Sears has everything but time: Market share, stock price fall as retailer tries to re-establish itself
By Phil Rosenthal
Chicago Tribune
December 31, 2011

"We have to do a much better job of demonstrating who we are as a company," Lou D'Ambrosio, chief executive of Sears Holdings Corp., told me Friday as the struggling retail giant prepared to close the book on 2011. "It's important to us to ensure that people understand the value proposition of Sears."

You remember Sears. Used to be huge.

Well, the stores are still big, and there still are thousands of them. It's the market share and stock price that got small.

Like many Americans, I couldn't remember when I last was in a Sears before the Hoffman Estates-based parent company's announcement last week that it planned to close as many as 120 underperforming Sears and Kmart stores and take a charge of as much as $1.8 billion.

But with same-store sales down 5.2 percent in the all-important two-month run up to Christmas, a span during which the International Council of Shopping Centers reported the overall department store sector was up about 4 percent, Sears obviously missed me and everybody else who had taken their business to Wal-Mart, Target, Macy's, Nordstrom, Amazon.com or wherever.

I grew up wearing Toughskins pants and learned to ride a bike on a Sears 16-incher. Such was the considerable sway the retailer (and its advertising) had on my developing psyche that, when asked as a child where babies came from, my response reportedly was: "Sears, because Sears has everything."

My son, 8, knows Sears only as what I mistakenly sometimes call its onetime showcase skyscraper, now properly known as Willis Tower. It's an error he never fails to point out.

Analysts say that among the mistakes Sears has made since Chairman Eddie Lampert's takeover in 2005 is its reluctance to invest in its stores. Lampert always seemed more interested in the real estate than the sales floor. Then he became infatuated with the Web as a successor to the bricks-and-mortar business, leaving many wondering if money-losing Sears even cared about stores.

Greg Melich of International Strategy & Investment said by phone the other day that Sears has been "a mismanaged asset" that has lacked focus, hasn't kept pace with more nimble rivals and offers little reason for customers it has lost to return.

Sears' Fitch bond rating fell to CCC, with the warning of "heightened risk of restructuring over the next 24 months." Its share price, which was north of $94 in February, was around $32 Friday.

Credit Suisse analyst Gary Balter, in a note, said that "we do not see how they dig out of these problems."

I'm not sure I do either, although I agree with D'Ambrosio that Sears' heritage is a big asset.

"Notwithstanding the company's financial inconsistency over the years, I think there's a certain set of brand attributes around its authenticity that has endured," he said. "We need to ensure that...people understand how the brand they remember as Sears...connects with today's environment."

The Sears I visited the other day — at Irving Park Road and Cicero Avenue on Chicago's Northwest Side — had an out-of-service escalator. But it still offered reminders of the eclectic array for which Sears once was famous, with a watch repair counter, photo studio and auto center, as well as offering hearing aids, new keys and exercise equipment alongside tools, clothes, electronics, jewelry, shoes, fragrances, appliances, cookware, towels and linens.

Unfortunately, the only place that was remotely crowded was near the lines by the undermanned sales registers, as if the company was in no hurry to take customers' cash.

All told, the closing of underperforming stores accounts for only 5 percent of its full-line stores and 2.5 percent of its total stores. They're expected to generate $140 million to $170 million in cash through real estate deals and the sale of inventory.

No stores in Illinois, which just gave Sears Holdings tax incentives to remain headquartered in the state, have shown up on the list of closures to date. D'Ambrosio would say only that the company must "make the right decisions to restore profitability and greatness to our company."

Moving ahead, D'Ambrosio said, the company plans to devote more money to its remaining stores, upgrading "fixtures, signs and cosmetics, such as paint and flooring" as well as "technology to enhance engagement between salespeople and customers." The goal is to make the best use of Sears' stores and website, the company's home repair and delivery service and its assortment of brands, including proprietary Kenmore products.

"We've underleveraged (all of that), and I think we have an opportunity to bring them together," said D'Ambrosio, who sees the Shop Your Way customer loyalty program as "the core of our strategy" to unlock value and bring these assets together.

The program enables Sears to compile a data dossier on its customers, their buying patterns, preferences, lifestyles and other details that will enable it to anticipate what, when and how they want merchandise. In exchange, customers get bonuses — and presumably greater satisfaction.

"At the end of the day, it's understanding who you are (as a customer) and how we can provide the kind of assortment to you at the persuasive compelling prices you want," D'Ambrosio said.

Like Lampert, who made his fortune as a hedge fund manager, D'Ambrosio does not come from a retail background. Before taking the CEO post, he was at IBM and helped take tech firm Avaya private. But D'Ambrosio sees information management as a part of the retail world going forward.

"It would be a mistake to think we undervalue classic merchant skills," he said. "Likewise, it would be a mistake not to recognize the profound shifts we're seeing in the industry.

"Some people believe everything is going online, so the stores are going to be antiquated in a very short period of time. Others view online as so much sound and fury. Others don't see the value in moving toward home services. We believe … that those increasingly are false distinctions. It is the interplay between online, store, home, mobile where the real engagement for our (customers are), and that's where we're investing, in that interaction."

The challenge is to get those who aren't now shopping at Sears to do so. Like the rush of diners at a long-neglected bistro when its closing is threatened, nostalgia isn't enough.

"You will go to a Sears store or buy something on Sears.com to the degree that it's relevant and you view it as providing value to you," D'Ambrosio said. "If you don't, you won't.

"Our commitment is to restore this company to greatness and improve the profitability and the right business decisions will be made to accomplish that. The brand counts. The company counts. I also think it's a company people are rooting for."

But even if Sears still has everything, it doesn't have forever.

Sears Details Store Closures
By John Kell
Dow Jones Newswire
December 29, 2011

Sears Holdings Corp. identified 79 of the stores the retailer is planning to close, with nearly half being Kmart locations and Florida having the most closures by state.

Earlier this week, the retailer said it planned to close between 100 and 120 stores and record up to $2.4 billion in quarterly charges after another weak holiday season.

Closures affect 25 states. Florida led the list with 11, followed by six each for Ohio, Michigan and Georgia. With the exception of Ohio, those states had jobless rates above the national average in November, according to the Department of Labor.

Most of the closures were distributed evenly across the U.S., though the Northeast won't see many. Pennsylvania and New Hampshire each are expected to have two store closures so far. No others were mentioned by Sears on Thursday for that region.

Sears is planning to close 38 Kmart stores, 25 Sears full-line locations and two Sears hardline-only locations. The company will also close 14 Grand/Essentials stores, a format Sears had opened over the past decade in an effort to better compete against Wal-Mart Stores Inc. and Target Corp.

According to the company's website, Sears said employment totals varied and thus the company couldn't provide an estimate of how many layoffs would occur. Sears said a typical store being closed employs between 40 and 80 associates.

A Sears spokeswoman wasn't immediately available to provide additional comments on the cuts or when the company would disclose the other closures.

Also Thursday, Fitch Ratings slashed its long-term-issuer-default rating on Sears by three notches, citing poor sales. Fitch now rates Sears at triple-C, eight levels into junk., as it warned the company may need to tap external sources of financing to fund operations in 2013 and beyond, while saying "the magnitude of the decline in profitability and lack of visibility to turn operations around remain a major concern."

Wednesday, Standard & Poor's Ratings Services said it was reviewing Sears for a possible downgrade deeper into junk.

A Sears spokesman said this week that the company has "ample financial flexibility." He noted Sears has $3.5 billion in liquidity, including $700 million in cash and $2.9 billion in credit under existing borrowing arrangements, as well as $8 billion to $10 billion in inventory and a sizable real-estate portfolio.

Sears lists 79 stores to close, none in Illinois
By Kathy Bergen
Chicago Tribune
December 29, 2011

Sears Holdings Corp. did not include any Illinois stores on its initial list of 79 retail locations to be closed in the wake of weak holiday sales.

The roster, released Thursday, did include three in Indiana. The company is expected to announce up to 41 more closings in coming weeks.

The partial closing list comes one day after Sears Holdings CEO Louis D'Ambrosio talked with Illinois Gov. Pat Quinn.

Quinn "had a good, long conversation" with D'Ambrosio, said Brooke Anderson, a spokeswoman for the governor. "We're pleased with today's outcome."

She declined further comment.

D'Ambrosio updated Quinn on the company's store closing plans, said Sears Holdings spokesman Chris Brathwaite, who declined to elaborate. "The content is really between them," he said, adding that D'Ambrosio was unavailable for comment.

What remains unknown is whether Quinn secured any assurances related to the company's 160 stores in the state, including Kmarts, Sears stores and specialty shops.

Some Illinois officials had been rattled earlier this week when the company revealed that it would close stores. That announcement came less than two weeks after the discount retailer received state tax breaks worth $150 million in exchange for a commitment to keep its headquarters in Hoffman Estates.

The legislative package also extended a special taxing district for the company, which could lower its local property tax bill for another 15 years, saving it an estimated $125 million.

Together, the state and local breaks could provide $275 million in relief to the company.

This is the second package for Sears, which won nearly $250 million in incentives about 20 years ago to stay in Illinois.

The company made the announcement of store closings Tuesday.

"While our past practice has been to keep marginally performing stores open while we worked to improve their performance, we no longer believe that to be the appropriate action in this environment," the company said in a press release Tuesday morning.

The list is available on Sears' website.

Sears, Kmart won't close Illinois stores
By
ABC News
December 29, 2011

(HOFFMAN ESTATES, Ill.) -- None of the 79 Sears and Kmart stores that Sears Holdings Corp. plans to close are in Illinois.

The Hoffman Estates-based retailer announced the specific stores it would close on Thursday. It said earlier this week that it would close up to 120 stores nationally after poor holiday sales. The retailer had reached an agreement with Illinois officials to keep its headquarters in Illinois. Gov. Pat Quinn had said the store closings don't affect that agreement.

Quinn signed legislation guaranteeing the company $15 million in tax breaks during the next decade. The company had threatened to move its headquarters from the state before securing the tax incentives.

The tax breaks depend on the company's ability to maintain 4,250 jobs at the Sears headquarters in Hoffman Estates.

S&P Puts Sears on Watch for Downgrade After Poor Sales Report
By Joan E. Solsman
Wall Street Journal
December 29, 2011

Standard & Poor's Ratings Services said it was reviewing Sears Holdings Corp.'s credit rating for a possible downgrade deeper into junk territory Wednesday, a day after the retailer reported sales continued to slump during the key holiday season.

S&P said its move was driven by the company's disclosure that sales and margins continue to be pressured by poor performance in consumer electronics, home appliances and apparel, and that quarter-to-date performance has been significantly below expectations. The firm said it expects credit conditions will deteriorate in the near-term as a result. The firm also indicated it was unimpressed by Sears's plan to close between 100 and 120 total Kmart and namesake stores in a bid to shore up capital for other operational investments. S&P said the closures "may do little to help its poor performance."

"We believe that one of the primary issues is that the company has underinvested in its stores base, especially when compared with its peers," S&P said. Other critics have pointed to store underinvestment as one root of Sears's problems.

Sears representatives were unavailable for comment following the S&P news Wednesday, but a company spokesman said Tuesday that Sears has "ample financial flexibility."

He noted that the company has $3.5 billion in liquidity, including $700 million in cash and $2.9 billion in credit under existing borrowing arrangements, as well as $8 billion to $10 billion in inventory and a sizable real-estate portfolio.

The company, controlled by billionaire hedge-fund investor Edward Lampert, has been hurt by dropping same-store sales for years. Tuesday, Sears said same-store sales are down 5.2% so far in the current quarter.

In its most recent quarterly results, its loss widened because of weakness in Canadian stores, meager electronics sales and downbeat clothing and pharmaceutical sales at its Kmart unit.

S&P currently rates Sears at single-B, five notches below investment-grade status.

Shares were down three cents at $33.30 after-hours. The stock has lost 55% of its value so far this year.

Sears facing tough new year: Up to 120 Kmart and Sears stores to be shuttered nationwide
By Becky Yerak
Chicago Tribune
December 28, 2011

Kim Ray remembers shopping at Sears as a child, where her parents bought her countless dresses. But she hasn't passed that tradition along to her two daughters, who favor stores like Abercrombie & Fitch or American Apparel.

"We go there to buy appliances, but how often do you need to buy appliances?" she said, while waiting outside the Sears store in Schaumburg's Woodfield Mall.

During the all-important holiday shopping season, it appears that Sears struggled to connect with other shoppers as well. The Hoffman Estates-based chain said Tuesday that it planned to close more than 100 Sears and Kmart stores because of soft sales, but it also had a more troubling confession: It admitted that it did a poor job of managing its business during the most important period of the year for merchants.

Even though Sears has spent decades trying to find the right formula to stem declining sales, Tuesday's announcement shows that answers continue to elude Edward Lampert, the Connecticut hedge fund manager who took control of the company, one of the Chicago area's most high-profile businesses, in 2005.

In a memo Tuesday to workers, Sears Holdings Chief Executive Lou D'Ambrosio said the retailer, which recently received tax breaks from the state of Illinois to keep its headquarters here, had "not generated the results we were seeking during the holiday."

In part, Sears blamed the tough economy, even as the National Retail Federation said it expects holiday sales overall to rise 3.8 percent this year, to a record $469.1 billion. But Sears, which over the years has been losing sales to fast-growing retailers such as Wal-Mart and Target, conceded that some of its problems this season were self-inflicted.

"We also did not execute with the consistency or speed necessary in areas we controlled," D'Ambrosio told workers.

