Sears
& Retirees Reach Agreement to Settle Life Insurance Law Suits
Peggy Palter, Sears
Media Contact - June 12, 2001
HOFFMAN ESTATES, Ill. -- Sears, Roebuck and
Co., the National Association of Retired Sears Employees (NARSE) and
attorneys for Sears retirees announced an agreement on a proposed
settlement of lawsuits regarding retiree life insurance benefit changes.
The agreement, which requires court approval, provides a process for
retirees to apply for eligibility to obtain partial relief from planned
reduction of life insurance benefits.
Sears Chairman and CEO Alan J. Lacy said,
"Some retirees felt disenfranchised by the company's change in life
insurance. Our retirees are an important constituency of the company. We
believe this agreement is a positive step to further strengthen our
relationship with them."
Everett L. Buckardt, chairman of NARSE,
said, "I commend Sears management for their sincere efforts to bring
the family back together. This agreement is a positive gesture and goes a
long way toward doing just that. NARSE leadership strongly supports the
agreement, which restores a solid relationship with the company. We are
very pleased."
Details of the agreement will be
presented to plan participants prior to court approval. The cost of the
settlement will not have a material impact on the financial results of the
company.
Sears, Roebuck and Co. is a leading U.S.
retailer of apparel, home and automotive products and services, with
annual revenue of more than $40 billion. The company serves families
throughout the country through approximately 860 department stores, more
than 2,100 specialized retail locations, and a variety of online offerings
accessible through the company's Web site, sears.com.
Sears
Same-store Sales Fall 3.3%
Reuters
Newsroom - June 7, 2001
Sears, Roebuck and Co., the No. 2 U.S.
retailer behind Wal-Mart Stores Inc., Thursday said sales at its
domestic stores open at least a year fell 3.3 percent in May from a year
ago. Total domestic sales in the four weeks ended June 2 fell 2.8
percent from a year ago, to $2.30 billion, the retailer said in a news
release.
``May was another challenging month as
the slowing economy continued to affect sales and cooler weather
discouraged consumers from purchasing seasonal items,'' Alan Lacy, Sears
chief executive officer, said in a statement. ``We did, however, see a
solid increase among our specialty store formats, led by strong sales
increases from Sears Automotive
Group and solid Hardware store increases.''
'Store
Wars': Incursion of a Superstore Galvanizes a Quiet Town
By Julie Salamon -
Wall Street Journal - June 4, 2001
Who would have thought "I love
Starbucks" could be fighting words, especially when uttered by a
gentle- looking woman as she makes cookies in her kitchen.
But they are, in "Store Wars: When
Wal-Mart Comes to Town," a documentary that really isn't about
coffee or cookies or even Wal-Mart. The real subject is homogenization,
and whether a town benefits more from preservation or change.
Will building a Wal-Mart ruin Ashland,
Va., (population 7,200) financially and aesthetically, forcing
businesses to close and creating traffic jams and eyesores with its
bland, boxy architecture? Or will it, as the Wal-Mart people promise,
enrich the community with jobs and one-stop shopping with lower prices?
This excellent program uses a David vs.
Goliath scenario — small- town citizens versus corporate behemoth —
to offer an engaging rendering of a placid community enlivened by
political action. As time passes, the pro- and anti-Wal-Mart factions
harden their positions, but politely for the most part. The young mayor,
up for re-election, tries to appease everyone but mainly worries whether
people like him.
In Ashland, where many people still speak
in soft Southern tones, politeness matters. "Passion and emotion
give you the French Revolution," says the mayor. "Passion and
emotion don't let you think through issues." "Store Wars"
captures how quixotic passion and emotion came to dominate life in
Ashland for a time, when Wal-Mart decided to set up (a very big) shop
there. The zoning battle is hardly the French Revolution. No one is
beheaded, and many of the protest signs are prettily decorated by
protesting children.
It does galvanize the town, however, not
to unified action but to unified discussion. Wal-Mart — and what it
means and doesn't mean — come to dominate discussion in coffee shops,
kitchens and even churches. Everyone proclaims expertise: Wal-Mart is
said to be a good employer and a bad one; it's said to be generous and
last among corporations in charitable giving.
When Wal-Mart put in its proposal to
build a store, Ashland wasn't exactly a virgin in the homogenization
department. Just off Interstate 95, the town had already been invaded by
fast-food restaurants and motel chains. But its downtown looks untouched
by time, and it still has a Fourth of July parade at which children ride
on ponies wearing American flags wrapped around their ankles. Its
hometown song contains the lyric: "Ashland, Ashland, center of the
universe."
The filmmaker Micha Peled follows a
tradition of social-minded documentarians, dutifully presenting all
sides, including Wal-mart's, though his heart is clearly with the
protesters. Wal-Mart doesn't emerge from this portrait as evil so much
as piggish, with its desire to open a store in Ashland when there's
another Wal- Mart 10 miles away. Its very bigness seems loutish,
especially when compared with the cozy little stores Mr. Peled visits.
The Wal-Mart representatives come off as
decent enough but soulless men who argue that if their stores are so bad
why do so many people shop there? The film answers that, too: prices are
cheap, variety is plentiful, and Wal-Mart refuses to sell CD's whose
lyrics haven't been sanitized, a policy many parents apparently
appreciate (and their children deplore).
Mr. Peled uses portraiture, not polemics,
to address the economic and philosophical issues. He wisely chose a
local woman, Rosanne Shalff, to act as narrator and guide. This affable
woman, who lives in Ashland and wrote its only history book, introduces
the characters with affection and an insider's knowledge of their
predilections. As the Wal-Mart proposal makes its way through the
development board up to the town council, she wryly comments on the
action without judgment.
Mr. Peled's persistence is rewarded by
actual drama. As the deadline nears for the town council to decide
whether Wal-Mart can come to town, the pressure that comes to bear is
heartfelt. Neighbors argue; political fortunes are upset. People weep
real tears over the outcome.
In capturing this passion, "Store
Wars" becomes a fascinating study in community action and a
valuable reminder that people still can care enough about a place to
fight for it.
Circuit
City Sees Electronics-Store Sales Declining 23% in Its Fiscal First
Quarter
WSJ.Com
- June 6, 2001
Circuit City Stores Inc. said it expects
fiscal first-quarter sales at its electronics-retail unit to drop 23%,
hurt by weak demand for personal computers and the chain's
discontinuation of appliances last summer.
Separately, Michigan's attorney general
announced that her office has initiated action against Circuit City for
allegedly violating the state's consumer protection laws. The notice
states that Circuit City failed "to provide rain checks to
consumers when certain specially advertised items were not available for
purchase during the advertised sale period."
In the period ended May 31, sales for
Circuit City Group, which operates the electronics chain, fell to an
estimated $1.88 billion from $2.45 billion a year ago, the company said
Wednesday. For stores open a full year, the drop came to 25%.
"We were obviously dissatisfied with
the overall comparable-store sales decline," said W. Alan
McCollough, Circuit City's president and chief executive, in a prepared
statement, noting that appliances represented 14% of merchandise sales
in last year's first quarter.
But even excluding home appliances, the
estimated drop in same-store sales was a sharp 13%, which the company
blamed on "continued industry-wide weakness in personal-computer
sales and general softness in other categories."
Not all the news for the quarter was
discouraging. City Circuit also estimated that sales at CarMax Group,
its operator of used-car stores, climbed to $796.4 million from $625.7
million, including a 27% rise in same-store sales.
"Above-plan" sales growth in the first two months of the
quarter continued through May, the company said.
CarMax, which like Circuit City Group
trades as a tracking stock, should report
earnings of about 25 cents a share, compared with 13 cents a share a
year ago. And given the peculiar structure of the overall company, part
of that good fortune will rub off on the electronics unit.
Circuit City said the electronics
business is expected to lose five cents a share in the quarter. However,
the CarMax business, in which Circuit City Group holds a retained
interest, should contribute about nine cents a share to the results of
Circuit City Group for a net result of four cents a share. A survey of
analysts by Thomson Financial/First Call yielded a consensus estimate of
a loss of three cents a share for Circuit City Group, which a year ago
earned 28 cents a share.
For the record, overall sales for the
company's first quarter are expected to drop 13% to $2.67 billion from a
year-earlier $3.07 billion. "Circuit City's results were worse than
expected and CarMax's were better," said Ken Gassman, an analyst
with Davenport & Co. in Richmond.
Also on Wednesday, Circuit City Stores,
which itself is not publicly traded, said it plans within a week to make
a filing with the Securities and Exchange
Commission relating to a public offering
of about 7.5 million shares of Circuit City Stores Inc.-CarMax Group.
They will be shares of CarMax Group
presently reserved for the Circuit City Group's retained interest in
CarMax, and the proceeds will be used for general corporate purposes of
the Circuit City business, including the ongoing remodeling of Circuit
City stores.
Michigan Attorney General Jennifer
Granholm, in threatening a lawsuit against Circuit City, said that when
notified of consumer complaints, the company responded that rain checks
weren't available on limited quantity sales or clearance sales.
"Luring customers to a store using
bargain advertising for a product that's not in stock, then relying on
them to buy a higher-priced substitute simply isn't playing fair,"
Ms. Granholm said.
A spokesman for Circuit City, which
operates 23 stores in Michigan, said no one was immediately available to
comment Wednesday.
The attorney general's action, filed in a
"Notice of Intended Action," gives Circuit City 10 days to
respond and begin settlement negotiations. If no settlement is reached,
the state could take Circuit City to court.
Unlike
Nordstrom on N. Michigan,
the New Sears on State Embraces the City
By
Blair Kamin - Chicago Tribune - June 5, 2001
The new Sears store on State Street is,
thank goodness, much more than a place to shop. It serves up
granite-and-glass proof that retailers who usually do business in the
suburbs don't have to build fortress-like downtown stores that look like
they belong in a mall.
That's what happened last fall with the
Nordstrom department store one block west of North Michigan Avenue,
which is eye-pleasing enough on the inside, but turns a cold, concrete
face to the world. But Sears, which occupies the lower floors of the old
Boston Store building at the northwest corner of State and Madison
streets, has broken out of the suburban, one-size-fits-all mold, and
State Street is the better for it.
The five-level, 250,000-square-foot store
doesn't only sell different products than its mall counterparts, with an
Afrocentric gift shop, for example. The store itself is different. It's
oriented outward to the street rather than turning inward on itself, as
Nordstrom does. It embraces the city rather than holding it at bay.
This exercise in architectural
neighborliness won't pop up on the cover of design magazines as the
latest "hot thing," but so what? An ego-tripping statement
would have been utterly inappropriate here, especially because Louis
Sullivan's masterful Carson Pirie Scott store is kitty-corner across
State.
Principal credit for the project goes to
Chicago's Daniel P. Coffey & Associates, whose portfolio includes
such other State Street bright spots as the restored Chicago Theater at
175 N. State and the teeming, renovated DePaul Center (the old
Goldblatt's department store) at 333 S. State.
Also deserving kudos are the Retail Group
of Seattle, which shaped the interior, Sears' facilities planners and
the Daley administration, which pushed Sears hard to come up with a
store that would maintain the momentum of State Street's astounding
comeback -- not just financially, but aesthetically.
As a result, the store's exterior strikes
an almost perfect balance between the needs of modern retailing and the
design traditions that endow State Street with its powerful sense of
place.
Its interior is a plus as well -- nothing
fancy, yet clearly organized, with enough design flourishes to raise it
above the ordinary.
Coming home
In a sense, then, Sears has come home. Its old downtown quarters at
403 S. State St., which the retailer deserted in 1983, remains a
handsome, unappreciated building that emerged from the drafting rooms of
skyscraper pioneer William Le Baron Jenney. Much like that building, the
old Boston Store is solid, turn-of-the-century architecture, with just
enough classical detailing to prevent it from being monolithic.
By the time Sears began eyeing the
building in the late 1990s, however, tenants like Walgreen's had slapped
on a mish-mash of modern facades at ground level and turned the lower
floors into a rabbit warren, with floors on different levels and a range
of ceiling heights.
It was a no-brainer for the design team
to strip the interior down to its structural columns and insert new
mechanical and electrical systems, thus making way for a major
department store.
Yet the trickier question involved the
store's public presence: Would it fit into State Street or be a suburban
clone?
Wisely, Sears opted to be a good
neighbor, recognizing that the key to urban retailing is to appeal to
the pedestrian moving along the sidewalk -- not, as in a mall, the
driver who arrives in the parking lot.
A new curving canopy at State and Madison
nicely turns the corner and directs those on foot to the main entrance,
not with screaming neon signs, like those at the Toys "R" Us
store a block to the south on State, but with a distinct architectural
feature that works wonderfully with the old building. A second canopy,
squared-off rather than round, announces another entrance on Madison
Street, midway between State and Dearborn Streets.
The canopies are a visual delight, their
cast-aluminum faces featuring patterns of circles and grids that subtly
echo the decoration and structural grid of the Boston Store. They also
provide a much-valued amenity that will protect pedestrians from the
rain and snow. Who knows? Maybe they'll even insert themselves into our
everyday conversation, with people saying, "Meet me under the
canopy at Sears" just as they say, "Meet me under the clock at
Marshall Field's."
Yet the beauty of the canopies would be
meaningless if Sears and its designers had not figured out a way to give
the retailer the interior display space it needs while also making the
store's exterior attractive and inviting.
This balancing act is mainly achieved
with traditional display windows along State Street and, along Madison,
a new, street-level window arrangement that works like this: Merchandise
is set in the middle of the window space along a partial back wall that
allows clear sightlines to the interior of the store on either side.
This setup promotes window-shopping, as a
conventional display window does, but at the same time it gives Sears
the kind of see-through "showroom" effect popularized by Crate
& Barrel's highly transparent flagship store on North Michigan
Avenue. Better yet, from Sears' perspective, the reverse side of the
wall can be used to display merchandise to customers inside.
To be sure, there are weaknesses, like
plastic banners on the store's Madison facade that are sure to look
scruffy after Chicago's weather has a go at them.
But on the whole, the job works because
it is straightforward, traditional design that respects State Street
rather than trying to suburbanize it.
Bang the drum quietly
Even the big attention-getting feature Sears has included in the
design -- a 7,800-pound drum that is suspended in the two-story entryway
at State and Madison and displays revolving images of Chicago scenes --
is relatively quiet visually. Sears' executives assure us, by the way,
that the drum is firmly secured to structural beams above it.
The inside of the store is equally
successful, which is no small thing because it required further
departures from Sears' suburban model. The most obvious shift is that
the store has five levels instead of one or two. It also has a tighter
window of opportunity -- between 11 a.m. and 2 p.m., and then after 5
p.m. -- to sell wares than a suburban store, which is more likely to get
customers throughout the day. All this puts a premium on letting
customers easily navigate their way through a store, especially its
upper levels.
Central escalator zone
The design responds to this need with a big oval cove light that
rings the store's centrally placed escalator zone. Light gray horizontal
stripes, which take their visual cues from still-in-place silver bands
on the elevators of the old Boston Store, further define this zone as
well as other escalator and elevator areas. Blue columns set near the
entrances are painted with floor numbers and department information that
should help customers orient themselves.
Throughout, the floors are bright, open
and airy. They also are souped-up visually, at least for Sears, with
wall-mounted projection screens on which the retailer's brands can be
advertised and column capitals that consist of blownup photographs of
landmark Chicago buildings.
That's a small, but telling, detail that
shows how the retailer has successfully attuned the new store to its
surroundings rather than inserting a generic suburban design in the
Loop. This isn't Marshall Field's, mind you, but it is appropriate both
for Sears and for State Street: It gets the basics right.
