdings posts loss,
plans store closures
Reuters.com
December 2, 2008

Sears Holdings Corp reported a wider-than-expected quarterly loss on Tuesday as sales fell at its U.S. Kmart and Sears, Roebuck divisions, and said it would close additional stores.

The retailer controlled by hedge fund manager Edward Lampert also said it approved the buyback of up to an additional $500 million of common shares.

The loss was $146 million, or $1.16 a share, for the third quarter ended November 1, compared with profit of $4 million, or 3 cents a share, a year earlier.

Sears Holdings took a charge of 49 cents a share in the quarter tied to the closure of 14 underperforming stores in the quarter, and said it planned to close an additional eight stores and take charges in the current quarter.

The results also included a gain of 23 cents a share on Sears Canada hedge transactions.

Excluding the special items, the loss was 90 cents a share, compared with a loss of 49 cents expected by analysts on average, according to Reuters Estimates.

Revenue fell 8 percent to $10.7 billion. Sales at stores open at least a year, or same-store sales, fell 10.6 percent at U.S. Sears stores and were down 7 percent at Kmart, bringing total U.S. same- store sales down 9 percent.

The company said sales declines were driven by housing related departments such as appliances, a pullback in consumer spending and a shift in its promotional strategy for certain goods.

The retailer had a cash position of $1.2 billion as of November 1, down from $1.5 billion a year earlier and $1.6 billion as of February.

The company plans to repay $2 billion of borrowings this month under a $4 billion revolving credit facility, but added it expects to borrow on the facility again in January 2009.

Sears suffers 3Q loss on weak US, Kmart sales
Associated Press
December 2, 2008

Sears Holdings Corp. said Tuesday hefty charges and weak results at its U.S. department stores and Kmart locations drove it to post a much wider-than-expected third-quarter loss, and the retailer withdrew its operating profit outlook due to the severe economic downturn.

The Hoffman Estates, Ill.-based company, led by financier Edward Lampert, also boosted its stock buyback plan by $500 million to $572 million.

Sears reported a loss of $146 million, or $1.16 per share, compared with year-ago profit of $4 million, or 3 cents per share. Excluding a hefty charge related to 14 store closings and gains on Sears Canada hedges, Sears posted a loss of 90 cents per share in the latest period.

Revenue dropped 8 percent to $10.66 billion from $11.62 billion as Sears U.S. same-store sales slid 10.6 percent and Kmart same-store sales slipped 7 percent. Total same-store sales, or sales at stores open at least a year, a key retail gauge, fell 9 percent.

Analysts surveyed by Thomson Reuters expected a much smaller loss of 49 cents per share on higher revenue of $10.93 billion.

Sears said it will take a pretax charge of $21 million in the fourth quarter, related to the closing of eight underperforming stores. The company said it will continue to evaluate additional store closings or divestitures, remodels, acquisitions and stock and debt repurchases to boost financial flexibility.

Sears withdrew its forecast for earnings before interest, taxes, depreciation and amortization, citing the severe economic slowdown.

In August, the company had said EBITDA in the second half of the year would exceed 2007 levels, but full-year results would be comparable year-over-year. However, the forecast had assumed flat to modest same- store sales declines in the third and fourth quarters, but third- quarter same-store sales ended up falling off sharply and in November, domestic Sears and Kmart same-store sales dropped a combined 8.7 percent.

Year to date, adjusted EBITDA totaled $722 million, less than half the $1.52 billion reported as of Nov. 30, 2007.

Aside from closing underperforming stores, Interim Chief Executive and President W. Bruce Johnson said in a statement that Sears has prepared for a challenging holiday season by cutting inventory and reducing expenses. The company also has resurrected layaway programs at both Kmart and Sears locations to provide consumers with another payment option. Layaway programs enable customers to make small payments toward the purchase over a set period of time.

Sears, whose proprietary brands include Kenmore and Craftsman, repurchased 1.4 million shares during the quarter. The company had about 123.6 million shares outstanding as of Nov. 28. The retailer runs about 3,900 stores in the U.S. and Canada.

Sears Holdings Announces Additions to Executive Leadership Team
Appoints Senior Executive for Operating and Support Businesses and
Presidents of Lands' End and Pharmacy Business Units
News Release
December 2, 2008

HOFFMAN ESTATES, Ill., Dec. 2 /PRNewswire-FirstCall/ -- Sears Holdings Corporation (NASDAQ: SHLD) today announced new executives to lead various business units:

-- Scott Freidheim will join Sears Holdings as EVP, Operating and Support Businesses and member of the internal holding company business unit board of directors. Freidheim has been with Lehman Brothers for over 17 years, where he most recently served as Chief Administrative Officer and Executive Vice President of Lehman Brothers Holdings Inc., overseeing the corporate division, reporting to the company's Chairman and CEO. He was responsible for a wide range of functions including brand, communications, legal, strategy and talent management. Freidheim was charged with driving significant cost containment and improved efficiencies across the organization.

Over the years, he held officer positions in the investment banking, private equity and corporate divisions.

--Nick Coe will join Sears Holdings as SVP and President, Lands' End
He has over 25 years of merchandising and marketing expertise along with experience working to grow recognizable brands such as Gillette, Levi's, Dockers and Banana Republic. Most recently, Coe served as Senior Vice President, Merchandising and Interim Head of Design for Banana Republic. In his three years with Banana Republic, he was instrumental in refining the brand strategy and customer segments, developing and executing key growth strategies and driving a profitable business model. Previous to Banana Republic, he spent 19 years within various divisions of Levi Strauss & Co in global leadership roles, most recently as Vice President, Merchandising, North America for Men's and Boy's.

--Mark de Bruin joins Sears Holdings as SVP and President, Pharmacy
He has a wealth of expertise in developing and managing profitable retail, online and mail order pharmacy businesses. De Bruin was most recently Executive Vice President, Pharmacy for Rite Aid Corporation with responsibilities for managed-care pharmacy, clinical services, procurement, operations, marketing, financial planning, business development and government relations. He joined Rite Aid Corporation in 2003 after spending four years at Albertsons, Inc., as VP, Managed Health Care and Pharmacy Procurement where he led the e-business strategy development for Savon.com, Albertson's online pharmacy.
 

Sears Swings to a Loss as Sales Slow
By Shirleen Dorman - Dow Jones Newswire
December 2, 2008

Sears Holdings Corp. swung to a fiscal third-quarter loss on falling sales and margins, notably at namesake domestic stores, as the sales woes worsened the past two months and prompted the company to pull its earnings forecast for the year.

The owner of the Sears and Kmart department stores also announced a $500 million addition to its stock-buyback efforts and said it could begin spending on store remodels and repositionings and close stores beyond the 14 recently shuttered and eight others.

For the quarter ended Nov. 1, the department- and discount-store operator controlled by hedge-fund manager Edward S. Lampert posted a net loss of $146 million, or $1.16 a share, compared to year-earlier net income of $4 million, or three cents a share. The latest quarter included a net 26 cents in charges, partially from the store closings.

Revenue slumped 8.3% to $10.7 billion as domestic same-store sales fell 9% - down 11% at Sears and 7% at Kmart. The latest estimates of analysts polled by Thomson Reuters were for a loss of 49 cents a share on $10.93 billion in revenue.

The sales declines worsened in October, said Sears, and continued into November. U.S. same-store sales dropped 8.7% in November, falling 7.8% at Sears and 10% at Kmart. But the comparisons were impacted in part by there being seven fewer post-Thanksgiving days because of the holiday's timing this year compared with 2007, as well as Kmart's layaway efforts. Sears said initial usage "has been encouraging" and has been extended to the Sears chain.

Gross margin slipped to 26.8% from 27.4% as markdowns at domestic Sears stores resulted in its margins falling 1.5 percentage points.

Sears has been criticized for not spending money on store upkeep, instead using cash for things such as stock buybacks, which have slowed this year.

Nonetheless, the company has bought $558 million in stock this fiscal year and the new authorization of $500 million will be added to the $72 million still available.

Sears's stock has slumped 69% this year as its sales have continued to weaken. The company's market capitalization has shrunk to about $4 billion. Shares finished Monday at $31.84 and didn't trade premarket.

Many retailers have struggled for some time, but Sears's challenges go beyond the economic environment as the retailer's namesake and Kmart stores have been plagued by a reputation for shoddy customer service, high out-of-stock levels and poor presentation. Those factors in recent years have made it hard for the company to stem customer losses to more focused rivals.

Sears has also seen significant turnover in its executive ranks and is still looking for a replacement for its interim chief executive, W. Bruce Johnson.

Sears faces tough test this holiday season
Storied retailer was already struggling before downturn
By Allison Linn - Senior writer - MSNBC.com
December 1, 2008

The holiday season is expected to be difficult for most retailers, but it could prove especially tough for one of the nation’s most storied brands: Sears.

Sears, a fixture of American retailing for more than 100 years, had already been struggling to find its niche before the economic downturn began in earnest.

Now, it’s facing the double whammy of a dismal housing market, which is crimping sales of flagship items like appliances, and cash- strapped holiday shoppers looking for the biggest bargains on other discretionary items, like clothes.

“They’re definitely in a weaker competitive position heading into the holiday season,” said Kim Picciola, a senior retail analyst with Morningstar.

Picciola doesn’t think Sears is in imminent danger of disappearing completely, but she said the chain could be forced to close more stores if it has a particularly weak holiday season.

“It’s going to be an extremely challenging (season) for all retailers selling discretionary goods, and I think for them in particular given that they’re just so much further behind the competition,” she said.

What’s more, some analysts worry that they aren’t seeing a clear plan for Sears to turn its fortunes around.

“The company is non-sustainable as its currently performing,” said Howard Davidowitz, chairman of the national retail consulting firm Davidowitz & Associates, citing Sears’ recent performance and continued loss of market share. “If that continues, Sears is gone,” he said.

Sears Holding Corp., the parent company of Sears and Kmart, will give investors a taste of where things might be headed when it reports quarterly earnings Tuesday. Shares in the holding company have fallen more than 60 percent over the past year.

For many Americans, the Sears name evokes nostalgic memories of thick catalogs selling everything from violins to sewing machines, as well as large stores filled with gleaming rows of appliances.

The company traces its roots to a railway station agent named Richard Sears, who in 1886 received an unwanted shipment of watches and decided to sell them himself.

Eventually, the company expanded into a successful mail order company, targeting rural residents and offering an alternative to the local general store.

Turning to a more urban shopper, Sears opened its first retail store in 1925, and had soon made a name for itself with appliance sales and service, as well as tools.

The retailer has had a more difficult time keeping up with the modern competitive landscape, however. Sears now faces stiff competition from all sides, including home improvement chains such as Lowe’s and Home Depot and department stores such as JCPenney and Kohl’s.

In 2004, Sears joined forces with Kmart, another retailer that had been so troubled by the competitive landscape it had been forced to file for bankruptcy protection just two years earlier. The combined company, Sears Holdings Corp., also includes The Great Indoors, Land’s End and Orchard Supply Hardware.

Both Sears and Kmart have suffered in the current economic malaise. Goldman Sachs analyst Adrienne Shapira, who has a “sell” rating on the holding company’s stock, noted in a recent research note that “ Sears is in the eye of today’s consumer spending storm.”

Sears Holdings has acknowledged that it has struggled as the company has weakened and competition has intensified. For the quarter ended August 2, the company reported a 6.7 percent drop in same-stores sales for its domestic Sears stores. The measure of sales at stores open at least a year is considered a key gauge of how well a retailer is faring.

Going into the holiday season, Sears spokesman Tom Aiello said the retailer is hoping to show customers that it “can’t be too big to not listen to customers.”

For example, he said Sears quickly responded to customers’ tighter budgets by making the decision to re-introduce layaway, which lets people purchase items and pay for them over time. Many companies, including Wal-Mart, have gotten rid of layaway in recent years.

Aiello said Sears also extended the number of days people have to return an item, from 90 days to 120 days, so people who are shopping early for the holidays can still be assured the gifts can be returned. Sears also is hoping to entice its most loyal customers with special deals and other perks.

The retailer also is aiming to appeal to customers through its continued support of military families, which this year includes a registry that allows shoppers to buy things for military families in need.

But Sears still faces bigger problems. Davidowitz faults company chairman Edward Lampert, the hedge fund manager behind the Sears/ Kmart merger, for not investing enough in improving Sears stores since taking them over. Sears also has made cuts in its legendary service offerings, Davidowitz said.

Still, he noted that Sears has shown some areas of improvement, including successfully building up its online business and promoting its Land’s End line in some retail stores.

The online business suffered on Black Friday as the site was inaccessible to U.S. shoppers for two hours. The site had similar problems the year before.

But Picciola, the Morningstar analyst, said Sears’ overall clothing offerings remain a weak spot, as the store struggles to compete against other mall-based retailers.

With the nation’s economy in turmoil, Sears also has fewer and fewer options for regaining its footing. At one time, some thought its corporate parent could make money by closing stores and getting rid of valuable mall-based property. But with many other retailers also paring back expansion plans or even closing stores, it’s looking less likely that will be an option anytime soon.

Sears also could start selling some of its flagship brands, such as Kenmore appliances, at other retailers. But Davidowitz thinks that’s a short-term fix that would eventually hurt the company because it would lose its exclusivity. “It’s a sad story,” he said of Sears' troubles.

 

Black Friday Probably Was a Red-Ink Day
A real turkey for retailers.
By Jacqueline Doherty - Barron's
December 1, 2008

A PUNK ECONOMY DIDN'T STOP CONSUMERS FROM LINING UP on Black Friday to make holiday purchases at bargain prices. But even that shopping spree isn't expected to salvage the month's results. Excluding Wal-Mart Stores (ticker: WMT), retailers are expected to report Thursday that November sales at stores open more than a year fell 7.1%, according to Thomson Reuters.

In addition, the sales Friday and this weekend might not translate into decent profits because merchants slashed prices. When you can find Jimmy Choos for 40% off at Saks Fifth Avenue, you know that retailers are hurting. "If there is any improvement in business, it's only because they're promoting like hell and because Thanksgiving is closer to the holidays," says David Berman of hedge fund Durban Capital.

The slowdown doesn't surprise Allan Mottus, publisher of the Informationist, which tracks retail and beauty trends. Median household income hasn't risen since 2000, he says, while the retail store base has grown 4% a year, leaving the industry with vast overcapacity.

The market seemed to catch on to this problem in early September. Since then, the S&P 500 retail index is down 38%. Unfortunately, with Wall Street's blessing, many retailers spent their money foolishly during the boom times and few have the wherewithal to purchase their shares now that they're on sale.

Consider Macy's (M), which purchased May Co. for $11.5 billion in 2005, using stock and debt. It also spent $3.3 billion on a stock- repurchase program in 2007, buying shares at an average price of 38.69. Now that the company has $10 billion of debt and needs to focus on its repayment, its shares are going for 7.42.

Similarly, Sears Holdings (SHLD) purchased 22 million shares at an average price of 135 last year and now trades at 36.25, down 71% this year. In 2007, Nordstrom (JWN) purchased 39 million shares for $1.7 billion. The average price: 44.17. Today the stock fetches 11.37, down 70%.

Compare them to New York & Co. (NWY). The specialty retailer kept its powder dry. It didn't repurchase any shares last year and has a nice, clean balance sheet with $41 million of cash and $21 million of debt. Its shares haven't been spared in this year's downdraft, having fallen from just north of 12 to a recent 1.88.

Friday, New York & Co. announced plans to repurchase up to 3.75 million shares over the next 12 months, using cash on hand. Its majority stockholder, Bear Stearns Merchant Banking, intends to purchase an additional 3.75 million shares. Together, the purchases represent about 12.5% of the company's 60 million outstanding shares. The stock jumped 51 cents on the news, for a 37% gain.

A clean balance sheet has quickly become a company's greatest asset and one that investors should search out.

AT LEAST ONE SHAREHOLDER IS restless at PHH Corp. A 2005 spinoff from Cendant, PHH (PHH) originates, purchases and sells home mortgages and runs vehicle fleets for corporations. Its shares have fallen to 7.62 from just above 30 last year, as mortgage originations dried up, and its deal to be purchased by General Electric and Blackstone for 31.50 a share fell apart.

Pennant Capital Management, which owns 9.7% of PHH shares, filed a 13D last week filled with fighting words: Pennant "has become increasingly concerned that the company has been seriously mismanaged and poorly positioned by its board of directors and senior executive management." They have "managed the company for long-term growth and client relationships rather than for profitability, near-term results and capital efficiency."

You might ask: What's wrong with that? In the current market, Pennant says, PHH doesn't have the luxury of long-term focus, and this has put it "in peril." The shares trade at 20% of book value, and Pennant is concerned about PHH's ability to refinance a $1.3 billion credit facility maturing in January 2011.

Pennant's suggestion: add Greg Parseghian, former Freddie Mac (FRE) executive, to PHH's board and create a special committee of non- management board members to oversee the CFO's strategic review of the business.

If PHH ignores this message, Pennant "will actively consider all available steps to ensure that the board refocuses senior management on the immediate and pressing task of turning the company around and creating shareholder value." PHH officials didn't return calls for comment, but shareholders should take heart that a large investor is clearly agitating to move the stock higher. On the other hand, we all know what happened to Freddie Mac

Delayed Gratification: Layaway
By Rob Walker - New York Times
November 30, 2008

Kmart has offered its customers the option of buying products on layaway for much of its 46-year history. What it has not done during that time, however, was make the layaway plan a central focus of an advertising campaign — until this year. Maybe you associate the layaway with low-income consumers who have few other options. But in October, Kmart television spots and direct-mail ads positioned it as a savvy and exciting way to shop “Kmart smart.” Indeed, the TV spot depicts a distinctly middle-class couple; she piles goods in a shopping basket while he stays home to rake the lush yard. The chain is evidently pleased with the results; in November, the Sears Holdings Corporation, which owns Kmart, announced that Sears itself would follow suit.

Clearly the layaway plan is not a new development in the annals of retail. In fact when someone first mentioned the Kmart ads to me, my initial reaction was along the lines of: Layaway . . . what’s that again? Kmart’s program serves as a reminder. Pick your items, pay 10 percent of the cost plus a $5 setup fee on the spot; your stuff comes off the selling floor and is stored (laid away) for you; pay off the rest in regular (interest-free) installments over eight weeks, and the goods are yours to take home. Should you stop making payments on an item — or simply change your mind — it goes back to the shelves, and your money is refunded, minus that initial setup charge and a $10 cancellation fee. You can put a whole shopping cart full of goods on layaway for one fee, and many do, says Tom Aiello, division vice president of public relations for Kmart and Sears.

Nancy Koehn, a Harvard Business School historian, notes that buying on installment has a long history; 19th-century-America examples include expensive farm equipment and Singer sewing machines. The layaway option — which various accounts suggest dates back to the 1920s or 1930s and which is often associated with the Great Depression — differs in a couple of ways from other installment plans. On the plus side, there’s no tacked-on interest. But gratification is delayed, and it’s not hard to see why this option lost steam as all-purpose credit cards became universally available. Wal-Mart discontinued its layaway option a couple of years ago, and Sears stopped offering layaway plans on anything except fine jewelry back in the late 1980s.

Kmart’s decision to treat this throwback as a selling point can be traced back nearly a year, when the discount chain began plotting its 2008 holiday strategy. Signs of an economic slowdown were already apparent — though not so acute as they are today — and in focus groups, shoppers talked about needing alternatives to racking up a pile of plastic-enabled debt. At least some of those Kmart regulars knew the chain still had layaway, intended to make use of it and suggested more early-season sales to help them get a head start on holiday shopping.

Kmart has struggled for years to change its image as the has-been retailer competing with more up-to-date rivals like Wal-Mart and Target, so hyping such a musty, old-school service seems risky, to say the least. But times have changed, Aiello says. “When we talked to customers, they gave us a lot of credit,” he says. “They didn’t see it as tired or a throwback. They saw it as a really great solution.” And not just fixed-budget consumers, he asserts, but also “ more affluent people who see it as a risk-free way to get something while it’s in stock, at the price they want to pay.” At Sears, he adds, layaway’s comeback was a direct result of consumers simply asking for it.

Meanwhile, a site called eLayaway.com lets Web shoppers use a version of the old payment style at a variety of online merchants, suggesting another future for such installment plans. It’s hard to know whether fresh consumer interest in the layaway is more than a one-season phenomenon. But it seems the suddenly more attractive feature of the layaway is the manner in which it enforces spending discipline. After all, credit cards don’t make people spend unwisely and rack up debt. They just don’t prevent us from doing so. Layaway is “smart” because makes it harder to behave foolishly.

Retail Downturn Rains on Macy's Parade
Department-Store Chain'sCEO  Says Size Lets it Strike New Deals,
Cut Costs to Weather Sales Decline
By Rachel Dodes - Wall Street Journal
November 26, 2008

When Macy's Inc. paid $11.5 billion to acquire rival May Co. in 2005, investors asked whether consolidation could save the department store, or just prolong its decline.

So far it looks more like the latter. The company lost $30 million in the first nine months this year on a 4.3% decline in sales. A brutal drop in consumer spending is expected to make the holiday season -- which begins with Macy's Thanksgiving Day Parade on Thursday -- the bleakest in nearly two decades, and already has sent smaller competitors into bankruptcy.

Macy's Chief Executive Terry Lundgren says the greater size is helping the 856-store chain weather the downturn. "I would hate to be in a position where I only had a bunch of regional department stores to compete in this environment," the 56-year-old executive said during a recent interview in his office at the company's landmark 34th Street store in New York City.

Because of the recent economic turmoil "the merger couldn't reach its full flower as soon as it was hoped," says Arnold Aronson, a managing director at retail consultant Kurt Salmon Associates.

Craig Johnson, president of Customer Growth Partners, a retail research firm, says Macy's has been "holding its own" against mid- tier department stores. But like most traditional department stores, it is "bleeding share" in the apparel market as customers trade down to discounters such as TJ Maxx and Target Corp., he says.

One looming question is whether Macy's will be able to refinance $950 million in debt coming due next year. Although analysts say the company doesn't face near-term liquidity problems, it will likely have to dip into a $2 billion revolving credit facility to pay at least part of the $350 million in debt coming due in April and $600 million due in July if the credit markets don't improve by then.

Macy's Chief Financial Officer Karen Hoguet said she hopes the credit markets "would open up for us" and Macy's would be able to refinance the debt. If Macy's debt, just a notch above junk status, were to be downgraded, interest expense would rise. Ms. Hoguet said on a call with investors earlier this month that Macy's is "going to do what we need to do to maintain the investment-grade rating."

At the end of the third quarter, Macy's had $300 million in cash and cash equivalents. It won't project cash flows for the fourth quarter.

Credit rating agency Moody's Corp. estimates that Macy's generated about 87% of its $2.24 billion in fiscal 2007 cash flow from operations in that year's fourth quarter.