That means Sears must cut expenses, he said, including the closing of 100 to 120 "marginally performing" Kmart and Sears stores that haven't yet been identified. Sears didn't return a call inquiring about the fate of its flagship store on State Street in downtown Chicago.

The chain, which has 4,000 stores in the United States and Canada, paid dearly Tuesday after its missteps and its weak holiday performance came to light, with shares closing down 27 percent, at $33.38. Investors are betting that more bad news will be revealed when Sears discloses fourth-quarter results Feb. 23.

Among the 500 companies that make up the Standard & Poor's 500, Sears' shares are the sixth-worst performer year to date, down 55 percent. That's only slightly better than Bank of America, whose consideration of a $5 monthly debit fee sparked a wave of anti-bank sentiment, and movie-rental firm Netflix, whose revamped pricing policies alienated scores of customers.

Sears also warned investors Tuesday that profits have plummeted. Fourth-quarter operating income will be less than half of the $933 million generated in the same period a year ago, it said. Meanwhile, sales at Kmart and U.S. Sears stores open at least a year, a key measure of retailers' health, fell 4.4 and 6 percent, respectively, for the eight-week period ending Dec. 25. Sears and Kmart saw declines in consumer electronics, with Sears also being hurt by lower sales in appliances and Kmart by lower apparel sales and layaway. Bright spots included Kmart's groceries and, at Sears, the Lands' End line of sporty, casual clothing.

Under Lampert, the company, once one of the most successful U.S. retailers with a history going back to 1886, has let stores deteriorate, said analysts, who also faulted poor locations and ho-hum merchandise for its ongoing problems. Sears also appeared to stumble early in the holiday season, as it opened its Sears, Roebuck and Co. stores at 4 a.m. on Black Friday, the day after Thanksgiving. But rivals, including Best Buy Co., Wal-Mart Stores Inc. and Toys R Us, opened as early as Thanksgiving night.

"When you have an environment where there's not much growth, the winners take from the losers," said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a New York City-based retail consulting and investment banking firm.

Sears has been a laggard in investing in its stores and its service, he said. "So if your pricing isn't particularly competitive, and you're in a tough environment, what do you think is going to happen?" Davidowitz said.

In a letter to shareholders in February, Lampert said Sears invested more than $400 million in capital expenditures in 2010, including "significant investments in stores in important markets."

Sears also invested slightly less than $400 million in Sears Holdings share repurchases in 2010, an action that stockholders typically favor.

But Sears' stock buybacks mean little to consumers who want better service and assortments and more competitive pricing, Davidowitz said.

"Consumers can't see stock buybacks," he said, explaining why increasing numbers of consumers are rejecting Sears as a place to shop. "They don't know what a stock buyback is." Still, while Sears has made strategic mistakes, anyone suggesting that the quarterly results and the closing of 100 stores are a death knell for Sears are mistaken, Davidowitz said. "This is a company with 4,000 stores that has cash flow and some of best real estate in America," he said.

Sears and Kmart also have a core of devoted shoppers, like Talmadge Epling, of Cicero, who said he can find everything he needs at Sears in one stop.

"I buy clothing, tools and appliances here," Epling said. "They've got everything."

Epling said he's also had a good experience with customer service.

"Sears backs its stuff up," he said. "I've had no problems with returns or exchanges."

Another shopper voiced her appreciation of Kmart's prices.

Barbara Fahey, 72, a retired secretary at Reavis High School in Burbank, said she buys "everything" at a Kmart store on Bell Road in Homer Glen.

"I buy a lot of clothing here; I love their shoes," said Fahey. "I'm a comparison shopper and I'll wait and see if I can find a better price here."

As Sears shopper Siri Siphengphone browsed through a rack of gray slacks in the Woodfield store Tuesday, she said she buys many of the clothes she uses for weddings and parties there.

She said she wishes there was more consistency across Sears stores. The Sears near her home in Rockford doesn't have the same selection, so she reserves her purchases of shirts, pants and dresses for her visits to the Sears in Schaumburg.

She also thinks the company could be helped by more effective marketing and more sales.

And most of all?

"More selection."

Becky Yerak is a Tribune reporter, and Erin Chan Ding is a freelance reporter. Tribune reporters Bridget Doyle, Jeff Vorva and John Byrne contributed, along with Tribune news services.

Sears, Kmart to close up to 120 stores
By By Laura Petrecca
USA Today
December 28, 2011

Sears Holdings was walloped by Wall Street and Main Street on Tuesday, following news that it would close 100 to 120 of its Sears and Kmart stores in a bid to shore up finances.

Its stock tumbled 27% to $33.38. It's off 83% from an April 2007 high of $195.18. Critical customers responded to the announcement by griping about messy stores and rude associates on online forums. A report issued Tuesday by Credit Suisse analyst Gary Balter said the company "effectively ask(s) customers to pay for a poorer shopping environment than available at competitors and online."

New sales data show that Sears Holdings stumbled during the all-important holiday shopping period. Comparable-store sales were down 4.4% for Kmart and 6% for Sears for the eight-week period ended on Christmas Day, the company said.

"We can do better than this. We will do better than this," Sears Holding CEO Lou D'Ambrosio said in an internal memo.

In addition to shuttering U.S. stores, the company plans to reduce fixed costs, improve inventory management and have more targeted pricing and promotions.

The iconic Sears and Kmart brands have been under the Sears Holdings umbrella since a 2005 merger. Sears Holdings Chairman Edward Lampert, a well-known financier who orchestrated that union, has taken much public heat about the combined companies' financial troubles.

Columbia Business School professor Mark Cohen— who was CEO of Sears Canada until 2004 — is critical of company management, as well as the pricing strategy and merchandise selection. "There is no retail turnaround that is possible," he says.

Yet, other industry observers aren't ready to count these storied retailers out.

Morningstar analyst Paul Swinand notes that Sears Holdings has well-known brands such as Craftsman tools and Kenmore appliances, and that its online business is strong.

Closing poor-performing stores will make the company "leaner and meaner," says Marshal Cohen, chief industry analyst at retail tracker the NPD Group. "They're getting rid of excess baggage," he says. "This is about preparing for the future. ... They are still going to be a big retailer. This is just a dent."

Sears on the Ropes?: Retailer will close 100-plus stores after lousy holiday sales; stock sinks 27%
By Sandra Guy
Chicago Sun-Times
December 28, 2011

Sears Holdings Corp. announced Tuesday that disastrous holiday sales will force it to close 100 to 120 Sears and Kmart stores to raise cash — raising new concerns about the Hoffman Estates company’s long-term survival.

Investors reacted strongly against the news, sending the stock plunging 27 percent to $33.38 a share.

The store closings are the latest and most visible in a long series of moves to try to fix a 125-year-old retailer that has struggled with falling sales and shabby stores.

Sears’ latest financial results “point to deepening problems at this struggling chain and renew worries about Sears’ survivability,” Credit Suisse analyst Gary Balter wrote in a note to investors Tuesday.

Revenue at stores open at least a year fell 5.2 percent to date for the quarter at both Sears and Kmart, the company said. That includes the critical holiday shopping period, when an industry forecast predicts retail sales will rise 3.8 percent this year over last.

Sears Holdings predicts fourth-quarter adjusted earnings will be less than half the $933 million it reported for the same quarter last year. It said the store closings will generate $140 million to $170 million in cash from inventory sales, and more cash from the sale or sublease of real estate.

Sears Holdings has watched its cash and short-term investments plummet by nearly half since Jan. 31, from about $1.3 billion to about $700 million.

The company has not said which of its 3,560 U.S. stores it will close.

D’Ambrosio, the company’s first full-time CEO in three years, acknowledged in an internal memo to employees that criticism over Sears Holdings‚ performance was likely to come, but that the company was prepared for the days ahead.

“We will bounce back and become stronger than ever,” he said.

But Balter said Sears’ weakening performance may lead its vendors to start to worry about their exposure.

“The moves announced by Sears point to desperation, with it closing about 6 percent of its big-box stores and reducing inventory,” Balter wrote in his note. “While Sears pointed to room on its ‘bank’ line, it is surprising to see borrowings at one of the peak cash-flow times for a retailer, before some credit-card receipts but also before payments to suppliers for Christmas goods.”

Andrew Jassin, co-founder at retail management consultancy Jassin Consulting Group, said his fashion supplier clients that sell to Sears aren’t limiting orders, but they’re watching to see what steps the company will take next.

“People are generally questioning the survivability long-term,” Jassin said.

Sears spokesman Chris Brathwaite said that “while our operating performance has not met our expectations, we have significant assets,” including inventory, real estate and valuable proprietary brands such as Kenmore and Craftsman.

The announcement came just two weeks after lawmakers agreed to a $15 million break on Sears’ state taxes over the next decade, as well as a 15-year extension of a special taxing district that reduces Sears’ local property tax payment.

Gov. Pat Quinn called Sears’ store closings regrettable but said, “We expect the headquarters to stay here and the jobs to be here, that’s what the agreement is all about.”

Asked about the announcement’s timing, Brathwaite said in an email: “We typically publish a release after the holidays as the fourth quarter is the critical performance period for our company.... We’re focused on improving our business and continuing to be a strong, contributing member of the Illinois business community.”

State Sen. Ira Silverstein (D-Chicago) said he felt “betrayed.”

“It wasn’t a good Christmas or Hanukkah gift for the people of the state of Illinois,” Silverstein said.

The weaker-than-expected results reflect what analysts say is a deteriorating outlook for the retailer.

Retail experts have complained for years, especially since hedge-fund billionaire Edward S. Lampert, Sears’ chairman, merged Sears and Kmart in 2005, that Sears has failed to invest in its stores and its customer service.

“There’s no reason to go to Sears,” said New York-based independent retail analyst Brian Sozzi. “It offers a depressing shopping experience and uncompetitive prices.”

Another expert, Jack Hendler, president of Net Worth Solutions, said he believes “it will be necessary” for Sears to sell its most valuable brands — Kenmore, Craftsman, DieHard and Lands‚ End — after many years of speculation about such a move. Sears Holdings has already started licensing certain items from the DieHard and Craftsman lines to rivals‚ stores.

“Each of the brands has value unto itself,” Hendler said.

Hendler speculated that South Korean appliance companies, notably LG Electronics, “would hit a home run” with a Kenmore acquisition.

Sears Holdings appeared to stumble early in the holiday season, as it opened its Sears, Roebuck and Co. stores at 4 a.m. on Black Friday, the day after Thanksgiving. Rivals including Best Buy Co., Wal-Mart Stores Inc. and Toys R Us opened as early as Thanksgiving night. Sears stores had opened on Thanksgiving Day in 2010. Kmart has been opening on Thanksgiving for years.

A hint that trouble might be brewing came in mid-December when Sears Holdings unexpectedly announced that 260 of its Sears, Roebuck and Co. locations would stay open until midnight through Dec. 23.

Sears said it will no longer prop up “marginally performing” stores in hopes of improving their performance and will now concentrate on cash-generating stores.

“These actions will better enable us to focus our investments on serving our customers,” D‚Ambrosio said.

Contributing: Staff Reporter Lisa Donovan and AP

Holiday Sales Woes Cast Cloud Over Sears
By Miguel Bustillo and Ann Zimmerman
Wall Street Journal
December 28, 2011

Edward S. Lampert's plan to build a reinvigorated retail giant from the crumbling ruins of Sears and Kmart is turning into a mess.

Sears Holdings Corp. said Tuesday that it will close as many as 120 stores and record up to $2.4 billion in quarterly charges after another bad holiday showing, raising fresh doubts among analysts about the future of the middle-market retailer. Sales at stores open at least 12 months have slid every year since the company was created by the well-known hedge-fund investor in 2005. But its deteriorating condition has accelerated this year—it posted a $421 million loss last quarter—and it said Tuesday that same-store sales for the eight weeks ending Christmas Day dropped 5.2% compared to the year before.

The 49-year-old Mr. Lampert has struggled to retain qualified executives: Under his watch, the company c-suite has become a revolving door. Stores have been criticized for showing their age.

Its once highflying shares—which peaked at $191.93 in April 2007 amid speculation that Sears would be an investment vehicle for Mr. Lampert akin to Warren Buffett's Berkshire Hathaway Inc.—plunged 27% to $33.38 Tuesday. They have lost more than half their value this year and are down 73% since the merger closed in March 2005. The market capitalization of Sears by the end of Tuesday had dropped to $3.6 billion.

That is far from what Mr. Lampert envisioned when he launched an $11 billion purchase of venerable Sears, using money from Kmart, a company he had steered out of bankruptcy earlier in the decade. He predicted the merger would create a "powerful leader in the retail industry."

Known for being analytical, Mr. Lampert has been a hands-on manager at the retailer he built, often managing its day-to-day affairs from the Greenwich, Conn., offices of his hedge fund, ESL Investments Inc., according to former company executives.

Though he has remained far from public view, giving no interviews about Sears in recent years other than group chats with the press at his annual shareholder meeting and annual letters to investors, he has expressed a maverick's disregard for retail traditions.

He dismissed same-store sales and other traditional retail metrics as irrelevant, promising to run the company as an investor would, with a focus on measures such as earnings before interest, taxes and depreciation and spending on high-growth areas such as online retailing.

But from the outset, Mr. Lampert's strategies for reviving the fading Sears and Kmart brands confounded retail experts, who especially question his decision to scrimp on renovating aging stores.

While store chains typically spend $6 to $8 per square foot on annual maintenance according to retail experts, Sears is spending a fraction of that amount—about $1.90, according to investor research firm International Strategy & Investment Group.