Sears
Throws Homecoming Party in Loop
By
Ellen Almer - Crain's Chicago Business - May 23, 2001
Thousands of eager shoppers joined Mayor
Richard M. Daley, blues legend Buddy Guy and Sears, Roebuck and Co. CEO
Alan Lacy Wednesday to welcome Sears back to State Street after a
20-year absence.
Boosters are hoping the new store at
State and Madison streets, which celebrated with a grand opening
Wednesday morning, will be a shot in the arm for both the struggling
retailer and the city's ambitious Loop redevelopment plans.
Mayor Daley, joined in a ribbon-cutting
ceremony by boxing champion and grill salesman George Foreman, thanked
Sears "for being inclusive, and reaching out to our entire city.
We're really proud of Sears, and they've been a great corporate member
of Chicago for so many years."
City officials, including the mayor, are
banking on Sears to continue the Loop's current upswing. Housing
developments and new hotels, theaters and retail stores‹most notably
value-conscious chains such as an Old Navy and Marshall's‹recently
have revitalized the area.
Dee Robinson, manager of the store's
Unity Square department, sells Afrocentric items to Sears employees
Freddie Flowers and Mattie Allison.
During his remarks today, Mr. Lacy said
the urban location of the store at "one of the most notable
intersections in the city," shows Sears' renewed commitment to the
customers who make up the chain's core multicultural customer base. He
also noted that a Sears-sponsored gala earlier this week raised $1.2
million that will go toward educational and job training programs for
Loop residents.
After the brief speeches by civic
leaders, the eager crowd surged forward when the doors finally swung
open after 11:30 a.m. Some were stunned by the sparkling new store, with
its colorful displays, open layout and special features such as the
Unity Square department that sells African crafts and jewelry.
"When I came in the door, I thought
I was in another store," said Mattie Allison, a Sears employee who,
along with dozens of other workers, was allowed a sneak peek of the
store before it opened to the general public. "It made me feel good
that Sears could get to this point."
Meanwhile, from inside a window display,
bluesman Mr. Guy belted out songs to the delight of the crowd outside,
who cheered when he exclaimed, "Welcome to Sears on State
Street!"
Retired friends Haskell Kaplan, of
Evanston, and George Banoff, of Chicago, came downtown specifically for
the opening, waiting in a line that snaked nearly around the block. They
planned to browse the tool department on the third floor. For Mr. Banoff,
who is budget-conscious, Sears has long been preferable to more upscale
stores. "They've got a men's shirt over at Marshall Field's for
$120," he says, waving his hand. "Not here."
Analysts believe Sears, which has been
absent from the Loop since closing its flagship store in 1982, will do
well in the location. "State Street has been successful more with
value retailers, rather than the upscale ones," said Neil Stern, a
partner with retail consultancy McMillan/Doolittle LLP.
"This truly is a downtown, urban
store that will attract more office workers, clerical workers, and not
the yuppies from Lincoln Park," Mr. Stern said. "This is
different than if they had opened on Michigan Avenue, this is where
their customer is."
Big
Names Part of Sears' State Opening
By
Sandra Guy - Chicago Times - May 18, 2001
Sears, Roebuck and Co. will roll out one
of the biggest promotion events ever beginning Wednesday as it opens its
first store on State Street in 18 years.
The retailer has scheduled dozens of
events and celebrity meet-and-greet promotions, designed to lure
shoppers into various parts of the five-story retail complex.
The new downtown Sears makes its debut
Wednesday at State at Madison as it opens a 250,000-square-foot store
after the obligatory ribbon-cutting ceremony at 11:30 a.m.
Chicago blues musician Buddy Guy and his
band open the show, followed by home improvement guru Bob Vila, who will
sign autographs from noon to 1:30 in Sears' Tool Territory.
Boxer-turned-grill master George Foreman will be stationed in housewares
from noon to 1 p.m.
Sears also will distribute $10 Sears Gift
Cards and Fannie May candy bars to the first 2,000 customers.
Among other events:
Wednesday, May 23
Chef Allen Sternweiler from Harvest on
Huron will perform a cooking demonstration from 1 to 3 p.m. in home
appliances.
Chicago Bulls forward Elton Brand will
sign autographs from 1:30 to 3:30 p.m. in men's apparel.
Leona and Lionel, characters from the hit
PBS children's show ''Between the Lions,'' will stroll throughout the
store.
Throughout the day, Sears Circle of
Beauty will provide free makeovers to customers from 11:45 a.m. to 6
p.m. A free 8-by-10 portrait will be offered with every makeover.
Shoppers at all Sears stores will receive
10 percent to 25 percent discounts on regular-priced merchandise.
Thursday, May 24
''Sears State Street Getaway'' promotion
runs through May 31, with customers who make a purchase of $35 or more
receiving an instant-win game piece. The grand prize is a weekend stay
for two in downtown Chicago at the Hotel Burnham, two tickets to a
performance at the Chicago Theater, a $1,000 Sears Gift Card for the
State Street store and $500 in cash.
Friday, May 25
Bobby Hull, former Chicago Blackhawks
left wing and Hall of Famer, will sign autographs from 11:30 a.m. to
1:30 p.m. in men's apparel.
Sears will showcase its summer apparel at
a fashion show featuring Miss Illinois Jennifer Powers from noon to
12:30 p.m. in women's apparel.
Chef Dean Zanella from 312 Chicago will
demonstrate cooking techniques from 1 to 3 p.m. in home appliances.
Saturday, May 26
Marisa Ramirez (Gia Campbell) and Coltin
Scott (Nikolas Cassadine) from ''General Hospital'' will sign autographs
in intimate apparel from 1 to 3 p.m.
Sunday, May 27
Faze 4, top ''boy band'' from Chicago,
will sign autographs from 1 to 3 p.m. on the second level.
Friday, June 1
±'Sears, Cubs and Grub'' promotion (June
1-9): Customers will receive an instant-win game piece with a $50
purchase in home electronics. Grand prize includes: a VIP Cubs pre-game
party and four tickets to the Cubs game on Wednesday, June 27, plus
spending money and four Ron Santo Topps Baseball Cards.
''Buy the Blues, Get the Blues''
promotion (through June 9): With a purchase of men's Levi's, customers
will receive an instant-win game piece and a House of Blues value pack.
Grand prize includes a House of Blues Foundation Room VIP dinner party
for 12, Opera Box seating for one of four concerts sponsored by Sears
and Levi's at the House of Blues and backstage meet-and-greet passes.
Ryne Sandberg, former Chicago Cubs second
baseman, will sign autographs from 11:30 a.m. to 1:30 p.m. in men's
apparel.
Saturday, June 2
"One Life to Live'' stars Kamar de
los Reyes (Antonio Vega) and Erika Page (Roseanne Delgado) will sign
autographs from 1 to 3 p.m. in intimate apparel.
Saturday, June 9
Chef Gale Gand from Tru will demonstrate
cooking techniques from 11 a.m. to 1 p.m. in home appliances.
''All My Children'' stars Cameron
Mathison (Ryan Lavery) and Esta Terblanche (Gillian Andrassy) will sign
autographs from 1 to 3 p.m. in intimate apparel.
Puppets from ''Between the Lions'' will
perform at 11 a.m., noon and 1:30 p.m. in the kids' department.
Sunday, June 10
Chicago Fire soccer player Diego
Gutierrez will sign autographs from 1 to 3 p.m.
From June 12 through 25, Sears on State
will continue its grand opening celebration by teaming up with
Puppetropolis Chicago, the city's newest summer festival, to feature the
United States debut of Urban Dream Capsule, presented by Performing Arts
Chicago. The interactive window theater will feature four
internationally acclaimed Australian artists who will live in four
display windows at the new Sears on State Street store 24 hours a day
during the two-week period.
In September 1999, Sears unveiled a $30
million program to renovate its six Chicago stores by the year 2003,
representing an overall $80 million commitment to the city by the
retailer over a 10-year period.
Sears
Debuts a New Push to Boost Credit
Rolling
dice, retailer will expand the
borrowing power of basic store card
By
Eddie Baeb, Crains Chicago Business - May 21, 2001
Hoping to reignite a stalled credit
business that produces more than half of its profits, Hoffman
Estates-based Sears is outfitting its basic store card with the features
of a general purpose bank credit card.
Beginning this fall, some Sears Card
holders will be able to use it for cash advances, balance transfers from
other credit cards and purchases at merchants not affiliated with Sears.
The retail and credit giant also is
hiking the interest rate on its store card to 21.9% from 21%, boosting
the minimum monthly finance charge to $1 from 50 cents and reducing the
minimum monthly payment - all moves that will squeeze more profits out
of the plastic.
Sears is the first U.S. retailer to turn
a store charge card into the functional equivalent of a Visa or
MasterCard. The strategy takes the card far beyond its traditional role
as a device to spur sales of Sears merchandise.
"(The Sears card) would become
something of a hybrid between a retail card and a general purpose card.
That is very, very unique," says Robert McKinley, CEO of
CardWeb.com Inc., a Maryland-based company that monitors the credit card
industry.
Sears hopes the new features will
jump-start a credit business that's fallen well below its $28.95-billion
peak at the end of 1997.
"We expect to get the Sears
private-label card in a growth mode again," says Kevin Keleghan,
president of Sears Credit Services. "We want to be people's primary
credit card company."
The expansion of the store card also
reflects the importance of credit to CEO Alan Lacy's plan to turn around
the long-struggling retailer.
He's ditching predecessor Arthur
Martinez's failed campaign to make Sears a power in the apparel
business, opting to focus on the company's traditional strength in
appliances and other hard goods, which carry higher price tags but lower
profit margins.
Financing big-ticket washers and dryers
at high interest rates makes those sales much more profitable for Sears
than they are when the purchaser uses cash or somebody else's credit
card. Mr. Lacy signaled his intention to emphasize credit last year,
when Sears rolled out a Gold MasterCard for its most creditworthy
cardholders.
But now, he's shifting his attention to
the 60 million Sears store card accounts in a strategy that echoes Mr.
Martinez's disastrous expansion of credit in the mid-1990s. By
increasing the borrowing power of a card with lower credit standards
than high-end credit cards, he risks triggering a wave of defaults like
the one that swamped Mr. Martinez and forced Sears to clamp down on
credit.
Since 1998, Sears' total outstanding card
receivables have fallen to $26.3 billion. For a time, Sears kept credit
profits growing by slashing the amount set aside each quarter to cover
expected losses. But it couldn't let reserves get too low, and profits
sank in the past two quarters after the loss provision stabilized.
Now, Sears is ready to push credit
revenues higher. The MasterCard, distributed to 15 million Sears
cardholders who pay off their balances every month, has already
generated $2 billion in receivables.
But the store card, with 40 million
active accounts, also has big potential, though Mr. Keleghan won't
discuss growth targets beyond a general goal of
"low-to-mid-single-digit" increases in the company's overall
credit business.
Mr. Keleghan dismisses worries about
sparking another explosion of losses. Although Sears is sending all 60
million cardholders a letter describing the new features, he says only
the most creditworthy will be allowed to get cash advances or transfer
balances to the card. Sears has become more stringent in extending
credit, he says, and catches problems more quickly than it did in the
past.
"You're not going to see '97 and '98
again," says Mr. Keleghan, who joined Sears in 1996 from GE Capital
Corp. "If the economy really goes south, will all credit card
companies feel a pinch? No doubt. But we think we'll sustain it better
than our competition."
Still, the plan to expand credit
increases Sears' exposure to defaults at a time when the economy is
softening and more people are having trouble paying their bills.
Sears' delinquency rate, after falling
from a peak of 9.3% at the end of 1998, ticked up to 7.5% in the first
quarter from 7.2% a year earlier. And the move to reduce the monthly
minimum payment on the card to 2.22% of the balance from 2.38% - already
well below the 5% required by many store card issuers - is a clear
exchange of risk for revenues.
Other elements of the store card
expansion are slowly taking shape. Mr. Keleghan won't name names, but
says he's in talks with airlines, gas stations and restaurants about
accepting the Sears Card. And he's working on plans to lure balance
transfers from other retailers' store cards with low introductory
"teaser rates."
As a model, Sears can look to its own
Canadian affiliate. Sears Canada Inc.'s store card has been accepted at
third-party merchants since 1996. The 55%-owned Sears subsidiary now has
10 such partners, including drugstores, gas stations and hotels.
A look at Sears' recent results shows why
the company is willing to raise its bet on credit.
In the first quarter, Sears' earnings
fell 25% to $176 million, or 53 cents per diluted share on revenues of
$8.86 billion, compared with earnings of $235 million, or 65 cents per
share, on revenues of $8.93 billion in the year-earlier period. Sears
lost money in all segments other than credit during the quarter,
including a loss of $56 million on retail and related services.
The credit and financial products
business posted $405 million in profits, down 2% from the same period
last year.
"Sears has got to start driving the
balances outstanding, and how else are they going to do it?" retail
analyst Michael Exstein of Credit Suisse First Boston says of the store
card expansion. "This would be a logical extension."
Sears
Return Caps State St.
Renewal Offerings at Loop Store Target Hispanics, Blacks, Whites
By
Susan Chandler, Chicago Tribune - May 20, 2001
Once abandoned and now embraced, the
retail heart of Chicago is making an unlikely comeback as a thriving hub
of diversity and commerce.
Nowhere is this rebirth more evident than
at the corner of State and Madison Streets, where Sears, Roebuck and Co.
will open its new store Wednesday, ending an 18-year absence from the
Loop. Sears is just the latest retailer to rediscover the area's
commercial allure, as new residents flock downtown.
A new Borders Books Music provides a
pleasant place to browse the latest bestsellers while sipping a latte.
Down the street, Old Navy lures urban and suburban teens with its
inexpensive mix of cargo pants and photo albums.. Across the way, the
Atwood Cafe in the newly restored Hotel Burnham offers a cozy spot to
have a drink after work or before the theater.
But Sears' return says as much about how
the company has changed. The Hoffman Estates-based retailer is reaching
beyond its core suburban customer base to embrace a growing, ethnically
diverse urban clientele.
The new store also presents a difficult
challenge for the nation's third-largest retailer--how to please a
customer base that is almost equally divided between whites, blacks and
Hispanics.
Sears says it is up to the task because
it has learned a lot about multicultural marketing in the past 20 years.
In fact, the retailer introduced a program to develop new products and
advertising pitches in the early 1990s focused on minorities. Out of an
860-store chain, Sears currently has special merchandise and
Spanish-language signs in 180 designated Hispanic stores. Another 175
stores have merchandise targeted at African-Americans.
But rarely has Sears tried to please so
many different groups of people--blacks, Hispanics and whites,
working-class people, college students and professionals--in the same
store at the same time.
"The message that America is truly
becoming a multicultural society rings very loudly at Sears," said
Gilbert Davila, Sears' vice president of multicultural and relationship
marketing. "While I will not claim victory, we are working very
hard to put this customer front and center."
A micromarketing trendTo be sure,
Sears isn't the first retailer to tailor its offerings to court ethnic
shoppers. Target Corp., for example, has been doing it for years at a
detailed level that reflects even religious preferences of shoppers on
different sides of the same town.
Arguably, the need to reach out to
minority groups has never been greater. Data from the latest U.S. Census
shows minority groups such as blacks, Latinos and Asians are becoming an
increasingly bigger piece of the population.
In fact, Chicago's Latino population has
expanded at light speed, growing 38 percent in 10 years to 26 percent of
the population. Meanwhile, the number of black residents in the city has
declined slightly to 36 percent as the number of Asians has increased to
4.3 percent.
"What was mainstream isn't
mainstream anymore. It's a smaller part," said Ira Mayer, publisher
of "Marketing to the Emerging Majorities," a New York-based
newsletter that formerly was named "Minority Markets Alert."
"People seemed to be surprised by
the Census Bureau report this year, but it's been building steadily for
a long time. Now there's a perceived critical mass."
Those are the customers attracting Sears.
