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

"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.