Mr. Lampert's bare-bones dιcor frustrated some of his business partners, notably Martha Stewart Omniliving Media Inc., whose relationship with Kmart ended acrimoniously in 2009.

"Have you been to a Kmart lately?" Ms. Stewart said in a CNBC interview around that time. "It's not the nicest place to shop."

Sears Holdings said it expects to close roughly 100 stores in a bid to revitalize its business and reduce expenses. Instead, Mr. Lampert and his board used company cash to finance a flurry of stock buybacks in recent years—$678 million in 2008, $424 million in 2009 and $394 million in 2010. The purchases had the effect of increasing Mr. Lampert's control of the company by reducing shares outstanding, while also punishing short sellers.

Sears recently put buybacks on hold.

Mr. Lampert, whose hedge fund controls roughly 60% of Sears shares and who serves as company chairman, didn't respond to requests for comment.

Sears Chief Executive Lou D'Ambrosio, a former tech executive who had no retail experience prior to assuming the job in February, said the company remained optimistic that it could reverse its fortunes with an increased focus on melding online and store operations to compete against the likes of Amazon.com Inc.

"We were not pleased with the results we issued, but in no way does that have us question the clarity of where we are taking the company," Mr. D'Ambrosio said in an interview Tuesday.

He noted in a memo to company employees Tuesday that there were some positive signs, including sales at Kmart's grocery division and the company's Lands' End business.

It has also gotten some recognition for improvements in its website, where sales were up 20% in the last quarter.

Though Sears and Kmart have been in decline for decades, Sears Holdings remains one of the largest retail chains in the U.S., with annual revenue last year of $43.3 billion. It operates around 4,000 locations in the U.S. and Canada and employs roughly 250,000 people. The retailer continues to offer iconic brands, namely Craftsman tools, Die Hard batteries and Kenmore appliances. It also has tried to refresh its fashion business with a line of Kardashian clothes.

The anticipated closures represent about 5% of its roughly 2,200 fullsize stores. It said it would detail the locations being shuttered at a future date.

The sizable sales decline at Sears took place amid what is widely expected to be a solid if unspectacular holiday shopping season overall, with 3.8% overall sales growth according to the National Retail Federation. Hyperaggressive competition may hurt profit margins at many chain stores.

At Kmart, a 4.4% drop in recent sales was blamed in part on fewer layaway purchases, as rival Wal-Mart Stores Inc. revived that pay-over-time service, stealing away strapped shoppers. A 6% sales drop at Sears stores reflected weaker consumer electronics sales, the company said.

"What is most surprising is that its cash balance is now negative—at a time when you get your maximum cash and you pay all your suppliers," said Credit Suisse retail analyst Gary Balter.

Mr. Balter pointed out that Mr. Lampert's favored measure, earnings before interest, taxes and depreciation, has fallen from $3.6 billion four years ago to $1.45 billion last year, and the company now projects them to drop to $400 million this year. "You don't deteriorate like that and survive," he said.

A Sears spokesman said the company has $3.5 billion in liquidity, including $700 million in cash and $2.9 billion in credit under existing borrowing arrangements, as well as $8 billion to $10 billion in inventory and a sizable real-estate portfolio.

"This provides our company with ample financial flexibility," the spokesman said.

Management instability has added to Sears's woes. It has had four chief financial officers in the past six years. For three years, the chief executive position was filled by an interim leader, W. Bruce Johnson, before Mr. Lampert finally settled on Mr. D'Ambrosio. The e-commerce chief, Imran Jooma, last month was given the additional responsibility of overseeing marketing as chief marketing officer David Friedman left the company.

"It's really hard to make an imprint on holiday sales without a chief marketing officer,'' said a former Sears executive.

Sears will likely look to get out from underperforming stores where it is leasing space but retain the properties it owns, said Greg Maloney, president of the U.S. retailing at real-estate firm Jones Lang LaSalle Inc., which manages about 200 shopping centers with roughly 50 Sears stores.

That may be a mixed blessing for some mall landlords.

"The good news from a landlord perspective, even though you never want to see closure of a big retailer, is that it gives us an opportunity to find something that can perform better in that space and turn it into something more productive," Mr. Maloney said.

Sears' struggles include a failure to remain relevant in the clothing business, where rivals such as Kohl's Corp. have prospered by catering to the working-class demographic that once made Sears the largest retailer in the world.

Those shifts were evident at the Barton Creek Square mall in Austin, Texas, on Tuesday, where customer traffic at the Sears store was light, as a nearby J.C. Penney was livelier.

"I like to shop at J.C. Penney for casual clothes," said James Dean, a 38-year-old, out-of-work construction worker visiting from Washougal, Wash. "I might shop at a Sears for guy stuff, like tools, but not clothes."

—Karen Talley, Joann S. Lublin, Nathan Koppel and Dana Mattioli contributed to this article.

'Mismanaged' Sears Loses Customers to Macy's
By Cotten Timberlake and Miles Weiss
Bloomberg
December 28, 2011

Jay Margolis, a Bloomberg Television contributing editor and former retail executive, talks about the performance of Sears Holdings Corp. and the outlook for the retailers. Margolis speaks with Betty Liu and Hitha Prabhakar on Bloomberg Television's "In the Loop." (Source: Bloomberg)

When Kmart acquired Sears (SHLD) in 2005, Chairman Edward Lampert said the new company would have the geographic reach and scale to compete with Wal-Mart Stores Inc.

The billionaire hedge fund manager has since presided over 18 consecutive quarters of declining sales. He’s on his fourth chief executive. While Sears Holdings Corp. shares soared in the first few months after the merger, they’ve fallen 55 percent in 2011 alone.

Sears “has been a mismanaged asset,” Gregory Melich, an analyst at International Strategy & Investment, said in a Bloomberg Television interview yesterday. “A lot of traditional department stores have reinvigorated themselves through merchandising, through changing their locations; you think of Macy’s. You haven’t seen that from Sears.”

Yesterday, the largest U.S. department store chain reported that it would close as many as 120 locations after same-store sales fell 5.2 percent in the eight weeks ended Dec. 25. By contrast, such sales in the department-store sector will climb an estimated 4 percent in November and December, compared with the same period a year ago, according to the International Council of Shopping Centers, a New York-based trade group.

The shares plunged, falling 27 percent to $33.38 yesterday in New York, the largest drop since April 29, 2003.

Since becoming chairman in 2005, Lampert, 49, has reduced costs, closing 171 large U.S. stores and cutting the headcount by about 12 percent. Sears employed 312,000 people as of January, down from 355,000 in June 2006, according to data compiled by Bloomberg. Meanwhile, his hedge funds have made money on the original investment.

Ceding Customers

He has tried one strategy after another. An initial push involved converting 400 Kmart stores to a format called Sears Essentials with grocery and convenience items. Sears Grand, another concept, hewed to a superstore model. All have failed to reverse falling sales and ceded customers to the likes of Wal- Mart (WMT) and Macy’s.

“At Sears, a lot of what we sell is tied to housing,” Chris Brathwaite, a Sears Holdings spokesman, said in a telephone interview yesterday. “The recession has had an impact on our company, like most retailers.” The closings will allow the Hoffman Estates, Illinois-based company to focus on “better-performing stores,” he said.

Steve Lipin, a spokesman for Lampert, didn’t return a call seeking comment.

Buffett Inspiration

Lampert founded his hedge fund ESL Partners in 1989, taking inspiration for his approach to finding undervalued stocks from the shareholder letters of Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc. Lampert has specialized in buying stakes in beaten-down retailers, some of which he helped turn around by either collaborating with or shaking up management.

Lampert’s hedge funds bought Kmart Corp. bonds and bank loans and then swapped the debt for stock in a bankruptcy reorganization in 2003. At the same time, Lampert’s funds were also building a 15 percent stake in Sears, Roebuck & Co. by purchasing shares on the open market.

When Kmart acquired Sears in 2005 to form Sears Holdings Corp., Lampert and his funds initially held a 39.4 percent stake, comprised of about 64.6 million shares. Based on what the funds paid for their Kmart stake, as well as the average trading price during the quarters that they bought Sears stock, the funds spent an estimated $1 billion on the investment.

Profitable Investment

Even after this year’s slump in the stock, Sears has been a profitable investment for Lampert. His hedge funds paid about $16 a share for the stake in the chain, based on regulatory filings and Bloomberg calculations.

When Lampert announced his plan to buy the department store chain in November 2004, he said Sears’s service and products were “every bit as good as any of the competition.”

Both Sears and Kmart were struggling at the time. Sears’s annual sales were stuck at $41 billion in each of the four years ending in 2003. Kmart had emerged from bankruptcy after failing to compete with Wal-Mart’s lower prices.

Now Sears is turning upside down a strategy that has prevailed for most of its 118-year history. It’s accelerating franchising efforts -- including Sears Hometown and Sears Auto stores. It’s leasing space to such retailers as Forever 21. And it’s allowing other retailers to sell the popular DieHard, Craftsman and Kenmore products and licensing those brands.

Capital Starved

In the meantime, the larger stores have been starved of capital investment and customers have defected, according to Gary Balter, an analyst with Credit Suisse Group AG in New York.

Sears is spending less than a quarter of the $8 a square foot that retailers typically invest to maintain stores, according to International Strategy & Investment Group. In an August report, the New York-based firm put Sears and Kmart at the bottom of the list of a dozen retailers ranked by sales per square foot and operating profitability.

Earnings before interest, taxes, depreciation and amortization in the fourth quarter will be less than half of last year’s $933 million, Sears said yesterday.

Lampert is a self-styled merchant who has found it difficult to cede managerial control to experienced retail managers, said Jay Margolis, a former executive with Limited Brands Inc. and Reebok International Ltd.

“Sears has just lagged way behind,” Margolis said yesterday on Bloomberg Television. “There is no energy there. We have not seen the results. We have not seen the change in the product. He has found it difficult to let go.”

Dwindling Cash

Cash had dwindled to $624 million at the end of the third quarter, compared with $790 million a year earlier.

“If the vendors are comfortable shipping to them, they could go on for years,” Balter said. “Their balance sheet is fine. But it’s usually vendors who decide and if they pull the plug, then the company has no choice and they have to file” for bankruptcy protection.

Closing the Kmart and Sears stores will generate $140 million to $170 million of cash from inventory sales and leasing or sales of the locations, Sears said yesterday. The chain plans to reduce fixed costs by $100 million to $200 million.

The company will incur non-cash expenses of as much as $2.4 billion in the fourth quarter to write down the value of potential tax benefits and goodwill.

Sears didn’t specify which stores will be closed. In his annual investor letters, Lampert has identified the smaller Hometown and Sears Outlet stores as sources of growth and profit. The company opened 122 of those “specialty” stores last year, he said in his 2011 letter, and now has 945 -- less than a quarter of the total.

Web Operations

New CEO Lou D’Ambrosio, hired in February, is ramping up Web operations. Online sales via Sears’s various websites grew 30 percent year-over-year in the second quarter of this year, and 22 percent in the first quarter. To jog that growth, Sears has given salesmen in 450 of its stores more than 5,000 iPads and 11,000 iPod Touches to help them track inventory and customer orders, and added free wireless access.

“If they can just create enough cash flow to get through the downturn, at some point there is going to be a huge uptick in appliance sales,” Paul Swinand, an analyst with Morningstar Inc. in Chicago, said in a telephone interview. “They just have to make sure that when that happens they are not cut off at the knees, and that it doesn’t all go to Home Depot and Best Buy.”

Sears is to report fourth-quarter earnings on Feb. 23.

“The market is assuming there’s more bad news to come,” Swinand said.

Nothing to Fear But Sears Itself
By Justin Lahart
Dow Jones Newswire
December 27, 2011

Running a retail chain is a lot like running a corner restaurant: A lot of people think they can do it well, but few can.

It's a lesson that, if they didn't already know, shareholders of Sears Holdings Corp. learned Tuesday. The company's announcement that sales in the eight weeks ended Christmas were down sharply from a year earlier sent its shares down 25%.

In response to the sales miss, the company said it will close 100 to 120 of its Sears and Kmart stores, will focus on "better inventory management and more targeted pricing and promotion," and will cut costs.

Sears needs an experienced retail hand to run it.

That simply isn't enough. Given the depth of the company's problems, Eddie Lampert—the hedge fund billionaire who engineered Sears' merger with Kmart in 2005 and who controls the company—needs to rethink how the company should be run and then get out of the way.

For the fiscal year ending next month, analysts are now looking for Sears to book about $42 billion in sales. That is down from $53 billion five years earlier. True, there was a nasty recession to deal with, but over the same period a benchmark measure of department-store-like sales has risen by about 5%.

During that time, Sears has announced any number of initiatives to get things going—focusing on small store formats, rebranding some stores as "multicultural"—but what it hasn't done is invest in its business. While retailers generally spend $6 to $8 per square foot a year on updating their stores, Sear's spends only about $1.50 to $2, notes ISI analyst Greg Melich. That is not even enough to keep up with depreciation and amortization.

Amazingly, Sear's has spent $5.2 billion over the past five years buying back its stock, more than twice as much as on capital investment. That strategy, of buying back stock and keeping capital expenditures low, worked well for Mr. Lampert at Autozone Inc. He began amassing shares of that company in the late 1990s, and engineered a management shakeup in 2001.