When the company closed its doors on
State Street 18 years ago, the city's best-known shopping district had
fallen on hard times. Many affluent shoppers had decamped to North
Michigan Avenue or suburban shopping malls, cutting into the store's
traffic and profits.
Rather than figuring out how to market
its wares to an increasingly urban and ethnically diverse base of
shoppers, Sears chose to fold its hand. "Our customers were going
out to the suburbs, and we were going with them," said Sears
spokeswoman Peggy Palter. "Other retailers were doing that
too."
Indeed, the exodus continued, leaving
State Street's remaining anchors--Marshall Field's and Carson Pirie
Scott--surrounded by a downscale collection of wig shops and cut-rate
electronics stores. The seediness was accentuated by a growing number of
empty storefronts and a miasma of bus fumes. Many loyal State Street
shoppers began avoiding the area altogether.
A showcase effort
Sears says its new State Street store will showcase its most
advanced effort to reach out to black and Hispanic shoppers. It's a sign
of the times for Sears, a giant retail operation legendary for its
centralized, bureaucratic way of operating and a one-size-fits-all
mentality. But stagnant sales have forced Sears to rethink the way it
does business.
Among the touches that Sears hopes will
strike a chord with State Street's smorgasbord of shoppers:
Store signs will be in Spanish and
English. The cookware section will feature tortilla-makers and other
items that relate to Mexican and Latin American cooking.
In the apparel area, Sears has tailored
its offerings with brighter colors and extended size ranges to appeal to
both black and Hispanic shoppers. An extended range of shoe sizes will
be offered.
In addition, the store will feature a
collection of special-occasion hats for black women who attend church
regularly and trendy clubwear that strikes a chord with younger black
men. It will also feature the Stacy Adams line of high-fashion dress
shoes targeted at black male shoppers.
One of the most dramatic examples of
Sears' diversity efforts is Unity Square, a 750-square-foot boutique on
the second floor of the new Sears store. It offers a panoply of
African-inspired products ranging from women's clothing to decorative
figurines to bathroom accessories such as shower curtains in a
traditional Mali print.
In an unusual twist, the Unity Square
shop doesn't actually belong to Sears.. It's a licensed business that is
the brainchild of Dee Robinson, a Chicago businesswoman who approached
Sears with the concept six years ago.
"A lot of people saw the Afrocentric
thing as a fad. I knew it was more than that," said Robinson, who
holds an MBA from Northwestern's Kellogg Graduate School of Management
and has worked at marketing giants such as Johnson Johnson and Leo
Burnett.
"I'm African-American, and I know
that African-American people really relate to their culture. People are
looking for things that speak to them whether it is housewares or
clothing. They want to make a statement," she said.
Boutique draws customers
Unity Square already has made a statement at a Sears store on the
South Side at 1334 E. 79th St., a working class neighborhood with an
almost entirely black population. It is the only other Sears store that
features a Unity Square shop.
The shop has been very successful,
attracting more affluent shoppers from surrounding areas such as Chatham
and Hyde Park, said Wilbert Reed, the manager of the 79th Street store.
"She draws clients that don't even
shop in the store with us," he said.
And it's not only black customers who buy
from Unity Square or other parts of the store that carry merchandise
targeted to African-Americans, Reed said.. A fashionable career
sportswear line designed by African-American designer Anthony Mark
Hankins has transcended racial lines.
"There's a cross section of white
people who buy it, too," he said. "Sometimes we have
stereotypes that aren't right."
Retail consultants applaud Sears for its
efforts to reach out to black consumers in a different way from white
shoppers.
"They're responding to the
population around an individual store, which is exactly the right thing
to do," said Cynthia Cohen, president of Strategic Mindshare, a
retail consulting firm. "It's a great thing for Sears to be
trying."
Of course, Sears has no intention of
ignoring its other customers either, some of whom include affluent
empty-nesters and young professionals.
The hardlines section has been slimmed
down for city dwellers and is skewed more toward outdoor grills and
gardening tools than weed-cutters and lawn mowers. Apartment-size
washers and dryers will be heavily promoted as will hand tools, items
that are in short supply in the downtown area.
There's another niche group of customers
that Sears recognizes but isn't quite sure how to address yet: the
50,000 students that live in the area, attending a variety of colleges
including the School of the Art Institute and Columbia College.
To get the word out to everyone that
Sears' State Street store is not just a clone of a suburban store, the
retailer is launching a multipronged marketing campaign.
Advertisements will be appearing on buses
and in subway cars. Some billboards and bus shelters will carry the
message in Spanish. Urban radio stations favored by black listeners will
get a share of the marketing pie as will Univision and Telemundo, two
Spanish-language television stations.
"Early on we understood one
thing," Davila said. "This store in particular is a wonderful
mosaic of diversity. So we engaged all of our different ad agencies. Our
Hispanic and African-American agencies all have had their hands on
it."
The State Street store will communicate
its message of diversity in another way as well. A large majority of its
employees are black and Hispanic. That's a switch from the 1960s when
Anthony Goosby was one of only two black salesmen in the hardlines
department.
Back then black sales associates were a
rarity, and "blacks in management were unheard of," said
Goosby, who has spent 34 years at Sears and will be selling appliances
at the new store. "Today, the sales associates are all black and
Hispanic, and young whites are the minority. It's flipped. It's done a
complete 180."
Sears
Debuts Push to Boost Credit
by
Eddie Baeb, Crains, May 19, 2001
Sears, Roebuck and Co. is supercharging
its store credit card.
Hoping to reignite a stalled credit
business that produces more than half of its profits, Hoffman
Estates-based Sears is outfitting its basic store card with the features
of a general purpose bank credit card.
Beginning this fall, some Sears Card
holders will be able to use it for cash advances, balance transfers from
other credit cards and purchases at merchants not affiliated with Sears.
The retail and credit giant also is
hiking the interest rate on its store card to 21.9% from 21%, boosting
the minimum monthly finance charge to $1 from 50 cents and reducing the
minimum monthly payment—all moves that will squeeze more profits out
of the plastic.
Sears is the first U.S. retailer to turn
a store charge card into the functional equivalent of a Visa or
MasterCard. The strategy takes the card far beyond its traditional role
as a device to spur sales of Sears merchandise.
"(The Sears card) would become
something of a hybrid between a retail card and a general purpose card.
That is very, very unique," says Robert McKinley, CEO of
CardWeb.com Inc., a Maryland-based company that monitors the credit card
industry.
Sears'
New CEO Ditches Helicopter
By Susan
Chandler - Chicago Tribune
May 12, 2001
When retail executives cut costs, it's
often the little people who bear the brunt. They lay off a few sales
associates and headquarters employees, and the expense line begins to
look better almost immediately. It's definitely not a time when you want
your job classified as a "support function."
But few chief executives look at their
own perks when it's time to tighten the belt. Sears, Roebuck and Co.'s
new chief executive, Alan Lacy, appears to be an exception.
Soon after he assumed the additional
title of chairman from his predecessor, Arthur Martinez, Lacy began
winnowing the corporate fleet. He sold the helicopter, a favorite form
of transportation for Martinez, who used it to travel back and forth
from Sears' far-flung headquarters in Hoffman Estates to Meigs Field,
conveniently located along Chicago's lakefront.
The helicopter, which was also available
for use by other members of Sears' top brass, will not be replaced, said
Sears spokeswoman Jan Drummond.
Lacy also has sold two corporate jets
that he deemed too large and expensive for Sears' needs. The Dassault
Falcon jets were capable of trans-Atlantic flight, a function that
wasn't necessary because Sears doesn't own anything on the other side of
the ocean.
To replace them, Sears has ordered two
smaller Lear jets. When they arrive, the Falcons will be transferred to
their new owners. Sears requires some corporate aircraft so executives
can visit stores around the country. "Alan felt the smaller jets
will do the job just as well," Drummond said.
We hear that Sears is netting about $15
million on the sales of the helicopter and jets, even taking into
account the purchase of the new ones. The retailer will save millions
more over time because of lower operating costs.
The helicopter, in particular, was more
than just a corporate luxury. It became a symbol of Martinez's aloofness
in the eyes of Sears retirees who were angry about his decision to
drastically cut their company-paid life insurance policies. Getting rid
of it can only be viewed as a sign of good faith as Lacy works to settle
a retiree lawsuit that has languished in the federal court for years.
Retirees
Don't Picket Meeting; Dispute Not Over
By
Sandra Guy - Chicago Sun Times
May 11, 2001
Sears, Roebuck and Co. retirees had no
picket signs protesting their benefits cutbacks at the shareholders
meeting Thursday, but they also have no agreement on restoring a portion
of their losses.
Tom Dowd, a founding member of the
National Association of Retired Sears Employees, complimented Chairman
and CEO Alan Lacy for initiating meetings to resolve a lawsuit the
retirees filed after Lacy's predecessor, Arthur Martinez, cut their
company-paid life insurance benefits. The benefits, formerly capped at
$100,000, were slashed to $5,000 per person.
However, Dowd said, "Our patience is
not everlasting," and warned that the retirees will not walk away.
"We sincerely hope that your recent
actions were not for show, and I don't think they were," Dowd said,
acknowledging that he had signed a confidentiality agreement and could
not discuss details of the negotiations.
After the meeting, Lacy told reporters he
wants to improve relations with retirees, regardless of the outcome of
litigation.
A solution "doesn't have to cost
more money," he said, explaining that the human resources
department is scrutinizing benefits for both current employees and
retirees to ensure that they are contemporary. The process involves
comparing Sears' benefits to those of its peers in retail and among the
Fortune 50, and takes into account the rising need for elder care.
Sears
Retirees Switch Gears with New CEO
By
Susan Chandler - Chicago Tribune - May 11, 2001
Sears, Roebuck and Co. wasn't able to
reach a settlement with its retirees over life insurance cutbacks before
the retailer's annual meeting Thursday.
But enough progress was made in
settlement talks that an activist retiree group decided not to picket
the meeting at Sears' Hoffman Estates complex, choosing instead to
praise new Chief Executive Alan Lacy for his open-minded attitude.
It was a relatively gentle reception for
Lacy, who was presiding over his first annual meeting as Sears' chief
executive. "We wanted to give him a bye on this one," said Ken
Johnson, a member of the National Association of Retired Sears
Employees, which has spearheaded a lawsuit and public relations campaign
to have company-paid life insurance benefits restored to previous
levels.
"But actions speak louder than
words. At least, he is opening the channels," Johnson said.
Sears retiree Tom Dowd, who spoke during
the question period, praised Lacy for his "fairness in resolving in
120 or 130 days an issue that your predecessor said could only be
resolved by judges."
Lacy declined to comment on any
litigation but said he was committed to improving relations with
retirees, many of whom have stopped shopping at Sears' stores.
"It's important for us as management
to reach out and treat you better than perhaps you feel you've been
treated in recent years," he said.
Lacy, who held an analysts meeting only a
few weeks ago, didn't have much new to say about Sears' strategy. He did
reveal that Sears will open its first free-standing appliance and
electronics store this June in Schererville, Ind.
Two other stores will open in late
October in southwest suburban Bolingbrook and in northwest suburban Mt.
Prospect. The stores will be called "Sears Appliances &
Electronics."
The 20,000-square-foot stores will be
used to fill in markets such as Chicago's North Shore, where there are
few Sears stores and lots of demand for home-related items, Lacy said.
But he emphasized that plans for the freestanding stores are modest.
"We don't need a thousand stores
here. Could there be 500 of these stores? No. Could there be a hundred?
Possibly."
As part of the meeting's official
business, Sears elected, Donald Carty, CEO of AMR Corp. and American
Airlines Inc., to its board. New director Carty couldn't attend the
shareholders meeting Thursday because of illness, Lacy said.
Sears
Meeting Shows Softer Side
By Eddie
Baeb -Crain's Chicago Business Newsroom
May 11, 2001
What didn't happen Thursday at the
annual shareholders meeting held at Sears, Roebuck and Co. was perhaps
more significant than what did take place at the meeting, which ran a
brisk 80 minutes. For the first time since 1997, the meeting did not
include any retirees wearing anti-Sears T-shirts. Nor did any retirees
stand outside toting pickets that decry Sears' decision to reduce
retirees' life insurance benefits, as they had at the prior three annual
shareholders' meetings.
One retiree, Tom Dowd of Baltimore,
delivered a long speech where he thanked CEO Alan Lacy for his part in
working to forge a settlement to a long-standing lawsuit filed by
disgruntled retirees. Another retiree says he expects a settlement to
become final within the next couple weeks.
"You have said what you meant and
meant what you said," Mr. Dowd said to Mr.. Lacy during the
meeting's question-and-answer-session. "When Alan Lacy refers to a
Sears family, it's credible. Š It feels so good to be home and to be
welcome."
Other comments consisted of the usual
gripes about Sears clothing. "It seems everybody has an anecdotal
bad experience at Sears story," Mr. Lacy said to reporters after
the meeting.
Mr. Lacy also disclosed that the company
this summer will begin testing stand-alone appliance and electronics
stores in the Chicago area.
The first of the stores, called Sears
Appliance & Electronics, will open next month in Schererville, Ind.,
with two others opening October in Bolingbrook and Mount Prospect.
Mr. Lacy says he's looking to locate the
stores in rural areas or in suburban pockets or urban areas where
there's no full-line Sears store.
Mr. Lacy said the stores will be about
20,000 square feet, which is slightly larger than the amount of floor
space typically dedicated to these products in a full-line store.
"The idea is to put these stores in
any voids we have," says Mr. Lacy. "Could we have 1,000 or 500
of these? No. But we could have 100."
Sears,
Retirees in Talks to End Suit
By Susan
Chandler - Chicago Tribune - May 8, 2001
Attorneys for Sears, Roebuck and Co. are pushing
to negotiate an end to a longstanding lawsuit filed by Sears
retirees before the company holds its annual meeting Thursday.
Both sides are hopeful a deal can be struck, which would spare new
Chief Executive Alan Lacy the embarrassment of having elderly
protesters picket at his first annual meeting, say sources close
to the case.
Such demonstrations and other disruptions have
occurred at each shareholder gathering since Sears announced in
1997 that it was drastically reducing company-paid life insurance
benefits for retirees, to $5,000 per person from a previous
maximum of $100,000.
Details of the negotiations were not available
Monday because both sides have signed confidentiality agreements
that prohibit them from discussing the talks with outside parties.
But a compromise could involve a partial
restoration of benefits or a lump sum payout, sources indicated.
Sears spokeswoman Jan Drummond declined to
comment on the status of negotiations, except to say, "We
certainly value a healthy relationship with our retirees."
Michael Mulder, the lead attorney for the
retirees, could not be reached for comment.
The time appears right for a deal. The
expectations of retirees, who initially pushed for full
restoration of benefits, were diminished as their case suffered a
series of legal blows.
In 1999, U.S. District Court Judge James B.
Moran declined to certify the retirees as a "class,"
leaving attorneys for the retirees with few options except to try
each case individually, a tedious task. The first individual trial
is set to begin Sept. 4.
Retirees contend the benefits were permanent,
because that's how they were described in company brochures,
seminars and conversations with managers. Sears maintains it
always had the right to modify benefits. In ending the dispute,
Lacy could lay to rest a divisive issue inherited from predecessor
Arthur Martinez.
Many of the 84,000 retirees affected by the cuts
were loyal customers and Sears boosters. But the cutbacks, which
Martinez said would save $1.4 billion, turned some into fierce
foes. Many wrote outraged letters to the company's directors, cut
up credit cards and urged people not to shop at Sears.
Lacy previously indicated he was open to
solutions by meeting with officials of the National Association of
Retired Sears Employees, a group that was formed to fight for
restoration of the benefits.