Moody's and Standard & Poor's changed their outlooks to "negative" in October after Macy's cut its earnings forecast for the year. Macy's forecasts a 1% to 6% same-store sales drop for the fourth quarter. "We have to see how this holiday season plays out," says Moody's analyst Ed Henderson.

As sales deteriorated in recent months, Mr. Lundgren trimmed Macy's holiday hiring plans and cut its fiscal 2009 marketing budget. To conserve cash, he slashed its 2009 capital budget by almost 50%, to $550 million to $600 million, mostly by postponing store renovations.

"I have gone through every single line item to make sure that the things we are eliminating or postponing are the right issues," Mr. Lundgren says.

He insists the merger was the right move despite a bumpy start that included the closing of nine underperforming former May stores. The combined company's size has helped the chain outperform direct competitors, he says.

Macy's same-store sales, off 6% last quarter, have held up better than its rivals. In contrast, the decline was 10.1% at Bon-Ton Stores Inc., which operates in the Northeast and Midwest, and 13.4% at Gottschalks Inc. in California. Dillard's Inc. posted monthly declines of 7%, 12% and 8% in the period.

By managing inventory and cutting costs, the company known before the merger as Federated Department Stores Inc. boosted gross margins in the latest quarter by 0.2 percentage point, compared to a 3.4 percentage point drop at rival Nordstrom Inc.

Macy's has been able to leverage its heft with a national ad campaign and exclusive deals with brands such as Tommy Hilfiger, Martha Stewart and Donald Trump, while adding new categories, such as toys by leasing space to retailers such as FAO Schwarz. In a test last year in Chicago, the added toy boutique improved sales in the adjacent kids' clothing department.

Such deals have helped distinguish Macy's from its competitors and improve its image. YouGovPolimetrix, which polls Americans on brand perception, found that over the past 18 months, Macy's reputation has improved more than any department store.

The company's holiday advertising campaign, has been thus far the most liked and the most recalled television spot of the season, says Nielsen IAG.

Other initiatives are paying off, too. A new program called My Macy's that tailors a portion of merchandise to regional tastes has shown encouraging results. In Utah and Western Pennsylvania, the addition of more modest dresses with sleeves turned the dress business from a drag on margins into a positive performer.

And when a regional store director in Flushing, Queens, an area with a large Asian population, traded his men's large shoe sizes for another store's smaller sizes, they sold out in three days, Mr.
Lundgren says.

In October, Macy's began allowing suppliers to track retail sales in real time. The system is helping suppliers adjust their holiday shipments, boost sales by location, and is helping Macy's control inventory to preserve margins.

The downturn hasn't helped. "We just need a little wind at our back for a change. And I look forward to that day," Mr. Lundgren says.

Consumers can find good deals beyond Black Friday
By Jayne O'Donnell, USA TODAY
November 26, 2008

It's wild. It's a ritual. And it's one way to save money on holiday gifts in these financially trying times. But blazing out in the early morning hours after Thanksgiving to hit stores for "door-buster" sales that often start at midnight sure isn't the only way to snag a great bargain this holiday season — as even the retailers rolling out the Black Friday deals acknowledge.

This year, you probably don't need to. The recession has made bargain hunters out of almost every consumer, and discounters of most every retailer. That's combined to make this year's Black Friday more feverish than ever, especially given the fewer shopping days between Thanksgiving and Christmas. Retail announcements about Black Friday prices are even more widespread, and started long before anyone was talking turkey. And deep discounting is likely to increase as the close of the holiday season grows closer, retail experts say.

"This year, every day will be a Black Friday," says Guy King, co-founder of coupon website RetailMeNot and price comparison site BeatMyPrice.com. "With retailers struggling to stay afloat and capture the limited consumer shopping budget, we'll see deep discounts on par with Black Friday deals throughout the entire holiday season."

A Consumer Reports survey of about 1,000 consumers out last week found 25% said they'd be shopping on Black Friday, up from 21% last year. In another, by Maritz Research of 1,100 consumers, 41% said they would be shopping on Black Friday, up from 37% in 2007. About 10% of stores' holiday sales are on Black Friday, says the International Council of Shopping Centers. The National Retail Federation and BIGresearch say about 66 million people shopped on Black Friday last year, up from 58.9 million in 2006

If that's not enough to keep you home, consider this: There seems to be as many price-comparison and deal-finding sites on the Internet as there are retailers, which means finding the best price doesn't require braving price-cut-crazed mobs. Black Friday's famous door- buster deals are deep price cuts on certain products that are typically only available in limited quantities. With all the door- buster-busters out there, it's become a less-necessary endeavor to fight for the last in-store TV.

Not the only option

But even retailers with bricks-and-mortar stores are downplaying Black Friday at the same time they're hyping it. "Black Friday is really just a focus point for consumers who think, 'This is the day I'm really going to get the best deals,' " says Richard Gerstein, chief marketing officer for Sears, which also owns Kmart. "We're trying to give the confidence that they can get lots of great deals not just on Black Friday but throughout the season."

Gerstein says Sears and Kmart "go really hot on price" on the select items offered in the wee hours of the morning, but acknowledges, "In reality, most people aren't buying that item."

Nor should they necessarily be.

Mike Boylson, chief marketing officer at J.C. Penney, says, "Merchants really sharpen their pencils for Black Friday." But he acknowledges that they also reassess prices each week based on how merchandise is selling. That makes it possible that slower-selling items from Black Friday could see prices slashed further as the holidays approach.

RetailMeNot's King, of course, has a vested interest in saying the best deals are online, and the "savvy shoppers can sleep in and still expect to save." But we turned to him and several other leading price and product comparison website owners to sort through deals.

"Black Friday is all about the 'upsell' — getting you in the door so you end up spending more than you intended," says Christine Frietchen, editor in chief of ConsumerSearch.com, which has been collecting and analyzing the best Web reviews since 1999. "Just because an item appears in a Black Friday circular doesn't mean it's necessarily a good buy. Our research turned up quite a few Black Friday 'deals' that weren't anything special."

For example, Lowe's has been advertising a KitchenAid coffeemaker for $100 on Black Friday. Frietchen found at least 10 other stores selling the same coffeemaker online for less than $100. More important, she notes, her site's top-rated coffeemaker, which has the same features as the KitchenAid model, was from Cuisinart and only $80.

Wal-Mart started the slashing in October — even earlier than last year — and many retailers have joined in the early discounting. CVS' Black Friday promotions started Sunday, and Toys R Us' started more than a week earlier. That's given door-buster-busters, such as Brad Wilson of BradsDeals.com, plenty of time to undermine sale claims. Even advertisements that haven't been formally released have been leaked by various websites, including BFAds.com, which are all too happy to help you find better deals from the comfort of your cozy home.

Gerstein acknowledges the Internet "brought a lot of transparency to price in the market" and notes Sears lets appliance shoppers search online at the store to make sure Sears' price is lowest. Still, citing Sears' service technicians, he notes, "When you buy a product, it's for more than just the price."

Sometimes it's also for convenience. CVS extended the Black Friday season because "it just makes it easier for our consumer to shop when she wants, not just in the crazy few days" after Thanksgiving, says Mike Bloom, CVS' senior vice president of merchandising. "It takes the pressure off." But are the drugstore chain's specials really special?

Wilson doesn't think so. CVS, for example, is promoting a Kodak camera that the store usually sells for $10 more, but others, including Amazon.com, are now selling it for $10 to $15 less.

"I'm stunned CVS claims theirs is a deal," says Wilson, who also doesn't have anything good to say about a GPS model that CVS is selling that's about $20 more expensive than other similar models.

The Disney Store chain doesn't take chances that snarky website operators will undercut its price-cutting. It doesn't disclose its big deals until consumers are in stores. Once someone has stayed up until midnight or later to shop at a Disney Store, it's hard to imagine they won't find something to buy, even if the promised broad selection of deals doesn't include something for them — or their kids.

Some of the few Disney Stores that opened at midnight after Thanksgiving last year had 300 people in line. This year, Disney's opening about half its stores at midnight on Black Friday, up from 5% last year. To convince skeptics, anyone who shops between midnight and 10 a.m. will get 20% off on top of other deals.

There is still no way Maura Ducharme of Madison Wis., would venture out on Black Friday. She prefers to do most of her shopping online, anyway, and will go online that day if there are good deals. But get out in the unruly crowd? Forget it.

"When one hears stories about people running over others who have fallen in line in the wee hours of the morning, that is sick and wrong," Ducharme says. "It does not speak well for our society."

Doris Davis, on the other hand, wouldn't miss the madness — it's become a family tradition. Every year after Thanksgiving, her family in Fayetteville, Ark., goes through the newspaper and maps out a plan for what they'll buy where. The men stay home and cook breakfast, then lunch when the shoppers arrive home.

She checks comparison shopping sites including ZDNet.com, and is sure her deals are legitimate, including the Kodak digital picture frame that she got at Best Buy last year for $50, down from $149. She missed out, however, on the $199 laptops which were limited to five per store.

"I love it," Davis says. "It's a bonding experience."

Penney's Boylson laments that his department store was somewhat behind other retailers in embracing the Black Friday mania. This year, they'll be handing out snow globes while quantities last, and Boylson will be standing at one of the doors at 4 a.m. when it opens, taking it all in. "The difference between today and 10 years ago is that (Black Friday) used to be a big marketing event," Boylson says. "Today it's a huge social event."

'Blue-light spenders'

Unless you're one to make a list, check it twice and stick to it, the Black Friday madness is not for you, anyway, warns psychotherapist and "money coach" Olivia Mellan. When it comes to social events, the movies may be a lot safer. These door-buster deals are designed to get you in the door.

Sales, she says, bring out consumers' competitive sides, and the competition isn't for either the faint of heart or quick with wallet. Mellan calls obsessive sale shoppers "blue-light spenders."

"There's the something for nothing mentality, which makes people feel special — like they found something no one else could," says Mellan, who wrote the book Overcoming Overspending and calls herself a recovering overspender. "Bargains make you feel high." She says anyone with a tendency to overspend, especially if they're on a tight budget, needs a holiday spending plan, along with a list and a fiscally conservative friend to shop with if they venture out this week on Black Friday. But she doesn't recommend Black Friday for anyone.

"I think it's a crazy ritual," Mellan says. She cites the keys to avoiding slipping in any 12-step program: Watch out when you're hungry, angry, lonely or tired (known as HALT). "It's dangerous getting up at the crack of dawn to go shopping!" she says.

Finding the real deal

It doesn't have to be, though. There are dozens of websites devoted to helping consumers find the best products at the best prices.

CheapUncle.com, a sister site to CouponCabin.com, searches the Internet for the lowest prices on products that people request, then applies any available coupons to prices they find. Like ConsumerSearch.com, the site aggregates both consumer and professional reviews. Wilson and Frietchen will often steer visitors to another product that their consumer reviewers have rated higher.

Dan de Grandpre, founder of Dealnews.com, says it's often the "no- name" TVs that are offered for Black Friday. The best time to shop for high-end, brand-name TVs is typically two weeks before Christmas, when retailers such as Amazon.com and Fry's Electronics (Frys.com) "really start to slash prices," he says. Toys get cheapest three weeks before Christmas, as Wal-Mart, Amazon, KBtoys, and others "try to get rid of inventory while people still want them," de Grandpre says.

And you can always avoid the crowds by going to these stores' websites and hitting "send to cart" after you find that great deal online.

Amy Koile has avoided Black Friday since she got up early to hit a Black Friday sale in the late 1990s.

"There were women pushing each other out of the way, blocking aisles with shopping carts, and yelling at their kids to 'grab' items off the shelf," says Koile of Yulee, Fla. "Christmas is supposed to be about giving, and let me tell you, these people weren't giving one bit."

Wal-Mart's Scott Surprises With Plan to Retire as CEO
By Ann Zimmerman, Miguel Bustillo, and Joann S. Lublin - Wall Street Journal
November 22, 2008

In a sudden change of leadership at the world's largest retailer, Wal-Mart Stores Inc. said Chief Executive H. Lee Scott Jr. is retiring and will be succeeded by Mike Duke, who heads the company's growing international operations.

Mr. Duke joins Wal-Mart's board immediately and will take over as CEO Feb. 1 to steer the discounter through the current global economic turmoil.

Mr. Scott, who in recent years led the company through a period of slowing growth and rising public criticism of its labor practices, will continue as chairman of Wal-Mart's executive committee and become a company adviser.

The ascent of Mr. Duke, who at 58 is just a year younger than the man he is replacing, puts a well-regarded insider at the helm of Wal-Mart as it executes an ambitious new strategy of remodeling many of its U.S. stores while grabbing a greater share of the global retail market.

Mr. Scott and Mr. Duke were not made available to comment. Wal-Mart shares were up $2.26, or 4.46%, at $52.92 in 4 p.m. New York Stock Exchange trading.

The handoff -- only the fourth CEO change in the company's 46-year history, and the third since folksy founder Sam Walton turned over the reins in 1988 -- comes as the retailer enjoys a renaissance.

After years of struggling with stagnant U.S. sales, Wal-Mart regained strength in the past year, posting strong revenue and profits with its renewed emphasis on low prices as well as improved merchandise and expanded marketing.

Mr. Duke's challenge will be shepherding Wal-Mart into a future where its traditional growth engine, its gargantuan U.S. superstores, no longer yields the upside they once did. Even though its U.S. sales have beaten the competition's recently, they are growing at about half the rate they did earlier in the decade, when fewer supercenters dotted the landscape. Meantime, it is pursuing promising but riskier expansion in emerging markets such as Brazil and China.

Mr. Duke's varied 13 years of experience at Wal-Mart -- which includes tenures as the head of its enormous logistics operation as well as stints running its U.S. and foreign operations -- make Mr. Duke the steadiest hand available for the task, according to some of Wal-Mart's business partners and the company itself.

In a memo to employees, Wal-Mart Board Chair Rob Walton, eldest son of the founder, offered reassurance about the unexpected timing of the management change, saying it was the culmination of a well-honed succession plan. He said it was Mr. Scott's decision to retire, and that Wal-Mart's current market strength in the midst of global economic turmoil made it a good time for the transition.

"We think the right time is now, a time of strength and momentum for our company," he wrote. "Our strategy is sound and [Mr. Duke] has been actively involved in developing and executing this strategy."

Two-Year Search

The search for a successor to Mr. Scott began two years ago, said someone familiar with the situation, and was formalized during a November 2007 meeting at a time when Wal-Mart's fortunes remained at a low ebb. Directors began examining internal CEO candidates, reassessing the chief executive's role and reviewing corporate strategy to carry the company through the next five to seven years.

The board also undertook a "benchmarking" study in which an executive- search firm compiled a list of potential external CEO candidates and compared them against likely inside contenders. But no outside candidates were interviewed.

The upshot: Mr. Duke and Eduardo Castro-Wright, the 53-year-old head of Wal-Mart's U.S. operations, emerged as the front-runners to succeed Mr. Scott, the informed individual said.

The selection of Mr. Duke was popular inside headquarters as well as among people who do business with the company, said some suppliers, who added that Mr. Castro-Wright's sometimes mercurial personality and controlling management style had ruffled feathers.

When to step down was left up to Mr. Scott, according to the company and other insiders. Now, "he feels he has the company positioned where he wants it to go," said one person knowledgeable about the succession planning.

Mr. Duke's age, however, was also apparently a consideration, this person said. Since he's just a year younger than Mr. Scott, waiting much longer might have aged Mr. Duke out of the job, which he is expected to hold only five or six years.

Although Mr. Castro-Wright was passed over for the top position, he was given an expanded role as vice chairman and head of the company's global procurement operation. Mr. Castro-Wright is a former CEO of a division of Honeywell International Inc., Honeywell Transportation and Power Systems Worldwide, and former president of Honeywell Asia Pacific.

He joined Wal-Mart in 2001 and previously headed its Mexican business, Wal-Mart de Mexico, before being put in charge of U.S. store operations in 2005.

For his part, Mr. Duke worked at Federated Department Stores and May Department Stores for 23 years prior to joining Wal-Mart in 1995. As head of the international division, he showed a willingness to make tough decisions, pulling out of two money-losing markets, Germany and South Korea, an acknowledgment that the company had failed to win over customers.

In Bentonville, Ark., Wal-Mart's headquarters city, where office parks are filled with liaisons to Wal-Mart from other Fortune 500 companies, reaction to Mr. Duke's ascent was overwhelmingly positive.

"He is a very strong manager who is not going to make any mistakes," said Paul Prebil, Goodyear Tire & Rubber Co.'s Wal-Mart sales director in Bentonville. "He's also outstanding in the community. People who meet him tend to like him."

Building on Gains

As someone who has worked closely with Mr. Scott in engineering the retailer's turnaround, Mr. Duke now will be charged with building on its gains even after the economy revives and competition strengthens again.

It was a very different time when Mr. Scott took over Wal-Mart in January 2000, embarking on a tenure marked by turmoil and change. He grappled with store saturation and falling investment returns in its U.S. division, while fending off critics who blasted the retailer's pay, benefits and treatment of its employees. A class-action sex discrimination suit against Wal-Mart is still pending in a federal court in San Francisco.

Mr. Scott also dealt with a series of scandals, including an investigation into stores hiring illegal immigrants, and a top executive accused of stealing from the company.

But in the last three years, Mr. Scott led a turnaround of Wal-Mart's U.S. operations, bringing in executives from outside the once-insular company. Mr. Scott reached out to critics and launched an environmental initiative to reduce company waste and increase fuel efficiency.

"We hope with the change of leadership Wal-Mart will turn over a new leaf and allow workers to choose freely whether or not to organize a labor union, rather than continue its coercive antiunion campaigning," said Carol Pier, labor rights and trade senior researcher at Human Rights Watch, a nonprofit organization.

Wal-Mart's stock, while still down 20% from when Mr. Scott became chief executive, has climbed 11% this year -- making Wal-Mart the only Dow Jones Industrial Average component to notch gains for 2008.

Mr. Duke's rise comes as Wal-Mart plans to shift two-thirds of capital expenditures to high-growth markets abroad.

The company also has begun breaking through in some established foreign markets. Wal-Mart's U.K. subsidiary, Asda Group Ltd, saw its market share rise to 17.1% recently compared to 16.7% for the same 12- week period a year ago, while leader Tesco PLC saw its share drop to 30.9% from 31.3%, according to market data from Taylor Nelson Sofres PLC.

"We are winning in the U.K.," Mr. Duke recently told a gathering of analysts in Bentonville.

Wal-Mart is also predicting that it will post an operational profit this year in Japan, where it has long struggled and continues to post comparable-store losses. But the international push, which Mr. Duke has spearheaded, comes rife with risks. Wal-Mart lowered its annual earnings projections last week, citing fluctuations in currency exchange rate.

Wal-Mart didn't say who will succeed Mr. Duke as head of the international division, which for the first nine months of this year posted sales of $74 billion vs. $184 billion for the U.S.

Wal-Mart Names Duke Its New CEO
By Mike Barris - Dow Jones Newswire
November 21, 2008

Wal-Mart Stores Inc. named its international chief, Mike Duke, to succeed Lee Scott as president and chief executive when the company's new fiscal year starts Feb. 1.

The move will end Mr. Scott's nearly nine-year tenure overseeing the day-to-day operations of the world's largest retailer. That time frame occurred during a period in which Wal-Mart received greater scrutiny on issues ranging from the handling of workers to its green initiatives as Scott has positioned the company to be a leader in energy efficiency.

Chairman Rob Walton said the leadership change "occurs at a time of strength and momentum," as the company has seen its sales strengthen of late in the U.S. as other retailers have been recording slumping sales.

Spokesman David Tovar added Wal-Mart's board "felt the right time was now" to make the succession. He declined to say whether the decision had been Scott's, the board's or by mutual agreement.

Mr. Duke, 58 years old, will become only the fourth CEO in Wal-Mart's nearly half-century of existence. David Glass held the role from 1988, when founder Sam Walton relinquished the role, until 2000.

A man of vision
Lake View resident wants to help others conquer their disabilities
By Nic Halverson - Contributing Editor - Chicago Journal
November 20, 2008

Walking across his college campus on a snowy night in 1965, Paul Scher heard a young woman's voice calling out for help.

"It was snowing and blowing," recalls Scher, "and I was having a hard time staying on the sidewalk with my white cane."

Scher, who is blind, found a young paraplegic woman. Her wheelchair was stuck in a snow bank. After helping her get back on the sidewalk, the young woman lamented that they had just missed the bus. Never one to back down from a challenge, Scher asked, "Are you good at giving directions?"

Putting his brief case and cane in the young woman's lap, the two fled across campus, taking a shortcut. Scher pushed her wheelchair while she verbally navigated the icy pavement.

"She was telling me 'left two degrees, right two degrees'," Scher chuckles, "We made the bus."

Paul Scher has spent his life rescuing the disadvantaged from self-doubt. As a steadfast advocate for the visually impaired and severely disabled, the 74-year-old has made a mission of helping others run across life's icy terrain. He is now looking to use his story to inspire others as a motivational speaker.

Born prematurely with severe visual impairment, Scher credits his parents with instilling in him a self-reliance that has shaped his willingness to meet challenges head on.

"Mother and father told me, 'we aren't going to live your life-you're going to live ours'," Scher recalls.

So he did. After learning Braille, typing and math in specialized classes for blind students, and learning that he could keep pace with his able-bodied peers, Scher enrolled as a regular student at New Trier High School in 1949. There he learned that having "a significant disability was going to be a real lifelong battle."

"Half of the battle is people telling you what you can't do," Scher said, "the other half is finding ways to work around the limitations."

Scher became the assistant features editor of the school newspaper and vice president of the wireless (radio) club. He would spend his Saturday evenings as a ham radio operator, talking with people all over the world.

Scher studied government at Harvard, graduating cum laude, and earned his master's in political science and international relations at the University of Chicago.

But when he tried to enter foreign service, he said he encountered a wall of skepticism.

"At job interviews, people were more interested in how I got downtown by myself than how I could be of service," he said.

He eventually was offered a position on the Governor's Committee on the Employment of the Handicapped. He carved out for himself a distinguished career advocating for people with disabilities, eventually going on to implement the President's Committee on the Employment of the Handicapped.

Though his work on these committees helped inform trailblazing legislation, including the Americans with Disabilities Act, Scher was unsatisfied.

"After four years on those committees, I was pretty angry," said Scher. "I hated the way agencies treated their clients like pawns. I wanted to change the system."

So he went back to school, earning his master's in education from the University of Illinois at Urbana-Champaign.

Scher became a certified rehabilitation counselor for the blind and disabled, and tried to buck the system from the inside. One of the first things he did was combine caseloads to try to show his clients with diverse disabilities that they were not alone.

"I wanted them to understand the social problems we all experience, due to our disabilities, were similar," he said, "and if we worked together we could make a bigger change."

Scher went on to work as Sears Roebuck and Co.'s corporate rehabilitation services manager, establish an International Association of Rehab Professionals and served on the board of the Chicago Lighthouse, a private rehab and educational facility for the blind. There he oversees policy where, he said, they "have placed more people who are blind or visually impaired than any other lighthouse in the country."