But selling car parts and accessories is not the same as running a retailer. In general retail, customers put a higher premium on service, the competition from the likes of Lowe's Cos. and Target Inc. is intense, and an inventory miss doesn't mean having an excess of mufflers that will eventually sell but an excess of ear muffs that will never sell.

Clearly, Sears needs to invest in its operations. But it also needs an experienced retail hand to run it—without interference from Mr. Lampert. As it is now, Mr. Lampert's cooking isn't fit for eating.

Sears to close 100 to 120 Kmart, Sears stores
Chicago Tribune
December 27, 2011

Just two weeks after Gov. Pat Quinn signed tax-break legislation aimed at keeping Hoffman Estates-based Sears Holdings Corp. from leaving Illinois, the retailer announced it would shut down between 100 and 120 Sears and Kmart stores.

Sears' move comes after terrible holiday sales during the most crucial time of the year for retailers.

Sears said Tuesday that the store closings will generate $140 to $170 million in cash in inventory sales. The retailer anticipates additional proceeds from the sale or sublease of real estate holdings.

The retailer says that same-store revenue fell 5.2 percent to date for the quarter at both Sears and Kmart. Kmart's declining sales were blamed on diminished layaways and a drop in clothing and consumer electronics sales. Sears' cited lackluster consumer electronics and home appliance sales.

The tax break bill that Quinn signed earlier this month gives Sears tax credits worth $15 million a year for 10 years, which it can use against withheld employee income taxes. The deal also extends a special taxing district, reducing the company's local property tax bill for another 15 years.

"We look forward to remaining in Illinois and building on our long and rich history here," said Chris Brathwaite, a spokesman for Sears Holdings, after the bill was signed.

Sears employs about 6,100 people at its headquarters site. The retailer has more than 4,000 stores in the U.S. and Canada.

With the Associated Press.

Sears Holdings Corp. to close 100 to 120 Kmart, Sears stores
Associated Press
Chicago Sun-Times
December 27, 2011

Sears Holdings Corp. plans to close between 100 and 120 Sears and Kmart stores after poor sales during the holidays, the most crucial time of year for retailers.

The closings are the latest and most visible in a long series of moves to try to fix a retailer that has struggled with falling sales and shabby stores.

In an internal memo Tuesday to employees, CEO and President Lou D’Ambrosio said that the retailer had not “generated the results we were seeking during the holiday.”

Sears Holdings Corp. said it has yet to determine which stores will close but said it will post on http://www.searsmedia.com when a final list is compiled. Sears would not discuss how many, if any, jobs would be cut.

The company has more than 4,000 stores in the U.S. and Canada. Its stock dropped $8.67, or 18.9 percent, to $37.18 in morning trading. The shares dipped to their lowest point in more than three years at $36.51 during the first few minutes of trading.

The company’s revenue at stores open at least a year fell 5.2 percent to date for the quarter at both Sears and Kmart, the company said Tuesday. That includes the critical holiday shopping period.

Sears Holdings said the declining sales, ongoing pressure on profit margins and rising expenses pulled its adjusted earnings lower. The company predicts fourth-quarter adjusted earnings will be less than half the $933 million it reporter for the same quarter last year.

Sears Holdings also anticipates a non-cash charge of $1.6 billion to $1.8 billion in the quarter to write off the value of carried-over tax deductions it now doesn’t expect to be profitable enough to use.

Sears said it will no longer prop up “marginally performing” stores in hopes of improving their performance and will now concentrate on cash-generating stores.

“These actions will better enable us to focus our investments on serving our customers,” D’Ambrosio said.

The weaker-than-expected performance reflects what analysts say is a deteriorating outlook for the retailer.

The results point to “deepening problems at this struggling chain and renewed worries about Sears survivability,” said Gary Balter, an analyst at Credit Suisse. “The extent of the weakness may be larger than expected but the reasons behind it are not. It begins and some would argue ends with Sears’ reluctance to invest in stores and service.”

Balter also said Sears’ weakening performance may lead its vendors to start to worry about their exposure.

The company has seen rival department stores like Macy’s Inc. and discounters like Target Corp. continue to steal customers. It’s also contending with a stronger Wal-Mart Stores Inc., the world’s largest retailer, which has hammered hard its low-price message and brought back services like layaway, which allows financially stressed shoppers to finance their holiday purchases by paying a little at a time.

The tough economy hasn’t helped, either. Middle-income shoppers, the company’s core customers, have seen their wages fail to keep up with higher costs for household basics like food.

But the big problem, analysts say, is Sears hasn’t invested in remodeling, leaving its stores uninviting.

“There’s no reason to go to Sears,” said New York-based independent retail analyst Brian Sozzi, “It offers a depressing shopping experience and uncompetitive prices.”

Sears Holdings Corp., based in Hoffman Estates, Ill., said that the store closings will generate $140 to $170 million in cash from inventory sales. The retailer expects the sale or sublease of real estate holdings to add more cash.

Sears Holdings appeared to stumble early in the holiday season, as it opened its Sears, Roebuck and Co. stores at 4 a.m. on Black Friday, the day after Thanksgiving. Rivals including Best Buy Co., Wal-Mart Stores Inc. and Toys R Us opened as early as Thanksgiving night. Sears stores had opened on Thanksgiving Day in 2010. Kmart has been opening on Thanksgiving for years.

A hint that trouble might be brewing came in mid-December when Sears Holdings unexpectedly announced that 260 of its Sears, Roebuck and Co. locations would stay open until midnight through Dec. 23.

Kmart’s 4.4 percent decline in revenue at stores open at least a year was blamed on diminished layaways and a drop in clothing and consumer electronics sales. Part of Kmart’s layaway softness likely stemmed from competitive pressure. Wal-Mart had said that its holiday layaway business had been popular. Toys R Us expanded its layaway services to include more items. Kmart’s grocery sales climbed during the period.

Sears cited lackluster consumer electronics and home appliance sales for its 6 percent dropoff. Sears’ clothing sales were flat. Sales of Lands’ End products at Sears stores rose in the mid-single digits.

Sears Holdings said it also plans to lower its fixed costs by $100 million to $200 million and trim its 2012 peak domestic inventory by $300 million from 2011’s $10.2 billion at the third quarter’s end.

D’Ambrosio acknowledged in his internal memo that criticism over Sears Holdings’ performance was likely to come, but that the company was prepared for the days ahead.

“We will bounce back and become stronger than ever,” he said.

Sears, Kmart to shut 100-120 stores: Sears Holdings will close 100 to 120 Sears and Kmart stores after posing a companywide drop in holiday sales
By Chris Isidore
CNN Money.com
December 27, 2011

NEW YORK (CNNMoney) -- Sears Holdings on Tuesday reported a sharp drop in holiday sales compared to a year ago, and said the results will force it to close 100 to 120 Sears and Kmart stores.

The company said the stores to be closed have yet to be identified. The company is the nation's No. 4 broadline retailer with more than 4,000 full-line and specialty retail stores in the United States and Canada.

Sears Holdings said sales at stores open at least a year, a closely watched retail measure known as same-store sales, tumbled 5.2% in the eight weeks ended on Christmas Day. That came from a 4.4% drop in sales at Kmart stores and a 6% slide in sales at domestic Sears stores. "Given our performance and the difficult economic environment, especially for big-ticket items, we intend to implement a series of actions to reduce on-going expenses," said Lou D'Ambrosio, CEO of the company.

Shares of Sears Holdings (SHLD, Fortune 500) plunged $8.29, or nearly 19% to $37.56 in early trading following the announcement. Shares are now down almost 50% year-to-date.

The Sears and Kmart sales results were in contrast to the broader industry. The National Retail Federation forecast before the start of the year that holiday sales would be up 2.3% this year, a target that was helped by record Black Friday sales following Thanksgiving. Final sales figures are not yet available.

But Burt Flickinger III, managing director of Strategic Resource Group, said that while he thinks the final holiday sales gain will be a bit better -- up 2.5% to 2.6% -- that will represent flat to slightly lower profits for retailers when taking into account the higher prices they paid this past year for the goods they are selling, such as clothing.

He said the continued weakness in the economy, which has depressed wages, coupled with the increased competition from online competitors, has made it difficult for brick-and-mortar retailers such as Sears and Kmart.

"There's been a significant shift online because of the sales tax savings," he said. "Consumers see it as instant discount and most online retailers are delivering for free. That puts Sears and other land-based retailers at a significant disadvantage for the foreseeable future."

He said that he believes most of the company's closings will be Kmart stores outside of its home base in the Northeast and Great Lakes region. He said Kmart has been caught in the crossfire of a price war between stronger discount retailers Target (TGT, Fortune 500) and Wal-Mart (WMT, Fortune 500).

Flickinger said that Sears has made some progress in fixing past problems in recent years. He said its Lands End store-within-a-store concept is working well and its customer satisfaction with Sears now rivals top retailers such as Apple (AAPL, Fortune 500) and Amazon (AMZN, Fortune 500).

But even with the improvement, he said some Sears stores could close because of problems in some of the malls they anchor.

"Shopping malls across America have record vacancy rates of 11%," he said. "Shopping mall owners have not done a good job keeping malls up to date and getting the tenants needed to support anchor tenants."

Sears Holdings signaled that additional store closings may lay ahead for poor performing stores.

"While our past practice has been to keep marginally performing stores open while we worked to improve their performance, we no longer believe that to be the appropriate action in this environment," said D'Ambrosio.

Flickinger said additional closings may amount to 5% to 10% of the nearly 4,000 stores it still has open.

The company will also cut its inventory in the stores that will remain open by $300 million as a cost-cutting measure. The company estimates the closings will generate between $140 million to $170 million in cash as the inventory of the closed stores is sold off, and additional cash from the sale or sublease of the real estate.

Sears said it has set a target of another $100 million to $200 million in fixed cost cuts.

The company said due to the weak sales, it expects to take a non-cash charge on certain deferred tax assets of between $1.6 to $1.8 billion.

Wal-Mart's makeover
By Geoff Colvin
Fortune
December 26, 2011

What happened to the smiley face? It's long gone from Wal-Mart marketing after years as the corporate symbol, and its disappearance is part of a much larger story. It's hard to believe, but for decades the world's largest retailer wasn't much of a marketer. It spent little on marketing, and its efforts, epitomized by the grinning circle, could be charitably called down-home and realistically described as amateurish.

Change finally began four years ago when Stephen Quinn was made chief marketing officer of Wal-Mart U.S. He exiled the smiley face to the land of e-mail emoticons and developed a new theme -- "Save money. Live better" -- that became a statement of corporate purpose. Current TV commercials actually include some wit while hammering home the message.

Quinn, 52, is a Canadian who spent 13 years as a marketer at PepsiCo's (PEP, Fortune 500) Frito-Lay division before joining Wal-Mart (WMT, Fortune 500). The company, No. 1 on the Fortune 500 with 2010 sales of $422 billion, increased profits through the recession by adding stores; U.S. same-store sales suffered until recently.

Quinn talked with Fortune's Geoff Colvin about marketing in today's "hourglass economy," how Wal-Mart stores are reversing their decluttering initiative, why the company just launched 3,500 new Facebook pages, and much else. Edited excerpts:

Q: Overall retail sales were up smartly over Thanksgiving weekend. What did Wal-Mart's experience tell you about the state of the U.S. consumer?

A: It really fits with a trend we've been seeing for several years, which is that customers have become incredibly smart about how to save money. All our research is showing that the number of people looking to save money is at an all-time high, at least in our lifetime. What we're seeing on the big shopping weekend around Thanksgiving is just a lot of people in there trying to get deals.

That ties into something you've talked about before, which is that the U.S. has an hourglass economy. What's that concept?

The population is bifurcating. Some people have said we're seeing the middle class being hollowed out a little bit. In the lower half we're seeing real incomes dropping -- that's been well reported. One of the more tragic pieces of that is that at the very bottom we're actually seeing poverty rising in this country. A lot of those customers in the lower half would absolutely fall into our core customers. So it's critically important that we serve those customers very well as they go through a challenging economic time.

A challenge for retailers is that at the other end of the spectrum people are doing relatively well. Unemployment is under control, and those people are even seeing some income growth. A lot of folks in that other half of America are looking for certain products that we've got to carry, but they're still very value-oriented. That's an overall theme -- there is still an ethic of value that may have changed forever, based on this recession.

That's a big marketing issue. You've got to communicate with both ends of the hourglass. How do you do that?

A lot of retailers used to be defined by what they sold. More and more -- and we're certainly an example of this -- retailers are defined by whom they serve and how they serve them. In our case, the people we serve are value-oriented. We've done a lot of segmentation studies and other work, and we've learned that there obviously are people who have to be on a budget, and Wal-Mart plays a critical role in helping them stretch their dollars. But there are also a lot of people who just love to save money, and some of them are actually quite well off, but it's still important to them to save money. With those customers, the key is to have the merchandise they really want to buy. They still want to save money on it, but you've got to have it. That's why, in areas like our general-merchandise area, we're expanding assortments to make sure we can appeal to both groups of customers.

What's an example of expanding the assortment to broaden the appeal?

Several years ago we really reduced our fishing area, and it hurt us. In the past 18 months we've dramatically improved the assortment we have there -- many more price points, a lot more brands have been added -- and then we've really focused on communicating that to customers. And we've seen a real dramatic turnaround in that business. Perhaps in this economy people are looking at more ways to just spend quality time with families. Fishing is a very inexpensive pastime, and we've really benefited from that expanded assortment. We've got numerous examples of this, done or in progress, across the store.