Kmart
Tags Sears CFO for No. 2 Role
Sears Names New CFO
By Yahoo
Finance - May 4, 2001
Kmart Corp. has snagged Jeffrey Boyer, a
top executive at Sears, Roebuck & Co., to be the retailer's
executive vice president and chief financial officer.
Boyer, who had been CFO and a senior vice
president at Sears, succeeds 52-year-old Martin Welch, who has accepted
early retirement from the CFO post he has held since joining Kmart in
1995, the company said Friday.
Sears moved quickly to replace Boyer,
naming Paul Liska, 45, on Friday as its CFO and executive vice
president, effective June 1. Liska has been executive vice president and
CFO since 1997 for The St. Paul Cos., a Minnesota-based property and
casualty insurance company.
"This is a great coup for Kmart. I
have terrific respect for Boyer. It puts Kmart in a new league,'' said
Walter Loeb, president of Loeb Associates, a retail consulting firm.
"People now believe there will be a turnaround, and they want to
participate in it.''
Boyer's tenure at Sears also included
titles as controller and vice president of finance for the company's
full-line stores. Before that, he had held senior-level financial
positions with Nutrasweet, Quaker Oats and Pillsbury.
"Jeff Boyer's retail and consumer
goods financial experience makes him the ideal candidate for Kmart's CFO
post,'' Chuck Conaway, Kmart's chairman and CEO, said in a statement.
At Sears, Liska's duties will include
oversight of that retailer's finances and its information technology
activities.
Before joining St. Paul Cos., Liska had
been president and CEO of Deerfield, Ill.-based Specialty Foods Corp.,
after being hired there as its CFO. Liska also has held senior finance
and information systems positions with Quaker Oats and Baxter Travenol/
American Hospital Supply Corp.
"Paul's broad experience in consumer
goods and services businesses and his passion for results will be of
tremendous benefit to us,'' said Alan Lacy, Sears' chairman and chief
executive.
Shares of Kmart fell 12 cents to close at
$10.54, while shares of Sears dropped a penny to close at $36.48, both
on the New York Stock Exchange.
Terry
Savage Talks Money with Arthur Martinez
By
Terry Savage - Chicago Sun-Times - April 29, 2001
Arthur Martinez' office on the 98th floor
of the Sears Tower gives the retired chairman of Sears, Roebuck and Co.
a commanding view of the city that his company once dominated.
But while Sears no longer is the pinnacle
of retailing, there is no doubt that his leadership rescued the company
from the oblivion into which once-great names like Montgomery Ward have
fallen. When Martinez arrived in Chicago in 1992 to take over as CEO of
Sears Merchandise Group, he faced a formidable task. Within his first
100 days, he halted production of the 100-year-old Sears catalog and
designed a complex restructuring plan that included layoffs and store
closings.
To employees and securities analysts
alike, he presented a stern face and demeanor--characteristics necessary
for the job. But he is also the man behind the "softer side of
Sears" merchandising campaign, which brought the business back in
the mid-1990s.
And in talking with me, he revealed the
softer side of Arthur Martinez.
On being the boss
"I used to read those articles in Fortune about the world's
toughest bosses," he recalled, "and I said to myself if I'm
ever in that position, I would demonstrate that you don't need to be an
SOB to be successful, that you can get the best from people without
being mean or threatening. I think accessibility and approachability are
important characteristics."
So much for the tough boss, but what
about the tough decisions?
"Well, the company was in big
trouble, really floundering [he was named CEO of Sears' merchandise
group in 1992]. We were losing over $100 million in the catalog, retail
was making zero money, and the credit business was making a couple of
hundred million dollars. When you put the whole package, together there
was no money and very little cash flow coming out of the retail
business.
"The question was how many
turnarounds you could deal with, what were you going to spend your time
and energy on? The stores had to be the focus. While the catalog was the
mother business, it was an old business. And even if we worked hard to
make it better, we would have a nicely restored 1978-model automobile,
and that's not what I wanted to drive in the '90s. While we could fix
and improve it, it would never be a growth vehicle for the
company."
On shareholder value
"If you're going to create shareholder value, economics has to
be the driver. Good fundamental growth and earnings are the things that
create shareholder value, and that's what we're paid to do. The
economics said we should close it [the catalog]. The heart said we
shouldn't close it--the spiritual soul of the company. And at the end of
the day, economics ruled.
"It would be presumptuous to say I
knew exactly what I was going to do when I walked in the door, but it
was pretty clear that dramatic action was called for. It was not a
situation where incremental improvement was going to be sufficient.
"There was no luxury of a long
period of contemplation. The whole company was waiting for direction,
not moving with any intensity in any direction, waiting for me. So it
was absolutely essential that we make some very quick decisions."
Did you care if you were popular?
"No, not at all, but putting all those people out of work was
not a fun thing, and I was concerned about potential organizational
backlash. Surprisingly the organization said to me, `We knew we needed
this, and I'm glad we did it. Now let's get on with the rest of our
lives.'
"And so, in a strange way, it was a
popular decision--though I wasn't in it for a popularity contest. But
the organization was full of smart people who were trying to do the
right thing, and they applauded the decisiveness."
On his legacy
"After the restructuring in '92, the business did take off in
1993. The sales trend was fantastic all the way through '97, but in '98
we hit a bump in the road. No, call it a pothole. We had that
complicated legal issue with our customers regarding bankruptcies."
[Sears admitted it forced bankrupt customers to reaffirm their debt, in
violation of bankruptcy code practices.]
"And it had more consequences than I
could have imagined. First, there was the legal aspect of being in
violation of the law, and settling up with our customers. And now, with
the perspective of time, I see that it caused us to turn away from our
outward, competitive perspective and return to being inwardly focused.
It took us a year and a half to bounce out of that.
"But when our top-line sales trend
slowed in '98, that's when everyone said `A-ha! This is an incomplete
revolution, a half-baked turnaround.'
"But I'll tell you, Terry, there
isn't a retailer out there who doesn't hit a pothole every few years or
so. Look at the Gap, the darling that can do no wrong. They're in the
toilet right now. Wal-mart had its own epiphany in '94-95 when they had
a tough year. You can look around and pick any store in any sector of
retailing, and they have their bobbles. But good ones come out of it,
and they're better when they come out of it.
"And I believe we'll come out of
this time as a stronger organization, and get back to our trend line of
16 percent compounded growth."
Which brings us to the issue of many in
the dot-com era who predicted Sears' demise.
On dot-com mania
I remind him that Flip Filipowski called Sears a dinosaur and said
the company deserved to die because it couldn't keep up in the new era
of online retailing. Martinez tries to suppress a smile.
"Fine. But who's dead now?"
The smile escapes and turns into a
chuckle. "The notion that all old economy companies were going to
be marginalized and put out of business was a laugher to me. The people
who were advancing that view were talking out of their own
self-interest, not a strategic viewpoint. We saw the Internet coming,
and asked ourselves how we could use it as an additional channel of
distribution and an additional channel for customer relations.
"It wasn't another new business
model, just another tool in the toolkit of how to run your
business."
"These monoline business models
created by dot-com-ers were doomed to failure. People aren't going to
buy potato chips over the Internet. The value proposition was never
delivered against--store-based retailers delivered better value. And the
technology wasn't so easy to use anyway, although that will get
fixed."
Martinez tells the story of competing
with his wife to order from a retailer at Christmas. While her online
foray kept getting hung up, he called the toll-free number and placed
the order instantly.
He added: "There is still something
in our collective DNA that likes to touch and feel the goods. The
shopping experience is a cultural experience as well as a task, and the
idea of scrunching up and doing all your shopping on a 15-inch monitor I
don't think is culturally acceptable in today's society.
"Internet retailing was overblown as
to its potential, for sure, and in the execution, became less of a
benefit to the consumer."
On retirement living
We turn to his personal life, and I ask
how he's enjoying retirement.
"I know who I am. I don't need the
title. I was at the airport the other day, wheeling our luggage on a
cart and waiting in the cab line, and I'm sure the guy I ran into got a
big kick out of that. Corporate jets and cars are useful as productivity
aids, but I don't all need that to run my life the way I run it
now."
The catalyst for his decision to
retire?
"My father died at age 59 of a sudden heart attack, and here I
turned 60 in good health, and I haven't taken more than a week's
vacation in over 20 years. My daughter was pregnant with our first
grandchild, and so a whole series of things came together."
How could you leave when the Sears
turnaround wasn't finished?
"Well, I felt it was another cycle.
It is never finished.
"I knew I was never going to be one
of those guys they were going to drag out of the office at midnight on
his 65th birthday, saying it's time for you to retire. But that was
never what I was all about. I loved what I did when I did it, but I'm
very glad I'm doing what I'm doing now."
On investing
"Probably about 40 percent of my assets are in fixed income.
The rest is in equity instruments ranging from commercial real estate
and private equity funds to all classes of stocks. I work with a
fee-based financial adviser for advice on asset allocation. Mostly, I
don't try to pick stocks, but I have a small piece of my portfolio that
I actively manage."
Do you do it online?
"Yes. Through Schwab."
I'm astonished at the idea of this
executive pointing and clicking to trade stocks. How long has he been
doing this?
"About a year and a half. Again,
economics rules. Full service brokerage charges are laughable it seems
to me. And it's a miracle to me that they still retain as much value as
they do for so many people."
Did he buy tech stocks?
"I never bought a dot-com company. I
was never tempted! Actually, recently I thought about Amazon at $11, but
I didn't do anything." [It closed Friday at $15.27].
On kids and money
Martinez and his wife have two children in their early twenties.
What did he teach them about money?
"I grew up in moderate
circumstances. My father was a wholesale fish dealer, and my mother was
an Irish immigrant to this country, and money was a big deal--not just
making it, but trying to keep it. And I always tried to teach my
children the importance of avoiding excess, being careful and using
money conservatively and respectfully. We've never accumulated the
trappings of wealth--cars, planes, boats--and some of that I think has
rubbed off on our kids."
"Today they are very good about
money. My son is getting his MBA, but before that, he had a job as a
biotech analyst at an investment fund. My daughter is fashion director
for style.com--the Conde Nast online division--but before that, she was
a senior editor at Vogue."
Did he give his daughter advice about
taking an online job?
"Get a good deal. Take it in cash.
Cash is king. Don't take options.
"Though my daughter works for Vogue,
she shops the sample sales to get her clothing, and my Christmas
presents always come from the sample sales, and she's very proud of her
bargains.."
Advice to young people
"When I was chairman at Sears, I would sometimes assist in
campus recruiting. Kids would ask, "How did you get where you are,
and what should I be doing?" I would say to them two or three
things: First, success will not be driven by your board scores and your
grade point average coming out of school. They'll be driven by your
character and your intensity, and by your willingness and ability to
continue to learn.
"Second, your success will also be
driven by your communication capabilities. You can have a great idea,
but if you can't explain it to anyone, it's not a great idea anymore. I
tell them to really work on communication skills. That's so important,
and I see so much evidence of that being a diminishing skill-set among
graduates.
"I also tell them to make no fixed,
long-range plans, and to be, frankly, opportunistic and aware of the
possibilities. Though I don't say be disloyal to a company, if an
opportunity presents itself to work for someone who can inspire and
teach you something, you should think about doing it.
"My own career is an exercise in
serendipity. I never planned to be chairman and CEO of Sears. I started
out wanting to make $10,000. It was lots of small steps along the way,
some very serendipitous."
On the future of America
"The opportunities today are no
less, though [at this point in the economy] they may seem to be less.
What's disappeared is the prospect of instant wealth. Sure the cycle is
affecting things, but it will work its way through and there will
continue to be enormous opportunity.
"There are things I worry about. I
worry about the failure of public education to prepare young people for
productive lives. I worry about that most. But, on balance, the
environment permits so much innovation--and our system encourages that
testing and provides capital for that testing. The ability to make those
concepts come alive is part of what makes this country great--and I
don't see that going away."
Terry
Savage is a registered investment adviser for stocks and commodities and
is on the board of directors of McDonald's Corp. and Pennzoil-Quaker
State Co. Send questions via e-mail at savage@suntimes.com. Her third
book, The Savage Truth on Money, recently was published by John Wiley
& Sons Inc.
Editors Note:
What an egotistical
arrogant person he is! Remember, he is the one that took away our life
insurance!
Sears
Future Still Locked in Mystery
By Sandra Guy,
Business Reporter - Chicago Sun-Times
April 20, 2001
Where is the softer side of Sears,
Roebuck and Co. going? CEO Alan Lacy doesn't know, at least not
yet. Lacy, who took over last October after
Arthur Martinez retired, knows where Sears doesn't want to be and what
it no longer will sell.
He told financial analysts Thursday that
Sears management has vetoed three ideas: Remold Sears into a
home-fashions superstore, remake Sears into a store that sells only
hardline goods such as hardware and appliances and reconfigure it into a
"mid-market" home-projects store akin to a blue-collar Great
Indoors store.
Yet glimmers of Sears' makeover are
emerging.
The full-line department stores will cast
off unprofitable merchandise lines. Sears will stop selling bicycles,
basketball equipment, pools and faucets, and will sharply cut its
offerings of VCRs, PCs, electrical sundries, paint, analog TVs and
ceiling fans.
The store's poorly performing apparel
lines will be cut, with career clothing taking the hardest hit. Last
year, Sears sharply cut the number of its apparel vendors.
In an ironic twist, analysts credit Lacy
with rescuing Sears' important credit-card business after Martinez led a
costly over-expansion of credit aimed at boosting apparel sales. The
credit-card business accounts for 60 percent of Sears' operating
profits.
What kinds of clothing will Sears sell?
That remains unanswered.
Yet again, Lacy defined what Sears will
not do.
Sears will stop trying to attract new
customers, as the often-ridiculed "Softer Side of Sears"
marketing campaign aimed to do, and will concentrate on getting
cross-over sales from customers who already shop for hard goods, such as
Kenmore, Craftsman and Die-Hard brands.
"We have lost our focus over the
last decade," Lacy said. "We must take back our brand."
Sears has started integrating its
customer databases so it can quickly spot cross-marketing opportunities.
A loyal auto center customer would be a prime target for a direct-mail
offer for work boots, for example, Lacy said.
The marketing strategy left some analysts
dissatisfied.
"Customers have a much more
difficult time relating to sweeping brand statements, rather than to a
fashion statement or a value statement," said Bill Dreher, research
analyst with Robertson Stephens, New York.
For example, Gap and Banana Republic
successfully market a style, while Kohl's has made its mark offering
brands for less.
"Consumers are always looking for
great values, and they are more willing to `cheap out' if they know it's
a national brand," Dreher said.
Sears should emphasize its national
brands, he said. Those include Nike athletic shoes, Calphalon cookware,
Oshkosh apparel for children and Mudd jeans for teens.
Other successful lines include Sears'
private-label clothes, such as Crossroads women's casual apparel, TKS
children's clothing and Field Master men's outdoor wear.
Neil Stern, partner with Chicago's
McMillan/Doolittle consultancy, said Sears' challenge is to decide
whether it should continue providing a full line of apparel, ranging
from children's to sportswear to women's career clothing..
"It has been very difficult for
Sears to establish itself in all those categories," he said.
A related question is when Sears will
hire a merchandising chief, and whether that person will hold the dual
job of leading softlines marketing. Mark Cohen, who previously held both
titles, is now president of Sears Canada.
Lacy listed the title of president,
softlines and marketing, as among seven of 20 top positions he has
eliminated. He has replaced two top executives, created and filled two
positions (senior vice president of strategy and senior vice president
of softlines) and redefined four others.
Economy
Hinders Sears Rehab Project
By
Susan Chandler - Chicago Tribune,
Alan Lacy is a veteran
of the home remodeling wars.
Sears' new chief executive has gutted and
rehabbed two houses and built a third from scratch, all of them in
Chicago's northern suburbs. But no matter how carefully the projects
were planned, inevitably something went awry.