Using his public service as a vehicle, Scher has also circled the globe in search of adventure. He has flown an airplane, gone whitewater rafting and steered a three-mast sailing vessel.

"People have incredible strength, you just have to let it come to the surface," said Scher.

Take a Good News Break This Holiday Season
Sears and Yahoo! Launch 'Good News Now' to Promote Uplifting Stories During Downturn
MarketWatch.com
November 19, 2008

HOFFMAN ESTATES, Ill., Nov 19, 2008 /PRNewswire-FirstCall via COMTEX/ -- In a bold move to dispel the pall overshadowing the holiday shopping season, Sears this week launched Good News Now on Yahoo! News. Designed to answer shoppers' call for an antidote to the pessimism served up by the traditional news and opinion outlets, Good News Now offers Americans a fun new place for a positive pick-me-up, access to values at Sears.com, and a social network to share simple ways to navigate the current economic climate.

"Getting into the 'news' business may seem like an unlikely step for a retailer but we see it as a unique opportunity to create a buzz around the positive things

Americans are doing to make a difference in each others lives and engage in goodwill, especially as we lead into the holidays," said Sears Chief Marketing Officer Don Hamblen. "The Sears Good News Now Web site also allows us to integrate the positive experiences from Sears.com and bring them to consumers in a highly relevant and engaging way."

According to the National Institutes of Health, the best techniques for managing holiday stress are to plan some fun, take a break and think positively. "No other major retailer is addressing shoppers' underlying stress to create a warm, happy holiday, not just for their families and friends, but also for those in need," added Hamblen. "Over the years, Sears always has supported Americans through tough economic times, and we are proud to partner with Yahoo! News to serve local communities today via an online news network that uniquely delivers value and fun."

"It's critically important to establish deep and positive relationships with customers and users. We think Sears' decision to send a positive message this holiday season to Yahoo! News' 40 million consumers is exactly what Americans need right now," said Joanne Bradford, senior vice president of revenue and marketing development, Yahoo!. "Given the uncertainty of the times and what seems like a constant barrage of negative news in today's current environment, it's great to have a partner like Sears who would rather remind people of all of the positive things happening in the world today. 'Good News Now' will be a breath of fresh air for our users."

Good News Now is filled with uplifting stories, a spotlight on military families through Heroes at Home(TM), as well as opportunities to sign up for inspirational e-mails and special offers from Sears. It is powered by Yahoo! http://spotlight.news.yahoo.com/ and includes features to get visitors thinking about what they are wishing for this holiday season and what wishes they can grant for others, including an opportunity to vote on the hottest gift ideas using Yahoo's Bix functionality.

Through a link on Sears Good News Now, visitors also can click onto http://www.sears.com for a chance to win one of 40 once-in-a-lifetime 'golden wishes' and more than 22,000 prizes in "The Search for the Golden Wish Ticket" giveaway now through Dec. 24, 2008. LL Cool J, Ty Pennington, and the Teutuls from the Orange County Choppers, will take players on an entertaining search for the Golden Wish ticket. Players can simply select their favorite celebrity character, who "jumps" into the wish bag to help find the winning ticket. Players pick the ticket they find in the bag or send them back in for another try. Thousands of tickets reveal instant prizes and savings coupons on Sears' merchandise. More than 30 million Golden Wish tickets will be distributed in-stores and online while supplies last.

Sears' future hanging on holiday sales
Poor showing may jeopardize retailer in '09, analysts say
By Sandra M. Jones - Reporter - Chicago Tribune
November 18, 2008

It was four years ago this week when billionaire investor Edward Lampert stunned Wall Street by announcing that Kmart Holding Corp., the discount chain he resurrected from bankruptcy, had agreed to buy Sears, Roebuck and Co., America's largest department store chain.

"This is going to be an enormous undertaking," Lampert said at a New York news conference at the time.

Few wanted to heed Lampert's cautionary tone. The stock in the new company soared as investors bet that the hedge fund guru would find a way to turn two ailing retailers into cash cows.

That never happened. Now, Sears is running out of options.

While most analysts predict Sears will make it through the holiday season, questions are emerging about how the company will manage next year.

Sears generates 30 percent of its annual revenue in November, December and January, according to its annual report.

With most economists saying the U.S. is in a recession and predicting it won't get any better until at least next spring, this holiday is a make-or-break season for Sears, said credit analyst Sean Egan.

"If they're going to make any money, they're going to make it over the next 40 days," said Egan, managing director at Egan-Jones Ratings Co., an independent credit rating agency.

"It's like crossing the desert. They need to have a lot of water stored up to cross the desert.

"If they don't ring up terrific holiday sales, it's going to be fairly difficult for them to survive to the next holiday season."

As Sears Holdings Corp. heads into its fourth holiday season, its shares are trading at a record low of $33.82, down from more than $100 as recently as September and a high of $191.93 in April 2007.

The stock market values the company at $4.3 billion, one-third of the
$12.3 billion value put on the stock-and-cash deal when it was completed in March 2005.

As Americans worry about their jobs, debt and homes, they are buying less of the goods Sears sells: appliances, tools, tires and clothing.

Meanwhile, the once-heady prospect of Sears raising cash by selling its stores is fading. The retail landscape is littered with empty storefronts, and the list of retailers going out of business grows longer each week.

Retailers that were once interested in the mall stores Sears owns, such as Target and J.C. Penney, are coping with the economic downturn by slashing their expansion plans.

Even the strongest retailers—with the exception of Wal-Mart Stores Inc.—are watching their sales decline and profits fall as consumers forgo discretionary purchases. Sears has the added burden of heading into the holiday season with a history of sliding sales and years of underinvestment in its stores.

"Sears is in the eye of today's consumer spending storm," said Goldman Sachs Group Inc. analyst Adrianne Shapira in an Oct. 31 report. Sears' appliance business is "vulnerable" as shoppers curtail big-ticket purchases, and Kmart's market share is likely to accelerate against a "better executed and sharply priced Wal-Mart," Shapira wrote.

The appliance business accounts for 15 percent of Sears' revenue.

Sears is scheduled to report third-quarter earnings Dec. 2. Sears officials declined to comment.

Deutsche Bank Securities Inc. analyst Bill Dreher last week lowered his third-quarter earnings estimate for Sears to a loss of 50 cents a share compared with a 1 cent profit in the third quarter of 2007.

He cited an uptick in liquidation sales from rival retailers such as Circuit City and Linens 'n Things, constant turnover in Sears' senior management and a tough market for selling assets such as the Lands' End division or the Craftsman brand among his reasons, according to his report.

Sears "owns a lot of real estate and intellectual property," Dreher noted, but "realization would be very difficult in the current environment."

Whatever you do, don't buy Sears
Investor Daily: Betting on the retail sector these days isn't for the faint of heart. But here's one stock to avoid at all costs.
By Suzanne Kapner, writer - Fortune.com
(November 18, 2008)

NEW YORK (Fortune) -- Investors who think shares of Sears Holdings are a bargain after plummeting 80% from their peak should think again.

That might sound like a no-brainer after retailers across the board - from Macy's (M, Fortune 500) to Best Buy (BBY, Fortune 500) - have been reporting dismal third quarter results amid one of the worst consumer spending downturns in decades. But there are reasons why Sears (SHLD, Fortune 500) is likely to disappoint more than most when it reports earnings Dec. 2.

A big chunk of the Hoffman Estates, Ill.-based retailer's sales comes from appliances, tools and electronics - categories that have been decimated by the housing collapse. Sears and its sister retailer Kmart have long been getting clobbered by competitors like J.C. Penney (JCP, Fortune 500) and Wal-Mart (WMT, Fortune 500). That drubbing is likely to get worse in an economic downturn.

What's more, Sears provides few clues between earnings reports, such as monthly sales figures or earnings guidance, to help analysts make accurate profit predictions. Analysts expect Sears to lose 50 cents a share in the third quarter ended Nov. 1 and earn $2.51 for the year. That compares with break-even for the year-ago quarter and $5.70 in earnings per share for fiscal 2007.

Credit Suisse analyst Gary Balter cut his 2008 earnings estimates last week, to $1.19 a share, but concedes that his revision may be too high. Meanwhile, Richard Hastings, a consumer strategist at the investment bank Global Hunter Securities, says he's concerned that Sears' sales of big-ticket items were impacted in the third quarter "greater than is generally understood."

Another bearish sign: Hedge fund Pershing Square Capital, run by activist investor William Ackman, recently sold all but 500,000 shares of what had previously been a 6.7 million share stake in Sears.

Sears' stock, which traded above $190 back in April 2007, is now changing hands around $34. Some analysts say the shares have further to fall. Balter thinks the stock could trade as low as $20. At is current level, Sears' trailing price to earnings ratio, at 9.7, is more expensive than most of its major competitors, including J.C. Penney, Macy's and Kohl's (KSS, Fortune 500).

"It's the most expensive stock we cover," Balter said.

A years-long decline

Much of that premium is predicated on the expectation that Eddie Lampert, the billionaire hedge fund manager who controls Sears, will live up to his boy wonder status and magically turn Sears' lemons to lemonade.

The company owns valuable brands, including Kenmore appliances, Craftsmen tools and Lands End apparel, as well as a pile of real estate. But those assets are worth less than they were in November 2004, when Lampert, after rescuing Kmart from bankruptcy, used its shares to buy Sears, Roebuck & Co. and create what is now called Sears Holdings.

So what does the future hold for Sears, one of the oldest names in American retailing? Despite a brief revival in the 1990s, Sears long ago lost its way. The company's problems, including a lack of focus and eroding customer service, predate Lampert's involvement. But Sears' slow decline doesn't mean it can limp along indefinitely.

While Sears is sitting on a $1.3 billion cushion - the difference between the cash it brings in from operations and what it owes in rent and interest payments - that safety net is expected to shrink in coming years as sales continue to decline.

"Sears is about as badly positioned as anyone we cover," said Morgan Stanley analyst Gregory Melich.

Also key to its survival is maintaining the confidence of suppliers. Electronics retailer Circuit City, which filed last week for Chapter 11 bankruptcy protection, was pushed to the edge when vendors stopped shipping goods. One important difference in Sears' case: collateral - essentially its inventory - is more than double its credit line, which should reassure vendors.

Sears spokesman Chris Brathwaite denies that the retailer is in dire straits. "Sears Holdings has consistently maintained a strong capital structure with more than adequate liquidity," he said. At the end of the second quarter, Sears had $1.5 billion in cash and a $4 billion revolving credit facility in place, which doesn't expire until 2010.

Still, it's not clear that Lampert wants Sears to survive. He has not made the usual store upgrades necessary to keep Sears competitive with peers, which suggests he is running the company for the cash it generates. Lampert has used some of the cash for buybacks, which typically boost a company's share price.

But you can only milk a cow for so long before it runs dry - one reason why investors should steer clear of this stock.

Lampert's Lament
By Duncan Greenberg - Forbes.com
November 17, 2008

Two years ago, Edward Lampert, the 46-year-old founder of investment firm ESL Investments, was a newly minted Master of the Universe.

He managed large sums of money for Forbes 400 stalwarts like David Geffen and Michael Dell. His personal fortune swelled to $4.5 billion, and his stellar returns invited gushing comparisons to a young Warren Buffett. To many, he was the envy of Wall Street.

Today, Lampert is worth less than $2 billion--and will likely become even poorer in the coming months. He faces the very real possibility that investors will pull their money out of ESL by the end of the year. Since January, the value of Lampert's portfolio has fallen an estimated 40%, extending its losses from 2007.

Even worse: His largest and most famous investment, Sears Holdings Corp., looks as if it can no longer compete with other big-box retailers like Wal-Mart, Target, Best Buy and Home Depot. As a result, rival hedge funds are betting against him, spurred on by a recent spate of high-level departures, including Sears' chief financial officer, J. Miles Reidy.

Six years ago, Lampert, who declined to comment for this story, steered Kmart out of bankruptcy after gaining control of the struggling retail giant by buying its bonds. He later merged Kmart with competitor Sears, Roebuck to create Sears Holdings Corp., the nation's third largest retailer by sales. The deal was hailed as brilliant by analysts and investors who bought the company's shares in droves.

In recent months, however, fears of a prolonged recession have roiled investors in industries that depend on customers continuing to splurge on clothing and appliances. Sears' stock is down 60% since May. ESL's 50% stake in Sears was worth $11.8 billion early last year. Today, it's worth less than $3 billion.

Sears' problems stem, in part, from its frugality. Instead of enticing customers with sleeker merchandise, plush store renovations and catchy ad campaigns, Lampert focused on cost-cutting measures that boosted the company's margins but did little to divert shoppers from competitors Wal-Mart, Best Buy and Kohl's.

At the same time, Lampert initiated costly share buybacks that some analysts believe are unsustainable, given the company's worsening financial position.

In August, W. Bruce Johnson, Sears' interim chief executive announced that the company expects this year's 12-month "adjusted EBITDA" (the company's internal measure of cash from operations) to be "comparable to" last year's, which was $2.55 billion.

To reach that goal, however, our calculations suggest Sears will have to grow its operating cash flow in the second half of the year by as much as 50% at a time when other retailers are struggling to stay in business.

This week, Circuit City filed for bankruptcy. Macy's, the first of the major retailers to report results, said it lost $44 million in the third quarter, a clear sign of the carnage to come this holiday season. Industry-wide sales are expected to rise an anemic 2.2% in November and December, 50% below the 10-year average. Sales in October were down 4.1% with gas stations and car dealers, such as AutoNation, another ESL holding, hit the hardest.

Sears' dim prospects have stoked the interest of short-sellers. In May, Lone Pine Capital, the hedge fund run by billionaire Stephen Mandel, disclosed it owned $100 million in Sears put options, contracts whose value will soar if Sears shares continue their downward trajectory.

That trajectory could accelerate if Lampert's investors start withdrawing their money, forcing the liquidation of ESL's Sears stake. According to a Morgan Stanley research report published in early September, which based its analysis on a price of $91.57, a massive sell-off brought on by redemptions could shave as much as $8 off the company's value.

Lampert may have one thing going for him. His investors agreed to a mandatory five-year lockup period and would be unable to withdraw from ESL if they invested after 2003. If he can stave off significant withdrawals, he may be able to keep his portfolio from crumbling under the weight of the recession long enough to stage a comeback in late 2009 or 2010. The number of locked-up investors Lampert has in his funds, however, is unclear.

Last year, Goldman Sachs reportedly helped Lampert raise billions in new investor capital, further reducing the risk, in the near-term at least, that his coffers will run dry.

Target plans price cuts despite lower 3Q earnings
By Mae Anderson, AP Retail Writer - Associated Press
November 17, 2008

NEW YORK - Target Corp. said Monday it will aggressively cut prices to give consumers bargains during the holiday season, even as weak sales of its apparel and home offerings led third-quarter earnings to fall 24 percent.

The discount retailer also said sales in established stores have been weak so far in November, and if that persists it expects fourth-quarter earnings below analyst expectations.

"The increasing financial challenges and economic uncertainties facing American households continued to pressure our performance during the third quarter," Chief Executive Gregg Steinhafel said during a conference call with analysts.

He also cited higher write-offs in the company's credit-card business, where profit fell 83 percent. Target added $104 million during the quarter to a reserve fund to cover future write-offs as customers have trouble paying their bills.

The company has fared worse than its chief rival, Wal-Mart Stores Inc., as consumers cut back on discretionary spending and shop mainly for necessities, since more than 40 percent of Target's revenue comes from nonessentials such as trendy fashions and housewares.

Last week, Wal-Mart said its third-quarter profit rose 10 percent, ahead of analyst expectations, as sales increased 7 percent.

During the holidays, Target will remain "keenly focused" on offering low prices on national brands and its own products and will match Wal-Mart prices on identical items in local markets, said Kathryn Tesija, Target's executive vice president of merchandise.

The company will also offer half a dozen "value items" online every day at special prices.

"We have taken a very aggressive point of view this year in terms of our promotional pricing, so we expect to be price leaders on selected items in our circular," Steinhafel said. "This is not unlike what we've done in the past. But given the current environment and recognizing how challenging it is we will be even sharper than we have in prior years."

The Minneapolis-based retailer said profit for the three months ended Nov. 1 fell to $369 million, or 49 cents per share, from $483 million, or 56 cents per share, last year. That was just above the average of 48 cents per share predicted by analysts polled by Thomson Reuters.

Revenue rose 2 percent to $15.11 billion from $14.84 billion last year, falling short of the $15.24 billion analysts expected. Sales were helped by new-store expansion, but that was offset by sales in established stores, which fell 3.3 percent during the quarter.

Target said sales at stores open at least one year, a key retail metric known as same-store sales, are expected to fall 6 percent to 9 percent in November. If they keep dropping in the mid single-digit range during the quarter, the company expects earnings of 90 cents to $1 per share. Analysts had been expecting a profit of $1.22 per share, and Target shares fell 49 cents to $32.54 in afternoon trading.

Profit in its credit-card business fell to $35 million from $202 million last year because of Target's lower investment in the portfolio, a decline in its overall performance because of higher bad-debt expenses and lower interest rates.

The company sold 47 percent of its credit card receivables to JPMorgan Chase in May.

Target said it will stop most share repurchases for now and cut its 2009 expected capital expenditures by $1 billion, mainly due to a lower estimate of 2009 investments in stores that would have opened in 2010 and beyond.

"The current environment and our financial outlook have naturally reduced our appetite for investment in our business," Chief Financial Officer Doug Scovanner said in a statement.

Meanwhile, Target said it was still evaluating the proposal last month by investor William Ackman, who heads Pershing Square Capital Management, which owns just under 10 percent of Target's common stock, to spin off a real estate investment trust that would take ownership of the land Target owns under its stores and distribution centers.

Lampert takes hit on Sears holdings
SEC filings show his hedge fund buying into Fannie, other financials
By Sandra M. Jones - reporter - Chicago Tribune
November 15, 2008

Sears Holdings Corp. Chairman Edward Lampert saw his investment in the retail chain dive to a record low Friday in the wake of the industry's worst monthly sales drop on record, while a regulatory filing disclosed that his hedge fund poured money into Capital One Financial Corp. and Fannie Mae.

Sears shares fell 14 percent, their biggest one-day drop, to $38.27, Friday after the Commerce Department reported a 2.8 percent decline in October retail sales. As recently as September, Sears stock was trading at more than $100.

ESL Investments Inc., Lampert's Greenwich, Conn.-based hedge fund, began buying shares in credit card issuer Capital One Financial last year. The fund held 9.9 million shares, valued at $504 million, as of Sept. 30, according to documents filed with the Securities and Exchange Commission late Friday. The fund also said it bought 34.6 million shares of mortgage giant Fannie Mae, valued at $52.9 million, in the quarter ended Sept. 30.

The U.S. government took control of the Federal National Mortgage Association, known as Fannie Mae, on Sept. 7, after a wave of mortgage defaults.

Additionally, Lampert's fund bought 550,000 shares of Hartford Financial Group Inc., worth $22.5 million, and nearly doubled his stake in CIT Group Inc., to 7.3 million shares worth $51 million, in the quarter, the filing said.

Lampert owns 52 percent of Hoffman Estates-based Sears through ESL, making it his largest equity investment. He also holds large stakes in AutoNation Inc., AutoZone Inc. and Citigroup Inc.

Activist hedge fund investor William Ackman, who had made a big bet on Sears a year ago, dumped most of those holdings last quarter. Pershing Square Capital Management LP, Ackman's New York-based hedge fund, held 501,000 shares of Sears as of Sept. 30, down from 6.7 million at the end of June, according to SEC filings. Ackman is known to invest in retail companies for their real estate.

Sears to close 7 more stores
By Sandra Jones - staff reporter - Chicago Tribune
November 13, 2008

Sears Holdings Corp. plans to shutter another seven poor performing stores in February, bringing to 19 the number of stores pegged to close early next year as retailers grapple with one of the worst consumer spending environments in decades.

The Hoffman Estates-based company told employees Thursday morning that it intends to close four Great Indoors stores, including one in Schaumburg, and three Sears Essentials stores due to "underperformance," according to company spokeswoman Kimberly Freely.

The Great Indoors stores are slated to close on or around Feb. 4 in Schaumburg, Las Vegas, Woodbridge, N.J., and Chino Hills, Calif. The Sears Grand and Sears Essentials stores will be closing in American Fork, Utah; Clearwater, Fla.; and Menomonee Falls, Wis.

After hedge fund investor Edward Lampert engineered the combination of Kmart and Sears three years ago, Wall Street anticipated Sears would sell some of its prized real estate to retailers looking to expand. That never happened. And now the retail landscape is littered with empty storefronts as struggling retailers either go out of business, close stores or slow expansion plans.

Last month Sears decided to close on Jan. 31 a dozen stores, including eight Kmarts, two Sears mall stores, a Sears Grand and a Sears Essentials.

Back in the 1990s, Sears had ambitions to build at least 100 Great Indoors. The upscale home decorating and remodeling format turned out to be too expensive to build and run. Sears currently operates 16 of them and will have a dozen Great Indoors stores in seven states after the latest closings. The last time Sears closed a Great Indoors store was in the summer of 2005 when it shut down a Deerfield location.

Sears Grand and Sears Essentials stores are freestanding formats that also at one time were considered a growth vehicle, but Lampert, as Sears chairman and controlling stakeholder, put that program on hold.

Kmart, for its part, shed hundreds of discount stores when it went through Chapter 11 bankruptcy reorganization in 2002 and has been quietly closing stores piecemeal ever since.

Sears is slated to report third quarter earnings on Dec. 2.

This Year Marks Centennial of Sears Modern Homes:
Pre-Cut Houses by Rail
By David M. Kinchen - Real Estate Writer - Huntingtonnews.net
November 15, 2008

Before 2008 slips into history -- and what a history-making year it's been -- let's mark the centennial of Sears, Roebuck & Co. Modern Homes pre-cut houses. An estimated 75,000 home kits were sold by the merchandiser between 1908 and 1940, shipped by rail to mostly Midwestern and Southeastern states, including West Virginia.

While the designs reflected the tastes of the early 20th century -- some 447 different styles were offered -- Sears Modern Homes were innovative in their use of balloon framing, using studs and joists like today's stick-built houses, and such innovations as drywall and asphalt shingles. You could even buy a house without a bathroom -- the three room, no-bath Goldenrod, for instance -- and buy an outhouse for another $25 -- a concept that appealed to many buyers of summer cottages on the lakes of the region.

At the other extreme, Sears offered designs like the multistory Ivanhoe, with elegant French doors and art glass windows. For an extensive look at the designs offered, click on the web sites below. You could pay close to $5,000 for the top-of-the line big houses -- serious money at a time when an annual income of $1,000 was fairly typical.

I first became aware of Sears Modern Homes in 1986, when I reviewed a book entitled "Houses by Mail" for the Los Angeles Times, where I was a staff writer on the Real Estate section. It's still the best book on the subject. But I must have seen many pre-cut Sears houses in my hometown of Rochelle, IL, 80 miles west of Chicago, without even knowing that they had been shipped to the town by rail. As I recall -- alas, I no longer have the book! -- there was even a model called the Rochelle.