More broadly, Wal-Mart reduced the number of items it carried store-wide a few years ago -- the decluttering initiative -- because it appeared that's what customers wanted. Now you're bringing the items back, thousands of them. What's the lesson to take out of that experience?

The thing that's great about retail is that if you get the assortment right and the value right, customers do respond. In our case, people are in our stores, and it's really up to us to make sure we have the right stuff for them. What we've learned through this whole recession is just how incredibly resourceful and smart our customers are. Certainly we made some mistakes in assortments where we overly reduced them, more from an efficiency standpoint, and it ended up causing customers to shop elsewhere. Fortunately for us, there is some forgiveness there, because as we've put some of those things back -- fabrics were a very well publicized example of an area we really reduced -- the customer is responding dramatically.

It's clear that value has to be the heart of your messaging. What have you found really works?

Our messaging really falls into two categories. My boss, Bill Simon, CEO of the business in the U.S., talks about how we have the broadest assortment, at the lowest prices. From an advertising and communications standpoint, my job is to make sure that, first and foremost, people have trust and confidence that we have the lowest prices, and that we have the assortments they're looking for. It's challenging because we have to communicate things like, when we put this fishing assortment back, that in fact it is back, that we've got the brands you're looking for and you can trust us to have the right assortment. A lot of shopping is very habitual for customers, so if they stop thinking of us as a place for fishing, as an example, they may not even look over there anymore.

What's the meaning of the Wal-Mart brand, and what have you learned about where it works and where it doesn't work?

Most of my background before I came to Wal-Mart was in building brands, and one of the things I help bring to Wal-Mart is thinking of the company not just as a company but also as a brand. We relaunched the brand four years ago based on something Sam Walton said, that if we work together, we'll give the world an opportunity to see what it's like to save and to have a better life. In the marketing department we worked on taking those words and crafting them into our purpose, which is to save people money so they can live better, and you see that in our advertising save money, live better.

Fundamentally, this is a brand that has a purpose, and our associates are very committed to making sure we can save people money so they can live better, and that's the main vector of marketing communication we have. More important, it's become everybody's job to own that, and that's one of the big differences between a retailer and a packaged-goods business like I came from, where you're managing a brand image. As a retailer you're interacting with millions of customers every day, and how you interact with them becomes your brand to the people you serve. So the brand has been critical to getting everybody on the same page about who we are and what we do, and then my job is to communicate that to customers.

Same-store sales in the U.S. were down for nine quarters in a row, but in the most recent quarter they went up. While the economy is better than it was, it still isn't great. What's the explanation?

What I'm most proud of in the last couple of years is that it has not been an external change that has helped us move into positive territory in comp-store sales. Our leader, Bill Simon, and Mike Duke, our CEO, really drove us to get back to the core basics of what Wal-Mart stands for and the families we serve. We had to take a look at assortments, which we've already talked about; the reason to come to Wal-Mart for some people had been removed. And then, importantly, we did not watch our costs as closely as we should have, and we're back into making sure we lower our costs so we can lower our prices while at the same time serving shareholders. Everything goes well if you get that promise right at its core.

You have more customers than any other retailer on earth. How do you sense what they want and need?

A couple of ways. First is something unique to retailers, in that we have hundreds of merchants in our merchandising area, and each of them tries to think of their business as their own business, so they're constantly trying things. That's why you'll hear people talk about the data that Wal-Mart has. It's really data about sales, and as we are trying things, we're seeing the customer likes this, they want more of that; they really don't like this other thing, and we should probably do away with that. The insights-driving machine at the core of retail is the ability to look at our data and bring some kind of meaning to that.

The second way is more traditional, and that is market research. We've amassed an enormous amount of data. Like almost everybody, we're trying to figure out how to get all that data into the same place so we can see how these data interact with each other. And that includes some of the newer areas like social media, where we've got almost 11 million Facebook fans, and they're constantly giving us feedback because that's the very nature of that medium.

How a retailer uses social media has become a huge issue. When people go to an e-commerce site from a Facebook page, they're twice as likely to buy something than if they go there some other way. Is there a way to use this to build sales?

Absolutely. We're obviously looking at the interaction between Facebook and our social media strategy, and how that ties into our e-commerce, which is one way we can trigger sales. But more important for us is how we use that to build communities, even local communities, around our stores. We're a retailer that is very committed to our stores, our bricks and mortar. How do we reflect that in how we interact with people on Facebook and in social media, and how does that translate into doing a better job at the store level?

You've just launched 3,500 new Facebook pages for individual stores.

Right, and that is based on this commitment to local communities. It's a little clichιd, but people talk about retailing being fundamentally a local business. As a customer, what you experience is your Wal-Mart and the other retailers you can choose from. So how we interact at a local level is really important to us, and that's why we've launched these local Facebook pages. Our goal is to integrate into the things that are happening in a local community and to make us better merchants through that.

What's some non-Wal-Mart marketing that you admire?

The marketing I really admire is marketing that goes beyond an advertising message. McDonald's (MCD, Fortune 500) has done an unbelievable job over a long period of time. As we're seeing their beverage strategy emerge, it's really impacting customer behavior in terms of the frequency of trips. I love that, because it's a marketing insight into the customer that ended up changing what the company did. Hyundai is another example. You may not have to be a genius marketer to communicate the Hyundai assurance guarantee, but where did that idea come from? What a great idea for customers. One of the things I look for at Wal-Mart is how we do marketing that makes a difference in the lives of customers and doesn't just build an image.

It goes beyond messaging.

Way past. In fact, if you have something compelling enough that will make a difference in the lives of customers, the marketing part of it, the communication to customers, is relatively easy.

There's only one major U.S. market that Wal-Mart isn't in, and that's the one we're sitting in right now, New York City. What's the plan?

I can't really let you in on the specific plans in New York. We want to serve customers here. It has become a pillar of our strategy to give people more access to everyday low prices, and that includes being much more flexible about the kinds of formats we're willing to put the Wal-Mart name on and how we're working with cities to find a way to serve those customers.

If a young person told you that he or she wanted to become the chief marketing officer of a big corporation, what would your advice be?

First, it starts with the customer. You've got to be incredibly customer-focused nowadays because -- it's been said many times -- the customer is in control. All the technology and the societal trends we're seeing point to that control just growing and growing. Second, marketing ought to be active inside the organization at breaking bureaucracy and getting the company to serve customers, to do the things we need to do to be successful with the customer. Way too many marketers get focused on the advertising and the marketing communications messages, even if all that is becoming more complex today with social media and so on, and they don't play enough of an activist role inside the company to get the company to do the things we know we have to do to be successful for the customer.

The Leadership Series: Formerly called "C-Suite Strategies," this is the latest interview with a top executive by Fortune senior editor-at-large Geoff Colvin. See video excerpts of this interview at fortune.com/leadership -- plus find Colvin interviews with Charles Schwab, the team of Jeff Immelt (GE) and A.G. Lafley (P&G), Pimco's Mohamed El-Erian, Harry Brekelmans of Shell, Nils Andersen of Maersk, and many more.

Allstate Partially Backs Down On Agent Compensation Overhaul
By Robert Pear
Dow Jones Newswires
December 21, 2011

Allstate Corp. (ALL) on Wednesday alerted its sales force that it was partially backing down on an unpopular revision to the way it calculates their pay.

The insurer, which currently pays its agents a 10% base commission, said it would cut the base pay to 9% beginning in 2013, instead of the 8% it had announced previously. The 9% base will last until at least 2014, the company said.

But the basic goal behind the change in the company's compensation structure remains the same: Allstate will use the money it saves on base commissions to fund additional rewards for agents who meet sales targets and service goals.

The pay overhaul is designed to boost the effectiveness of Allstate's sales force after years of losing market share to smaller rivals including Geico Corp. and Progressive Corp. (PGR). Executives have said the changes in pay will better reward larger and more successful agencies, but may prompt smaller agencies to shut down or sell themselves.

The original plan to cut the base pay to 8% was met with a broad outcry from the company's sales force, and supervisors quickly began telling agents that the 8% figure wasn't set in stone.

The plan was hatched under Joseph Lacher, who was forced out by Chief Executive Tom Wilson before it could be implemented. His departure was said to be unrelated to the compensation overhaul, but was tied in part to the performance of the home- and auto-insurance units Lacher oversaw.

Mark LaNeve, the company's chief marketing officer and senior executive vice president for agency operations, is now overseeing the overhaul in agent pay.

Under the revised pay program announced Wednesday, agents will be able to earn an additional 6% in bonuses on top of their 9% base, giving them the possibility of earning total commissions as high as 15% of their annual premiums. That's up from the current 14.2% for top performers.

A company spokeswoman said the change in the compensation will "better reward agency owners for serving our customers, investing in their business and delivering higher levels of performance."

Jim Towns, co-chair of Allstate's Agency Executive Council, said the change "gives agency owners time to transition their business strategy and the agency owner can plan into the future now that we know the commission structure for the next three years," according to a statement provided by the company. The Agency Executive Council is comprised of about 20 agency owners who serve as a strategic sounding board for Allstate's senior executives.

Allstate backs off plan for steep agent pay cut
By Steve Daniels
Chicago Business
December 21, 2011

(Crain's) — Allstate Corp., facing a backlash from many of its roughly 10,000 agents, has backed off on a plan to cut its salesforce's base pay by 20% beginning in 2013.

The Northbrook-based insurance giant informed agents on Wednesday that it instead will reduce their base commission to 9% of the premiums they sell from the current 10%. The company previously had informed agents that base pay would be at 8%. The 9% base commission rate will be effective for at least 2013 and 2014.

At the same time, Allstate said it was increasing the variable component of agents' pay. With bonuses for hitting sales goals, staffing agencies and keeping certain hours, among other things, agents in 2013 will be able to earn up to 15% commissions. Before, that ceiling would have been 14.2%.

The concessions came in an internal communiquι from Mark LaNeve, senior executive vice-president in charge of agency relations and Allstate's chief marketing officer.

“This change eases the transition to the variable component and better allows you to plan for your business over the next several years and develop your long-term strategy,” Mr. LaNeve wrote.

Allstate's plan to reduce base pay while making more compensation contingent on meeting company-set goals ignited a firestorm among its agents. They already were feeling bruised from a company campaign to thin their ranks in pursuit of larger, if fewer, agencies around the country.

Allstate has been losing auto-insurance marketshare consistently over the past several years to cheaper rivals like Geico and Progressive Corp., which sell direct to consumers online.

In recent months, company executives, including CEO Thomas Wilson, have taken a more conciliatory tack with agents. On the company's most recent earnings conference call, for example, Mr. Wilson explicitly blamed the company rather than agents for the poor sales performance.

In a statement, the company said it had consulted with more than 300 agents to redesign the commission structure. "Our success as a company has been--and will continue to be--built on the strength of our local agency owners and we will continue to work closely with them to ensure the success of the company and our Allstate agency business.''

A representative of a group of agents who have been unhappy with corporate leadership said the company was bowing to the unpopularity of its previous plan.

“I have a feeling they're losing more agents voluntarily than they expected,” said Jim Fish, executive director of the National Assn. of Professional Allstate Agents, a group representing more than 1,000 agents. “I think they had to sweeten the pot a little bit.”

He emphasized that, even with the change, agents will be seeing a 10% cut in their base commissions. “I don't know if that is going to satisfy the agency force,” he said.

Jim Towns, an Allstate agent who co-chairs the company's agency executive council, said in a statement: "Agents have open access to senior leadership and we've been working together on a compensation plan that makes sense. The compensation structure rewards performers who deliver policy growth as well as a high level of customer service.''

Liberals Love the 1%: A lesson in big business tax favoritism in Illinois
By Robert Pear
Wall Street Journal
December 20, 2011

Or at least they love them if they are big businesses threatening to flee higher taxes. That's the story in Illinois, where last week the Democrats who run the state government ladled out $85 million in tax relief to the Chicago Board of Trade and the Chicago Mercantile Exchange, plus tax credits for Sears Holdings Corp. worth $15 million a year for the next 10 years.

In January Governor Pat Quinn and his fellow Democrats passed a $2 billion tax hike, the biggest in Illinois history, with the income tax rising 67% and the effective corporate tax rate rising to 9.5% from 7.3%, which gives Illinois one of the highest business tax rates in the nation.

That law fired up a motorcade of lobbyists from major Illinois companies like Motorola, Caterpillar, Sears and others to descend on Springfield and seek tax breaks lest they leave for states where business taxes are much lower. More than a dozen companies have already left for Indiana and Wisconsin.

So Mr. Quinn started giving special tax passes to the biggest and most influential 1%. The Chicago Tribune reported in May that Mr. Quinn had already doled out corporate welfare to at least 80 firms, costing the state nearly $500 million since 2009. The Chicago Merc and the Board of Trade complained that the Quinn tax grab would cost them $50 million a year.

Naturally, Mr. Quinn justifies the carve-outs as essential to job creation. But in January Democrats claimed that tax increases would have no economic impact. Now small and medium-sized businesses that don't have lobbyists are stuck paying the higher tax rates. Mr. Quinn's policies benefit the 1% of politically connected businesses at the expense of the other 99%, often small shops with 10, 20 or 50 employees.

Mr. Quinn's other claim in January was that the tax hike was essential to balance the budget. Yet the Illinois Policy Institute recently calculated that over 15 years the revenue loss from all the corporate tax giveaways will exceed the revenues raised from the corporate tax increase. Oh, and there's still a budget deficit.