"You wind up being your own
contractor, whether you want to or not," Lacy said as he stood in
the middle of Sears' most promising retail concept: the Great Indoors,
an upscale home-remodeling store.
Now Lacy finds himself acting as a
general contractor on his biggest project yet: reshaping Sears, Roebuck
and Co. into a feisty retail competitor. While he hopes the Great
Indoors will add style to Sears' retail empire, Lacy knows there is no
quick fix out there, as he told Wall Street analysts Thursday. A soft
economy and anxious consumers who are worried about losing their jobs
are only making this remodeling job harder.
In fact, Lacy warned that Sears' earnings
will fall short again in the second quarter and will be flat for 2001,
excluding one-time items. That's a far cry from the 15 percent annual
earnings increase that Sears was promising in the mid-1990s.
But it sounds an awful lot like the
first-quarter results released Thursday, when Sears' net income plunged
25 percent to $176 million, or 53 cents per share, on flat revenue of
$8.86 billion. Results were dragged down by slow sales of spring
merchandise in the U.S. and Canada as well as lower revenue from Sears'
lucrative credit card business. In the same period last year, Sears
earned $235 million, or 65 cents per share.
It wasn't what investors wanted to hear
even though they were warned last week that first-quarter results would
fall below analysts' expectations. They trimmed Sears' stock price
Thursday by $1.22, or 3.2 percent. The company's shares closed at $36.59
on the New York Stock Exchange.
'Realistic' outlook
Still, the analysts who heard Lacy's
presentation in Dearborn took the pessimistic outlook in stride.
"It's pretty realistic. Maybe,
they'll surprise on the upside," said George Strachan, retail
analyst with Goldman Sachs.
Veteran retail analyst Walter Loeb agreed
that Lacy was only being candid about Sears' short-term prospects.
"I'm not looking for a great leap forward."
Lacy used the words
"conservative" and "disciplined" several times as he
described what he is doing to get Sears' retail business back on track.
Among his recent moves, Lacy instituted a hiring freeze on salaried
positions in February. He also has put the kibosh on plans to
aggressively expand Sears' home improvement business and has cut back on
expansion plans for its tire and hardware stores.
But while he is carefully watching
overhead expenses, Lacy isn't afraid to spend money on the Great
Indoors, which is designed to be a one-stop shop for those planning to
redo a kitchen or update a bathroom.
"I wish this store existed
then," Lacy said Wednesday night, referring to the early 1980s when
he redid an entire house in Deerfield. "My wife wishes it even
more."
Sears invited analysts to tour the newest
Great Indoors in suburban Detroit the night before Lacy's presentation.
The 140,000-square-foot store opened in November, bringing the number of
Great Indoors stores to four.
Concept's rollout scaled back
Soon there will be many more of them.
Two more Great Indoors will be opening
soon in the Chicago area #151;in west suburban Lombard and northwest
suburban Schaumburg. This summer, a two-story version will be unveiled
in suburban Denver. Before the end of the year, a Great Indoors will
anchor a mall in Columbus, Ohio. Altogether, Sears will have added 11
Great Indoors stores by the end of the year, bringing the total to 15.
But that's a lot fewer than Lacy's
predecessor, Arthur Martinez, had in mind. Martinez, who was pushing for
an even faster rollout of the concept, targeted 30 stores for this year,
an ambitious goal that few experts thought Sears could meet.
Lacy said one of his first decisions as
CEO was to cut that goal by more than half. "The idea is not to
throw capital at this. Eleven stores is ambitious," he said.
And while he likes the Great Indoors and
its more upscale customer base, Lacy vowed not to be distracted from his
main goal: fixing Sears' core of 860 mall-based department stores.
"We are clearly not winning with
customers, he said, citing data that show customers are making fewer
trips to Sears and their spending is flat. "We haven't really stood
for much. We've had a rack of this and a rack of that."
Lacy and his executive team still haven't
worked out exactly what niche Sears will target with its apparel, a task
that likely has been hampered by the lack of a chief merchant.
But he pledged that Sears is ready to
make tough decisions—whether that means exiting more businesses
or reining in growth.
"We will act on things that are
important to this franchise for the longer term," Lacy said.
"If that leads to missing a quarter, we will do that."
Sears
Profits Down 25%, Issues Warning
Reuters
Newsroom April 19, 2001
Sears, Roebuck and Co., the No. 2 U.S.
retailer behind Wal-Mart Stores Inc., Thursday reported a 25 percent
decline in first-quarter earnings which were in line with Wall Street's
lowered forecasts and said second-quarter profits will also suffer at
the hands of a slowing U.S. economy.
Sears reported net income of $176
million, or 53 cents a diluted share, compared with $235 million, or 65
cents a share, a year earlier.
Analysts on average had expected a profit
of 53 cents a share, from a range of 52 cents to 53 cents, according to
research firm Thomson Financial/First Call.
Earlier this month, Sears warned of a
first-quarter shortfall, saying it would earn 53 cents a share. At that
time, analysts on average had expected a profit of 57 cents a share,
from a range of 50 cents to 67 cents.
``The trends seen in the first quarter
are likely to continue through the second quarter,'' Sears Chairman and
Chief Executive Alan Lacy said in a statement. ``We are projecting a
high-single to low-double digit percentage decline in second-quarter
earnings per share excluding noncomparable items and securitization
income.''
Shares of Sears fell on the warning. The
stock, which has outperformed the Standard & Poor's index of mass
retailers; which includes Wal-Mart by about 5 percent
in the last 52 weeks, was off $1.12 at $36.69 in morning trade on the
New York Stock Exchange.
In the year-ago second quarter, Sears
earned $1.11 a diluted share. In the year-ago full fiscal year, Sears
earned $4.80 a share.
Sears said it looks for improvement in
the second half of the year and that it expects full-year earnings per
share to be in line with last year, excluding one-time items.
At a meeting with Wall Street analysts in
Detroit that was broadcast over the Internet, Sears said it sees second
quarter same-store sales down in the mid-single digits, while same-store
sales for the full year are seen flat.
In the 2001 first quarter, the company
reported sales at its stores open at least a year fell 1.5 percent.
Most retailers expect consumer spending,
which accounts for two-thirds of all U.S. economic activity, to recover
in the back half of 2001 as lower mortgage and credit card interest
rates put more money in shopper's pockets.
Sales in the first quarter slid to $8.86
billion compared with $8.93 billion a year ago.
"Our domestic and Canadian retail
businesses performed below the company's expectations, with comparable
store sales declines in both domestic and Canadian stores," Lacy
said. ``In addition, pressure on margins and higher Canadian expenses
also contributed to lower earnings.''
Retail and related services revenues
dipped slightly to $6.81 billion from $6.83 billion, as the slowing
economy and colder-than-expected weather in early spring hurt sales of
products like lawn and garden items and apparel. The retail unit posted
an operating loss of $56 million compared with operating income of $21
million in the prior-year period.
Retail gross margins declined to 24.3
percent from 25 percent a year-ago, reflecting increased markdowns.
Reported operating income from credit and
financial products declined by 2.2 percent from a year-earlier to $405
million.
Sears Canada had an operating loss of $10
million, a $28 million decline from last year's quarter. The decline is
primarily due to costs associated with the Eatons stores opened in 2000,
Sears said.
Martinez's
Pay Last Year: $13 million
By
Susan Chandler - Chicago Tribune, April 12, 2001
In keeping with recent generous packages
for departing chief executives, former Sears, Roebuck and Co. Chief
Executive Arthur Martinez walked away last year with nearly $13 million
in compensation, a period in which Sears' net income declined.
Martinez, who spent eight years trying to
turn around Sears' retail business, received a $9.1 million lump-sum
payment as part of his retirement agreement, according to Sears' proxy
statement, which came out late last month. That's in addition to his
$1.2 million salary, $2.4 million annual bonus and $295,668 in other
compensation.
In comparison, the former chief executive
of Sears' rival, J.C. Penney Co., didn't do nearly as well. James
Osterreicher, who failed to revive Penneys' franchise, received a
retirement package valued at only $3.2 million, according to Penneys'
proxy statement filed Wednesday.
Although that may sound like plenty given
his track record, neither Osterreicher nor Martinez made out like
bandits by today's outsized severance packages, compensation and
corporate governance experts say.
"The year 2000 was the best in
history to leave a company," said Nell Minow, editor of The
Corporate Library, an Internet site focused on corporate governance and
CEO pay. "People who did much worse got much more," she said,
referring to Martinez's package.
Indeed, former Mattel Inc. CEO Jill Barad
set the standard when she received a $50 million exit package after the
toymaker's stock price had declined 74 percent. As part of her package,
Barad was forgiven a $3 million mortgage on her house, and the company
paid her tax liability on the debt forgiveness, Minow said.
Martinez didn't get anything quite like
that, but he was well taken care of, the proxy shows. In addition to his
cash compensation, Martinez's pension was sweetened and his vesting on
more than 819,000 stock options was accelerated, the proxy states.
Even though he spent less than a decade
at Sears, Martinez was credited with 21 years of service, a Sears
spokeswoman said. Ten of those years were given to him as part of his
original employment contract back in 1992, and another three years was
tacked on as part of his retirement agreement, she said.
Martinez elected to take his pension as a
$12.1 million lump sum, according to the proxy, which means he departed
Sears with more than $25 million in cash.
Among his other going-away gifts from
Sears, Martinez was provided with a furnished office and a secretary for
up to nine years, along with tax and financial planning services for
five years.
Such long-term perks have become common,
experts said. Nevertheless, it's "ludicrous" that shareholders
pay for such services, Minow said. "CEOs shouldn't need financial
planning, and they're more capable of paying for it than anyone else on
earth," she said.
But Sears' shareholders got a break on
the salary package of Martinez's successor, the proxy shows. Alan Lacy,
who assumed the CEO job in October, took home $1.7 million in salary,
bonus and other compensation last year, less than half his
predecessor's. He was also granted 603,750 stock options expiring in
2010, with a present value of $6.4 million under the Black-Scholes
options pricing model.
In contrast, Penneys paid its new CEO,
Allan Questrom, $2.0 million in salary, bonus and other compensation and
granted him 3.5 million options. Questrom got more, compensation experts
say, because he is an outsider who previously headed a major retail
chain and is considered a turnaround expert.
Lacy
Compensation
Reuters
Company News
March 27, 2001
No. 2 U.S. retailer Sears, Roebuck and
Co. more than doubled a compensation package last year for its new chief
executive, Alan Lacy, to $7.5 million from $3.3 million in 1999,
according to the company's proxy statement.
Prior to his promotion in October, Lacy
headed up the credit and service operations of the Hoffman Estates,
Ill.-based Sears, which competes with Wal-Mart Stores Inc. . He replaced
Arthur Martinez who retired in December.
In addition to slight increases in his
salary and other forms of compensation, Lacy received a much bigger
long-term compensation award in the form of stock options, the proxy,
which was filed Monday with the Securities and Exchange Commission,
showed.
The company awarded 47-year-old Lacy, who
is also president and chairman, 603,750 options valued at $6.4 million
based on the dates they were granted. The options expire in 2010 and the
exercise prices range from $31.07 to $33.14, according to the proxy, an
annual report to shareholders.
The 40,000 options he was awarded in the
previous year were valued at $620,000, based on the date they were
granted.
Lacy's 2000 compensation also included a
$675,000 salary, $1 million bonus, and $15,000 in other forms of
payment, according to the proxy, which was filed with the Securities and
Exchange Commission.
Sears said Lacy's bonus was based on a
pre-approved target level for the company's earning per share over 2000.
"The company's actual earnings per share exceeded the target
level," it said.
The company's 2000 earnings were $1.34
billion, or $3.88 per share, compared with $1.45 billion, or $3.81 per
share, in 1999.
Lacy was paid almost half of the $13.7
million compensation paid to Martinez, who held the top posts starting
in 1995 and whose package included a $1.2 million salary, $2.35 million
bonus, $9.4 million in other forms of compensation, and options valued
at $754,802.
Editors note
And to think in the wake of taking away our life insurance they can
do this!
Exide Unit Pleads Guilty
to Fraud Charges Stemming From Role as DieHard Supplier
By Gregory L. White and
Amy Merrick Staff Reporters -The Wall Street Journal
March 26, 2001
A unit of Exide Technologies, the maker
of automotive and industrial batteries, pleaded guilty to federal
charges of conspiracy to commit fraud stemming from its role as a
supplier of Sears, Roebuck & Co 's DieHard batteries. Exide agreed
to pay criminal fines of $27.5 million, but could still face civil
litigation as a result of the guilty plea. Defects and Illegal
Gratuities Exide, Reading, Pa., admitted in the plea to supplying
inferior batteries to Sears, attempting to cover up the defects and to
paying $80,000 in illegal gratuities to Sears buyer Gary Marks, who also
pleaded guilty in the case. The plea refers to about 750,000 batteries
sold starting in late 1994, of which an unspecified number were
defective. Exide's plea documents also allege that Sears knowingly sold
potentially defective batteries under the DieHard name, one of the
retailer's most precious brands. Sears denied it knowingly sold
substandard batteries.
Exide also admitted to bribing other
customers, making substandard batteries and concealing defects from the
public.
The top executives of Exide at the time
of the violations have since left the company. Exide's current
management, led by Chairman and Chief Executive Robert Lutz, the former
vice chairman of Chrysler Corp., has sought to put the litigation
related to previous management's misdeeds behind the company.
Resources to Cover Cost The plea
agreement allows the company to pay the fine over five years. Exide said
it has the financial resources to cover the cost. As part of the plea
agreement, the U.S. Attorney for the Southern District of Illinois,
which prosecuted the case, agreed not to prosecute any other charges
against Exide stemming from the Sears contract or from information made
known in the course of its investigation.
In court documents connected with the
guilty plea, Exide and the U.S. Attorney said that Exide and Sears
failed to inform consumers that an unknown number of batteries had the
defects, which could cause them to stop operating or shorten their
advertised lives. The documents also allege that Exide agreed with Sears
not to recall the defective batteries but to extend the warranties on
them to protect the DieHard brand name and Exide's reputation.
Sears spokeswoman Jan Drummond declined
to comment specifically on the Exide plea agreement. But she said,
"It remains our position that Sears did not knowingly sell
batteries that did not meet our own technical standards."
Ms. Drummond also said she wasn't aware
of any criminal charges against Sears connected with the case.
The
Softer Side of Sears Turning Hard
By Dimitra Defontis
- Barron's Online - March 22, 2001
The good life at a great price seems to
have caught up with Sears, Roebuck & Co.
When we last wrote about Sears (see
Weekday Trader, "Investors Seek the Sizzling Side of Sears!,"
April 12, 2000), some bulls thought the Hoffman Estates, Illinois-based
retailer could spin off its Internet operations and regain some of its
former luster.
But an Internet boom turned bust and a
U.S. economy heading south has caused Sears stock to start sliding
south. (It traded late Thursday at 34.60, down 7% this week and off 17%
since our story ran.) And despite hopes of a recovery, which have
boosted some retail stocks until recently, some pros say Sears stock
might be dead money, at best, into 2002.
Their big worry: Sears, which boasts the
largest proprietary credit card in the retail industry, with 63 million
cardholders, might get zapped by consumers struggling to pay off heavy
debt.
Meanwhile, those same consumers are
likely to hold off on purchases of big appliances – a Sears mainstay.
And products like appliances and tools face stiff competition from
competing megastores.
"Comparable-store sales are weak,
and I just don't see an acceleration in the business," says Kevin
Rendino, co-manager of the Merrill Lynch Basic Value Fund. He sold 4.5
million shares of Sears, his entire stake, in 2000.
Sears plans to close 89 stores, redesign
its core stores with wider aisles and expand its private-label Kenmore,
Craftsman and Diehard brands. It also continues to push a Sears
MasterCard launched last year.