If you didn't find a house to your liking in the special Modern Homes catalog -- an unlikely situation given the wide variety of styles offered -- you could design your own: All you had to do was to sketch out what your wanted or -- better yet -- have a local draftsman draw up blueprints, submit them to the Sears people in Chicago, which would put together a kit with wood, shingles, nails and drywall and ship the kit to your nearest railway station. Rochelle, to this day a major rail center, was served by both Northwestern and Burlington trains.

A few years after the homes were on the market, Sears began offering financing, one of the pioneers in extending credit anywhere in the world. The 1929 Depression marked the beginning of the end for Sears Modern Homes, although houses were delivered until 1940. Many of the houses have survived and are proudly owned by people who find a special pleasure in living in a little-known but important part of housing history.

From the Sears archives: "Over time, Modern Homes catalogs came to advertise three lines of homes, aimed for customers’ differing financial means: Honor Bilt, Standard Built, and Simplex Sectional. Honor Bilt homes were the most expensive and finest quality sold by Sears. Joists, studs, and rafters were to be spaced 14 3/8 inches apart. Attractive cypress siding and cedar shingles adorned most Honor Bilt exteriors. And, depending on the room, interiors featured clear-grade (i.e., knot-free) flooring and inside trim made from yellow pine, oak, or maple wood. Sears’s catalogs also reported that Standard Built homes were best for warmer climates, meaning they did not retain heat very well. The Simplex Sectional line, as the name implies, contained simple designs. Simplex houses were frequently only a couple of rooms and were ideal for summer cottages."

Sears, which sold just about anything imaginable, helped popularize the latest technology available to modern home buyers in the early part of the twentieth century. Central heating, indoor plumbing, and electricity were all new developments in home design that Modern Homes incorporated, although not all of the homes were designed with these conveniences.

Central heating not only improved the livability of homes with little insulation but it also improved fire safety, always a worry in an era where open flames threatened houses and whole cities, in the case of the Chicago Fire. Indoor plumbing and homes wired for electricity were the first steps to modern kitchens and bathrooms. Sears Modern Homes program stayed abreast of any technology that could ease the lives of its home buyers and gave them the option to design their homes with modern convenience in mind, according to the Sears archives web site.

If you're wondering if you have a Sears house, there's an easy way to check it out if your house has a basement. The joists are stamped with a model number and there are web sites -- and the "Houses by Mail" book -- that will give an exterior view and floor plans of the various models. I've seen used copies of "Houses by Mail" on the amazon.com site.

For an online tour of pre-cut houses -- there were other manufacturers besides Sears, including Gordon Van Tine, Aladdin, Lewis Brothers and Sterling -- in the Chicago suburb of Libertyville, click on: http://www.searsarchives.com/homes/index.htm

This useful site also has a bibliography of books and stories on pre- cut houses.
* * *
For a story on Sears pre-cut house in the Old House Journal, click on: http://www.oldhousejournal.com/magazine/2002/july/sears.shtml
* * *
For a 2002 story in the Christian Science Monitor on Sears homes:
http://www.csmonitor.com/2002/0612/p11s02-lihc.htm

Enrollment for Medicare Drug Plans Begins Again
By Steven Reinberg - Reporter - Health Day News
November 14, 2008

With the enrollment period for Medicare's Part D prescription drug coverage program for 2009 kicking off Nov. 15, experts are advising seniors to choose a plan carefully because premiums and covered medications can vary from plan to plan.

"As we enter the fourth year of the Medicare Part D prescription drug program, we continue to see high satisfaction rates among beneficiaries and high participation among plans," Kerry Weems, acting administrator of the U.S. Centers for Medicare and Medicaid Services, said in a statement.

"However, plans do change their offerings from year to year. Some beneficiaries may see significant premium increases or changes, such as reduced coverage in the gap, if they stay in the same prescription drug plan in 2009. We encourage individual beneficiaries to review how their plans are changing and what other options are available to them to determine which plan best meets their needs," Weems said.

Paul Precht, director for policy and communications at the Medicare Rights Center, echoed that advice. "Probably the higher premiums will get some folks to look at their coverage options," he said.

"It's going to be tough for people. The premium increases are substantial," Precht added. "People are also seeing increases in the co-payments -- it comes at a tough time."

Medicare prescription drug coverage, sometimes called Part D, is insurance for seniors and some disabled people that covers both brand- name and generic prescription drugs at participating pharmacies. Open enrollment for Part D runs until Dec. 31.

People who are satisfied with their current plan don't have to do anything to stay enrolled. But those in so-called standalone plans that only cover medications will see premiums increase by an average of $7.40 a month, from $29.89 in 2008 to $37.29 in 2009, according to Medicare officials.

Consumers should be smart when choosing a plan because premiums can vary widely, from $10.30 a month to as much as $136.80 a month. Most people should be able to find a plan in the lower premium range, according to the Kaiser Family Foundation.

Most Part D participants who don't qualify for a low-income subsidy and who don't switch plans will see an increase in their monthly premium, according to the foundation. Twenty-seven percent will see premium increases of at least $120 per year.

Premiums aren't the only consideration when choosing a plan. Another important issue is making sure the plan you choose covers the drugs you take. Covered drugs and restrictions on drugs vary from plan to plan, so it's important to review each plan before making a choice, Precht said.

One of the most serious issues in choosing a plan is the coverage gap, or so-called "doughnut hole." While in this gap in coverage, most Part D participants must pay 100 percent of their total drug costs. For most plans this will total $3,454 in 2009, according to the Kaiser Family Foundation.

In 2009, nearly all Part D plans have a coverage gap, but one in four plans offers limited coverage in the gap -- generally coverage for some or all generic drugs, though some plans also cover some or a few brand-name drugs, according to the foundation.

Considering the price of drugs in a plan is also important, Precht said. "There are a number of plans that charge quite a bit more for generics than other plans," he said. "Particularly for people who take multiple drugs, that can make a difference between getting in the doughnut hole or not getting in the doughnut hole."

Precht said some people use a combination of strategies to reduce their drug costs. "They rely on the cheap generics, if you can get it from some of the 'big box' stores, using Part D for brand name drugs, plus buying drugs from Canada as an option for brand-name medications," he said.

People in Part D who meet the requirements for the low-income subsidy usually aren't responsible for costs in the coverage gap. The gap was intentionally included in the plan when it was launched four years ago so costs would not exceed the limits set by Congress.

Another option for some people may be a so-called Medicare Advantage Plan. These plans cover both your medical care and prescription drugs. But before enrolling in one of these plans you may want to be sure your doctor and hospital are part of the plan you choose.

Wal-Mart Flourishes as Economy Turns Sour
By Miguel Bustillo and Ann Zimmerman - Wall Street Journal
November 14, 2008

Wal-Mart Stores Inc., the nation's largest private employer, is reaping big gains from the souring economy even as consumers cut back, retail chains struggle and thousands lose their jobs.

On Thursday, after a week of bad news from retailers such as Best Buy Co. and Starbucks Corp., Wal-Mart said earnings for the third quarter rose 9.8% while sales rose 7.5%. At stores open at least a year, sales rose 3%, twice as much as a year before, and far better than nearly every other U.S. retailer.

Behind the figures is a confluence of trends fueled by the downturn. As strapped consumers look for cheaper goods, and weaker retailers go out of business, Wal-Mart is using its unmatched economies of scale to drive down prices, undercut competitors and squeeze costs out of suppliers ever more dependent on the Bentonville, Ark., behemoth.

Indeed, the downturn is increasing Wal-Mart's clout just as its dominance was being threatened by diminishing returns on its big-box expansion formula, more-selective consumers and a growing field of rivals. The company's size is now turning to its advantage: For every $1 spent in the last year on goods other than cars in the U.S., 8.2 cents went to a cashier at a Wal-Mart store or a Sam's Club, the company's membership warehouse chain, according to Michael Niemira, chief economist at the International Council of Shopping Centers.

Even with unemployment rising, Wal-Mart said that it had hired 33,000 new employees in the 12 months prior to October. Its U.S. work force now stands at 1.45 million, making it an economic driver for millions of other jobs dependent on Wal-Mart.

On Thursday, the Labor Department reported that the number of workers filing new claims for jobless benefits rose by an unexpectedly steep 32,000 last week to 516,000, the highest since the weeks following the Sept. 11, 2001 attacks. The total number of U.S. workers drawing jobless benefits for more than one week hit a 25-year high this month.

Wal-Mart is using its current edge to accelerate what it hopes will be a permanent turnaround of its tarnished image and slowing business. The goal: to hold on to its gains when the economy improves and its customers begin trading back up to trendier rivals such as Target Corp. and Whole Foods Market Inc.

"Our balance sheet is actually stronger today than a year ago. If you think of the environment we are in, there are very few people who can say that," Tom Schoewe, Wal-Mart's chief financial officer, said in an interview.

Just two years ago, the discount retailer appeared to have lost its way after some failed efforts to attract more upscale customers, and bad publicity from union attacks on its labor practices and a class- action sex-discrimination lawsuit. The lawsuit is still pending in federal court in San Francisco.

Wal-Mart U.S. sales were slowing after reaching what analysts viewed as a saturation point with its supercenters, and as Target and other rivals lured away shoppers with cleaner stores and more appealing merchandise.

About 18 months ago, Wal-Mart forged a plan to turn things around. It slowed new store growth in the U.S. and returned to its low-cost roots. It also began executing a makeover featuring a sunny new logo, a heavily publicized environmental campaign, tidier stores, and a more targeted mix of free-trade Argentine wines and high-definition videogames to go along with the diapers and dog food.

These improvements boosted the company's appeal just as the economy started to turn. While most retailers have seen fewer customers in recent months, Wal-Mart recently said in a conference with analysts that it has seen a 2% jump this year in shoppers from households earning $65,000 or more. And while competitors caught in the credit crisis struggled last month to borrow money to pay for holiday inventory, Wal-Mart secured several hundred million dollars of commercial paper to help finance its purchases at less than 2% interest.

Wal-Mart on Thursday reported net income of $3.138 billion for the third quarter, up from $2.857 billion the previous year. That amounted to diluted earnings per share of 80 cents, up from 70 cents a year before. Net sales were $97.634 billion, up from $90.826 billion.

Wal-Mart's strength amid weakening rivals has given it leverage to negotiate lower prices from its suppliers.

Mr. Schoewe, Wal-Mart's CFO, recently told analysts that several cash- pinched suppliers had asked the retailer to pay for shipments faster. Wal-Mart agreed -- but only after extracting price reductions that it could pass along to consumers, Mr. Schoewe said.

But Wal-Mart is not immune to the chaos in the world economy. On Thursday, the company warned that currency fluctuations were beginning to blunt progress in its international business. It slightly lowered its fourth-quarter profit estimate by six cents per share, to between $1.03 and $1.07. It also tweaked its annual earnings forecast, which it had raised in August, to a range of $3.42 to $3.46, down from $3.43 to $3.49.

There are other signs of potential weakness. A big part of Wal-Mart's sales improvement this year was due to a transitory lift from federal stimulus checks and food, which was priced higher than the year before partly due to inflation. Both of those trends have begun to temper.

The retailer has also been expanding market share in its beefed-up electronics section, and more recently in sales of apparel, thanks to the addition of well-known teen brands such as l.e.i. jeans. Such expansions make the company vulnerable to the same sales declines in big-ticket items that led consumer electronics giant Best Buy Co. Wednesday to warn of steeply lower profits in the coming months.

And when the economy eventually improves, Wal-Mart will still be facing one of its biggest problems: the lack of an obvious growth engine that can propel expansion the way its enormous U.S. supercenters did through the last decade and a half.

With limited new growth prospects in the U.S., which comprises 70% of the company's revenues, Wal-Mart is shifting attention internationally. Over the next five years, it plans to invest two thirds of its capital expenditures to high-growth markets such as Brazil and China.

But Wal-Mart's foreign forays have had a checkered history. The risks were highlighted Thursday when the company reported that while it was notching strong same-store sales in the U.S., its Japanese stores were down 3% compared to the same period a year ago.

Wal-Mart's image problems also persist. In ads and press releases, union-funded groups continue to portray Wal-Mart as a retail vampire draining the lifeblood of Main Streets across America.

YouGovPolimetrix, a firm that polls Americans on brand perception, says people think more positively about Wal-Mart this year than they have in the past, but less positively than they do about Target. And among college-educated consumers, Wal-Mart's reputation has not improved.

As Janine Keller shopped at a Wal-Mart in suburban Houston earlier this month, she said she felt a little guilty, citing the retailer's reputation for low wages and stores on the periphery of towns that spur urban sprawl.

"If I could afford to keep shopping at Whole Foods, I would," said Ms. Keller, 44 years old. "But when the economy gets better, I know I will go back. It's probably silly but still I don't feel good about shopping at Wal-Mart."

Not everyone will feel that way, says Michael Niemira, the council of shopping centers economist. "I do think they will lose some of this customer base when people get more money in their pockets," he said. "But if they keep even half, that's a big deal."

Shopping a few aisles over from Ms. Keller, oil firm manager Shree Vikas said he was a Wal-Mart convert. "The prices can't be beat, and I honestly don't see a difference in quality," he said as his wife and two daughters loaded his cart with Silk brand soy milk.

J.C. Penney to Tout Bang for Buck
By Cheryl Lu-Lien Ta - Wall Street Journal
November 13, 2008

J.C. Penney Co. is turning its sights to shoppers who may be looking to spend less this holiday season.

An ad from J.C. Penney's 2008 holiday campaign. A marketing campaign that kicks off Friday will aim to convey to patrons of higher-end stores that Penney sells similar items at lower prices. For example, in one ad that will run in cinemas a mother opens a small box bearing the Penney logo to find a sparkling diamond necklace.

"It's going to be a real dogfight out there for the customer's dollar," said Mike Boylson, the Plano, Texas, retailer's chief marketing officer. "We need to take market share from somebody else."

Like other retailers, Penney is bracing for a tough holiday season after watching consumers curtail spending this fall. In its new ads, Penney will emphasize both price and the brands it carries, including national brands such as Nike and Sharper Image and house brands such as American Living, designed by Ralph Lauren. "When business is good, you emphasize branding more but when it's not, you push on price harder," Mr. Boylson said. "We have to communicate style, quality and affordability."

This year's campaign will include more online ads than in the past.
On its Web site, Penney will launch a weekly video "newscast" in which gift ideas are discussed.

"It's a whole new way of communicating that's much more engaging than static print," said Mr. Boylson, who hopes shoppers will email the videos to friends or load them on their own Web sites or blogs.

Penney also plans to send more email alerts this holiday season and to promote its Web site in its stores.

Drug costs for seniors growing
By Julie Appleby - USA TODAY
November 12, 2008

Elderly and disabled people in Medicare prescription drug plans with the largest enrollments will pay 43% more on average in monthly premiums next year than when the drug program began in 2006, and some enrollees will see increases of as much as 329%, two analyses show.

The rising costs "are wreaking havoc on seniors' wallets and are simply not sustainable in the long run," says Rep. Henry Waxman, D-Calif., who chairs the House Committee on Oversight and Government Reform.

Overall, the Medicare drug program is costing taxpayers less than originally estimated. The government's drug spending on the program fell by 12% to $44 billion in the fiscal year that ended Sept. 30, largely from the widespread use of low-cost generic drugs. The government pays part of the drugs' costs for seniors and helps subsidize premiums for low-income people.

Still, seniors have seen their actual expenses for premiums and drug co-payments go up each year. Insurers have raised prices for many reasons, including increases to cover higher drug costs and more prescriptions filled.

Monthly premiums in the drug-only plans will go from an average $26.03 in 2006 to $37.10 next year, according to Avalere Health, a private consulting company. People who signed up for a policy marketed as the low-price leader in 2006 — Humana's standard plan — will pay $40.83 next year, up from $9.51 in 2006, according to Avalere's analysis and a similar one from the Kaiser Family Foundation, a non-partisan research group.

Humana raised premiums to reflect its actual costs, according to its government filings. Spokesman Tom Noland says its prices remain competitive with other insurers.

The amounts Medicare beneficiaries pay at pharmacy counters as their share of drug costs, particularly for brand-name products, jumped in many plans as well — from $1 a month per prescription to more than $13 per drug, Avalere reported.

Enrollment for the drug program next year will begin Saturday. About 17 million people are enrolled in drug-only plans and an additional 9 million are in plans that cover both drugs and medical care.

Avalere and Kaiser looked at drug-only plans with the largest enrollments. Kaiser studied six plans nationally that cover about half of all enrollees. Avalere studied plans that cover about 60% of the enrollees.

Medicare spokesman Jeff Nelligan says most beneficiaries should be able to find a plan that is the same price or cheaper than what they're paying now, as long as they are willing to change plans. In some cases, the lower-cost plans cover both medical care and drugs and are offered by private insurers as an alternative to traditional Medicare.

Yet many seniors are worried. Mary Madden, 80, a retired administrator from Cleveland, says her premium will rise next year from $33.70 to $38.20, and the monthly amount she pays for two of her drugs will go from $30 to $38 each.

She's tempted to drop out of the program and go without drug coverage — but she knows she'll face a financial penalty if she rejoins later. "So, I'm leaning (toward) staying in," she says.

Robert L. McIntire, Sears executive, dies at 88
Philadelphia Inquirer
November 12, 2008

Robert L. McIntire, 88, a store manager in South America, died of bladder cancer Friday at Cathedral Village, a retirement community in the Andorra section of Philadelphia.

A 1938 graduate of Olney High School, he was a 1947 graduate of Thunderbird, the American Graduate School of International Management, in Glendale, Ariz.

During World War II, Mr. McIntire was a Navy dive-bomber pilot.

In 1947, he became the manager of the principal Sears, Roebuck & Co. department store in Havana, Cuba.

After the Castro revolution, Mr. McIntire worked at Sears outlets in Texas before Sears named him its Venezuelan regional manager in 1967, with offices in Caracas.

In 1970, he was named president of Sears of Peru, with offices in Lima, his son John said. In 1977, Mr. McIntire returned to Caracas as president of Sears' 14-store Venezuelan operation.

Before Mr. McIntire retired in 1981, his son said, Venezuela honored him with its Order of Francisco de Miranda, its highest award to a foreigner.

Upon retirement, Mr. McIntire settled in Glenside before moving in 2001 to Cathedral Village.

He was a member of the Philadelphia Cricket Club in Chestnut Hill.

In addition to his son John, Mr. McIntire is survived by another son, Robert A., and six grandchildren. His wife, Lalita, died in 2002.

Friends may call after 9 a.m. today at the Immaculate Heart of Mary Roman Catholic Church, 819 E. Cathedral Rd., Andorra, where a Funeral Mass will be said at 10. Burial will be in Holy Sepulchre Cemetery, Cheltenham.

Lampert Buyback, Sales Drop Drain Sears Cash in Holiday Crunch
By Lauren Coleman-Lochner - Bloomberg.com
November 11, 2008

Sears Holdings Corp. is entering what may be the worst holiday season in decades with 42 percent less cash on hand than a year earlier, declining cash flow, hard-to-sell real estate and retail operations lagging behind competitors.

While Chairman Edward Lampert has downplayed the importance of revenue growth, the Hoffman Estates, Illinois-based company now has little else to fall back on to boost cash flow. Sears faces a loss of $44 million, or 38 cents a share, excluding some items, on sales of $11 billion when it reports third quarter results Dec. 2, according to a survey of analysts by Bloomberg.

"We're definitely arriving at a point when some people will make the argument that the steps not taken before are logically leading to the operating losses that are building up now,'' said Richard Hastings, a consumer strategist at Global Hunter Securities LLC of Newport Beach, California.

More than three years after Lampert's Kmart Holding Corp. bought Sears Roebuck & Co., the 46-year-old chief still hasn't revived revenue growth at the largest U.S. department-store chain. The combined company has seen sales drop at stores open at least a year in every quarter since the acquisition.

Lampert has bolstered cash from operations while spending less on them. Sears's capital expenditures last year were $570 million, less than half of the $1.2 billion by J.C. Penney Co. and a sixth of the $3.6 billion spent by Home Depot Inc. That may hurt the retailer's ability to compete for Christmas sales, according to Russell Jones, the director of retail at consultant AlixPartners LLP in Southfield, Michigan.

Store Investments
Sears hasn't "made the investments that would cause consumers to start coming to the stores more, and on top of that, the economy's causing everyone to spend less in general,'' Jones said.

Competitors such as J.C. Penney and Kohl's Corp. have invested in new brands by designers such as Polo Ralph Lauren Corp. and Vera Wang and sprucing up stores.

Cash flow from operations in the second quarter decreased 27 percent to $515 million after Sears's sales declined 4.1 percent from a year earlier. Third-quarter revenue may fall 4.1 percent, according to the average estimate of analysts.

Lampert also committed $5 billion since the 2005 acquisition for stock repurchases. Cash dwindled from $4.4 billion at the end of 2006 to $1.5 billion in the quarter that ended Aug. 2.

'Not There'
"When times get tough, that cash is just not there anymore,'' said Gerald Hirschberg, a Standard & Poor's credit analyst. ``It could have been there to reinvest in the business if they had not bought back stock.''

For the moment, Sears has "adequate'' access to cash, with borrowings still available under a $4 billion credit line that's up for renewal in March 2010, said Monica Aggarwal, an analyst at Fitch Ratings Service in New York.

Shareholders have seen the value of the stock drop 51 percent in the past year, compared with a 24 percent decline for Home Depot, 16 percent for Lowe's, 56 percent for J.C. Penney's and 32 percent for Kohl's. Through his investment companies, Lampert controlled 52 percent of the stock as of Oct. 15. Activist investor William Ackman's Pershing Square Capital Management LP hedge fund held 6.7 million shares, or 5.3 percent, as of June 30, according to data compiled by Bloomberg. Ackman declined to comment.

Chris Brathwaite, Sears's spokesman, declined to comment on why the stock hadn't risen since the buybacks began.

Pension Declines
Pension costs may cut into the company's spending flexibility. An Oct. 28 Morgan Stanley report by analysts Abhijit Chakrabortti and Jason Todd said increased pension contributions might cost Sears 41 cents a share over time, starting next year.

Sears's 2008 contribution to the fund was $245 million. The company is "apt to see potentially some increased contributions necessary,'' according to Charles O'Shea, a senior analyst at Moody's Investors Service, depending on where it had its assets invested. The plan was 89 percent funded at the end of 2007, according to calculations made using figures from the company's annual report.

"I don't think contributions to the pension plan for 2009 will have a material negative impact on Sears's liquidity,'' O'Shea said.

'Strong Capital'
Sears "has consistently maintained a strong capital structure with more than adequate liquidity,'' Sears's Brathwaite said in an e-mail. The retailer has more than $1 billion available under its credit line for the peak Christmas season, Brathwaite said. "We currently expect to completely repay these borrowings, in the month of December,'' he said.