Once again the lesson is that high tax rates fail to raise the revenue that liberals claim, not least because liberal politicians follow their tax increases by passing out favors to the rich and powerful. The same will happen in Washington if President Obama gets his way to allegedly soak the rich. Too bad the liberal media won't admit it.

Health Care Law Will Let States Tailor Benefits
By Robert Pear
New York Times
December 17, 2011

WASHINGTON — In a major surprise on the politically charged new health care law, the Obama administration said Friday that it would not define a single uniform set of “essential health benefits” that must be provided by insurers for tens of millions of Americans. Instead, it will allow each state to specify the benefits within broad categories.

The move would allow significant variations in benefits from state to state, much like the current differences in state Medicaid programs and the Children’s Health Insurance Program.

By giving states the discretion to specify essential benefits, the Obama administration sought to deflect one of the most powerful arguments made by Republican critics of President Obama’s health care overhaul — that it was imposing a rigid, bureaucrat-controlled health system on Americans and threatening the quality of care. Opponents say that the federal government is forcing a one-size-fits-all standard for health insurance and usurping state authority to regulate the industry.

This criticism has inspired legal challenges to the new law — with the Supreme Court set to decide next year whether the government can require Americans to buy health insurance — and helps explain why public opinion of the law remains deeply divided.

The law is looming as a central issue in the 2012 presidential race, with Republican presidential candidates being evaluated on the strength of their opposition to it. The announcement by the administration follows its decision this year to jettison a program created in the law to provide long-term care insurance, a move that disappointed liberal backers of the program championed by the late Senator Edward M. Kennedy.

The action Friday prompted questions among supporters of the new health care law. Prof. Timothy S. Jost, an expert on health law at Washington and Lee University, said, “The new bulletin perpetuates uncertainty about what benefits an insurer will be required to cover under the Affordable Care Act.” From the consumer’s point of view, Professor Jost added, “I wish the Department of Health and Human Services had signaled that there would be more uniformity and less flexibility.”

Chris Jacobs, a health policy analyst for Senate Republicans, said the new policy “gives states the flexibility to impose more benefit mandates, not fewer,” and would lead to higher insurance premiums, contrary to what Mr. Obama promised in the 2008 campaign.

The new law lists 10 categories of “essential health benefits” that must be provided by insurance offered in the individual and small-group markets, starting in January 2014. These include preventive care, emergency services, maternity care, hospital and doctors’ services, and prescription drugs.

Kathleen Sebelius, the secretary of health and human services, had been expected to provide details of what services and benefits must be provided in each category. Instead, in an insurance bulletin issued Friday, Ms. Sebelius said the federal government would respect the states’ role, giving them “the flexibility to design coverage options that meet their unique needs.”

Under this approach, each state would designate an existing health insurance plan as a benchmark. The benefits provided by that plan would be deemed essential, and all insurers would have to provide benefits of the same or greater value. Plans could modify coverage within a benefit category so long as they did not reduce the value of coverage.

Each state would choose one of the following health insurance plans as a benchmark:

• One of the three largest small-group plans in the state.
• One of the three largest health plans for state employees.
• One of the three largest national health insurance options for federal employees.
• The largest health maintenance organization operating in the state’s commercial insurance market.

While working on health care legislation in 2009 and 2010, Congress spent many hours debating how to balance the goals of comprehensive benefits and affordable coverage.

Sherry A. Glied, an assistant secretary of health and human services, said the administration’s approach “builds off the experience of today’s marketplace and will minimize disruption to it.”

Steven B. Larsen, deputy administrator of the federal Centers for Medicare and Medicaid Services, said, “The state is always in control of what the essential benefits package is in that state.”

In recent months, federal health officials have taken a number of steps that could help inoculate Mr. Obama against charges that he was foisting a rigid, inflexible model of health care on the nation.

Several states have received temporary waivers from tough new federal standards that require insurers to spend more of each premium dollar for the benefit of consumers. Federal officials have also provided temporary exemptions from some provisions of the law for some employers and labor unions offering bare-bones coverage.

The new law says that the scope of essential health benefits must be “equal to the scope of benefits provided under a typical employer plan.” But the law itself specifically requires some benefits not widely available in employer-sponsored health plans, like “habilitative services” for people with conditions like autism or cerebral palsy.

Under the new law, each state is supposed to have an insurance exchange or marketplace where consumers can compare options and buy insurance. Health plans must offer the essential benefits, regardless of whether the coverage is sold inside or outside the exchange.

The government will offer subsidies to help low-income people buy insurance through exchanges. The subsidies will help cover the cost of essential benefits. States can require insurers to provide additional benefits, but states will have to pay much of the extra cost.

The law also says that the definition of essential benefits must not “discriminate against individuals because of their age, disability or expected length of life.”

Sara Rosenbaum, a professor of health law and policy at George Washington University, said the new bulletin “does not offer any guidance on this crucial part of the law.”

Quinn signs Sears-CME tax breaks into law
By Kathy Bergen
Chicago Tribune
December 16, 2011

Gov. Pat Quinn today signed into law tax-break legislation aimed at keeping Sears Holdings Corp. and Chicago's financial exchanges from leaving the state.

CME Group responded with an immediate announcement that it would stay in Chicago, where its roots go back more than 160 years.

"We are pleased that Illinois Governor Pat Quinn and the State Legislature have addressed the inequitable distribution of corporate taxes currently levied on CME Group," said CME Group Executive Chairman Terry Duffy. "This necessary adjustment to the Illinois corporate tax laws will put CME Group on more equal footing with other Illinois companies and other global exchanges."

The two packages, which cleared the General Assembly with bipartisan support on Tuesday, also will provide tax relief to small and mid-size businesses, and to individuals, including the working poor. When fully implemented, the provisions will cost the state an estimated $371 million a year.

Quinn lauded the package after it passed the Senate Tuesday, saying the relief for working families would help the economy by triggering more consumer spending. He also defended the use of financial incentives to retain companies, saying it was a necessity in today's competitive climate.

"You have to be realistic here," he said Tuesday. "Every state in the union has tax incentive measures on the books to try to get jobs from another state...the bottom line is, you have to defend yourself."

The top executive at Sears Holdings, parent of Sears and Kmart, earlier this week told employees the company would remain at its Hoffman Estates headquarters if Quinn signed the tax relief legislation.

The Chicago Board Options Exchange also indicated it would stay put.

The breaks for business will account for $216 million of the total tax relief package when fully in place in the 2014 fiscal year, with $85 million attributable to the tax change for financial exchanges, according to an analysis by the legislature's Commission on Government Forecasting and Accountability.

The state tax code would be revised for financial exchanges so that just 27.54 percent of their electronic trades will be taxable in Illinois. Both CME and CBOE had threatened to move operations out of state if they did not get tax relief, as did Sears Holdings.

CME has said a change is needed because most transactions have shifted from Chicago trading floors to electronic systems, with many trades made out of state.

The deal gives Sears tax credits worth $15 million a year for 10 years, which it can use against withheld employee income taxes. The deal also would extend a special taxing district, reducing the company's local property tax bill for another 15 years. Its property tax savings would total about $125 million.

This is the second package for Sears, which won nearly $250 million in incentives about 20 years ago to stay in Illinois.

The breaks for Sears Holdings and CME were in a legislative package that also included breaks for all businesses. It reinstates the net operating loss deduction, up to $100,000 a year; hikes the estate tax deduction; and extends the research and development tax credit.

A companion piece of legislation includes relief for individuals. It hikes the earned income tax credit for lower-income taxpayers and hikes the personal income tax exemption in 2012 and indexes it to inflation in later years.

These provisions will cost an estimated $110 million and $45 million, respectively, when fully implemented in fiscal 2014.

Tax breaks for Sears, CME head to governor: Lawmakers to examine state's policies to deal with expected flood of similar demands from other businesses
Chicago Tribune
December 14, 2011

Illinois Sen. Toi Hutchinson, D-Chicago Heights, sponsor of the business and individual tax relief bills, and Rep. John Bradley, D-Marion, sponsor of the bills in the House, talk Tuesday after the two bills cleared the Senate. (E. Jason Wambsgans, Chicago Tribune / December 13, 2011)

While a tax-break package aimed at keeping Sears Holdings Corp. and Chicago's financial exchanges from exiting the state cleared the General Assembly on Tuesday, Illinois' business tax policies will continue to be a hot-button issue in the coming year.

Lawmakers from both sides of the aisle said they expect the parade of companies seeking special relief to continue, creating pressure to further examine how the state taxes business.

"States all over the place are trying to steal our companies. That is not the Chicago way, it's the Republican governor way throughout the Midwest," said Sen. Toi Hutchinson, D-Olympia Fields, who sponsored the $371 million tax-break package that won approval in the Senate Tuesday, following passage Monday in the House.

The bill, which also provides breaks for small and midsize businesses and for individuals, will be sent to Gov. Pat Quinn, who lauded its passage Tuesday. If he signs it, as expected, Sears Holdings, parent of Sears and Kmart, will remain in Illinois, the company's chief executive told employees late Tuesday in a memo obtained by the Tribune.

The Chicago Board Options Exchange, in a statement, lauded the legislative action and indicated it would stay put. CME Group Inc., parent of the Chicago Mercantile Exchange and the Chicago Board of Trade, declined to comment.

While Democrats and Republicans agree that cutthroat competition for companies will continue, they diverge on how to manage the situation, setting the stage for what is likely to be further contentious debate over how to improve the state's business climate.

Democrats, who control the General Assembly, say that the problem isn't Illinois' corporate income tax rate, but the fact that two-thirds of filers find ways to pay nothing.

"We have to look and see if there is a fairer way of apportioning the corporate tax rate," said Senate President John Cullerton, D-Chicago.

A Senate-House committee began examining business tax issues this year and will continue the work next year, looking at a broad range of issues, including how the state goes about awarding tax credits to individual employers, such as Sears Holdings, Motorola Mobility, Navistar and others.

The state "needs to figure out a more reasoned process, a more definitive process, for the awards of EDGE credits and state grants," said Rep. John Bradley, D-Marion, who is co-chairman of the joint panel with Hutchinson. The EDGE acronym stands for Economic Development for a Growing Economy, and the program is a cornerstone in the state's efforts to attract and retain employers that make investments in the state.

Quinn has been accelerating the use of the credits, mainly to retain jobs rather than attract new ones.

On Tuesday, he said financial incentive packages are necessary to protect the state's turf.

"If Ohio is offering $400 million to Sears, a company that has thousands of employees in Illinois, we will defend ourselves," he said.

Meanwhile, Republicans point to the temporary hike in the corporate income tax rate early this year as a wound to the state's image.

House Republican Leader Tom Cross, of Oswego, who has called for rolling back the temporary increase in the corporate income tax, is expected to unveil legislation regarding that tax Wednesday morning.

Senate Minority Leader Christine Radogno, R-Lemont, acknowledged it is a "legitimate possibility" that Illinois companies will flood to state government for relief now that they've seen lawmakers react to the demands of CME and Sears.

"It seems to me that maybe we ought to get the word out that there's a moratorium until we can do some real tax relief," Radogno said. "Otherwise, we will be faced with one after another."

Radogno, who opposed the Democratic-approved income tax increase, maintained the state must recognize it needs comprehensive reforms, and a moratorium "might be a way to hold our feet to the fire to get it done."

Radogno supported the legislative package Tuesday, saying it was a start. The Senate gave bipartisan support to the two-part package, which separated breaks for business from breaks for individuals.

The package reinstated the net operating loss deduction, up to $100,000 a year; hiked the estate tax deduction; and extended the research and development tax credit. The breaks for business account for $216 million of the total tax relief package in the 2014 fiscal year, with $85 million of that attributable to the tax change for financial exchanges, according to an analysis by the legislature's Commission on Government Forecasting and Accountability.

The legislation also included relief for individuals. It would hike the earned income tax credit for lower-income taxpayers and would hike the personal income tax exemption in 2012 and index it to inflation in later years.

These provisions will cost an estimated $110 million and $45 million, respectively, when fully implemented in fiscal 2014.

The state tax code would be revised for financial exchanges so that just 27.54 percent of their electronic trades will be taxable in Illinois. Both CME and CBOE had threatened to move operations out of state if they did not get tax relief.

CME has said a change is needed because most transactions have shifted from Chicago trading floors to electronic systems, with many trades made out of state.

The deal for Sears states that the company would receive tax credits worth $15 million a year for 10 years, which it can use against withheld employee income taxes. The deal would also extend a special taxing district, reducing the company's local property tax bill for another 15 years. Its property tax savings would amount to about $125 million.

This is the second package for Sears, which won nearly $250 million in incentives about 20 years ago to stay in Illinois.

Tribune reporter Ray Long contributed.

Sears Holdings Applauds Illinois Lawmakers for Recognizing Company's Value to the State: Fourth Largest Retailer Awaits Governor's Signature on Legislation Designed to Keep Jobs in Illinois
PRNewswire
December 13, 2011

HOFFMAN ESTATES, Ill. -- Sears Holdings, parent company of Sears Roebuck and Co., Kmart and Lands' End, on Tuesday expressed its sincere appreciation for the bipartisan support by the Illinois General Assembly of legislation that, when approved by Illinois Gov. Pat Quinn, will allow Sears to maintain its headquarters in the state it has called home for nearly 125 years.

In a statement released today, Lou D'Ambrosio, Sears Holdings' chief executive officer and president said:

"While this legislation still must be signed by Gov. Quinn, this is an important day in our company's history. Clearly state leaders recognize our impact on the state of Illinois and have taken the step necessary to keep Sears Holdings an Illinois company. Sears Holdings employs 20,000 people in Illinois alone, we work with 9,100 local vendors, contractors and businesses that provide services and goods to the company and we are a significant taxpayer to the state - over $213 million last year and billions over the last 20 years.