But so far the grand plans seem to have
fallen victim to the sagging economy: Same-store sales were down in
February, and the threat of more consumer bankruptcies doesn't bode well
for the more than $27 billion in receivables in Sears' portfolio.
Sears' retail revenues rose 2.8% to $23.4
billion in 2000. Comparable-store sales, which increased by 2.3% in
2000, dropped 2% in February as the economic slowdown kicked in. For all
retailers, sales at stores open a year were up between 2% and 4% in
February, The Wall Street Journal reported.
But consumers spend less on big-ticket
items in a slowing economy, and that could hurt Sears, because roughly
17% of its domestic retail revenue comes from appliance sales.
Sears may actually gain some market share
among appliance retailers since Circuit City, which controlled 16% of
U.S. major appliance sales in 1999, said it would exit that business,
and Montgomery Ward, with a 6% share, shut down. Sears controlled a
formidable 53% of all U.S. major appliance sales, but will have to fend
off Lowe's (with a 13.5% share), Best Buy (with 11.5%) and Home Depot,
which now also sells large appliances.
Even so, "it is unlikely that Sears
is completely immune to the industry slowdown currently underway in
major appliances," writes Michael Exstein, an analyst with Credit
Suisse First Boston, who has a Hold rating on the stock..
And then there is Sears' credit
portfolio, which accounts for some 10% of its revenue, but a whopping
60%-plus of its profits. Credit revenues were up only 0.7% to $4.11
billion in 2000.
And if 2001 goes according to form, Sears
may have to take more charge-offs (uncollected account balances that
must be written off). While charge-offs declined overall by $253 million
in 2000, some analysts observe that the charge-off rate in Sears' Master
Trust II accounts (which has some $9 billion in receivables) has taken a
big jump -- to 7.57% of receivables in January, from only 6.34% last
May.
Even more troubling, as Sears' charge-off
rates rose last fall, the rest of the bank card industry's declined
slightly, according to UBS Warburg analyst Linda Kristiansen. That
suggests Sears has a more economically sensitive customer base.
Another potential canary in the coalmine:
The delinquency rate (past-due balances as a percentage of total
receivables) for Sears' Master Trust holdings also increased in the
second half of 2000.
Sears responds that Master Trust
receivables, which are sold to third parties, represent only a third of
its total credit portfolio.
"If there is a large and deep
recession, will we feel an impact? Of course," says Kevin Keleghan,
president of Sears Credit Services. "My peers in the industry see
increases in delinquencies and bankruptcy filings.. We have not. Not
yet."
Not yet is just what worries the 16
analysts who cover Sears. Ten firms have the equivalent of a Hold rating
on the stock, according to First Call "There are always issues of
credit quality when the economy slows, and there are issues with
appliances when the economy slows," says Rendino. "When the
consumer does not feel as wealthy as he or she did a year ago, they are
less likely to go to a department store and buy."
Right now, Sears' stock is changing hands
at 7.2 times First Call's 2001 earnings estimate of $4.78 and 6.6x 2002
earnings of $5.21. That's a discount to the company's projected
long-term growth rate of 10%.
And Sears may indeed gain market share in
appliances, offsetting weak sales in a slowing economy. Also, there's a
silver lining to some of the concerns about consumer credit: By
stretching out payments, consumers ultimately pay more interest, which
is positive for Sears.
But if consumers sit on their wallets
this year, matching 2000's total revenue growth of almost 4% will be
tough. That's why Sears and its shareholders may wind up paying the
piper this year.
Sears
Expands Its Tool Territory
By
Ellen Almer - Crain's Chicago Business - March 21, 2001
Sears, Roebuck and Co. said Wednesday it
is adding its Tool Territory concept, a so-called "playground for
men," to 155 more stores across the country.
The Hoffman Estates-based retailer said
it is expanding its do-it-yourself concept after initial success in
several stores in Virginia, Connecticut, and the Boston and Great Lakes
regions.
This year, the 10,000-square-foot Tool
Territory stores will be introduced to stores from Florida and New York
to Washington, Oregon and Idaho.
In a statement, George Kurkowski, Sears
national marketing manager of Tool Territory, said, "We're covering
a lot of ground with Tool Territory – in a very short time.
And it's a result of the consumers' acceptance of this format."
In fact, Tool Territory has been one
bright spot for the battered retailer, which in the past few years has
seen its stock slide as it faced competition from discount retailers
such as Dayton Hudson Corp.'s Target stores and do-it-yourselfer giant
Home Depot Inc.
Neil Stern, a partner with Chicago-based
retail consultancy McMillan/Doolittle LLP, said the Tool Territory
expansion is obviously part of an overall strategy to leverage the
company's strengths—namely its Craftsman tool brand.
"That's a spectacular brand, and it
looks like now they're growing and augmenting it with other brands to
make this a destination department," Mr. Stern said.
He noted Sears has succeeded with a
similar approach at Brand Central, where the company has built a
thriving appliance business around its Kenmore brand.
But he also notes that while Sears'
competition in the appliance market is waning, the do-it-yourself market
is already somewhat crowded.
And, he notes that while most people
don't mind going to a mall for a new microwave once every few years,
they are less inclined to "run to the mall to buy a hammer."
In mid-day trading, the company's shares
are down slightly to $35.28, after opening at $35.60.
Wards
Stores to Close by March 25
Crain's
Chicago Business Newsroom
March 17, 2001
Montgomery Ward & Co. stores are
expected to conduct their final day of sales on Sunday, March 25.
Scheduled to close their doors March 18 were stores in Chicago Ridge,
Crystal Lake, Joliet, Mount Prospect, Niles, St. Charles and at 47th
Street and Damen Avenue in Chicago, according to a company spokes-man.
Chicago-based Wards launched a
liquidation in January, marking the end of the 129-year-old chain.
Apple
to Pull Out of Sears
By Ian Fried
Staff Writer, CNET News.com
March 15, 2001
Amid slow sales and a shift in its retail
strategy, Apple Computer has decided to stop selling its computers at
Sears, CNET News.com has learned.
"Apple and Sears have mutually
decided to part ways and will be unwinding their relationship during the
remainder of this year," Sears Roebuck spokesman Tom Nicholson said
Thursday. Nicholson declined to elaborate.
The move comes as Apple is changing its
retail strategy, which includes plans to open its own line of stores.
An Apple representative was not
immediately available for comment.
In a January meeting with analysts, Apple
Senior Vice President Tim Cook hinted that the company might sever ties
with some retailers.
"We'll cut some channel partners
that may not be providing the buying experience" Apple wants, Cook
said at the time. "We're not happy with everybody."
Apple has had a bumpy relationship with a
number of retailers, including Sears. In February 1998, the company said
it would stop selling its computers at Sears, Best Buy, Circuit City,
Computer City and Office Max. However, Apple returned to Sears not long
afterward.
Sears
to Return to Chicago's Loop with Urban Store at State & Madison
Streets
Rebecca Sullivan,
Sears
March 15, 2001
Chicago- Sears will unveil its
five-level, 250,000 Square foot urban store at the corner of State and
Madison streets on May 23, 2001. Sears on State, Chicago's newest
neighborhood store will be the only full line store serving more than
one million Loop area residents and workers.
"Not only will downtown shoppers
have a great new source, but shoppers throughout the city will have
access to vastly improved Sears Stores in their neighborhood," said
Mayor Richard Daley. "This commitment to the city is a critical one
for the revitalization of State Street and residents throughout
Chicago".
"Sears is committed to serving
downtown-area business and with a tailored assortment of merchandise and
services," said Dave Johnson Sears tore general manager. We intend
to be actively involved in enriching the community with events and
cultural programs. Sears on State is an ideal location for our seventh
urban Sears store in Chicago."
Sears on State will be the sole full-line
downtown retailer to offer a comprehensive selection of merchandise
including apparel, home fashions, cosmetics, appliances, consumer
electronics, hardware and lawn and garden products. The new store will
offer Chicago name brand clothes and accessories for men, women and
children at a reasonable cost. In catering to the busy urban lifestyle,
Sears on State will offer delivery service and customer pickup.
To better serve the needs of Customers
Sears on State will feature eight special businesses, including: Cole
Vision Optical. H&R Block, Java Java Coffee Shop, Miracle Ear, Sears
Portrait Studio, an Afrocentric gift shop called Unity Square, a hair
salon and a dental practice.
Sears retained the architectural firm of
Daniel P. Coffey and Associates, Ltd., Redeveloper of many Chicago
landmarks, to design the facade of the State Street store. Architectural
significant and originally built in the early 1900s by Holabird and
Roche, the structure at the corner of State and Madison streets
originally housed The Boston Department store, which according to
Chicago legend, was located at the busiest corner in the world.
Encompassing half a block, the 17-story was once touted as the tallest
building in the world devoted exclusively to the retail trade of a
single business. Other noteworthy aspects of this historic building were
its great open floor plates, deep basements, and escalators.
In addition to Sears on State, Sears
stores are located throughout the city, employing 1,450 associates. The
new Sears on State will create nearly 350 new job opportunities.
In September 1999, Sears unveiled a
$30million program to revamp its six Chicago stores by the year 2003,
representing and overall $80 million commitment to the city by the
retailer over a ten-year period.
Sears Roebuck and Co. is a leading U. S.
Retailer of apparel, home and automotive products and services, with
annual revenue of more than $40 billion. The company serves families
throughout the country through approximately 860 department stores,
approximately 2,100 specialized retail locations, and a variety of
online offerings accessible through the company's Web site at www.sears.com
Sears
February Comparable Sales Decrease 2.0
HOFFMAN
ESTATES, Ill.
PRNewswire - March 8, 2001
Sears, Roebuck and Co. announced total
domestic store revenues for the four weeks ending March 3, 2001 were
$1.97 billion. Comparable domestic store revenues decreased 2.0 percent.
Total domestic store revenues decreased 1.5 percent compared to $2.0
billion for the four weeks ending March 4, 2000.
"February proved to be a challenging
month with retail sales falling below our expectations, as the impact of
the slowing economy was felt across both our hardlines and softlines
businesses," said Chairman and Chief Executive Officer Alan J.
Lacy. "In the full-line stores, increases in fine jewelry,
footwear, and home electronics were offset by decreases across other
categories. In our specialty stores, automotive and The Great Indoors
posted comparable sales increases for the month."
Sears
Site Showing a Soft Side
Slow
Development is Costing Retailer Millions
By
Mickey Ciokajlo and Susan Chandler - Tribune Staff Writers
March 8, 2001
Twelve years ago, it looked like a stroke
of genius. Leaders of northwest suburban Hoffman Estates struck a deal
to lure Sears, Roebuck and Co. from its swank corporate headquarters in
downtown Chicago to a sprawling, 786-acre tract of undeveloped land off
the Northwest Tollway.
The upfront cost to Hoffman Estates was
substantial: Sears received $181.3 million in financial incentives to
acquire the land and build its new office complex. The deal was
considered worth it because the village hoped to reap big benefits down
the road as other businesses joined Sears, boosting property tax
receipts.
But the Prairie Stone development hasn't
filled up as planned. Some 270 acres remain vacant, almost half the 565
acres available for development. No other major corporation has joined
Sears, and midsize businesses have been reluctant to move in despite the
park's attractive rents and natural landscaping.
The upshot: Sears must fork over an
estimated $5.1 million in May to cover the shortfall in property tax
payments that are needed to service bonds issued by the village.
As part of a guarantee it provided in
1989, the nation's third-largest retailer has paid $4.1 million during
the past two years to cover the mounting principal and interest
requirements of the bond offering.
Sears faces seven more years of
escalating payments if it can't find new tenants for the space. The
principal and interest payment that is due annually on May 15 will rise
from $6.9 million this year to $9.4 million next year and $11.4 million
in 2003. Sears is responsible for making up the difference only if
property tax receipts fall short of those amounts, but the lead times
involved in real estate development almost ensure that it will be forced
to come up with more money in the next several years.
The extra expense comes at an awkward
time. Sears is fighting to turn around its struggling department store
business in a softening economy that hurt holiday sales.
Sears' frustration with the situation
became evident last summer, when it switched developers on the project
from John Buck Co. to Jones Lang LaSalle.
"Of course we are concerned about
the slower-than-expected development at Prairie Stone, but we also feel
very fortunate that Jones Lang LaSalle is aggressively working on
bringing business to the site," said Sears spokeswoman Peggy
Palter. "I would definitely say there is some pressure to get
Prairie Stone developed."
Real estate experts say growth at Prairie
Stone has been slow for one simple, cliched reason: location, location,
location.
Hoffman Estates is a good half-hour drive
beyond O'Hare International Airport for commuters coming from the city.
It also can be a 45-minute drive from other northern suburbs such as
Lake Forest.
"Although the demographics are
promising, there aren't as many companies that want to venture out
there," said Greg Van Schaack, vice president with Hines Interests,
the largest office-building developer in the country. "The
absorption of office space has been greatest in suburban core areas
where there is access to a deep amenity base of hotels, shopping and
restaurants."
With the tight job market, few companies
want to inconvenience their employees by adding even 15 minutes to their
commute, adds Alain LeCoque, co-manager of the Chicago office of Equis,
a brokerage firm that represents tenants.
"When Sears moved, it was in the era
of big corporate cutbacks. Today it's an employee's world instead of an
employer's world," LeCoque said. "All the businesses I meet
with are very concerned about anything that would cause them to lose
people."
Yet another reason some cost-conscious
businesses haven't moved to Prairie Stone is real estate taxes, said
John Pikarski, a real estate broker and president of J.D. Partners of
Des Plaines. The Northwest Tollway exit to Prairie Stone is little more
than a mile from the Kane County line, where tenants seeking Class A
office space can cut their taxes by more than half.
"Prairie Stone is its own little
island out there, and it's perceived as a wonderful complex,"
Pikarski said. "But it's the taxes, and it's a little out of the
way."
Competition from nearby Schaumburg also
has played a role, developers say. Although the suburb that is home to
Motorola Inc.'s world headquarters is filling up, there is still another
1 million feet of office space that could be built, according to Steven
Fifield, president and chief executive of Fifield Cos. in Chicago.
Despite growing traffic headaches,
Schaumburg remains popular because of its accessibility to the highway
and assortment of restaurants and shopping at Woodfield mall. Fifield's
Windy Point office development in Schaumburg has only 28,000 feet of
vacant space left out of 487,000 square feet.
"We have competed head-on with the
office buildings out there and generally have won," Fifield said.
Real estate experts agree that it could
take more than 10 years for Prairie Stone to fill up. Nevertheless,
there are a few promising things happening.
Last year, a fitness club and day-care
center opened in Prairie Stone, making the development more attractive
from an employee point of view. Later this month, the Hoffman Estates
Village Board will vote on preliminary approval of a long-awaited
full-service Marriott hotel. And under construction is a new
headquarters for Leopardo Construction of Glendale Heights.
Although Hoffman Estates has a lot riding
on the development's ultimate success, the village and other taxing
entities already have reaped some benefits. School District 300, for
example, received $759,662 from the development last year.
And the percentage of taxes the school
district and the other agencies will receive from Prairie Stone will
increase over the life of the agreement, leaving an increasingly smaller
share of the levy for Sears to apply toward bond payments.
Sears wouldn't comment on whether it
would ever attempt to reopen the agreement to reduce its financial
burden. But Hoffman Estates acting Mayor William McLeod said such as a
move would be "a public relations disaster of epic proportions.
They would be showcasing a problem, and they really don't want to do
that," he said.
McLeod said although development has been
slow, he is optimistic about Prairie Stone's future.
"Probably, we all had unrealistic
expectations when the project was approved initially," he said.