Part home-improvement retailer, part department store, Sears's profitability trails competitors. Earnings before income, taxes, depreciation and amortization fell 28 percent last year compared with a drop of 15 percent for Home Depot Inc., little changed for J.C. Penney, and a 2.5 percent gain for Kohl's Corp. Sears's net income, at 1.6 percent of sales last year, trailed the 6.6 percent at Kohl's, 5.7 percent at Home Depot and 5.6 percent at J.C. Penney.

Sears also has been slower to cut inventory levels than Kohl's, J.C. Penney and other competitors. In August it forecast a profit increase in the second half based in part on a pledge to cut inventory after posting a 62 percent net income decline in the second quarter.

Not Done Yet
While the numbers aren't necessarily showing it now, Lampert may be able to show off his cost-cutting prowess during an economic slowdown, Hastings said. "I would trust this situation to him better than almost anyone else,'' Hastings said.

One advantage Sears has in a recession is a wider range in appliances, including more lower-priced choices, O'Shea said. Its brands such as Craftsman tools and Kenmore appliances are also a draw, AlixPartners' Jones said.

"The problem is, that's not strong enough to sustain the entire business,'' Jones said. ``Sears has definitely failed to seize opportunities that they've had, and they're in a tough situation now.''

Chief strategist latest executive to leave Sears
By Sandra M. Jones - reporter - Chicago Tribune
November 10, 2008

Sears Holdings Corp.'s top strategy executive has resigned, part of an ongoing shake-up among the senior management team at the ailing retailer.

Corwin Yulinsky resigned as executive vice president of customer strategy and insight effective Nov. 14, the company said in a regulatory filing Monday. Yulinsky joined Sears in October 2005 from McKinsey & Co. as part of a new group of executives controlling stakeholder and Chairman Edward Lampert brought in to run the company created by combining Sears and Kmart.

The departure follows a wave of other executives leaving the company this summer, including chief marketing officer Maureen McGuire, the head of the home services business Mark Good and Lands' End chief David McCreight.

The Hoffman Estates-based retailer is still searching for a permanent chief executive to replace Aylwin Lewis, who was ousted this year. W. Bruce Johnson, a former Kmart executive, has been interim CEO and president since February.

A Sears spokesman called Yulinsky's resignation "a mutual decision" and declined to comment further.

The retail industry is facing one of the toughest holiday seasons in recent memory as consumers reduce spending. Sears is expected to be particularly hard hit because it enters the grim economic environment after years of declining sales.

The company is slated to report its fiscal third-quarter results Dec. 2. Sears shares fell 1.3 percent, to $52.26 Monday, after having traded as high as $126 a year ago.

Some G.M. Retirees Are in a Health Care Squeeze
By Nick Bunkley - New York Times
November 10, 2008

DETROIT — General Motors is living on borrowed time, spending more than $2 billion in cash a month and lobbying for a government bailout to keep it out of bankruptcy.

And for about 100,000 of its white-collar retirees, time is about to run out on G.M.’s gold-plated medical benefits.

To conserve its dwindling cash reserves, G.M. is eliminating lifetime health care coverage for its legions of retirees at the end of this year, leaving people like Ken Hewitt to fend for themselves in deciding how to cover their doctor’s bills and prescription drug costs.

“Everybody felt like they were set for life,” said Mr. Hewitt, 81, who retired from the former Chevrolet Engineering Center in 1982 and lives north of Detroit. “It’s been difficult, but the information they’ve given us has been beneficial. Still, when you get to be our age, it’s tough to make any big changes like that.”

G.M. has had little choice this year but to make deep cuts wherever it can, including benefits that were long considered sacred.

The move was announced in July as part of a package of broad cutbacks to increase the company’s liquidity, including a 20 percent reduction in payroll for salaried workers and suspension of G.M.’s annual stock dividend of $1 a share.

But even these and other measures have not been enough to stabilize the company’s finances, as the auto industry suffers from a weakening economy and tight credit that makes it hard for shoppers to get loans.

On Friday, G.M. warned that it might run short of cash by mid-2009, and it is asking for federal help with greater urgency.

G.M. has estimated that eliminating the white-collar retiree medical benefits, in addition to pay and staffing cuts in its current white- collar work force, will save the company about $1.5 billion annually. Union contracts prevent the company from revoking coverage for former factory workers. Ford and Chrysler already have cut health coverage for salaried retirees.

In fact, paying the cost of hospital stays, surgeries and expensive drugs for retirees, a group now larger than G.M.’s active work force, is a major reason the company’s financial woes are so great. G.M. says it spent $4.6 billion in 2007 on health care for its one million employees and retirees and their dependents.

Many retirees say they are aware of the burden these costs represent to the company, so they do not blame G.M. for cutting them off. Even so, they lament the demise of such a valuable perk.

“If the company goes out of business, we’ll lose everything anyway,” said Richard J. Moore, 70, who held management positions at G.M. plants in New York and Illinois before retiring in 1991 to suburban Phoenix. “You can’t survive by giving away everything.”

G.M.’s decision to halt health care benefits for salaried retirees at age 65 means that nationwide, former engineers, plant managers and executives are anxiously trying to decipher various combinations of Medicare and other insurance plans.

For months they have been poring over stacks of brochures and sitting through sometimes-baffling sales pitches ahead of an enrollment window that opens this month and ends Dec. 31. Because G.M. told them it would cover their health care for life, few studied up on Medicare and other coverage options as they approached retirement.

“Some of these people have been on G.M.’s plan for 40 or 50 years, and now all of this is thrown at them,” said Jack Dickinson, a G.M. retiree who runs the Web site OverTheHillCarPeople.com. “People are highly upset, confused and totally lost. The Medicare system is very hard for older people to tackle.”

Eliminating that confusion has been a major undertaking. G.M. scheduled 150 informational meetings in cities where its retirees are concentrated and hired a company called Extend Health to answer questions and help with Medicare enrollment. A company in Tennessee, My Part D USA, which provides personalized comparisons of different plans, has met with groups of G.M. retirees and is working with OverTheHillCarPeople.com to ease the transition.

“These people have never had to deal with Medicare at all,” said Karyn Blake of My Part D USA, a Detroit-area native whose uncles owned Cadillac and Oldsmobile dealerships. “They’re hearing different things from different salespeople, and they’re totally overwhelmed. I think they kind of feel abandoned.”

Many G.M. retirees have simply turned to one another for help, by getting together with former co-workers who live down the street, sharing information on Internet message boards, or discussing the issue at meetings of the numerous G.M. retiree clubs in Michigan, Florida and other states.

“It’s nothing that we ever had to think about before,” Barbara Spencer, 77, who worked in payroll for Buick and retired in 1988. On Thursday, she attended a meeting of the Buick retirees club to discuss health care options. “You don’t want to make a mistake,” she added.

To help retirees pay for their new coverage, G.M. is raising monthly pension payments by $300, which typically means $240 or $255 after taxes.

The cost of replacement coverage varies, depending on a person’s needs. Some find that they can get adequate benefits for about the same amount as their pension increase, but others must now find several hundred dollars more in their monthly budget.

“Anyone that thinks they can go out and replace insurance that you had with General Motors for $255 and get the same kind of coverage, I’d like to sell them a bridge in Wisconsin somewhere,” said Mr.
Dickinson, 65, whose irritation with G.M.’s move is apparent in the headline “G.M. Robs Their Elderly Retirees” on his Web site atop information about the changeover.

In recent months, he said, the number of visitors to the site has doubled and its membership — for a one-time $25 fee — has grown rapidly, keeping him and a small team of volunteers busy for many hours each day.

Mr. Dickinson said G.M., regardless of its financial woes, was ignoring the steadfast loyalty that its retirees showed to the company by exclusively buying its vehicles and toiling there for decades.

“Many of these people had other jobs offered to them,” he said. “In 34 years with General Motors, I had many opportunities to go in other directions that were much more lucrative, but the promise of health care and pension for life was something that I had to consider.”

None, though, can look at the uncertainty confronting those who work for G.M., Ford and Chrysler today — along with the thousands whose jobs were eliminated — and feel they are the only ones being squeezed.

“I just hope they can recover and come back,” said Kenneth Shear Jr., 70, a former plant supervisor who retired in 1992 and now lives in Summerfield, Fla., in a community with a handful of other G.M. retirees. Mr. Shear was billed $52 to get a pacemaker several years ago, a $148,000 procedure, and never had to pay a health care bill in 31 years at G.M.

“I used to tell some of the guys that worked for me that this job is not going to be available to your kids,” he said. “I’m glad I had my career when I did.”

Retailers Wallow and See Only More Gloom
By Ann Zimmerman - Wall Street Journal
November 7, 2008

U.S. retailers reported dismal sales for October, prompting them to resort to steeper discounts and earlier promotions as they try to salvage the coming holiday season.

Almost 60% of chain stores reported sales for the month that fell below already-weak forecasts. Even a 40% decline in the price of gasoline since July did little to motivate penny-pinching consumers to buy more than the basics.

Department stores, apparel retailers and luxury emporiums posted the worst results. Sales by department stores and upscale retailers slid 11.7% overall from a year ago, led by a 17% decline at Saks Inc., while J.C. Penney Co.'s sales fell 13% and Kohl's Corp.'s slid 9%.
All three said customers just weren't walking in the door.

Upscale retailer Neiman Marcus said its same-store sales fell a staggering 28% while catalogue and Internet purchases plummeted 23% compared to a year ago.

Once again, the exception to the dire data was Wal-Mart Stores Inc., whose reputation for lower prices has siphoned off shoppers from other retailers. Wal-Mart's sales at stores open at least a year rose 2.4%, well above its prediction of a 1% to 2% gain.

The Thomson Reuters index of 34 retailers showed a comparable-store sales decline of 0.7% for October, its lowest level since the company began tracking figures in 2000. Without Wal-Mart, the index fell more than 4%.

The pallid U.S. economy, drained by rising layoffs, the credit crunch and havoc on Wall Street, led retailers to sharply reduce their already grim Christmas sales predictions in just the last six weeks.

In a survey of the 40 biggest retailers, 60% now expect sales in November and December to be flat at best, while some say they will decline up to 15% , according to consulting firm Hay Group. In mid- September, when the firm conducted a similar survey, the majority of retailers expected holiday sales to rise 5% to 10%.

Retailers had been braced for a slow holiday season, and most thought they had planned for the worst by paring back inventories. But since September, sales slowed far more than expected. Retailers now have pinned their hopes on heavy discounting.

"The holidays are not going to be pretty," said Stacy Janiak, vice chairman of the retail practice at consulting firm Deloitte LLP. "You have a highly motivated consumer looking for deals, not just as sport, but out of necessity."

Across the retail landscape, stores are overhauling their plans for Black Friday, the day after Thanksgiving that's the official start to the holiday shopping season.

Retailers have decided they can't wait for the sales boost they usually get through "doorbuster" discounts that day and already are rolling out deep cuts.

Dan de Grandpre, chief executive of Dealnews.com, a Web site devoted to retail bargains, had predicted a 42-inch LCD TV would be a big doorbuster item this Black Friday, priced at $600. "We saw it hit that price a week ago," he said.

In contrast to the usual secrecy surrounding Black Friday specials, which traditionally have been announced Thanksgiving Day, retailers are now trying to catch shoppers' attention early.

Lowe's Cos., the home improvement chain, disclosed 20 of its Black Friday doorbusters on its Web site earlier this week. Kmart, a division of Sears Holdings Corp., has begun announcing Black Friday specials in its weekly Sunday circulars.

Wal-Mart, building on a program it began last year, is advertising on its Web site an early-morning holiday store sale this Saturday, including a 46-inch Sanyo LCD high-definition TV for $798.

Black Friday ads are starting to appear on bargain-hunting Web sites.When Sears's Black Friday circular was leaked to BFads.net last week, the retailer issued a press release touting the "buzz" its specials are creating.

"Everyone wants to get their information out there early," said Michael Brim, a California college student who has run BFads.net since 2003.

Retailers also are getting more creative about marketing Black Friday. Best Buy Co. is holding a Black Friday video contest, with 20 winners getting $1,000 gift cards and a limousine ride to one of the chain's stores. Starting Nov. 16, Sears will distribute 30,000 "Golden Wish Tickets" in its stores and online, entitling winners to prizes ranging from a shopping spree with rapper LL Cool J, to a Sony Corp. media room setup worth $5,000.

The Hay study initially found that 45% of retailers planned to hold Black Friday promotions and the remainder of retailers would run discounts starting in mid-December. The most recent survey showed that 33% of retailers now plan to run the most promotions on Black Friday, while 57% plan discounts starting now and running through New Year's Day.

Even luxury stores have stepped up discounting. In the last month, Saks has offered 60% off new merchandise, a 20% "friends and family" discount and a no-interest, no-payment plan for a year on $2,000 purchases. Neiman's, too, has increased its promotions and said Thursday it would offer more discounts.

Among those releasing data was Macy's Inc., which posted a 6.3% drop for the month and said same-store sales for its fiscal third quarter fell 6%.

Apparel retailers fell 8.6%., led by Gap Inc.'s 16% drop, with similar decreases at all three of its chains. Despite the big fall in same-store sales, the company's fiscal-year earnings guidance remained intact.

Even Costco Wholesale Corp. missed Wall Street's expectations for a 4.4% gain in same-store sales. It posted a 2% jump in the U.S. In contrast, Wal-Mart's competing Sam's Club posted a 3.6% rise, with strong sales in fresh food, groceries and pet supplies.

The anemic sales portend lower profits for retailers, which begin reporting third-quarter results next week. Nordstrom Inc., whose same- store sales slid 15.7%, said it now expects third-quarter profit will be slightly below its earlier estimate of 32 cents to 37 cents a share.

—Kevin Kingsbury contributed to this article.

Sears, Walgreen may find CEOs within
By Sandra Guy - Chicago Sun-Times
November 6, 2008

Chicago's venerable Sears and Walgreen retailers are looking for new CEOs, and names are starting to surface as contenders.

Sears' challenge is to find a CEO to work under Chairman and hedge- fund manager Edward S. Lampert, who is known as a micromanager, while the Hoffman Estates-based retailer reorganizes into separate business units. Former CEO Aylwin Lewis left in February.

One possibility, according to sources, is Wm. Wrigley Jr. Co.
President and CEO William Perez, who is leaving the chewing-gum maker at yearend. Perez is leaving after Wrigley's new owner, Mars, named Dushan (Duke) Petrovich, a longtime Wrigley insider, to run Wrigley. Perez, who was president and CEO of Nike from 2004 to 2006, could not be reached. A Sears spokesman declined to comment.

Some observers believe Sears and Walgreen will stick with insiders. One source said he believed Sears interim CEO Bruce Johnson is the choice. Walgreens, whose former CEO Jeffery Rein abruptly left, may look to President Greg Wasson to stay the course, according to analysts.

Expect Changes in Drug Co-Pays for Medicare
On Eve of Open Enrollment, Many Plans Announce Shifts;
Poring Over the Fine Print
By Jane Zhang - Wall Street Journal
November 4, 2008

Signing Up for Part D
Many Medicare drug plans are adjusting premiums and co-pays next year. Here's what you need to know:
Open enrollment runs from Nov. 15-Dec. 31.
Thick enrollment packets can be confusing. Call your insurer to confirm your expected costs.
Use the online tool at medicare.gov to make sure your plan offers you the best deal.

Millions of older Americans are bracing for big increases in their Medicare drug-plan premiums next year. But consumers also need to watch for changes in co-payment costs, which often can represent the biggest out-of-pocket expense for plan beneficiaries.

In recent weeks, people enrolled in the Medicare Part D program have been receiving information about changes in their plans for next year. Premiums at the 10 largest drug plans are expected to rise 31% on average next year, with some increases topping 60%, according to an analysis by consulting firm Avalere Health LLC. But some insurers also are sharply adjusting co-payments, which consumers generally pay each time they purchase a medication. Adding to the difficulty: People may need to dig deep into the insurance literature to find how their plans are changing.

About 26 million seniors and other eligible Medicare beneficiaries are signed up for the Part D drug benefit, which was begun in 2006 to provide government- subsidized coverage of prescription drugs through private insurers. Each year during the fall open-enrollment period -- which runs from Nov. 15 to Dec. 31 -- beneficiaries may elect to change plans. They don't have to. Indeed, in previous years, only a small percentage of beneficiaries switched plans. But some experts say that people should at least consider it.

"It always pays to do the search again," says Cheryl Matheis, senior vice president for health strategy at AARP, the advocacy group for older Americans. "If your plan's cost is going up, then you really do need to make sure you have the best deal."

For example, the country's biggest Medicare drug plan, AARP MedicareRx Preferred, sponsored by UnitedHealth Group Inc., is expected to boost average premiums by 18% next year to $34.92 a month, according to an Avalere analysis of pricing in five big states. The plan, which had 2.7 million beneficiaries nationwide as of August, will have the same $7 average co-payment for generic drugs. But consumers buying brand-name medications on the insurer's preferred-drug list -- such as cholesterol drug Lipitor and Nexium for heartburn -- will have to shell out $36.40 in average co-payments, up 21%, for each purchase, according to the five-state study.

"The pricing of prescription-drug plans is determined every year by the trends in drug pricing and the number and types of drugs purchased by the members within a plan," said a UnitedHealth spokeswoman.

Co-Payments Jump

Even bigger price changes are expected at Humana Inc.'s PDP Enhanced plan, the third-largest with 1.4 million enrollees. Premiums will jump 51% on average to $39.56 a month, according to Avalere. Average co-payments for generics will surge 75% to $7, and 60% to $40 for preferred brand-name drugs. Avalere's study averaged expected prices for plans in Florida, New York, California, Texas and Illinois.

A Humana spokesman said: "Our prices reflect the experience we've seen over the past three years, and our expectations around what will most interest our members and potential members going forward."

The government doesn't regulate how insurers set premiums and other prices on Part D plans, though the companies must get approval from the Centers for Medicare and Medicaid Services before they can market their plans. Today's presidential elections could bring changes to Medicare's drug benefit. Democratic candidate Sen. Barack Obama has said he wants the government to be able to negotiate directly with pharmaceutical companies for lower prices, an idea Republican rival Sen. John McCain also supports. Sen. McCain also supports making wealthier beneficiaries pay more for their drug benefit.

Consumers' total out-of-pocket expenses, including premiums, deductibles and co-payments, will vary depending on such factors as what part of the country they live in and what specific drugs they use. The plans have various tiers of drug types that each insurer can define differently. In the most basic structure, Tier 1 contains generic drugs; Tier 2 is preferred brand-name drugs; Tier 3 is non-preferred brand-name drugs; and Tier 4 is specialty drugs. John Murdock, a retired electronics engineer in Rigby, Idaho, says he received a 108-page booklet from his insurer describing changes in his drug plan, Humana's PDP Standard plan. Mr. Murdock, who takes two cholesterol medications, says he saw from a chart on page 6 that his premiums were going up 36% to $38.90 a month and that his yearly deductible would rise $20 to $295. The chart also led him to expect a steep jump in his co-insurance, a type of co-payment calculated as a percentage of a drug's cost. But when he got to page 57, Mr. Murdock was relieved to learn his co-insurance would remain at 25%.

Overall, Mr. Murdock figures his out-of-pocket costs next year will rise by 14% to $1,147, not counting possible higher prices for his drugs. "It is certainly hard to translate the tables into real numbers," Mr. Murdock says. "It is especially galling that I have to dig into the data to learn this myself."

Generics Favored

Some costs are coming down. The Humana PDP Standard plan, the country's second-largest with 1.5 million enrollees, is expected next year to lower its average co-insurance rate on generic drugs to 14%, from 25% this year, according to Avalere's five-state study. The average rate on preferred brand-name drugs will stay at 25%, but the rate on non-preferred brand-name drugs, which will include Actonel for osteoporosis, and cholesterol drug Zetia, will jump to 42% from 25%.

Analysts say plan beneficiaries should double check how much their total out-of-pocket costs will change next year and compare that with other plans on the market. Medicare has an online tool called Plan Finder to help consumers do this at www.medicare.gov. A number of insurers also have their own online calculators, but the Medicare site allows you to compare plans from different companies.

Comparing Plans

Consumers should gather a list of the drugs they take, along with the dosage, and plug the information into the Plan Finder calculator. Consumers who have trouble navigating the Internet can enlist help from friends or family or get individual help from the State Health Insurance Assistance Program. (A list of these programs can be found at www.medicare.gov. Near the bottom of the page, click Find Helpful Web Sites, and then click the Related Web Sites tab.)

Plan Finder lets beneficiaries compare plans based on premiums, specific drugs they take, out-of-pocket expenses and their preferred pharmacy networks. The online tool was improved this year to allow consumers to compare the costs of filling a prescription by mail order and at a retail pharmacy. The tool also can offer suggestions to help beneficiaries choose cheaper alternatives, such as generics or other brand-name drugs that treat the same conditions. Medicare officials advise consumers to talk with their doctors about these alternatives.

Insurers next year will continue cutting back on supplemental coverage of the so-called doughnut hole, the coverage gap where consumers generally must begin paying the full cost of their medicines, says Tricia Neuman, vice president and director of the Medicare policy project at the Kaiser Family Foundation.

"Things appear to be getting skimpier," Ms. Neuman says. "Premiums are going up. More plans have deductibles. The overall picture seems to be less rather
than more."

In 2009, the doughnut hole will open up after beneficiaries and their drug plans have spent a total of $2,700, up from $2,510 this year. Consumers then must pay the full cost until their own out-of-pocket spending reaches $4,350. After that, the drug plan picks up most of the tab.

Analysts say the latest price increases might prompt more beneficiaries to switch to Medicare Advantage plans, in which private insurers combine coverage for physician and hospital services, often with prescription drugs. Currently about one-third of Medicare drug-benefit enrollees are in Advantage plans.

The plans tend to have lower premiums than traditional fee-for-service Medicare programs, but might have other disadvantages, such as higher co-payments for hospitalization. A flood of consumer complaints about Medicare Advantage plans prompted the Bush administration this year to bar insurance agents from using aggressive tactics to market the plans.

Wal-Mart Wins Big During Downturn
The retailer was reeling from overexpansion and tough competition. Now it's stressing bargains and pulling in crowds
By Christopher Palmeri - Business Week
November 10, 2008

These are heady times for Wal-Mart (WMT). The Bentonville (Ark.) retailer has been enjoying double-digit profit growth and strong sales as bargain hunters crowd its aisles. Its stock is up about 20% since the start of the year. And shoppers like Sal Garcia of Downey, Calif., are joining the growing ranks of loyal customers. "Look," says Garcia, 52, putting the last of 10 shopping bags into the trunk of his Lexus, "all that for $54!"

Wal-Mart's turn in fortunes has as much to do with a shift in strategy as with the economic downturn. After years of stuffing a wider array of products into stores to broaden its appeal, the $375 billion mass merchant is simplifying its look and drilling down prices of its most popular products. "You'd swear the only reason they're having any success is the economy and customers trading down," says analyst Daniel T. Binder of Jefferies & Co. "But the company has done a lot to help the consumer make that decision."