"All of our Illinois-based associates and I appreciate the efforts of Governor Quinn, Senate President John Cullerton, House Speaker Michael Madigan, Senate Minority Leader Christine Radogno and House Minority Leader Tom Cross - as well as House Revenue Chairman John Bradley (D-Marion), Minority Spokesperson David Harris (R-Arlington Heights), and Senate Revenue Chairwoman Toi Hutchinson (D-Olympia Fields) for making our company and future in the state a priority. We are also grateful for the leadership and dedication shown by State Sens. Dan Kotowski (D-Park Ridge) and Matt Murphy (R-Palatine) and Rep. Fred Crespo (D-Hoffman Estates) in working for months to bring this matter to a vote. I also want to thank our associates for their continued focus on our customers and for those that reached out to state lawmakers to reiterate our value to Illinois."

Senate passes CME-Sears tax-cut package
By Kathy Bergen
Chicago Tribune
December 13, 2011

A two-part package of tax breaks aimed at keeping Sears Holdings Corp. and Chicago's financial exchanges from exiting the state is on its way to Gov. Pat Quinn, having passed the Illinois Senate this afternoon.

Quinn has indicated a willingness to sign the package, which is estimated to cost $371 million annually once fully in place in fiscal 2014.

The Senate gave bipartisan support to the portion of the package aiding businesses, including Hoffman Estates-based Sears Holdings, the Chicago Board Options Exchange, and CME Group Inc., the parent of the Chicago Mercantile Exchange and the Chicago Board of Trade. The vote was 44-9.

This package also reinstated the net operating loss deduction, up to $100,000 a year; hiked the estate tax deduction; and extended the research and development tax credit. The breaks for business account for $216 of the total tax relief package, with $85 million of that attributable to the tax change for financial exchanges, according to an analysis by the legislature's Commission on Government Forecasting and Accountability.

The Senate also endorsed legislation providing breaks for workers, on a 48-4 vote. This would hike the earned income tax credit for lower-income taxpayers, and would hike the personal income tax exemption in 2012 and index it to inflation in later years.

These provisions will cost an estimated $110 million and $45 million, respectively, when fully implemented in fiscal 2014.

The measures are nearly identical to those of a single, overarching package that received bipartisan support in the Senate late last month, only to be shot down in the House.

The deadlock was broken when lawmakers decided to split the package in two, giving lawmakers greater latitude in voting.

The single package had stalled after House Republicans balked at supporting a hike in the earned income tax credit, saying the state could not afford it now. Quinn and a number of Democratic representatives had held it was essential for any deal.

The tax code would be revised for financial exchanges so that just 27.54 percent of their electronic trades will be taxable in Illinois. Both CME and CBOE have threatened to move operations out of state if they do not get tax relief.

CME has said a change is needed because most transactions have shifted from Chicago trading floors to electronic systems, with many trades made out of state.

The package's deal for Sears states that the company would receive tax credits worth $15 million a year for 10 years, which it can use against withheld employee income taxes. The deal would also extend a special taxing district, reducing the company's local property tax bill for another 15 years. Its property tax savings would amount to about $125 million.

This is the second package for Sears, which won nearly $250 million in incentives about 20 years ago to stay in Illinois.

Also in the business tax break package, UCI International Inc., the parent company of filter supplier Champion Laboratories Inc., would receive tax credits worth $350,000 a year for 10 years for relocating its corporate headquarters to Illinois, retaining 1,000 jobs in the state and adding another 250. Aid to Indiana-based UCI was not in earlier versions of the package.

Champion previously won a state tax-break package, qualifying for $5.3 million in credits since 2002.

Tax credits of up to $2 million a year would be available for long-run, live theater productions, such as those put on by Broadway in Chicago.

Sears deal struck but far from sure
By Mike Riopell
Daily Herald - Suburban Chicago
December 8, 2011

SPRINGFIELD — House Republican Leader Tom Cross said today that he's agreed to a tax breaks package that would include incentives intended to keep Sears Holdings Corp. in Illinois.

But whether other lawmakers and Gov. Pat Quinn will go along will remain an open question until at least early next week, as lawmakers who raised income taxes on all Illinoisans earlier this year might be hesitant to give out big tax breaks to companies months later.

"We have come to an agreement on a jobs package that will give some relief to a broad base of businesses in our state," Cross said in a statement released this afternoon. "This package will allow businesses to plan on longer-term research and development and the ability to carry their losses forward in a tough economy."

Under the terms of the new package, Sears would get its property tax breaks with Hoffman Estates extended, as well as up to $150 million in income tax help over 10 years. Company officials have said they want to decide whether or not to move to another state by the end of the year.

Also as part of the proposal, online trades made via CME Group would be taxed differently in Illinois, leading to less tax cost for the company, which has an operations center in Aurora.

Other provisions include a research and development credit available to businesses across Illinois, a break in the estate tax, a credit for live theater productions in Illinois and other proposals that will cost the state about $150 million next fiscal year.

State Rep. Fred Crespo, a Hoffman Estates Democrat who helped work out the Sears part of the deal, said voting for the bigger proposal will mean compromising and agreeing to provisions he doesn't want.

"How badly do you want this to happen?" he said. "And in order to do that, do you have to swallow a poison pill?"

Despite Cross' announcement of a deal, the package is far from assured. When lawmakers last debated a similar proposal weeks ago, the Illinois House rejected it forcefully, despite Senate approval.

This time, though, an increase in tax credits for the working poor and in the standard income tax deduction for everyone will be separated from the business breaks, perhaps setting up a situation where both pieces of legislation could be approved separately.

Cross has loudly opposed tax credits for individuals as part of this plan.

But the Senate signed off on the package as a whole. So will splitting it up cause problems for them?

"We'll have to see," said state Sen. Dan Kotowski, a Park Ridge Democrat.

The House is scheduled to reconvene in Springfield Monday, and if they approve the deal, the Senate is set to return Tuesday.

"There might be an agreement," Crespo said. "But then you need the votes."

House leaders split up Sears, CME tax package
By Mallory Stone
Chicago Tribune
December 8, 2011

Illinois House leaders have reconfigured a tax-break package aimed at keeping Sears Holdings and CME Group Inc. from leaving the state, hoping to make it more politically digestible by splitting it in two.

The agreement negotiated this week by House Minority Leader Tom Cross, of Oswego, and Rep. John Bradley, D-Marion, comprises tax relief for Sears and CME, as well as a range of breaks for businesses generally. But it excludes tax breaks for individual workers.

Those elements -- a hike in the earned income tax credit for low- and middle-income families and indexing the personal income tax exemption to inflation -- will be voted on separately.

Republicans have pledged support for the business breaks, but not the relief for individuals, a spokeswoman for Cross said. But leaders feel each package will be able to garner enough votes for passage. The House is expected to convene Monday, followed by the Senate on Tuesday

An earlier package encompassing both was resoundingly defeated by the House when Cross balked at the expense of hiking the earned income tax credit, an element of the package viewed as crucial by some House Democrats and Gov. Pat Quinn.

The changes would not take effect until fiscal 2013, which begins July 1, and many would phase in over two years. Ultimately, the business breaks would cost an estimated $218 annually, House Republicans estimate. The breaks for individuals could increase the overall price tag to about $325 million when fully in place, Bradley said.

The cost would be offset by a resurgence in state corporate income tax receipts that is expected with the expiration of a tax break that allows business to accelerate their deductions for capital investments through 2012, Bradley said.

The business breaks are similar to the earlier failed package, but with a couple of add-ons.

• The tax code would be revised for financial exchanges so that ultimately only 27.54 percent of their electronic trades will be taxable in Illinois, which would cost the state an estimated $85 million a year.

• Sears would receive tax credits worth $15 million a year for 10 years, which it can use against withheld employee income taxes. As well, the deal would extend a special taxing district, reducing the company's local property tax bill for another 15 years.

• Filter supplier Champion Laboratories Inc., based in Albion, would receive tax credits worth $3.5 million for expanding its employee base. Aid to this Downstate firm was not in earlier versions of the package.

• The research and development tax credit would be extended for five years.

• The net operating loss deduction would be reinstated, but capped at $100,000 a year.

• The estate tax exemption would rise from $2 million to $4 million over two years, up from a $3.5 million cap in the defeated legislation.

• Tax credits up to $2 million a year would be available for long-run, live theater companies, such as Broadway in Chicago.

"This package will allow businesses to plan on longer term research and development and the ability to carry their losses forward in a tough economy. It will also lessen the tax burden on our family farmers and small businesses," Cross said in a statement.

A separate measure would include breaks for individuals.

• Over two years, the earned-income tax credit for low- and middle-income families would rise from 5 percent to 10 percent.

• The personal income tax exemption would be indexed to inflation.

The two pieces of legislation "will provide relief to working folks and small businesses, will retain jobs at a couple of big employers, and Downstate, it will attract a few more jobs," Bradley said.

Sears Holdings has the Highest Sales per Share in the Department Stores Industry
By Mallory Stone
Financial News Network
December 7, 2011

Below are the three companies in the Department Stores industry with the highest sales per share. Sales per share is a valuable metric in comparing relative value for companies in the same industry.

Sears Holdings (NASDAQ:SHLD) is highest with sales per share of $397.07. Sears Holdings Corporation is a broadline retailer with full-line and specialty retail stores in the United States and Canada. The Company retails home appliances, as well as tools, lawn and garden products, home electronics, and other products. Sears Holdings also provides automotive repair and maintenance.

Sears Holdings (NASDAQ:SHLD) defies analysts with a current price ($59.45) 24.0% above its average consensus price target of $45.18. The stock should run into initial resistance at its 50-day moving average (MA) of $68.01 and subsequent resistance at its 200-day MA of $70.84.

Following is Bon-Ton Stores (NASDAQ:BONT) with sales per share of $166.02. Bon-Ton Stores has traded 47,000 shares thus far today, vs. average volume of 353,000 shares per day. The stock has underperformed the Dow (-3.3% to the Dow's -0.4%) and underperformed the S&P 500 (-3.3% to the S&P's -0.7%) during today's trading.

Finishing up the top three is Dillard's (NYSE:DDS), with sales per share of $112.44.

Dillard's share prices have moved between a 52-week high of $61.08 and a 52-week low of $34.45 and are now trading 40% above that low price at $48.32 per share. Over the past week, the 200-day moving average (MA) has gone up 0.2% while the 50-day MA has advanced 0.4%.

Sears, Staples and J.C. Penney top mobile performance index
But three retailers are excised because they made a splash.
By Bill Siwicki
Internet Retailer
December 7, 2011

Sears Holdings Corp., Staples Inc. and J.C. Penney Co. Inc. topped this week's Keynote Mobile Commerce Performance Index with very high scores and speedy page load times.

For the week ending Dec. 4, Sears came in first: Its m-commerce site home page loaded on average in 3.91 seconds and it did so successfully 99.44% of the time. These measures earned it a perfect score of 1,000, according to mobile and web performance management firm Keynote Systems Inc. Staples came in second with a load time of 6.38 seconds and a success rate of 99.33% for a score of 946.

J.C. Penney came in third with a load time of 6.45 seconds and a success rate of 99.32% for a score of 945. Best Buy Co. Inc. came in fourth with a load time of 6.68 seconds and a success rate of 99.12% for a score of 928. And Walmart.com came in fifth with a load time of 6.29 seconds and a success rate of 98.71% for a score of 910.

Sears is No. 21 in the Internet Retailer Mobile Commerce Top 300. Staples is No. 13, J.C. Penney No. 26, Best Buy No. 16 and Walmart.com No. 4.

Dell Inc., Nordstrom Inc. and Walgreen Co. did not register on this week's performance index. This is because of a web site redirection practice occasionally used by retailers and other companies.

"These retailers were not ranked in this week's index because they decided to serve a splash page first rather than taking customers directly to an m-commerce site home page," says Haroon Chohan, mobile performance expert at Keynote Systems. "A splash page provides an inaccurate picture when it comes to measuring site response time because a splash page contains very little content and the load time is not representative of hitting an actual home page."

A splash page is a web page promoting a single theme that precedes the appearance of a home page; splash pages generally are much lighter in kilobytes than home pages and thus can load much faster than home pages. For example, a splash page might feature a picture of an iPhone with text urging users to download the iPhone app rather than use the m-commerce web site. As a result of rendering a splash page, Dell, Nordstrom and Walgreens are not included this week because the index measures m-commerce site home pages.

AT&T, the HTC Evo on Sprint, the BlackBerry Curve on T-Mobile and the Droid X on Verizon. The HTC Evo and the Droid X run Google Inc.'s Android operating system. Keynote runs the tests in Chicago, Dallas, New York and San Francisco.

Keynote combines a site's load time and success rate, equally weighted, into a single score. Given that both performance and availability are important, the score reflects the overall quality of the home page; a higher score indicates better performance. Scores also reflect how close sites are to each other in overall quality. The index average score is the midpoint among all the sites' scores.

J.C. Penney to Acquire Martha Stewart Stake
By Dana Mattioli and Russel Adams
Dow Jones Newswire
December 7, 2011

J.C. Penney Co. is buying a stake in Martha Stewart Living Omnimedia Inc., in the first move by the department-store chain's new chief executive to beef up its portfolio of brands.