Sears
Same-store Sales Dip
Reuters - March 8,
2001
Sears,
Roebuck and Co., the No. 2 retailer behind Wal-Mart Stores Inc., on
Thursday said sales at its domestic stores open at least a year fell 2
percent in February as a slowing economy pinched results. Total
domestic-store revenues for the four weeks ended March 3 fell 1.5 percent,
to $1.97 billion.
"February
proved to be a challenging month with retail sales falling below our
expectations as the impact of the slowing economy was felt across both our
hardlines and softlines businesses,'' Alan Lacy, Sears chairman and chief
executive, said in a statement.
Shares of Sears closed at $40.76 on
Wednesday. The stock has traded in a range of $43.50 to $25.88 in the last
52 weeks.
Sears
Out to Clean Up with Carpet Franchise
By Eddie Baeb
- Crain's Chicago Business - March 5, 2001
Hoping to bolster its carpet-cleaning
business, Sears, Roebuck and Co. is offering its first-ever national
franchise program: Sears Carpet Upholstery Care.
The Hoffman Estates-based retailer began
signing up franchisees two years ago, and now has 77 nationwide. Sears
hopes to double that number over the next couple of years, says John
Hassey, president of the Columbus, Ohio-based division. Sears declined
to disclose the business' revenues.
Though Sears has offered carpet cleaning
for more than a decade, until two years ago, the work was done by more
than 100 contractors licensed to use the Sears name.
That arrangement left Sears with tenuous
control over the contractors, and some became known for poor quality,
says Tom Hill, executive administrator of the Institute of Inspection,
Cleaning and Restoration Certification, a Vancouver, Wash.-based
organization that certifies professional cleaners.
The licensee program also kept Sears from
capitalizing on its retail carpet business, Mr. Hill says, because Sears
wouldn't give customers' names to independent contractors. But the
retailer is willing to provide the names to franchisees, who agree to
clean carpets exclusively for Sears.
"This new program has a lot more
potential to succeed (than the licensee system)," says Mr. Hill.
While the Sears carpet care business has
sputtered, others, such as Downers Grove-based ServiceMaster Co. and
Chem-Dry, a unit of Harris Research Inc. of Utah, have built strong
positions in the industry.
Mr. Hassey hopes to gain marketshare by
offering cleaning contracts to carpet purchasers in Sears stores.
"Sears is one of the largest carpet retailers in the U.S., and has
come to realize the synergy of selling it and taking care of it,"
says Mr. Hassey.
The carpet-cleaning initiative is another
effort by Sears CEO Alan Lacy, who formely headed the services
businesses, to take advantage of the company's name in that area. The
strategy has produced mixed results.
In January, Sears announced a
$100-million charge for anticipated losses in its pest control business
and said it was "evaluating strategic options" for the unit.
Sears
Canada Warns of 1Q Loss
From the
Reuters Newsroom - March 5, 2001
Department store chain Sears Canada
issued a shock earnings warning Monday, saying it expected a first
quarter loss and that it will revise downwards its sales and gross
margins plans.
The retailer, which is majority-owned by
Sears, Roebuck and Co, said the lowered expectations were due to weak
economic conditions, and an ``extraordinary amount of additional
full-line department store square footage'' added by its acquisition of
the Eatons chain.
``Given weaker than planned sales and
gross margins, we think it prudent to lower expectations for the first
quarter to a loss of 10 to 15 cents per share,'' Mark Cohen, Sears
Canada's new chief executive, said in a statement.
Sears also announced its same store sales
in February grew by 0.5 percent. The retailer said revenues rose 5.5
percent to C$414.1 million in the four week period ending Feb. 24, up
from C$392.6 million in the prior-year period. Merchandise sales rose
10.3 percent.
State
Street Sears to Open May 23
Crain's Chicago
Business
March 1, 2001
Sears, Roebuck and Co., which vacated the
State Street shopping district in 1983, on Thursday announced May 23 as
the opening date for its new 250,000-square-foot store at the corner of
State and Madison Streets.
The five-level store will offer the full
line of Sears merchandise, including apparel, appliances, electronics
and hardware.
"State Street retailing is dramatically
different now," said a company spokeswoman. "It has become a
stronger shopping destination."
Sears has six other stores in Chicago.
Sears
Admits it Must Boost Retail Business
By
Sandra Guy, Business Reporter - Crain's Chicago Business
Feb. 28, 2001
Sears,
Roebuck and Co. Chief Executive Alan Lacy minced no words Tuesday when he
said the Hoffman Estates company needs to "fix" its retail
business.
"That's priority No. 1 because it's
not competing as effectively as we'd like it to," he told the Bear
Stearns Retail and Apparel Conference in New York.
As part of the turnaround effort, Lacy has
consolidated under one roof the company's online business, specialty
merchandise and specialty catalogs.
Activities in those areas are being refined
so they work more effectively with the retail stores, said Sears
spokeswoman Peggy Palter. Already, stores have kiosks that enable
customers and sales associates to reach the company Web site, and online
purchases may be returned at stores.
Sears' hard lines are online, but only a
few of its soft lines are. Jewelry will be brought online, but no date has
been set.
It's
not known yet whether Lacy will appoint a new manager to oversee the
direct-to-consumer initiative, as it is called.
As for Sears' soft lines, apparel sales
remain a disappointment, Lacy said.
With 860 full-line stores and 2,000
specialty stores, retail accounts for $29 billion, or 75 percent, of
Sears' overall sales. Yet more than half the company's operating income
last year came from its credit business. A key aspect of the credit
division's 13 percent growth rate was the new Sears Gold Mastercard, which
accumulated $1.4 billion in balances by the end of 2000.
The Mastercard is aimed at a more affluent
audience than the Sears Card, the same audience Sears is targeting by
expanding The Great Indoors home-decorating chain.
Sears
Cautious on Expansion Plan
By Amanda L.
Milligan - Crain's Chicago Business
Feb. 27, 2001
Despite
longstanding plans to gear up its Great Indoors home remodeling and
decorating store concept in 2001, Sears, Roebuck and Co.'s Chairman and
CEO Alan Lacy told analysts on Tuesday that the Hoffman Estates-based
retailer intends to keep expansion plans restrained in 2002;or until
returns improve.
Sears is adding 11 new Great Indoors stores
this year, bringing the total nationwide to 15. The company will open
stores in Lombard and Schaumburg during the first half of this year.
The "2002 store opening (plan) is not
significantly more ambitious than this year's," Mr. Lacy said at a
Bear Stearns conference. "We want to make sure that we are managing
this transition well." He said returns at Great Indoors stores exceed
that of its full-line stores, but "it's not outstanding yet,
though."
Great Indoors stores rang up $50 million in
annual store revenues in 2000. Sears' total 2000 revenues were $41
billion.
As part of the retailer's efforts to focus
on productivity and returns, Mr. Lacy reiterated that Sears is conducting
a comprehensive review of its merchandise lines, and said he expects
changes to the merchandise mix.
Although he would not elaborate on which
lines are likely to be retained or phased out, Mr. Lacy made some remarks
about several of Sears' major units.
Home:
After a decade-long hiatus from the mattress category, Sears is
re-entering the mattress business with 400 stores carrying a mattress line
by the middle of this year.
Apparel: Despite disappointing sales
during the past year, Mr. Lacy said Sears is staying in the apparel
business. Calling it a "work in progress," he stressed that the
product assortment is evolving.
Home appliances: Sears is monitoring
its core business carefully as Bentonville, Ark.-based Wal-Mart Stores
Inc. and Atlanta-based Home Depot Inc. set themselves up as appliance
sellers. But Mr. Lacy said Sears is not concerned about losing much market
share to these competitors because Wal-Mart and Home Depot are pursuing
the lower-end consumers; a segment that Sears does not consider its main
target for these products.
Online: Sears is seeing a good
response to its online efforts, Mr. Lacy said, especially as it is used as
a research tool by shoppers prior to a store visit. But there are no
immediate plans to put all product lines on the Web site.
Shares of Sears stock were trading at
$40.57 late Tuesday afternoon, up from its opening price of $40.31, but
below its 52-week high of $43.50.
Reit
Leads Bid to Buy Wards Assets
By
Eddie Baeb - Crain's Chicago Business
February 24, 2001
A real estate investment trust has
offered to buy the marketing rights for Montgomery Ward & Co.'s 250
stores along with its warehouses and Chicago headquarters tower in a
deal likely to generate proceeds of more than $450 million.
A partnership led by New Hyde Park,
N.Y.-based Kimco Realty Corp. is considered the front-runner to acquire
the sites in an auction scheduled Tuesday for Bankruptcy Court in
Delaware, where Wards is liquidating its operations. Approval could come
as early as Wednesday.
Although Kimco may face a competing bid,
it is considered the strongest candidate to lease or sell the sites
because it has lined up leading retailers interested in the Wards
locations, including Kohl's Corp., which is expected to take the largest
number of stores. Menomonee Falls, Wis.-based Kohl's might use the deal
to enter California, according to real estate and retail sources.
Both Wards and its unsecured creditors
committee have approved the deal.
Home
Depot's Ascension Again is at Sears' Expense
Now 2nd-largest General Retailer
By Susan
Chandler - Chicago Tribune Staff Writer
February 21, 2001
It wasn't a proud day for Sears,
Roebuck and Co.
Sixteen months ago, retail upstart Home
Depot was chosen to replace venerable Sears in the bellwether Dow Jones
industrial average, a spot the Hoffman Estates-based retailer had held
for 75 years.
The decision was an easy one for the
editors of the Wall Street Journal. Home Depot's sales were leaping
ahead by double digits every year, while Sears' revenue growth and stock
price had stalled.
On Tuesday, Home Depot added insult to
injury by displacing Sears as the nation's second-largest general
merchandise retailer. The Atlanta-based home improvement giant reported
annual sales for the year ended Jan. 28, 2001, rose 19 percent to $45.74
billion, easily eclipsing Sears' sales of $40.94 billion, which were
announced last month.
The revenue jump was a result of Home
Depot's aggressive growth--it added 204 stores last year--as well as
sales increases at its existing stores, which cater to building
contractors and do-it-yourself home remodelers.
The role reversal is particularly notable
given that Sears had the chance to buy Home Depot in the early 1980s,
but ended up taking a pass. In their book, "Built From
Scratch," Home Depot founders Bernie Marcus and Arthur Blank called
it "one of Sears' biggest mistakes ever."
Still, Sears executives say they aren't
losing any sleep over slipping to the No. 3 slot.
"Sales aren't nearly as important as
profits," said Sears spokeswoman Peggy Palter. "Whether we're
No. 1, No. 2 or No. 3, we want to make sure we're a healthy, successful,
profitable company."
Sears operates about 860 department
stores and more than 2,000 specialty stores nationally.
Besides, being big isn't necessarily all
that great as the economy goes through a slowdown, retail experts note.
Home Depot--hailed as recession-proof by some retail pundits--is
discovering that.
The 1,134-store chain reported a 20
percent drop in fourth-quarter profits, to $465 million, or 20 cents a
share, from $578 million, or 25 cents a share. And despite sales for the
quarter rising 14 percent to $10.46 billion, Home Depot said it is
struggling with sluggish sales and weak prices for some of its products.
As a result, the company warned Tuesday that it expects first-quarter
same-store sales to be flat or actually decline from the same period
last year.
"The uncertainty of the current
economy continues to put tremendous pressure on consumer spending,"
said Home Depot Chief Executive Robert Nardelli. He told Wall Street
analysts the company expects to "continue to see pressure for
competition for share of our customers' wallet" during the first
half of the year.
Higher energy costs have siphoned off
consumers' disposable incomes, Nardelli said. And so far, interest rate
cuts, courtesy of the Federal Reserve, haven't reignited spending.
Even industry leader Wal-Mart Stores Inc.
isn't immune.
The nation's largest retailer was able to
meet Wall Street's scaled-back earnings expectations Tuesday and even
show a 4.5 percent increase in fourth-quarter profits, to $2.004
billion, or 45 cents a share, from 1.917 billion, or 43 cents a share,
in the year-ago period. Sales, meanwhile, jumped 10 percent, to $56.56
billion from $51.39 billion for the same period a year ago.
But the spending slowdown kept those
numbers from meeting Wal-Mart's previous targets, which were higher. Lee
Scott, Wal-Mart's chief executive, blamed slowing sales on declines in
consumer confidence. He added that Wal-Mart believes the worst is over.
"Fortunately, we do not see any
indication that spending will further slow from current levels,"
Scott said.
Whether or not retailers have seen the
worst of it, Wal-Mart has nothing to fear about being dislodged as the
nation's largest retailer. With $191.33 billion in sales for the year
ended Jan. 31, 2001, Wal-Mart is more than four times larger than Home
Depot. It overtook Sears as the nation's largest retailer in fiscal 1990
and has remained in first place since.
In fact, Wal-Mart is now the nation's
second-largest company overall, ahead of even General Motors Corp. The
Bentonville, Ark.-based merchant trails only Exxon Mobil Corp., which
racked up sales of $232.74 billion in 2000.
Wal-Mart operates more than 3,100 stores
in the United States as well as more than 1,000 stores in nine other
countries.
Ruling
Gives Two Vets Health Care for Life
By Robert Pear
- New York Times News Service
February 21, 2001
WASHINGTON -- A federal appeals court has
ruled that the government owes free lifetime medical care to certain
veterans of World War II and the Korean War because recruiters promised
them such care if they served in the armed forces for a minimum of 20
years.
The decision said the government had
broken a contractual obligation to the military retirees. The case
involved two men from Ft. Walton Beach, Fla.: William Schism, who served
in the Navy and the Air Force from 1943 to 1979; and Robert Reinlie, who
served in the Army and the Air Force from 1942 to 1968.
"We're ecstatic that we got a
favorable ruling," Schism said Tuesday. "We feel that we've
been vindicated a little bit."
The court's ruling involved only Schism
and Reinlie, but their lawyer, George Day, said he was trying to have
the case certified as a class action. Day said the reasoning of the
court's decision could then provide free care for 3 million people.
In an opinion for the court issued
earlier this month, Judge H. Robert Mayer said, "The government
made an unambiguous offer of free lifetime health care, and the retirees
accepted that offer."
The Army was making similar commitments
as recently as 1992, Mayer said. A recruiting brochure issued in that
year said, "Health care is provided to you and your family members
while you are in the Army, and for the rest of your life if you serve a
minimum of 20 years of active federal service to earn your
retirement."
The government acknowledged that military
recruiters had promised free lifetime health care, but argued that the
promises were unenforceable because the recruiters did not have the
authority to bind the government.
Sears
Fills Exec Slots; Top Buyer Still Sought
By Susan
Chandler, Chicago Tribune
February 17, 2001
Alan Lacy, Sears, Roebuck and Co.'s new
chief executive, is moving quickly to align his management team. In
little more than two months, he has hired a new head of human resources,
shipped his top marketer off to Sears Canada and named a company veteran
as his top strategic adviser.
But the most important job he has to
fill--head merchant--is still vacant and will be for at least the next
two months. The person chosen for that highly paid position will play a
large role in determining whether Lacy is successful at turning around
Sears' floundering retail ship, retail experts say.
Here's the rub: Even a two-month delay
could be hazardous to Sears' health. A head merchant would need to be in
place now to oversee and influence Sears' buying for the 2001 holiday
selling season.
Sears, the nation's second-largest
retailer, can ill afford another disappointing Christmas season. Last
year, December sales fell 1.1 percent at Sears, putting extra pressure
on Lacy to show progress during his first full year at the helm.
"If you have a bad year, you better
not follow with another bad year," warns George Whalin, president
of Retail Management Consultants in San Marcos, Calif.
But instead of moving aggressively to
find the right executive to revamp Sears' troubled apparel business,
Sears is still trying to finalize the job description.