A little over a year ago, the world's largest retailer was suffering from a midlife crisis made worse by overdevelopment and a costly push to take on Target (TGT) with "cheap chic" offerings. Core customers were confused by an ever-changing mix of products, while higher-end shoppers dismissed Wal-Mart as the epitome of uncool.

Now, the main thrust of Wal-Mart's strategy is what Chief Merchandising Officer John Fleming calls "win, play, or show." "Win" categories are those where Wal-Mart can outmaneuver rivals with low prices on hot products such as flat-screen TVs, including higher-end models. Wal-Mart has doubled its share of the industry's sales to 16% this year, according to market research firm TraQline, while increasing its average sale from $489 two years ago to $660. "Play" applies to areas like apparel where Wal-Mart can be a player but is unlikely to dominate. Here, it's reducing the range of offerings to hot sellers like $20 L.e.i. jeans and cutting back on higher-end items. "Show" are the one-stop-shopping essentials such as hardware, which are necessary to compete with the likes of Lowe's (LOW) and Home Depot (HD). "It's important we have hammers and tape measures," says Fleming, "but not 28 tape measures."

But the big focus for Wal-Mart every holiday season is toys. Rivals have long dreaded the annual slashing of prices in its toy aisle before Christmas. This year, instead of cutting prices by its usual 30%-plus across the board, Wal-Mart is trying to drive traffic by emphasizing a deeply discounted $10 price on a handful of toys—including Barbie and Hot Wheels.

At the same time, Wal-Mart has tried to upgrade the feel of its stores. Crammed blue and gray stores are giving way to more open sales floors with warmer earth tones of mustard, tan, and green. Apparel departments boast wood flooring, while skylights brighten stores more naturally and save energy. It's curbing expansion in an effort to stop new locations from cannibalizing sales at old ones. From opening 218 new U.S. stores in fiscal 2008, Wal-Mart may open just 142 next year with an emphasis on smaller, more intimate locations.

To consumers like Mary Washington of Los Angeles, though, size matters less than price. Washington, 67, heads to Wal-Mart every Monday for the food and $4 generic prescriptions. "Even if it's just pennies," she says, "it all adds up."

World's Scariest Stock: Sears Holdings
By Rich "Handcuff Jack" Duprey - The Motley Fool.com
October 31, 2008

Bat got your tongue? We dare you to keep reading our special series on the World’s Scariest Stocks.

It's not just things that go bump in the night that you need to be afraid of, but also the monsters lurking in your portfolio that can give you the shakes. Just ask investors in Sears Holdings (Nasdaq: SHLD), because they know what a scary stock the retailer has been. Even at these depressed prices, it holds monstrous potential to haunt you for years to come.

George Romero's zombie hit Dawn of the Dead showed the slack-jawed undead attracted to a mall, perhaps in some primal remembrance of how their lives used to be. That's how the once-venerable retailer must be feeling these days. At a time when Wal-Mart Stores (NYSE: WMT) has been surprising analysts with same-store sales that meet or exceed expectations, Sears Holdings hasn't posted a single quarter with rising comps in the three years since emerging from bankruptcy.

For a discount retailer, that has to be especially painful -- but then again, zombies don't feel pain.

Lampert the Reanimator

Yet painful it has been. Like a modern-day Dr. Frankenstein, Sears Holdings Chairman Eddie Lampert has been trying to cobble together a living being, one rotten corpse at a time, much as Warren Buffett did with ailing textile mill Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK- B). First, Sears merged with a failed Kmart and then tried to pick up fading home-decor specialist Restoration Hardware.

It's been a long time since the Oracle wannabe displayed any of his "Lampert magic," though. His use of total return swaps has seemingly failed more times than it has worked in Sears Holdings' favor, and the idea that the retailer may have been some kind of asset play with valuable real estate in prime locations has faltered as the commercial market collapsed and credit remains in a deep freeze.

Bring out your dead!

Too often, it seems Lampert has resorted to using share buybacks to prop up earnings, both at Sears Holdings and at his other fiefdom, AutoZone. In both cases, hard-earned capital was squandered on buying up overpriced shares instead of investing in the stores. Over the past year, Sears Holdings has spent more than $1.35 billion buying back some 11.5 million shares, for an average cost of $117 each. Today, the stock trades around $50 a share. The vaunted cash balances that once exceeded $4.4 billion now register at just over $1.5 billion.

Malls have become ghost towns as consumers strive to stretch their dollars as far as they can. When you can save even more money by shopping at Wal-Mart or Costco (Nasdaq: COST), why go to Sears? As fellow Fool Richard Gibbons points out, things are going to get worse as even retailers such as Target (NYSE: TGT) -- a brand slightly more happening than Sears -- suffer from declining comps.

At 27 times next year's earnings, Sears Holdings trades at three times the valuation of midmarket retailers such as Kohl's (NYSE: KSS) and J.C. Penney, yet it may still induce the kind of chills investors don't need in these markets.

A place for ghost stories

Do you agree with me that buying Sears Holdings stock is a scary thought and that the aging retailer is the World's Scariest Stock? If so, join with me over at the investor-intelligence community Motley Fool CAPS and select Sears Holdings to underperform the market. You can lay out your creepy tale and let us know you find there are more tricks than treats in this stock. Then come back in a week to find out who has won the dubious distinction of being the World's Scariest Stock.

Wal-Mart, Sears, and Berkshire Hathaway are Motley Fool Inside Value recommendations. Costco and Berkshire Hathaway are Stock Advisor picks. The Fool owns shares of Berkshire Hathaway.

Fool contributor Rich Duprey owns shares of Wal-Mart but has no financial position in any of the other stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.

Comments from our Foolish Readers

Nothingiscertain wrote:

The only thing scary is your lack of hard hitting facts to support an argument based on generalizations and glitter generalities. As of this writing, over the past 1 year period Sears Holdings stock has declined 55.73% versus Macy's stock which is down 61.60% and JCPenney which is down 57.73%.

No one could have predicted a meltdown of this magnitude. I am not worried over the long-term as because Eddie Lampert is a value investor, who will turn ailing retailers into a financial engine that could power what could become the world's most successful holding company.

Sears Holdings is the largest appliance seller in the U.S. The company also has great brands.

The question becomes how can you sustain the sales and growth of these great businesses while leveraging the company's valuable assets.

In the meanwhile he built his position in Sears Holdings using the company's money to buy back stock and pay off debt. He has 51% of Sears Holdings. Every long-term share holder has benefited as their ownership in the company has increased along side Lampert's stock. Eddie Lampert is not interested in growth at a competitive disadvantage which destroys value.

It's taken him 5 years to allocate capital to increase his ownership to 51%. Comparably, it took Warren Buffet 7 years to obtain a 49% stake in Berkshire Hatahaway and change the management.

In 1985, 23 years after Buffet initially started buying a position in Berkshire Hatahway the last textile operations (Hathaway's historic core) were shut down. As I stated before this a long-term investment. Unlike Berkshire Hatahway, Sears Holdings is MAKING MONEY.

Wal-Mart View: Big Plans Abroad, Small U.S. Stores
By Miguel Bustillo and Ann Zimmerman - Wall Street Journal
October 29, 2008

Wal-Mart Stores Inc. said it will continue emphasizing international expansion, particularly in emerging markets such as Brazil, as it trims U.S. growth, company officials said on Tuesday.

A day after declaring that it will curtail openings of its traditional U.S. stores and focus more on remodeling existing locations, the world's largest retailer by sales laid out a vision for growth during the second half of a two-day conference with investment analysts.

Wal-Mart officials forecast that they will add approximately 19% less square footage in the coming year compared with a year earlier, with much of the reduction coming from the U.S. In all, Wal-Mart expects to add 34 to 36 million square feet of retail space in the fiscal year starting in February, compared with 42 to 43 million square feet of retail space globally in the current fiscal year, ending Jan. 31.

Wal-Mart, which has benefited from the global downturn thanks to its economies of scale and lower prices, reiterated it felt well- positioned to prosper in the current economy.

"This company will emerge from this time a tougher competitor," Wal-Mart Chief Executive Lee Scott said.

Still, company officials detailed plans to transform into a different kind of discount retailer by focusing more on smaller stores than in the past. Wal-Mart has been executing that shift for the past three years, officials noted, well before the economy soured.

Analysts generally seemed to approve Wal-Mart's moves. Some predicted that by focusing on sprucing up older locations, the retailer may be poised to hold on to some of the new customers it has attracted during the downturn.

"The strained consumer environment has driven sustained traffic from core customers and new traffic from affluent shoppers, which could prove sticky if executives are able to maintain and enhance the customer experience," Goldman Sachs analyst Adrianne Shapira wrote in a note to investors.

Wal-Mart stock rose 11%, or $5.50, to $55.17 Tuesday in 4 p.m. New York Stock Exchange composite trading.

Over the next five years, Wal-Mart said it will devote 53% of its international spending to emerging markets such as Brazil and India, up from 33% in the previous five years, with the remainder going to mature markets such as Canada and the U.K.

Wal-Mart also said it remains committed to succeeding in Japan, a plan that was criticized by analysts a year ago. The retailer said it is on pace to post its first operating profit in Japan this fiscal year.

Though Wal-Mart said it remains bullish on international expansion, overall capital spending, including adding new stores and remodeling existing ones, was projected to rise only slightly, to $4.8 to 5.3 billion in the year ending January 2010, from the current year's $4.5 billion to $4.8 billion.

Retail stocks: Where the smart money is
Investor Daily: The outlook for retailers isn't good.
Here's one way pros are separating the winners from losers.
By Suzanne Kapner, writer - Fortune Investor Daily
October 28, 2008

NEW YORK (Fortune) -- A chill has descended on America's shopping malls. With credit markets frozen, the Dow plunging and consumers buying less, retailers are bracing themselves for one of the worst holiday seasons in nearly two decades.

Linens' n Things, Steve and Barry's and Sharper Image are among the retailers to file bankruptcy this year, double the usual pace. Ailing retailers at risk of a similar fate are likely to make it through the holiday season, but restructuring experts predict a fresh wave of bankruptcies come January.

Most at risk are apparel and furniture sellers, where consumer spending has been especially weak. As long as banks continue to limit lending, retailers that need fresh capital in 2009 are also vulnerable.

Betting on which retailers will survive isn't easy. For those loath to pore over quarterly filings or who, like me, have an aversion to math, the rating agencies are a good place to start. But as the housing crisis has shown, Moody's and Standard & Poor's have made terrible calls in recent years. Dozens of highly rated mortgage securities based on loans to low-income homeowners turned out to be little more than junk.

One useful tool the pros use is credit default swaps, which are unregulated insurance policies that investors or lenders buy to protect themselves should a company default on its debt. A lender, for example, might pay $30,000 to insure $10 million in debt. As the risk - perceived or real - of default increases, the swaps become more expensive. Credit default swaps, or CDSs, have been blamed for the collapse of AIG, Lehman Brothers and Bear Stearns.

CDSs aren't an absolute indicator of risk, but they offer useful clues as to how the overall market views a company's health. A quick look at CDSs for the retail industry shows a spike in CDS prices beginning in September, when monthly sales data were lower than expected and fears of a global recession slammed markets worldwide.

Consider Dillard's (DDS, Fortune 500), a Southeastern department store chain embroiled in a nasty battle with shareholder activists.
The company's controlling stockholders are an entrenched family that has been slow to shore up the sagging business. Its shares, at $4.52, are off 80% from a year ago. As of Monday, Dillard's swaps were trading at $1.6 million per $10 million of coverage, up nearly threefold from $400,000 in late summer. Typically, alarm bells in the retail sector go off when a company's CDS spread reaches about $700,000 per $10 million of debt. Investors are clearly nervous.

Useful, but not perfect

Sears Holdings (SHLD, Fortune 500) is another company that has been dogged by liquidity fears. Although the company has plenty of cash and credit available, its market share is declining, stores are dilapidated and its boy-wonder financial backer, Eddie Lampert, has yet to articulate a sensible turnaround strategy. Sears' shares, at $48.61, are less than half their level a year ago, and its CDSs (which trade as Sears Roebuck Acceptance Corp., a wholly owned finance subsidiary) have soared to $1 million, more than three times their level of late August. Investors beware.

Not all retailers are getting walloped by investor fears. Wal-Mart (WMT, Fortune 500) is a fairly safe bet, with a AA credit rating from Fitch. It stands to benefit from tighter consumer spending.

Although Wal-Mart swaps have risen to $98,300 per $10 million in coverage, up from an average $30,000 in the previous six months, they're still pretty cheap. Wal-Mart is also one of the few retailers whose stock, at $51.35, is trading above year-ago levels. Similarly, rival Costco's (COST, Fortune 500) swaps are trading at a healthy $87,200 (although its shares are down 21% in the last year).

To be sure, credit default swaps aren't perfect predictors of where a stock is headed.

Macy's, for example, is a favorite of liquidity bears. The company operates in the highly-competitive middle ground of retailing, is still struggling with the 2005 buyout of the May Company, and has seen sales at stores open at least a year decline. What's more, the retailer has $1 billion in debt coming due over the next year. It's CDSs have jumped to $530,000 from $137,000 in August.

But analysts say those fears are overblown. Macy's has $740 million in cash on its balance sheet and a $2 billion revolving credit facility that runs through 2012. After meeting with Macy's management recently, Charles Grom, an analyst with J.P. Morgan, assured clients that the company "isn't a going concern risk."

CDSs can be useful, but they aren't the only one tool. Investors still need to do some homework (and maybe even a little math) before placing a bet.

Discover Settlement Terms Set
Wall Street Journal
October 28, 2008

MasterCard Inc. (MA) and Visa Inc. (V) will pay $2.75 billion to settle a lawsuit brought by Discover Financial Services (DFS).

As previously disclosed, the settlement allocation between Visa and MasterCard is based primarily on their respective payment card volumes.

Visa will pay $1.89 billion, which includes $1.74 billion from the escrow created under its retrospective responsibility plan, $80 million from Visa to obtain releases from MasterCard, and an additional $65 million which will be refunded by Morgan Stanley under a separate agreement related to the settlement. The settlement is subject to approval by Visa's former U.S. member financial institutions.

MasterCard will pay $862.5 million and will take a $515.5 million charge in the third quarter related to the settlement. The company also will receive $35 million from Morgan Stanley (MS), Discover's former parent company, resulting in a net settlement of $827.5 million.

MasterCard will make its payment to Discover and receive the payment from Morgan Stanley in November.

"Resolving this longstanding case on reasonable terms is in the best interest of Visa and our clients, cardholders and shareholders," said Visa Chief Executive Joseph W. Saunders.

MasterCard General Counsel Noah J. Hanft said, "We believe Discover's lack of success resulted from decisions that created a business model that is not attractive to bank issuers. Nonetheless, we chose to settle this lawsuit to avoid the uncertainty and distraction of a lengthy jury trial." He noted that the company made no admission of liability.

Earlier this month on the eve of jury selection, Discover agreed to settle the lawsuit over anticompetitive rules that Discover said limited its growth.

Discover sued Visa and MasterCard in 2004, seeking damages for rules imposed by the credit-card giants that allegedly precluded their member banks from issuing credit and debit cards over the Discover network. The suit was filed shortly after the Supreme Court let stand a lower-court ruling that forced Visa and MasterCard to allow their member banks to issue credit cards on rival networks.

At the time of the settlement, Visa noted the case is covered by a retrospective responsibility plan developed as part of its restructuring to address potential liability in certain U.S. litigation.

As part of the plan, $3 billion was deposited into an escrow account at the time of Visa's initial public offering of stock.

Lampert's a Huge Loser: $30M/Hour
By Richard Wilner - New York Post
October 26, 2008

Even for a billionaire hedge-fund titan, losing $30 million an hour has got to be a bummer.

That's what Eddie Lampert, the chairman of Sears Holdings, has experienced with just his nine largest holdings since Sept. 19 - over just 26 trading days.

His massive holdings in Sears Holding, the parent of Sears and Kmart stores, and in AutoZone, AutoNation, Citigroup and five other companies have lost $5 billion in value over that time, based on the size of the holdings as of June 30, according to his 13F filing with the Securities and Exchange Commission.

The biggest hit - by far - came from the steep drop in Sears Holdings, which fell from $103 in mid-September to $47.67 on Friday, a drop of 53.7 percent that translated into a paper loss of $3.6 billion for Lampert's 65.3 million shares.

Lampert's Greenwich, Conn.-based ESL Investments saw its holdings in the eight companies fall by an average of $193 million each trading day - which translates into $30 million an hour for each of the 6 1/2- hour trading days.

The investor lost about $587 million on Auto Nation, $480 million on AutoZone, $174.7 million on Home Depot and $162.4 million on Citigroup. The group of nine companies fell 39.4 percent over the 26 trading days - compared with a 26.4 percent drop for the Dow Jones industrial average.

Allstate Third-Quarter Net Falls on Market Turmoil
By Jennifer Hoyt - Dow Jones Newswire
October 22, 2008

Allstate Corp.'s swung to a third-quarter net loss on investment losses caused by turmoil in the financial markets coupled with what it called "two of the costliest hurricanes in U.S. history."

Shares fell 5.2% to $26.75 in after-hours trading.

The nation's largest publicly held personal-lines insurer reported a net loss of $923 million, or $1.71 a share, compared with year- earlier net income of $978 million, or $1.70 a share. Operating loss was 35 cents a share, compared with operating earnings of $1.54 a share a year earlier.

Revenue fell 19% to $7.32 billion.

Analysts polled by Thomson Reuters expected operating income of 72 cents a share on revenue of $6.32 billion.

Catastrophe losses rose to $1.8 billion from $343 million a year earlier, due to 35 events, including Hurricanes Ike and Gustav.

The property and liability segment's combined ratio, the percentage of each dollar the company collects in premiums that it pays out on losses and expenses, jumped to 112.7% from 91%. Allstate said Wednesday it expects the ratio to be at the favorable end of the previously stated range of 86% and 88% for the full year 2008.

Meanwhile, the insurer reported $1.3 billion in capital losses. Operating income in Allstate's financial services division fell 40% to $88 million.

Separately Wednesday, Allstate said it suspended its $2 billion share repurchase program and doesn't plan to complete it by the original target date of March 2009. The company will re-evaluate this program as market conditions develop next year. The number of shares repurchased under the program during the quarter was 9.9 million shares for $449 million.

Like other insurers, Allstate has been hit been the combined challenges of high catastrophe charges and investment losses caused by the financial market turmoil. Earlier this month, however, analysts at Wachovia said Allstate's underlying profitability should remain strong because it is in better position than its peers in the increasingly competitive personal-lines market.

Wal-Mart sees shifts in shoppers' buying habits
By Chris Woodyard, USA TODAY
October 22, 2008

LOS ANGELES — Financial insecurity is forcing Wal-Mart (WMT) shoppers to change buying habits, cut credit card use and live more paycheck- to-paycheck, the CEO of the U.S. division of the world's largest retailer said Tuesday.

Economic pain is leading to what Eduardo Castro-Wright termed "disturbing behaviors" among shoppers over the past few months.

For instance, more families are buying baby formula at the start of the month when they are more likely to have money. In the past, he said, the chain hadn't noticed such surges in formula sales.

A double-digit decline in credit card use at Wal-Mart stores in the second quarter this year sharply contrasts with the first quarter of 2007, when a vibrant economy was resulting in double-digit increases in card use.

"Credit has been declining dramatically," said the Ecuador-born executive who has run Wal-Mart Stores USA for three years. "That decline in credit means people have to make choices about how they spend their hard-earned money."

Many don't have a choice when it comes to their form of payment.

"They have maxed out on their credit limits," Castro-Wright said in an interview after a speech to Town Hall Los Angeles, a non-profit that provides a forum for public figures and opinion makers. "Customers are really going through some hard times."

The observations are significant because of Wal-Mart's massive scope, with 4,000 U.S. stores. Castro-Wright said nine out of 10 American families shop at Wal-Mart at least once a year.

How financial hurt is showing:

•Money worries. About 80% of shoppers cite "personal financial security" as their top concern in internal surveys, up from 65% just a few months earlier, he said. A year ago, the price of gasoline was the top concern.

More consumers worry: "Will I have enough to put on the table so my family can eat?" Castro-Wright added.

•Fewer name brands. Wal-Mart has seen a rise in purchases of staples instead of discretionary items. Shoppers have more then doubled purchases of private-label items, eschewing name brands. Castro- Wright said, however, that Wal-Mart has no immediate plans to change the stores' merchandise mix to take advantage of the trend.

•Changing shopping patterns. Some shoppers aren't coming to the stores as often so they don't have to drive as much. Others, who may be unemployed, are coming more frequently to buy a few items when they have money in their pockets, he said.

And more sales are showing up around paydays. Wal-Mart has seen a 2.5% increase in sales at the start and the middle of the month, when workers are paid, compared with four months ago.

Wal-Mart is responding to slower growth by cutting back on capital investment and not opening as many new stores.

He also pointed to the chain's program to sell generic prescription drugs at $4, which he said has saved some of the neediest consumers more than $1 billion.

He also pledged that Wal-Mart won't cut back on philanthropic spending this year, though other corporations may be forced to reduce their charitable donations.

8 Kmart, 4 Sears stores to close Jan. 31
By Sandra M. Jones - reporter - Chicago Tribune
October 20, 2008

Sears Holdings Corp. plans to close a dozen underperforming stores early next year, a decision that comes as retailers pull back heading into what is forecast to be one of the toughest holiday seasons in decades.

The Hoffman Estates-based retailer told employees last week that it intends to shutter eight Kmart and four Sears stores, company spokeswoman Kimberly Freely said Monday. The stores, none of which is in Illinois, are slated to close Jan. 31. Liquidation sales are scheduled to begin in early November.

Kmart, which shed hundreds of discount stores when it went through Chapter 11 bankruptcy reorganization in 2002, has been quietly closing stores for three years, as it loses market share to Wal-Mart and Target.

But Sears has been slow to shed department stores, despite Wall Street's initial infatuation with what was once perceived as valuable mall real estate. In fact, Sears has been adding smaller-format dealer and appliance stores the last two years.

Sears plans to shutter department stores at malls in Indianapolis and in Florissant, Mo. It also intends to close a Sears Grand in Columbia, S.C., and a Sears Essentials in St. Petersburg. The Grand and Essentials formats are free-standing stores that under previous management were intended as growth vehicles. Edward Lampert, Sears chairman and the investor who owns a majority of the company, halted that program.

"We close stores as a normal course of business, and this is a small percentage of our overall business," Freely said.

Sears operated 1,382 Kmart stores as of Aug. 2, down from 1,479 in spring 2005 when Kmart bought Sears, according to Sears regulatory filings. In the same period, Sears stores in the U.S. increased to 2,110 from 2,040. The increase reflects, in part, some Kmart stores that were converted to the free-standing Sears Grand and Sears Essentials stores. In total, Sears had 3,492 stores as of Aug. 2, down from 3,519 when Kmart and Sears combined.

Separately, in September Kmart began liquidating a store in Salt Lake City to make way for a Wal-Mart and decided to shut down a store near Rochester, N.Y. Both of those stores are slated to close in mid- November.

Sears reported a 62 percent drop in fiscal second-quarter earnings in August, citing the deteriorating economy's chilling effect on consumer spending. As the nation's leading appliance retailer, Sears also has been hard hit by the housing decline.

Impact of an 'invisible' man
Black industrial designer's work will be honored at Smithsonian
By Sandra Guy - Columnist, Chicago Sun-Times
October 18, 2008

Who knew that hours of fun with the View Master (you remember, the 1960s-era 3D viewer with the sliding disk of photos) started with Evanston industrial designer and teacher Charles A. Harrison?

Harrison, 76, is responsible for the design of everyday items we take for granted such as lightweight sewing machines and plastic garbage cans with wheels. Indeed, he has created and improved upon 750 products from radios to fondue pots to cordless shavers to hair dryers.

Harrison's efforts have garnered him the Lifetime Achievement Award from the Smithsonian's Cooper-Hewitt, National Design Museum, which hailed him as improving "the quality of life for millions of Americans through the extraordinary breadth and innovation of his product designs." He will be honored at the Cooper-Hewitt in New York on Oct. 23.

"As much as anyone, [Harrison] is responsible for the look of the consumer revolution," said Tim Brown, CEO of Ideo, a Palo Alto, Calif.-based design firm, and chairman of the awards jury.

"It's remarkable that one person could have had that much of an impact, somewhat invisibly. This is someone we haven't heard of, and we should be celebrating his career. . . . He ought to be a great role model."

Ph.D.s at post office

Harrison, who drafted maps of war targets while serving in the Korean War, remembers being refused a job in the late 1950s because of his race, even though he had just graduated second in his class from the School of the Art Institute of Chicago.

"There were no equal opportunity programs, and [companies] weren't hiring African Americans in any jobs above labor," he said. "There were more Ph.D.s in the post office in those days than you can imagine."

Harrison finally got work in 1956 as a free-lance designer for Sears, Roebuck. Just as Sears' free-lance budget was running out, he was hired as a furniture designer at the American Furniture Mart working for one of his professors, the celebrated Austrian designer Henry Glass.

Harrison worked stints at two small design companies before he got a call from Sears to come back as a manager. In 1961, he became the first African American to hold an executive job at Sears' headquarters. Harrison stayed for 32 years and retired in 1993.

Technology played a big role in Harrison's work, which dovetailed with the consumer revolution.

New manufacturing processes allowed industrial designers to add aesthetic appeal to everyday items, and people who lived through the Great Depression were hungry to improve their lives.

"We started looking at human interaction with a product. Was the product confusing? Were the knobs in a convenient spot? Were the controls easy to handle or easy to read?" Harrison said.

Suddenly, the washing machine was no longer a monstrosity hidden under the porch, and furniture evolved from wood into steel, metal, plastic and particle board, while sewing machines previously made of cast iron became lighter with plastic and electronic parts.

"I describe design as a three-sided discipline of art, science and business," said Harrison, who teaches industrial and product design at Columbia College and the School of the Art Institute of Chicago. "Art was a much longer side of that triangle in the beginning. It's an equilateral triangle today."

Plastic garbage can

Harrison got the chance to upgrade the View Master in 1958 when he was working at Robert Podall Associates at Wacker and Michigan.

Harrison redesigned the View Master so that it could be made by injection molding, which made it lighter, and gave it its bright color.

"We got the cost down and made it priced low enough to let children play with it," he said.

The plastic garbage can started with a Sears scientist who came to Harrison with the idea of making the can out of polyethylene polymer rather than metal.

After a Sears buyer OKd the project, Harrison went to work.

"We were the first to blow-mold a product that large," he said. The trash can's improvements included hand grips and a sloped lid so that water and snow could run off.

Harrison said Sears' designers tested the new garbage can's durability by throwing it out of the lab's fourth-floor window onto a parking lot.

"A big roar went up with applause and cheers when the trash can bounced," he said. "We had a can that wouldn't rust, wouldn't dent, and had a memory -- the lid would come back if it was run over."

Sears designed the garbage cans so they could be stacked up, and then wheels could be attached.

Harrison quickly puts a worldly spin on the seemingly mundane.

"In [designers'] training, our charge is to improve things," he said. "You ask, 'Now what can we contribute to mankind, to society, that makes people's lives better, that makes them smile?'"

Sears Canada Appoints Chief Financial Officer
Stockhouse.com
October 17, 2008

TORONTO, Oct. 17 -- Sears Canada Inc. (TSX: SCC) announced today that David B. Merkley, Senior Vice-President and Chief Financial Officer, will be leaving the Company to pursue other interests. He will remain with Sears until November 13, 2008, to help ensure a smooth transition. Mr. Merkley has served as Chief Financial Officer since 2005.

The Board of Directors of the Corporation is pleased to announce the appointment of Allen Ravas as Senior Vice-President and Chief Financial Officer effective October 20, 2008. Mr. Ravas has held his current position as Senior Vice President, Finance, Sears Holdings Corporation since 2005.

"On behalf of the Board of Directors and associates of Sears Canada, I want to thank David for his contribution to the Company and wish him much success in his future endeavours," said Dene Rogers, President and Chief Executive Officer, Sears Canada Inc. "I also extend a warm Sears Canada welcome to Allen as he joins us in this very important role. He brings a wealth of experience to the position of CFO which will provide leadership to the organization on all financial matters. I look forward to having Allen join our team."

Mr. Ravas joined Sears Holdings in 1997 and has held senior roles in various finance portfolios including Merchandising, Supply Chain and Off-Mall. He was with Target Corporation from 1993 to 1997 and with May Department Stores from 1980 to 1993.

Sears Canada is a multi-channel retailer with a network of 197 corporate stores, 185 dealer stores, 45 home improvement showrooms, over 1,850 catalogue merchandise pick-up locations, 106 Sears Travel offices and a nationwide home maintenance, repair, and installation network. The Company also publishes Canada's most extensive general merchandise catalogue and offers shopping online at www.sears.ca.

Sears Tower Spending $145 Million On Green -
Turbines, Solar In Mix
Environmental Leader
October 15, 2008

Sears Tower in Chicago is planning a green makeover to further reduce its energy use by 10 percent. The skyscraper has already reduced energy consumption by 50 percent since it was built in 1973, Building reports.

Adrian Smith, one of the architects overseeing the plan, says the project is expected to cost over $145 million. The plan includes installing wind turbines and PV on the roof, as well as incorporating new lighting systems, extra insulation and a green roof.

In August, New York City Mayor Michael Bloomberg proposed installing wind turbines on the top of New York City’s skyscrapers.

Boston recently launched a pilot program that saw 34 Boston skyscrapers turning off the lights above their 30th floors between 11 p.m. and 5 a.m. The program could save the city about 25 percent in energy used for lighting.

Sears Finance Chief to Leave by Year End
By Miguel Bustillo - Wall Street Journal
October 14, 2008

Sears Holdings Corp. said Monday that its chief financial officer is leaving the struggling retailer, which has been without a chief executive for months. J. Miles Reidy plans to leave later this year, the company said; several people familiar with the move said he is departing to care for a family member who is seriously ill.

The company said Mr. Reidy was not available for comment.

In preparation for Mr. Reidy's departure, Sears announced that Michael D. Collins has joined the company as a senior vice president. Mr. Collins, an 18-year General Electric Corp. veteran who was most recently a senior vice president at NBC Universal, will become Sears's next chief financial officer before its fiscal year ends in January.

Mr. Reidy's departure is the latest in a long line of executive departures from Sears Holdings, which is based in Hoffman Estates, Ill. The parent of Kmart and Sears, Roebuck & Co., Sears operates roughly 3,800 stores in the U.S. and Canada.

Controlled by activist investor Edward S. Lampert, who arranged the Sears-Kmart marriage three years ago, Sears Holdings has been struggling to maintain market share amid stiff competition from rivals such as Wal-Mart Stores Inc. In August, the company announced a quarterly profit drop of 62%.

The company's chief executive, Aylwin Lewis, was forced out in January after nearly three years marked by sharp cost cutting and middling performance. W. Bruce Johnson, an executive vice president, has served as interim CEO. An executive search has yet to yield a successor.

In addition, the marketing officers of both Sears and Kmart left over the summer, as did the head of the Lands End clothing business and the executive who ran one of the company's few bright spots, its home- services business.

Edgar B. Stern Jr., longtime Sears director, dies at 86
Aspen Daily News Online
October 14, 2008

Edgar B. Stern Jr., chairman of Royal Street Corporation; founder of WDSU Television, New Orleans; Deer Valley Resort; Park City, Utah; the Stanford Court Hotel, San Francisco; and a longtime director of Sears Roebuck and Co., died Sunday, Oct. 12, in Seattle at the age of 86.

He was a true visionary, a pioneer in television and an innovator in the ski and hotel industries. In all his endeavors he had a deep commitment to excellence and a philosophy of unstinting service to his community.

Mr. Stern was born Sept. 1, 1922 in New York City, the son of Edgar B. Stern, a businessman with interests in publishing, and the former Edith Rosenwald, whose philanthropist father owned a large interest in Sears, Roebuck & Co.

The younger Mr. Stern was raised in New Orleans, where he attended Metairie Park Country Day School. He was a graduate of the Hotchkiss School and Harvard University.

During World War II he served as a signal corps officer in the Pacific Theater and at the Pentagon during the Korean War.

In 1948, along with his father, Edgar founded WDSU-TV, Channel 6, in New Orleans, the first commercial television station in the Gulf Coast region. WDSU was the recipient of a Peabody Award for excellence in broadcasting. He served on local civic and social services boards and served nationally as public relations chairman of the United Fund.

Among his many New Orleans projects was participation in the creation of the Royal Orleans Hotel and the Royal Sonesta Hotel. Oakwood Shopping Center, another of his developments, was the first air- conditioned shopping center in the region.

In 1968 Edgar moved to Aspen, where he developed the Starwood residential subdivision and Red Mountain Ranch. There he served for many years as chairman of the Music Associates of Aspen, the governing body of the Aspen Music Festival and School. He took the leadership position in establishing the Aspen Valley Improvement Association and served on the Aspen Valley Hospital board of directors.

His continuing interest in hospitality led in the ’70s to the nearly simultaneous development of The Stanford Court Hotel and Deer Valley Resort. Stanford Court Hotel was continuously awarded the prestigious Mobile five star rating. A new standard for the ski industry was set at Deer Valley when Edgar achieved his dream of combining the sport of skiing with the service, food and amenities of a five-star hotel. Deer Valley Resort is frequently honored by the readers of SKI magazine with the rating of No. 1 ski resort in North America.

In the field of education, Edgar served on the visitors committee of the Harvard Graduate School of Education and on the boards of Tulane University and the University of Chicago.

Edgar relocated to San Juan Island, Wash., in 1986 where he served as president of the board of the San Juan Community Theatre and contributed to numerous community endeavors.

In 2007, he retired his position as chairman of the board of Royal Street Corporation.

In addition to his wife of 61 years, Pauline (Polly), Edgar is survived by his daughter, Sandra McIver; sons, Eric, Monte and Lessing; seven grandchildren; and one great-granddaughter.

A private memorial service will be held for the family and a public celebration of Edgar’s life will be planned at a later date in Park City, Utah. In lieu of flowers, the family suggests that donations be made in his name to any of the following: UW Medicine, box 358045, University of Washington, Seattle, WA 98105 with a memo reference in the check “Alzheimer’s Disease Research Center in memory of Edgar B. Stern Jr.”; “Alzheimer’s Association,” 12721 30th Ave., NE, suite 101, Seattle, WA 98215 with a memo reference in the check “In memory of Edgar B. Stern Jr.”; “The United States Ski Team” P.O. box 100, Park City, UT 84060 with memo reference on the check “In memory of Edgar B. Stern Jr.”; or to the charity of your choice in Edgar Stern’s name.

The family respectfully requests that they be given private time to grieve. Please direct all expressions of sympathy to: Royal Street Corporation, 7620 Royal Street East, Suite 205, P.O. box 3179, Park City, UT 84060-3179 or e-mail to edgar@deervalley.com [1].

Sears shares fall after target cut
CHICAGO BUSINESS.COM
Oct. 13, 2008

(AP) — Shares of Sears Holdings Corp. fell Monday after an analyst cut the retailer's price target.

Goldman Sachs analyst Adrianne Shapira added the suburban Chicago company to the investment bank's "conviction sell list" while lowering the retailer's 12-month price target to $46 from $61.

"Sears is in the eye of today's consumer spending storm," Shapira told investors in a note, adding that company that operates Sears and Kmart stores is being hit by fewer big-ticket appliance purchases and falling clothing sales.

She also cut earnings-per-share estimates for the next three years, saying the company would likely earn $2.13 in 2008, down from $2.43; $1.57 in 2009, down from $2.27; and $1.75, down from $2.51.

Analyst surveyed by Thomson Reuters expect the retailer to earn $2.53, $1.77 and $1.75 per share during those respective periods.

"In today's jittery market environment investors carry little patience for flagging results, and quarterly (same-store sales) and operating profit trends will likely display sequential worsening," Shapira wrote.

Also Monday, Sears said Michael D. Collins joined the retailer as senior vice president of finance and is expected to succeed J. Miles Reidy as chief financial officer by the end of fiscal 2008.

Sears' finance chief to step down;
Collins named successor
By Mike Barris - Trading Markets.com
October 13, 2008

Sears Holdings Corp. (SHLDsears hldgs corp com SHLD) said Chief Financial Officer J. Miles Reidy will step down in the coming months to "attend to a family issue" and named Michael D. Collins, a former General Electric Co. executive as his successor.

Reidy will leave before Sears' fiscal year ends Jan. 31, the retailer said.

Collins was most recently the senior vice president for planning and analysis at NBC Universal, a GE unit. He starts Monday as Sears' senior vice president of finance and is CFO-elect.

The change is the latest shake-up in Sears' executive suites, including January's ouster of former Chief Executive Aylwin Lewis. Reidy has been CFO for a year.

The appointment comes as the as the struggling department-store retailer deals with waning business and rising complaints about stores and service that made it hard to stop customer losses to more-focused rivals. The retailer's namesake and Kmart stores have been plagued by a reputation for shoddy customer service, high out-of-stock levels and poor presentation.

Sears shares closed Friday at $70.92 and there was no premarket trading.

Why It's No Time to Neglect Cause Efforts
P&G, Others Emphasize 'Purpose Branding' in Midst of Economic Crisis
By Natalie Zmuda - Advertising Age
October 13, 2008

BATAVIA, Ohio (AdAge.com) -- You might expect that cause marketing would be the kind of intangible, feel-good advertising to get axed in a recession. Instead, quite the opposite is true, as major marketers, from retailers such as Sears, Target and OfficeMax to package-goods players such as General Mills and P&G, find that cause efforts actually help persuade weary consumers to spend.

Speaking on the subject last Friday, Procter & Gamble's Jim Stengel said "purpose branding," or building brand propositions around emotionally laden missions often backed by cause-marketing efforts, "is more important than ever" amid turmoil in financial markets and growing consumer fear.

Mr. Stengel is on special assignment for the marketer pending his scheduled departure Oct. 31. But he said his successor, Marc Pritchard, concurs that the "purpose brands" approach Mr. Stengel spearheaded at P&G needs to continue. "I was talking about this yesterday with my successor, Marc, and I think now these concepts should resonate even stronger," Mr. Stengel said. "I would argue maybe we wouldn't be in such a mess if we were more purpose-centered in more organizations around the world."

Therein lies part of what interests marketers such as P&G in cause programs right now: There is a sense that consumers are waking up to the need for some social responsibility. Marketers say they believe cause initiatives help them stand out. Some also say cause marketing adds another layer of value for customers, who get the product they want and make the charitable donation they want, in a sort of two-for- one deal.

"It's easy when things are tough for [marketers] to just fold up their tents [when it comes to cause marketing] and go home. I've got to look after my stocks, my company, and that's understandable," said Bob Thacker, chief marketer at OfficeMax, which this fall increased 30% the number of schools helped and supplies donated as part of its "A Day Made Better" program that aids teachers. "These times demand even more of a focus on contributing and giving and saying thank you. ... Cause marketing, I think, will become even more important."

Doing good

Consumers seem to agree. In the 2008 Cone Cause Evolution Study released this month, 26% of consumers expect companies to give more support to causes and nonprofits in an economic downturn, while 52% expect companies to maintain existing programs. Another 79% of consumers said if price and quality were similar, they would switch to a brand associated with a good cause.

"Consumers are absolutely looking for value, meaning that it's a quality product and fairly priced," said Carol Cone, founder and chairman. "If they can also have an easy and inexpensive way to help with a cause that's relevant to them, it adds value to the shopping experience."

Tellingly, this fall and holiday season, marketers will be evolving their cause programs as they look to capture their share of consumer spending. Sears, for example, is making Heroes at Home, its cause campaign, one of only two major holiday initiatives this year. And Target is expanding an October promotion in which a portion of sales from certain products benefit St. Jude Children's Research Hospital. Nine manufacturers will take part this year, up from just one partner, Procter & Gamble, last year.

Sears' inaugural Heroes at Home Wish Registry is meant to provide consumers an easy way to give back -- and urge them to take a closer look at the retailer this holiday season. "We had to take stock and think about what was going to be compelling and differentiating and just really help us to stand out," said Tom Aiello, divisional VP- public relations at Sears Holdings. The Heroes at Home Wish Registry "is not only breaking through, it's refreshing. And it's [a campaign] that hopefully will not only bring good marketing results but will account for some long-term brand loyalty."

The registry works much like a wedding registry; military families sign up for items, and consumers make donations toward the purchase of those items. It launches Nov. 2 and is an extension of existing military efforts. A multipronged campaign that includes TV, digital elements and print ads in Hearst Magazines titles will support the program. A Fox NFL special and a special on MyNetworkTV are also planned.

Rewards of giving

But some of the most popular programs could be those that donate a percentage of sales to charities or add on dollars at the cash register. Those programs, say cause-marketing experts, are relatively inexpensive for marketers, enable consumers to be charitable while watching their budgets and, in some cases, boost sales.

Clark Sweat, senior-VP corporate alliances at St. Jude Children's Research Hospital, said companies do continue to give when times get tough, whether because of a difficult economy or a downturn in a specific business. But, instead of writing a check, they will offer access to customers through promotions.

Those types of promotions also tend to be popular with shoppers. The addition of the Susan G. Komen for the Cure logo to products, especially consumer package goods, is a hugely successful initiative, said Margo K. Lucero, director-corporate communications.

"The programs that perform extremely well for us are those where the consumer sees that a percentage of the retail price comes back to Komen," she said. "If everything remains equal, the type of product and the price, if there is one of our logos on the product, the consumer would typically go for that product. We're still seeing that even today."

Similarly, Brian Peters, promotions marketing director of General Mills' Box Tops for Education, expects that program to raise more money this year than last, when it raked in $39 million. The initiative has raised $250 million for public schools since it started 12 years ago and has grown every year. When the economy is down, he said, cause marketing lets consumers "give back by doing something they were always doing: [buying] cereal."

Stretching a dollar

When consumers engage in cause marketing, Mr. Peters said, it can ease the burden of charitable giving. "They [think], 'I can write a check, but I don't have to,'" he said, because their cereal purchase diverts funds to public schools so they don't have to open their wallet twice. "They can make their dollars go further, and that's important for the consumer to be engaged."

Still, despite varied promotions, charities often see a downturn in tough economic times. In five recessions since 1973, donations declined an average of 1.3%, adjusted for inflation, said Sandra Miniutti, VP-marketing at Charity Navigator, an independent charity evaluator.

"We're starting to hear from charities that they're really concerned. They're particularly anxious because much of their donations come in toward the end of the year," Ms. Miniutti said. "It's a tough time to be fundraising."

Indeed, a survey of about 500 consumers conducted by Omnicon Group's Grizzard Communications found that just 44% of respondents plan to donate the same amount this year as last year. A full 26% said they planned to stop giving altogether, while 29% said they planned to give less.

According to the IEG Sponsorship Report, cause-marketing spend is expected to reach $1.5 billion this year, a 4% increase over last year. But that was before the economic turmoil of late.

Still viable

William Chipps, senior editor of IEG's sponsorship report, said the company won't be revising 2008 projections until December. He did say, however, that the growth seen in cause marketing and nonprofit sponsorships in the past few years could slow. The crisis among financial-services firms and automakers is particularly troubling given their status as the "low-hanging fruit" for sponsorship sellers.

"After the dot-com fallout there was a blip, where overall spending continued to grow but not as quickly as in years past," he said. "I'm sure there will be a decrease in growth. ... But overall, cause marketing is still a viable marketing platform."

Sears Shares Seem Ripe for a Reduction
By Martin Peers - Wall Street Journal - Heard on the Street
October 10, 2008

It's time for a markdown sale at Sears.

Despite steadily declining same-store sales and plunging profitability over the past 18 months, Sears's stock is defying gravity. But a looming recession is likely to bring the retailer back to earth.

Even after coming way off its highs of last year, Sears's stock is trading at the nosebleed valuation of about 26 times this year's expected earnings. In comparison, discount retailers such as Wal-Mart Stores and Costco Wholesale -- both of which reported higher same- store sales in September, even as consumers deserted other stores -- are trading in the mid-to-high teens. Not to mention lower-profile retailers like TJX Cos., whose chains draw brand-conscious consumers looking for a bargain, which is trading at a multiple of about 11.

Part of the reason for the anomaly could be Sears's inclusion on the no-short-sale list; indeed, Thursday, after the ban expired, Sears fell sharply. Sears also benefits from a relatively small float, as several loyal investors have stuck by controlling shareholder Eddie Lampert. And the company has been steadily buying back stock, even as cash generation has slumped.

At some point, though, the faith in Mr. Lampert displayed by these investors may start to crumble. Recessions are the ultimate in Darwinian exercises for retailers. Every time there's a severe economic downturn, a smattering of big and small retail chains go bankrupt. Recent months have already seen a handful of specialty chains file for Chapter 11 bankruptcy protection, including Steve & Barry's, Linens 'n Things and Mervyn's. Others, like electronics chain Circuit City and drugstore operation Rite Aid Corp., face serious challenges. Sears says it has more than enough liquidity. But an extended downturn will test that.

Shorts Reclaim Control of Sears Holdings Corporation
Put volume and short-selling ramp up on this sliding retail stock
By Elizabeth Harrow - Schaeffer's Research
October 9, 20008

It's been a long trip down the charts for Sears Holdings Corporation (SHLD: sentiment, chart, options). The department-store titan has seen its stock slide consistently for the past 18 months. From its April 2007 peak of $195.18, the security has shed 61% of its value. SHLD now faces staunch resistance from its 10-month moving average -- it's closed just 1 month atop this descending trendline since June 2007.