Sears' top brass has yet to decide
whether to hire an overall president of merchandising, who would oversee
both softlines and hardlines as did former Sears executive Robert
Mettler, or return to having two executives who would split those
responsibilities. Lacy recently told his senior management team there
may be even more possible job configurations, said Sears spokeswoman
Peggy Palter.
Finding the right person is more
important than getting the job done fast, Lacy believes. "Obviously
we would like to fill these positions as quickly as we can, but we need
to get the right person," Palter said.
When Sears decides what it is shopping
for, its executive search firm, Herbert Mines Associates Inc., will be
contacting a long list of people from a variety of retail backgrounds.
Executives from department stores will be considered as will those from
specialty retailers and so-called big box retailers such as Home Depot
and Best Buy.
Despite the fact that a "short
list" for the merchandising job doesn't exist yet, names already
are being bandied about. One of the most popular ones is Roger Goddu,
the soon to be out-of-work chief at Montgomery Ward & Co.
Goddu reportedly visited Sears' Hoffman
Estates headquarters last month and spent time with Lacy. He only may
have been trying to sell Sears on some of Wards' retail locations, but
few Sears watchers doubt he threw his hat in the ring.
Goddu declined to comment on whether he
is interested in the Sears job. A Sears spokeswoman declined to comment
on whether Goddu is a candidate or if he had called on Lacy.
Surprisingly, perhaps, retail experts are
deeply split on whether Goddu would be right for the job.
Some say Goddu would be a good fit--an
experienced, gregarious guy who would complement Lacy's financial acumen
and understated style. Goddu's reputation hasn't been damaged by Wards'
failure, some executive searchers say, because liquidating the chain was
a financial decision made by Wards' parent, General Electric Co.
Hiring Goddu as Sears' head merchant
"makes sense to me," said Sid Doolittle, a veteran Chicago
retail consultant. "He has done a good job administratively, and he
would be an outsider, not a Sears bureaucrat."
But other retail experts say picking up
Goddu would be a big mistake for the Big Store.
"He doesn't have any great
vision," Whalin said. "You can't blame all of Wards' problems
on him, but a lot of them you can."
There isn't a deep pool of retail
executives with the kind of merchandising track record that would
attract Sears. And vice versa, for few high-ranking folks at well-run
chains such as Target Corp. and Kohl's Corp. are likely to be interested
in such as high-risk position, because they already are well taken care
of, retail search experts say.
While a CEO job can sometimes lure
contented executives into making a jump, a second-tier position is not
nearly as attractive, they add.
Still, Sears must plow ahead with holiday
buying decisions now. But the retailer says it has the situation well in
hand. "We are not holding back on preparing for the holidays or any
other merchandise initiatives," Palter said.
Sears executive Leslie Mann was named
acting head of softlines merchandising last month after Mark Cohen, who
assumed Mettler's merchandising responsibilities in addition to his
marketing function, departed to be president of Sears' Canadian unit.
Sears,
Spiegel See Mixed January
Ellen Almer, Crain's Chicago Business
February 9, 2001
Attempts to move leftover December
merchandise by slashing prices yielded mixed January results for area
retailers Sears, Roebuck and Co. and Spiegel Inc.
Hoffman Estates-based Sears said Thursday
its comparable-store sales for the month were up 2.6% to $2.3 million
compared with the year-earlier period. Company officials said
double-digit increases in sales of appliances, electronics and sporting
goods helped boost sales, while certain soft-line categories saw
declines.
Downers Grove-based Spiegel, however,
blamed a delay in the shipment of its semi-annual catalog and severe
cost reductions at its Eddie Bauer stores for weak January sales, which
fell 4% to $177 million compared with the year-earlier period.
Retail consultant Keven Wilder said Sears
probably benefited from a cautious outlook.
"I suspect that going in (to the
holiday season), they were pretty controlled on their inventory,"
she said. "They've been in difficult times for a while now; I'm
sure they were watching things."
On the other hand, she said, Spiegel's
catalog business has not kept pace with competitors such as
Massachusetts-based J. Jill Group Inc., whose trendy apparel appeals to
a niche market. Similarly, Spiegel's Eddie Bauer stores are losing
ground to more agile competitors such as Pennsylvania-based American
Eagle Outfitters Inc., which has been more successful at capturing
teenage shoppers, Ms. Wilder said.
The results come at a time when consumer
confidence is at a four-year low, according to a report released last
week by the Conference Board in New York. But Ms. Wilder, for one,
doesn't foresee imminent doom for retailers, noting that low
unemployment rates and a strong housing industry indicate that the
economy is still healthy.
New
Bill Highlights Retiree Benefit Issue
By Trish
Nicholson, AARP Bulletin - February 5, 2001
Rep.Rep. John F. Tierney, D-Mass., thinks
he has an answer to retirees' worst nightmare. He plans to introduce a
bill this month to keep companies from slashing medical benefits for
former workers after they've retired.
"If we really wanted people to be
able to retire with dignity, then they have to be able to rely on decent
health benefits." Tierney says in an interview with the AARP
Bulletin.
Although Congress watchers think the ambitious bill brought by the
49-year-old lawmaker has little or no chance of being passed, the
proposal nonetheless has merit. At a minimum it under girds support for
Medicare reform by highlighting growing inadequacies in retirees health
benefits, says Dallas Salisbury, president of the Employee Benefits
Research Institute, a Washington-based think tank.
What prompted Tierney who is just
starting his second term in the House, to take on such a controversial
issue? Meetings with older Americans who had lost retiree medical
benefits piqued his interest, he says. So did talking with his mother, a
former telephone worker, who keeps in touch with retired colleagues who
have lost their benefits.
"It came to our attention from a
number of different avenues," he says. "We decided something
had to be done."
Tierney who serves on the Committee on
Education and the Workforce wants to amend the Employee Retirement
Income Security Act of 1974, which regulates company health and pension
plans. That law prohibits companies from reducing pension benefits after
workers have retired, but offers no such protection for retirees'
medical benefits.
His bill - the Emergency Retiree Health
Benefits Protection Act - would prohibit post-retirement cuts in medical
benefits. Moreover, it would require companies to restore coverage to
retirees whose benefits have already been cut because their former
employers made changes to these group insurance plans after they
retired.
Yet the trend in trimming benefits may
well continue. Spiraling inflation in health care costs, coupled with
changes in U.S. accounting standards and increased international
competition, have sent American corporations scouting "down the
road of benefit cutbacks" for more than a decade, Salisbury says
and there's little chance of turning back.
Still, the reforms in Tierney's bill
"are long overdue," says C. William Jones, president of the
Association of BellTel Retirees, Inc. Jones says companies have been
slashing benefits even "while . . . enjoying record earnings"
in a period of prosperity.
The BellTel retiree group is working to
advance the legislation, along with the General Electric Retirees'
Justice Fund and other members of the Coalition for Retirement Security.
Sears
Checking Out Wards Store Sites
Crains Chicago Business
Feb. 4, 2001
Sears,
Roebuck and Co. is eyeing Montgomery Ward & Co. stores across the
country, a spokeswoman for the Hoffman Estates-based retail and credit
card company confirmed. The spokeswoman said Sears is considering opening
stores in locations that will be vacated as Chicago-based Wards
liquidates.
She wouldn't identify the Wards sites Sears
is evaluating, but people familiar with the matter said the North
Riverside Park Mall location is on the list.. North Riverside Village
Treasurer Guy Belmonte confirms that Sears has spoken to the western
suburb's building commissioner about the site.
A
Big-ticket Downturn Detours Sears' Strategy
Latest Turnaround
Plan Centers on Recession-sensitive Appliances
By Eddie Baeb, Crain's Chicago
Business
January
29, 2001
A downturn in the sales of washers,
dryers and other major household items threatens to throw Sears, Roebuck
and Co.'s comeback plans into a spin cycle.
Alan Lacy, who took over as CEO of the
Hoffman Estates-based retailer in October, is counting on Sears' prowess
at selling and marketing appliances and other hard goods to be the
cornerstone of his turnaround strategy. His efforts include squeezing
more out of Sears' credit card operation by enticing customers to use
the retailer's own plastic or the new Sears MasterCard to purchase
appliances, enabling the company to make money on interest charges.
Sears sells nearly four out of every 10
big appliances purchased nationwide.. Yet, with a growing number of
consumers concerned about losing their jobs and nervous about lackluster
investment returns, sales of big-ticket items like appliances are
starting to tumble.
Analysts do see one bright spot, though:
Projections of new-homes sales remain solid - if not stellar - and that
means buyers will be in the market for stoves, refrigerators and other
household items.
More broadly, however, "The slowdown
in demand is going to hurt (Sears)," says Efraim Levy, an equity
analyst who follows appliance manufacturers for New York-based Standard
Poor's Corp. "(Appliance manufacturers) have given up on the first
half (of 2001). The question is: How strong will the second half
be?"
Both Michigan-based Whirlpool Corp.,
which makes most of Sears' Kenmore products, and Iowa-based Maytag Corp.
suffered deep declines in fourth-quarter earnings, as their domestic
sales fell sharply and increasing price competition cut into profits.
Whirlpool plans to begin laying off 6,000
employees, about 10% of its workforce. And Maytag took a $49-million
charge in the fourth quarter for discontinued business initiatives,
asset writedowns and severance costs for executives.
Appliance industry statistics also paint
a bleak picture.
Sales were up 7.9% during the first half
of 2000, compared with the same period in 1999, but took a sharp dive in
the second half of last year, when sales fell 7.7% vs. the year-earlier
half, according to industry data.
Overall, industry shipments of six core
appliance categories rose a mere 1.9% last year, compared with 1999,
according to the Assn. of Home Appliance Manufacturers. The Washington,
D.C.-based trade group is forecasting only a 1..6% increase in shipments
this year.
By contrast, shipments rose around 8% in
1998 and 1999.
The slowdown doesn't bode well for Sears,
whose major appliance sales account for about $5 billion of its nearly
$30 billion in total annual retail sales.
An equally vexing issue for Sears will be
how its massive credit card business will perform in an economy heading
down. If widespread layoffs lead to unpaid credit card bills, that would
be a major blow for Sears, which makes more than half of its profits
from its credit business.
Sears recently increased its provision
for uncollectable accounts 28% to $224 million - reflecting, Sears says,
the increased number of new accounts, not a decline in the quality of
its credit portfolio.
But Sears watchers are wary.
"I think the major area of concern
is the credit division," says analyst Asma Usmani of St.
Louis-based Edward Jones. "(Sears) increased its reserve, which
indicates they may be expecting more charge-offs. Part of Sears'
improved earnings the last couple of years has been a product of
improvements in the credit card business."
One of Mr. Lacy's initiatives for growth,
a remodeling superstore called Great Indoors, also is dependent on
appliance sales and home remodeling - sectors tied closely to the
economy's health.
Sears operates four Great Indoors stores,
which sell home furnishing accessories, linens and candles along with
faucets, kitchen cabinets and major appliances.
Mr. Lacy recently told analysts that he
has scaled back on planned 2001 openings of Great Indoors stores to 10
from 15.
Repositioning Sears to focus more on
appliances and other big-ticket hard goods such as treadmills and lawn
tractors makes sense because, despite a huge investment and heavy
advertising for apparel lines under former CEO Arthur Martinez, that
business remains a non-starter for Sears.
Mr. Lacy also can be glad there are
bright spots in the economy.
The Federal Reserve's interest rate cut
this month pushed mortgage rates lower; that's encouraged people to
refinance mortgages, which often leads to remodeling projects and, in
turn, appliance purchases. And sales of existing homes have been
trending up since hitting a three-year low last year.
Some contend that Sears actually may
benefit from a slight slowdown because consumers often spend more on
their homes when they're feeling unsure about the economy, rather than
taking trips, dining out or buying luxury goods.
"Housing in the past has certainly
been more cyclical than other industries," says Carl Tannenbaum,
chief economist at Chicago-based LaSalle Bank N.A., who is predicting a
soft landing for the economy. "Being deeper into that market may
make Sears a little bit more vulnerable to turns in the cycle."
Sears
May Find Advantages in Selby's Ad Past
Chicago
Tribune - January 26, 2001
Sears, Roebuck and Co. stayed inside to
fill its top marketing post, naming No. 2 retail marketing executive
David Selby to the post of senior vice president of marketing.
The promotion, announced internally
Thursday by new Sears Chairman and Chief Executive Alan Lacy, puts an
executive with an extensive advertising background at the helm of one of
the largest, and most watched, retail marketing accounts in the
business--a move that many say could bring a fresh perspective to
efforts to refine the retailer's identity with consumers.
Selby, 44, takes over for Mark Cohen, the
chief marketing officer and head merchant for the $40 billion chain, who
this week was named chairman and CEO of Sears Canada.
That move gave Lacy an opportunity to
split Cohen's former duties, which traditionally had been separate jobs
and which many insiders believed were too much for one executive. Selby
now reports directly to Lacy.
"David is clearly an experienced
marketing executive who has added significantly to the marketing
direction of Sears," Lacy said.
In making Selby's announcement, Lacy also
named Leslie Mann, currently senior vice president of accessories, to be
acting head of softlines while the company looks for a permanent hire.
But Thursday, all eyes were on Selby, who
went to Sears in 1997 after an 18-year stint at ad agency giant Leo
Burnett.
In an interview, Selby indicated Sears
may make a bigger marketing push behind the overall Sears brand than in
recent years.
"We have an opportunity to tell our
story and to tell it more broadly," Selby said. "Sears as a
brand is hugely important."
But he added that the company has no
plans to back off its significant pushes behind its core brands,
including Kenmore, Craftsman and Die-Hard. Sears, like many other
retailers, is coming off a tough fourth quarter and faces competition on
new fronts this year, especially from retailer Home Depot, which is
expanding its appliance offerings.
It's unclear whether Sears will continue
to carry its current advertising tagline, "The good life, at a
great price. Guaranteed." Selby wasn't showing his hand on
Thursday, saying the tagline "is a very complete thought. We are
going to continue to evaluate the fit and relevance of our marketing
program going forward. We haven't made any decisions."
Most insiders don't expect a major
shakeup in Sears' agency relationships as a result of the move. Sears
uses Ogilvy & Mather Chicago, and the New York and Chicago offices
of Young & Rubicam.
J.C.
Penney to Close About 50 Stores
Reuters
- January 23, 2001
J.C. Penney Co., the nation's
fifth-largest retailer, on Tuesday said it will close about 50 of its
department stores and cut an unspecified number of jobs in an effort to
cut costs and streamline its business.
"(Chief Executive) Allen Questrom
has said on a number of occasions that he will close some
underperforming stores,'' Tim Lyons, a spokesman for the Plano,
Texas-based retailer said.
Lyons could not provide specifics about
the job losses or any charges that may be associated with the store
closings.
"We are probably going to have more
details in a few days or so,'' he said.
Lyons said the company's managers and
officers had been in meetings scheduled for Tuesday and Wednesday.
Retail veteran Questrom, who helped pull
Federated Department Stores Inc. out of bankruptcy, took the top job at
Penney this summer. Penney has seen its results flag in the face of
stiff competition from discounters like Target Corp. and Wal-Mart Stores
Inc. The cooling U.S. economy has also cut further into sales and
profits.
Earlier this month, Sears, Roebuck Co.
said it would close 89 stores and cut 2,400 jobs, citing a slowdown in
consumer spending.
Shares of J.C. Penney ended 1/4 higher at
$12-1/2 on the New York Stock Exchange . Over the past year, J.C. Penney
shares have underperformed the S index of department stores by about 48
percent.
Penney operates about 1,100 J.C. Penney
department stores and over 2,600 Eckerd drugstores.
A spokeswoman for Clearwater, Fla.-based
Eckerd said it plans to close 5 to 7 stores in 2001, which is
"below
normal,'' she said.