It's no surprise, then, that option players rushed yesterday to buy puts on SHLD. On the International Securities Exchange (ISE), traders bought to open 1,101 puts on the stock, compared to just 124 calls. The security's single-day put/call ratio on the ISE was 8.88, which indicates that nearly 9 times more puts than calls were purchased on Wednesday.

During the past 10 days, SHLD has garnered a put/call ratio of 1.04 on the ISE. This ratio reveals that traders have snapped up more puts than calls during the past couple of weeks, although it's not an overwhelmingly bearish reading. The 10-day ratio ranks higher than just 55% of other such readings in the past year, which points to only a mild preference for SHLD puts among traders on the ISE.

In fact, the stock's Schaeffer's put/call open interest ratio (SOIR) has dropped sharply in recent weeks. Since September 22 -- the day that October- dated options became the front-month series -- SHLD's SOIR has pulled back from 1.06 to its current perch at 0.97. In other words, calls are now outnumbering puts among near-term options, despite the shares' poor performance. Today's SOIR ranks higher than 64% of comparable readings in the past year, which suggests a slight pessimistic skew among short-term option players.

In the October series, peak call open interest of 5,981 contracts rests at the 95 strike. As SHLD trades near the 70 level, this call is deep out-of- the-money. By contrast, peak put open interest of 6,393 contracts at the October 85 strike is in the money by a comfortable margin.

Yesterday's ISE volume indicates that the tide may be turning bearish on SHLD, and it appears that new puts are also being added in today's session. The October 65 put has seen volume of 2,151 contracts change hands on open interest of 1,107, which reveals that new positions are being opened at this strike.

Today, SHLD is battling a bearish tide unleashed by a skeptical Wall Street Journal article. Martin Peers noted that "It's time for a markdown sale at Sears... a looming recession is likely to bring the retailer back to earth." Not only that, Peers says, but SHLD was also one of many not-quite- financial stocks that was brought into the fold of the SEC's short-selling ban. Now that the shorting embargo has expired, the shares are down more than 8% this afternoon.

Indeed, Sears is a favorite target of the shorts. Short interest represents a staggering 31% of the equity's available float, an accumulation of bearish bets that would take 11.4 days to unwind at SHLD's average daily volume. However, given the stock's current struggles, these pessimistic players have little motivation to cover their profitable positions.

In addition to overhead pressure from its 10-month moving average, SHLD recently breached support from the 85 level for the second time this year. This region could now act as an overhead ceiling for any rally attempts -- as could the 70 level, which the stock is currently struggling to maintain a foothold atop.

On the plus side, there's very little opportunity for analysts to push the stock lower with negative commentary. Zacks reports that there are absolutely no "buy" ratings on the shares, and not even a "hold" to be found -- just 1 "sell" and 2 "strong sells." In the same vein, Thomson Financial places the security's average 12-month price target at $75.80, which represents a discount of 0.5% to SHLD's closing price yesterday.

Of course, in today's trying market environment, a lack of bad news is not quite the same as good news. While it's well-insulated from potential downgrades and price-target cuts, SHLD could still be punished if option traders ramp up their bearish stance on the stock. As Peers noted in his article today, "At some point... the faith in [controlling shareholder Eddie Lampert] displayed by these investors may start to crumble." In the case of Sears, that sentiment reversal may come sooner rather than later.

It's been a long trip down the charts for Sears Holdings Corporation (SHLD: sentiment, chart, options). The department-store titan has seen its stock slide consistently for the past 18 months. From its April 2007 peak of $195.18, the security has shed 61% of its value. SHLD now faces staunch resistance from its 10-month moving average -- it's closed just 1 month atop this descending trendline since June 2007.

It's no surprise, then, that option players rushed yesterday to buy puts on SHLD. On the International Securities Exchange (ISE), traders bought to open 1,101 puts on the stock, compared to just 124 calls. The security's single-day put/call ratio on the ISE was 8.88, which indicates that nearly 9 times more puts than calls were purchased on Wednesday.

Major Drops in September Sales:
Saks, J.C. Penney, Nordstrom
By Cheryl Lu-Lien Tan - Dow Jones Newswire
October 8, 2008

Big U.S. retailers including Saks Inc. and J.C. Penney Co. reported worse September same-store sales than expected, with some logging declines of over 10% that surpassed analysts’ estimates of the extent of the retail downturn.

“It was even worse than my worst fears—it appears to me that the luxury customer really has eroded meaningfully in the past few weeks,” said Charles Grom, an analyst with JP Morgan Securities. “I don’t think there’s any place for retailers to hide – even the former safe havens of Wal-Mart and Costco are having a harder time – their comps are slowly decelerating.” Wal-Mart Stores Inc. posted a 2.4% increase for September while Costco Wholesale Corp. reported a 7% jump for same month—both numbers were slightly under analysts’ estimates. At Target, the reported drop of 3% was more than double the decline analysts had anticipated.

Saks posted a 10.9% drop in September sales at stores open at least a year, which are considered a key indicator of retail growth. The dip was almost double the decrease that analysts had projected. Nordstrom Inc. also posted a bigger drop than analysts expected—its September sales decreased 9.6% year over year.

Kohl’s Corp. logged a September sales decrease of 5.5%, which it attributed in part to better control over inventory, noting that sales of accessories, menswear and children’s apparel performed better than expected. At its rival J.C. Penney, September sales dropped 12.4% for the period ended Oct. 4 and the retailer slashed its third-quarter earnings forecast. Penney now is projecting a profit of between 50 cents to 60 cents a share, down from 70 cents to 75 cents a share.

The results further fueled the prevailing expectation that retailers will take a massive hit during the upcoming holiday season.

Retailers’ Sales Fall Sharply at Both High End and Low
By Stephanie Rosenbloom - New York Times
October 9, 2008

Sales at some of the nation’s best-known retailers fell by double digits in September, highlighting the rapid deterioration of the economy and raising fresh questions about how many of those chains can survive.

Retail analysts and executives said they had not seen such a rapid slowdown in consumer spending since the nation’s last deep recession, in the early 1980s. Retail executives, though braced for bad news, were stunned at the magnitude of the drop-offs reported on Wednesday. Retailers high and low — like Nordstrom, J. C. Penney and Kohl’s — lowered their earnings projections.

September sales for stores open at least a year, known as same-store sales, a barometer of retail health, plunged 14.8 percent at Stein Mart, an off-price department store. That chain, like many others, was already in trouble a year ago, but the drop-off last September was only 9.1 percent.

Sales at Dillard’s dropped 12 percent, compared with a 7 percent decline last year. J. C. Penney’s same-store sales fell 12.4 percent, compared with a decline of 3.7 percent for the period a year ago. Sales at Kohl’s decreased 5.5 percent, compared with a 3.2 percent decrease last year.

At Bon-Ton Stores, same-store sales decreased 4.6 percent, and they declined 3 percent at Target.

The sales results laid to rest any lingering notion that the nation’s luxury retailers might be impervious to the downturn. Same-store sales in the specialty retail segment of Neiman Marcus, which includes Neiman Marcus Stores and Bergdorf Goodman, tumbled 15.8 percent. Saks’s same-store sales sank 10.9 percent and Nordstrom’s were down 9.6 percent.

Blake W. Nordstrom, president of Nordstrom, said the deteriorating consumer environment led to “a weakening sales trend that was greater than our earlier expectations.”

Specialty retail sales figures, too, were soft. At Zumiez, same-store sales were down 9 percent compared with a 13.9 percent increase in the year-earlier period. Same-store sales at Wet Seal were down 7.5 percent. Sales at American Eagle Outfitters and Limited Brands decreased 6 percent. At Pacific Sunwear, sales were down 5 percent, while Children’s Place fared slightly better. Its sales were flat compared with a 2 percent decrease last year. The exception in this category was Aeropostale, which reported a 5 percent increase in same- store sales compared with a 1 percent increase in the year-earlier period.

Dean Hillier, a partner and a retail specialist with A. T. Kearney, a management consultant, said the Christmas shopping season “could quite frankly be one of the worst we’'ve seen in 25 years.”

It might be a holiday of movie tickets and board games, he said, not of big-screen televisions and vacations. “This is the cocooning that we saw in the ’80's, for goodness sakes, that we’re seeing coming back,” he said.

Sales drops of 5 or 10 percent might not sound like the end of the world. But because store chains have fixed costs, declines that large can devastate their profits and discourage banks from offering the financing necessary to run such a seasonal business. Most of the chains will report their third-quarter profits in October and November.

Some analysts are expecting a fresh wave of bankruptcies among store chains after the holidays. Already, famous names like the Sharper Image and CompUSA have gone out of business. Share prices of most leading retailers, which have been declining for many months, fell by 2 to 5 percent on Wednesday.

Shares of Circuit City Stores, the struggling electronics chain, fell 18 percent, to 41 cents a share, down from $9.02 a year ago. That chain said on Sept. 29 that same-store sales for three months ending in August fell 13.3 percent.

In general, the weakest categories in Wednesday’s report were nonessentials like housewares, furniture, electronics, jewelry and women’s apparel. To the extent stores showed any strength, it was in must-have categories like food and children’s clothing.

“Even the über-wealthy are slowing down,” said Bill Dreher, an analyst with Deutsche Bank Securities. “It’s going to be a discount- store Christmas.”

Indeed, warehouse stores, where affordable groceries can be bought in bulk, continue to be the bright spots in the retailing firmament. Costco’s same-store sales in the United States were up 6 percent (not including increased prices for gasoline sales) compared with the same period a year ago. Same-store sales at BJ’s Wholesale Club increased 5.6 percent, not including sales of gasoline. Sales at Wal-Mart Stores were up 2.4 percent excluding fuel sales, though Wal-Mart noted that sales of discretionary items were soft.

Wallets snapped shut in the last month as consumers faced a plunging stock market and were made even more skittish by headlines about rising unemployment, declining home prices and bank failures.

Consumer trips to stores, already down in August, declined further as the financial crisis unfolded in the beginning of September, according to ShopperTrak, a research firm. Its traffic index fell 9.2 percent between Aug. 31 and Sept. 20, then dropped a bit further in the following week as the financial news worsened.

Many chains were hit last month with hurricanes that forced them to close stores. Neiman Marcus, Dillard’s, Wal-Mart and Stein Mart all noted the impact of hurricanes Gustav, Hanna and Ike on their monthly results.

“Our business in September was significantly below our expectations,” said Linda M. Farthing, president and chief executive of Stein Mart. “ In an already difficult environment, our stores in the path of the hurricanes saw their sales plummet, and following Hurricane Ike, the situation was exacerbated by post-storm gas shortages in many of our core Southeast markets such as Nashville, Charlotte and Atlanta.”

Whether retailers point a finger at the economy or the hurricanes, the sales figures do not bode well, even though many retailers have cut inventory and staff.

“I think we’re at the point where it’s beginning to have repercussions for the holiday,” said John D. Morris, an analyst with Wachovia. “The lesson retailers have learned is that they need to get promotional fast to wake the customer up out of his or her trance.”

J.C. Penney, Kohl's Cut Forecasts After September Sales Slump
By Heather Burke - Bloomberg
October 8, 2008

J.C. Penney Co., Kohl's Corp. and Nordstrom Inc. forecast third-quarter profit that may trail analysts' estimates after September sales fell because of consumer concerns that the Wall Street meltdown will cost them their jobs and savings.

Wal-Mart Stores Inc., the world's largest retailer, reiterated its third-quarter earnings forecast today after monthly sales at stores open at least a year rose 2.4 percent. Costco Wholesale Corp. posted a fourth-quarter profit gain that may have missed estimates, a UBS Securities LLC analyst said.

The biggest banking crisis since the Great Depression is threatening retailers' sales going into the holiday-selling season, the largest source of revenue for most stores. Spending may remain sluggish as banks hoard cash and job losses mount.

"The consumer hasn't disappeared but is hunkered down, waiting to see the direction of the economy,'' said Craig Johnson, president of Customer Growth Partners LLC, a retail consulting firm. ``Department stores and mall-focused players are facing prospects of a dismal holiday season.''

September same-store sales may range from little changed to an advance of 1 percent, the International Council of Shopping Centers said yesterday. Last month's results may be the worst since a 0.5 percent decline in March and a 0.5 percent increase in January, according to ICSC data. The New York-based trade group will release its final results tomorrow.

Wal-Mart, based in Bentonville, Arkansas, was unchanged at $54.84 at 9:37 a.m. in New York Stock Exchange composite trading. The shares increased 15 percent this year through yesterday, compared with a 26 percent decline in the Standard & Poor's 500 Retailing Index. J.C. Penney decreased 3.7 percent while Costco dropped 3.9 percent.

"Many of the retailers hit a wall in the last third of September as Wall Street headlines hit front and center,'' Johnson, based in New Canaan, Connecticut, said in a telephone interview.

The collapse of the U.S. housing market has upended the economy, frozen credit markets and saddled financial firms with almost $600 billion in mortgage-related writedowns and credit losses. Last week the U.S. Congress passed a $700 billion program to shore up the financial system following the bankruptcy of Lehman Brothers Holdings Inc. and the government takeover of American International Group Inc. and Fannie Mae.

Borrowing by U.S. consumers unexpectedly fell in August by the most on record as banks shut off access to loans, according to a report released yesterday by the Federal Reserve. The U.S. lost the most jobs in five years in September, the Labor Department said Oct. 3.

Penney Drops

J.C. Penney, the third-largest U.S. department-store chain, said third-quarter profit will fall to 50 cents to 60 cents a share, less than the 70 cents to 75 cents it had forecast. Sales at stores open at least a year dropped 12.4 percent in September, the Plano, Texas- based company said.

Sixteen analysts surveyed by Bloomberg estimated average profit of 72 cents a share.

Nordstrom Inc. posted a 9.6 percent sales drop, compared with a 7.3 percent decline estimated by analysts. The company said quarterly profit would be 32 cents to 37 cents a share, less than its previous forecast of 49 cents to 54 cents.

Luxury department-store chain Neiman Marcus Group Inc. said sales sank 13 percent.

"Based on our September performance and the current economic environment, we expect customer demand will remain weak for an extended period of time,'' Neiman Marcus Chief Executive Officer Burton Tansky said in a statement.

Wal-Mart Climbs

Wal-Mart had predicted a September sales gain of 2 percent to 3 percent. The retailer reaffirmed third-quarter profit would be between 73 cents to 76 cents a share.

Wal-Mart ``reported heroic results, while the economy had a significant slowdown,'' David Katz, who helps manage Wal-Mart shares among $1.4 billion in assets at Matrix Asset Advisors in New York, said today in a telephone interview.

Costco, the largest U.S. warehouse club, said today that fourth- quarter profit rose 6.8 percent. Its September sales gain of 7 percent trailed analysts' estimates of a 7.3 percent increase, based on data compiled by Retail Metrics LLC, based in Swampscott, Massachusetts.

Warehouse retailer BJ's Wholesale Club Inc. posted a 10.4 percent gain. Food sales increased 10 percent, while general merchandise including televisions and jewelry fell 3 percent.

Target May Miss

Target, the second-largest U.S. discount retailer, said third-quarter profit may be "slightly below'' analysts' estimate of 52 cents a share after same-store sales declined 3 percent.

Sales plunged 12 percent at department-store chain Dillard's Inc. after Hurricanes Gustav and Ike. The drop was more than double the 5.4 percent decline estimated by analysts.

Kohl's said third-quarter earnings would be at the low end of its forecast of 51 cents to 56 cents a share. The company said customers are making ``need-based'' purchases, pushing monthly sales down 5.5 percent. Analysts were estimating profit of 54 cents.

The National Retail Federation has forecast the worst holiday season since 2002. The holiday period accounts for 20 percent to 35 percent of a retailer's annual revenue.

Many U.S. retailers are reporting September same-store sales results today, a day earlier than usual, because of the Yom Kippur holiday.

Same-store sales are considered by some investors to be the best measure of retail health because they exclude the effect of location openings and closings in the past year. Sears Holdings Corp. and Macy's Inc., the two largest department-store chains, don't release monthly results.

Big Discounts Fail to Lure Shoppers
Retailers Tried Promotions in September But Worried Consumers Curbed Spending
By Jennifer Saranow and Rachel Dodes - Wall Street Journal October 6, 2008

As the financial crisis spread last month, some U.S. retailers hit the panic button, offering more generous discounts than they did at this time last year.

But the promotions did little to convince cautious shoppers to open their wallets. When they report September sales this week, many retail chains are expected to show big drops in sales at stores open at least year, a key measure of retail performance, according to analysts polled by Thomson Reuters.

That augurs poorly for the coming holiday season, which some predict will be the worst for retailers since 1991. Even before the most recent financial turmoil, retailers had been planning conservatively for inventory and seasonal hiring. But September's performance could mean even more inventory cutbacks in coming months as retailers try to preserve their margins.

A wild card is whether Congress's passage of the financial bailout plan boosts consumer confidence in the months ahead.

In September, same-store sales overall are expected to rise an average 1.9%, according to analysts polled by Thomson Reuters. That number is buoyed by Wal-Mart Stores Inc., which analysts expect to post a gain of 2.8%, and discount membership clubs Costco Wholesale Corp. and BJ's Wholesale Club Inc., which are expected to post large gains.

Department stores are expected to post the worst showing, with same- store sales falling an average of 6.1%, Thomson Reuters said.

The numbers don't include results at Macy's Inc., the Cincinnati- based department store chain, because the company stopped reporting monthly sales. But Michael Gould, chief executive of Macy's upscale Bloomingdale's chain, said in an interview: "Let's be honest. The business is difficult."

Spending on apparel and other discretionary items, however, appears to have declined more last month than it did during the summer, according to MasterCard SpendingPulse, a MasterCard Inc. data service that tracks spending of all types and is set to release September figures this week.

The problem for many retailers is that shoppers balked in the second half of the month as the daily drumbeat of bad news from Wall Street and Washington gripped consumers.

"I feel guiltier shopping in this environment," said Charlotte Houghteling, 28 years old, a New York attorney who is spending less freely as a result of the credit-market woes.

Some consumers are becoming hardened to retail claims of "last chance" and "final sale." Katie Ertel, 30, a La Jolla, Calif., counselor, said she's begun to tune out. "Every week it's the same 'last minute sale.' Eventually it's like 'Ha, ha. You are not getting me this time,'" said Ms. Ertel.

The increased discounting doesn't seem to be luring consumers to stores. ShopperTrak RCT Corp., which tracks retail sales and traffic, estimates that shopper visits to U.S. retail stores and enclosed malls was down about 9.2% last month compared to 2007.

In late September, retailers usually try to sell their fall merchandise at full price. But after the bankruptcy filing by Lehman Brothers Holdings Inc. on Sept. 15 and the $85 billion bailout of American International Group Inc., stores stepped up their promotions in an effort to attract shoppers.

"We started seeing e-mail messaging around sales and special values very quickly" after the news hit, said Wendy Liebmann, chief executive officer of New York consulting firm WSL Strategic Retail.

AnnTaylor Stores Corp. began touting an "unprecedented" sale with discounts of up to 60%, which a spokeswoman attributed to this year's "significantly different retail environment."

Gap Inc.'s namesake chain and its Banana Republic stores advertised discounts of up to 40%. A spokeswoman called the markdowns "incremental promotions versus last year."

By the end of the month, some retailers resorted to citing the crisis directly. Posters at Steven Madden Ltd. footwear stores, for example, depicted a declining stock chart and implored shoppers to "Sell Stocks, Buy Shoes." To sweeten the offer, the company knocked 20% off all products. A spokeswoman declined to comment.

Restoration Hardware Inc., meanwhile, sent out a blast email on Thursday saying it "unanimously approves bailout bill" and offering $100 off purchases of $400 or more at the home furnishings chain.

Wal-Mart is already cutting prices for Christmas, saying last week it had cut prices to $10 on 10 popular toys. Target Corp., Minneapolis, also is emphasizing value more than in the past. "Since 1994, we've had the brand promise 'Expect more. Pay less,"' said a spokeswoman. "Now we are focusing more on the 'Pay less' side of that promise."

Prices may have to go even lower to get consumers interested again. At Costco, where sales of non-discretionary items such as food and gasoline have increased and consumers have cut back on discretionary purchases of furniture, apparel and electronics, Chief Financial Officer Richard A. Galanti said last week, "If [a purchase] can be put off, it will be put off."

A message from your NARSE Chairman

What Has Congress Done?!
(Oct. 1, 2008)

Have you taken a look at your portfolio recently? Shocking, isn’t it? Well, you can thank your elected representatives who are more concerned about partisan politics than the folks they are supposed to be representing.

Yesterday, the House defeated the Administration’s historic $700 billion financial-rescue package which would have gotten our financial institutions lending again and help stabilize the financial markets. The majority party in the House is responsible for this defeat and partially based their decision on not wanting to “put taxpayers on the line.” You got to be kidding me!! Since when did Congress ever care about the taxpayer?!

Just look at what they have done to taxing our Social Security benefits that we have already paid taxes on while we were in the workforce. Back in 1983 when the tax burden began for our Social Security benefits, about 10% of Social Security recipients were hit with the tax. In 2008, 33% of the Social Security recipients are being caught in the tax net; and it is projected that in 2018 that number will rise to 43%.

First of all, Social Security benefits should not be taxed and, as you know, NARSE has already sent letters to both presidential candidates asking for their opinion on this subject. The reason more Social Security recipients are paying taxes on their benefits is because when Congress first approved a tax on these benefits they established “threshold” amounts where the tax would kick in. However, these threshold amounts have never been adjusted for inflation.

In effect, this tax on Social Security benefits is a STEALTH TAX: Congress knows the tax on Social Security benefits is going to generate more money every year, but it conveniently allows lawmakers to raise taxes without having to go on record and cast a vote. How convenient for our elected officials!!

It is time that we fight back. Contact your representatives NOW and express your extreme displeasure, first with how they are screwing up our financial system by not approving the Administration’s financial-rescue package; and second, letting them know that taxing Social Security benefits is not only unfair, but is also downright scandalous for the many seniors who are trying to make ends meet during these tough economic times.

Regarding the proposed bailout plan which Congress initially rejected, The Wall Street Journal, in an editorial on September 30, 2008, said: “The financial system has a huge capital hole due to losses on mortgage securities and other assets and private capital won’t begin to fill it without the life preserver of public capital.” Congress must act to defend and restabilize our financial system NOW!

For those caught in the taxation of their Social Security benefits, the tax makes the shelter of 401(k)s and traditional IRAs less valuable than you might have assumed. Let’s say you get $24,000 a year from Social Security and draw $22,000 from a pension. That’s enough to start moving you into the threshold taxing 85% zone.

For every additional $1 you take from an IRA or 401(k), another 85 cents of your Social Security is taxed that turns $1 into $1.85 of taxable income. So, at a 25% rate, you pay 46 cents in tax on that $1 thus turning your effective tax rate into 46%. Thank you Congress!!

These are difficult times, tell Congress not to make them more difficult by playing partisan politics.