Penney Chief Executive Ron Johnson, who joined the company from Apple Inc. in November, has made it a priority to add more name brands to give consumers a reason to shop at his stores, which have struggled against competitors like Macy's Inc. and Kohl's Corp.

Penney is buying a 16.6% stake in Martha Stewart Living for $38.5 million, or $3.50 a share, and will have representation on its board. Shares in the company founded by Martha Stewart jumped 27% to $3.95 in premarket trading, while Penney was inactive after closing Tuesday at $33.30.

Under the deal, Martha Stewart will set up distinct retail spaces inside the majority of J.C. Penney stores beginning in February 2013. The stores within a store will offer home and lifestyle gear selected by Martha Stewart's team and sourced by Penney.

As part of a 10-year pact, the companies also jointly will develop an e-commerce site, also expected to launch in 2013. Martha Stewart Living is expected to receive more than $200 million over the life of the contract.

For Martha Stewart, the partnership provides a much needed infusion of cash at a time when all of its key businesses have been shrinking. In recent years, revenue has mostly declined in all three divisions of the company, which includes publishing, broadcasting and merchandising.

• The merchandising unit has emerged as the key source of profits as the media assets, including the flagship magazine, have grappled with plummeting advertising revenue. The merchandising unit generates revenue by putting Ms. Stewart's name on items ranging from kitchen tools to furniture to paint through partnerships with retailers such as Home Depot Inc., Macy's and PetSmart Inc. Yet revenue in that segment is still well below levels from before a lucrative deal with Sears Holdings Corp.'s Kmart lapsed at the beginning of last year.

Martha Stewart put itself in play in May, retaining investment bankers at Blackstone Group LP to explore offers to partner or invest in the company. Blackstone advised the company on the transaction with Penney, which will help shore up the company while not requiring it to give up control.

Penney, meanwhile, has successfully cut costs and brought in new merchandise. But it continues to struggle with weak sales, even as exclusive lines such as Liz Claiborne from Liz Claiborne Inc., MNG by Mango and Call It Spring by Aldo Group Inc. have drawn new customers.

Part of Mr. Johnson's new management team's strategy is to attract more well-known brands to the department store as a way to draw younger customers and excite existing ones, says a person familiar with the matter. The Martha Stewart deal is evidence that Penney will still focus on its core consumer —middle-aged women—whom the department store is being careful not to alienate as it updates brands and brings in younger looks, this person said.

Mike Kramer who began as chief operating officer at Penney this week, also has experience in upgrading designer brands. The former Kellwood Co. CEO shed the company's lower-end brands and replaced them with higher-margin fashion brands like Vince, Scotch & Soda and Rebecca Taylor.

Sears: The Best Thing For An Investor Is To Get Out Now
SeekingAlpha.com
December 7, 2011

If you are one of the unfortunate investors still holding onto Sears Holding Corporation (SHLD), sell now. The company and its leaders are destroying the remaining value. Luckily for current investors, the market has not priced where this stock is headed.

It seems that there are opposing points of view on the stock. There are many institutional types who share our point of view that this company is imploding (e.g. Credit Suisse report dated Nov 17, 2011). There is another group who seem to resist the fall of one of the great names in American retail history (e.g. Morningstar report dated Nov 17, 2011). (Standard & Poor's cites poor results offset by strong brands in their stock report dated Nov 18, 2011.)

The case against Sears is simple.

• The company has lost market share against its competitors. In the past 4 fiscal years, Sears' cumulative sales has decreased 15%. Over the same period, softline, hardline, and broadline retailers have had generally moderate to strong revenue growth over the same period. Again, this year, Sears is on pace to have lower sales while the competition is showing improved sales. After a Thanksgiving weekend when other retailers were tallying their most impressive results ever, Sears dove into deeper discounts in a number of product lines. This is further bad news for sales and margins.

• Management's - not least the chairman's - priority has been stock buy backs through debt and operating cash flows, not investing in the company's operations. The company has made share purchases consistently over the last 3 years. During that period, cash could have been allocated to shareholders or to operations. The company's leadership chose to put the cash into share repurchases. Over the same period, the stock price has decreased. The share purchases have been a consistent loser for Sears and shareholders. Money was squandered.

• The share repurchases have taken away from investment in stores. Capital expenditures have been embarrassingly low for Sears since at least 2008. While other retailers have been investing in new stores and maintaining existing stores, Sears has significantly cut back. Based on public financial filings, between 2007 and 2011, average capital expenditure for a sample of retailers was over 3%. Sears average capex was below 1% over the same period. This is particularly striking for Sears, which owns around 20% of its locations. Currently capital expenditures are about half of depreciation (the accountant's measure for how much fixed assets are used during the period). Capex is necessary with such a large real estate portfolio. With Sears, it is just not happening. As a result, the physical stores are suffering.

• In addition to cutting back on capital expenditures, overhead costs have been cut to barebones. Operating margins are as low as any retailer should go. (See our previous article on movements in retailers' margins.) Cutbacks have two major impacts. First, once margins are as low as they can be sustained, there is no more room for margin improvement. In fact, if anything, costs will increase. Second, cutbacks lead to poor customer service. Fewer sales people make fewer sales. Poorly maintained stores are undesirable to customers. Poor monitoring creates opportunities for theft. Lacking warranty service spawn fewer warranty sales. These impacts build an environment that repels customers. Operating margins are already around 2%, by far the slimmest in the industry. They do not have room to go down, and with the existing operating structure they cannot go up.

• Management is quick to blame poor sales on the macroeconomy. However, who wants to shop at a store that is not maintained? Who wants to buy an appliance (one of Sears' mainstays) when warranty service has been cut back? As management continues to cut back support, sales will continue to slide. The only way to bring in customers then will be to lower prices (and margins, which the company can barely afford).

Further, poor sales and cash flows (including many stores which have negative cash flow) have put the company is a bad cash position for the future. The company has short term debt that will need to be refinanced in 2012 and anticipated pension contributions of $74 million in Q4 of this year. The company had cash of $624 million at the end of October. For any retailer, Q4 is a huge cash inflow period, so there is some room to breathe. But Sears will be struggling to stay afloat through the inventory purchases in Q3 of next year.

In effect, Sears is run like a company being liquidated over the next 10 years. A poor 2011 holiday and bad cash flows in the short term could accelerate the liquidation to big downsizing and sell-offs in 2012 which will continue over the next few years. Investors must ask what, if anything, will reverse this trend. So far, nothing has been done to fix the problems. The new CEO cannot make a change as long as the largest shareholder and chairman of the board has a vice grip on the company. Based on the recent sales figures, unfortunately, the company's historic image has already shifted in the eyes of consumers.

Continued poor financial performance will tip the markets further against Sears. It is not clear how fast or how far down the share price will go. However, it is clear that the price will go down. In twelve months, the possible range is between $25 and 55 per share. The midpoint of the range, $40, is a most likely candidate. This represents a roughly 30% decline from the current price. If the company continues on the current track, the price will continue to zero. The best thing for an investor is to get out now.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Madigan calls Illinois House back to work Monday for CME/Sears bill
By David Schaper
Chicago Tribune
December 7, 2011

Speaker Michael Madigan has just called the Illinois House back into special session Monday, an indication that a tax-break deal is close to keep Chicago's trading exchanges and Sears Holdings Inc. from leaving the state.

Multiple sources confirm that the House Revenue Committee is set to meet at 10 a.m. Monday, and the full House at noon.

A spokesman for Senate President John Cullerton said that while he has not yet announced anything, "Tuesday is a good possibility."

House Revenue Committee Chairman John Bradley, D-Marion, who has been leading negotiations on a big tax-break deal, said nothing yet is complete, but seemed to suggest that just a a few loose ends need to be tied up.

The fact that a session has been called "is not a bad sign," Mr. Bradley said. "We want to get this done before the holidays and have some certainty."

As previously reported, the deal that had been discussed yesterday and over the weekend was to break the tax-break package into three separate bills.

One would offer about $100 million altogether to CME Group Inc., CBOE Holdings Inc. and Sears, with lesser breaks for other firms that would benefit from extending the state's research-and-development tax credit and renewing its corporate loss carry-forward provision.

A second bill that's been discussed would hike the state's earned-income tax credit for low-income working people—a particular demand of Gov. Pat Quinn—with a third reportedly hiking the personal exemption on the individual income tax.

The Legislature two weeks ago was unable to firm up a bill, with the Senate and House mainly differing over the earned-income break.

-------------------------------------------- D P. wrote:
Good Jobs First

Good Jobs First is a national policy resource center for grassroots groups and public officials, promoting corporate and government accountability in economic development and smart growth for working families. We provide timely, accurate information on best practices in state and local job subsidies, and on the many ties between smart growth and good jobs. Good Jobs First works with a very broad spectrum of organizations, providing research, training, communications and consulting assistance.
Good Jobs First
1616 P Street NW Suite 210
Washington, DC 20036
202-232-1616


D P. wrote:
Time for lawmakers to stand up to those corporate bullies

I desperately want to believe our lawmakers have come to understand that, if they continue to entertain this form of corporate blackmail, business after Illinois business follows in their larcenous footsteps.

But above all, my fondest wish is, like our stalwart NBA players, these suddenly-savvy state representatives actually have the nerve to call Sears' bluff.

Holding Illinois hostage over tax breaks

Honestly, if I were running a big business in Illinois while watching the clowns in Springfield driving the state into financial ruin, I'd also want to get out before the state's debt bubble bursts. This unfolding disaster isn't something that businesses can afford to watch from the sidelines. A good business climate requires more than a reasonable and fair tax structure; it also requires a sound infrastructure and a reasonable expectation that it will stay sound. Illinois can promise none of it.

Yet …

Talk about shooting the wounded. Coming now, the companies' demands are as untimely as extorting a blood donation from an intensive-care patient. Yes, the state put itself in the financial intensive care unit and yes, the corporate threats of moving might finally spur the clueless Democratic state leadership to finally clean up their mess.

But the corporate demands are shameless. They come at the wrong time. The state can no more afford to pay this kind of extortion now than it is able to immediately clear up its multibillion-dollar debt to the public employee pension funds.

The line of companies whose demands for taxpayer largesse seems endless.

D P. wrote:

How are they going to pay for these special backroom deals for the favored few?

What about the rest of the businesses in the state that are upset about paying higher taxes?

Why not just lower taxes for all Illinois businesses?

These politicians make me sick, the CME/CBOE shakedown is just a bluff and they have no plans to go anywhere over state taxes.

Jolly J. wrote:

The fact of the matter is these exchanges directly and indirectly have create thousands of high paying local jobs in Chicago and Illinois. Some put the number of jobs these exchanges have helped create, directly and indirectly­, at 10 to 20 thousand and even higher. Some who have commented simply do not realize the enormously positive impact these exchanges have had on the economy of Chicago and Illinois. Both these exchanges have been in Chicago longer than anyone in Illinois has been alive, if they where to leave their hometown the economic impact to Chicago and Illinois would be many, many times the impact of Illinois losing 6% or it's corporate tax revenue. CME Group pays 6% of the entire amount of corporate taxes the State of Illinois collects. However these two exchanges asking for tax relief is not the real problem, the real problem is the perceived anti-busin­­ess climate which exists in Illinois due to the relatively huge increase in corporate taxes. And, the main reason for the need of increased taxes is the unfunded State of Illinois pension liabilitie­s. Until the Illinois pension system problem is solved, the State of Illinois will never have enough revenue to properly govern the state. If the two exchanges leave it is unlikely Chicago and Illinois could fully recover. The exchanges have been and continue to be a start-up incubator for Illinois based financial service businesses­­ and the exchanges are the reason Chicago, Illinois is a world class financial center.

Matt L. wrote:

We would urge the legislators and other parties who are considering their options in regard to these tax incentive proposals, on both or all sides, to ask themselves the question "is this within 10% or 15% of reasonable?" and if the answer is "yes", to go for it. If Governor Quinn wants a couple of legislative things from the other side to give it the all clear, he should not be ignored. There are terrible problems with Sears today. The firm has serious management problems, coming straight from the top and also from the flanks and while the firm not on the rocks yet, it is coming under various kinds of pressure. What this means is that you, the legislators, need to be careful about being too tough on them, because they may be weaker than you think - and it is an important Midwestern company, hopefully with some kinds of improvements in its future, we hope so anyway. We think there are still strong roots belonging to Sears Roebuck, and the company can grow its way into a stronger future, with new management. If they are pressed into making a fast money deal somewhere else, they might do it, because today they are weak. That does not mean they will be weak forever - we hope there will be management changes at the level of a sale of the company - but for the moment the issue is not to harm them in a corporate finance sense, in the sense of deep-sixing the tax package they want. They can go elsewhere, and that would not be good. And, we would take this opportunity to say to Mr. Lampert, now that you have backed a distressed State, the State of Illinois, into the corner, bravo Mr. Hedge Fund, count your winnings or losings and put the company up for sale, because you are running it into the ground, and it is an important American company.

Matthew W. Lechner
Chairman of the Board
CONTINENTAL ILLINOIS

James C. wrote:

Crains has had about 4 articles - at least - about giving Sears a tax break. After each one, I have suggested that Crains go out and investigate how many jobs are actually held by US citizens at Sears in Hoffman Estates and how many jobs are being done by H-1B Visa workers who are NOT US citizens and do not own property in Illinois (they are in apartments)

How many jobs are we really saving? Either the "journalists at Crains fo not care or they just aren't competent enough to do a simple investigation. Either way, Crains is NOT on top of this story.

Any sum of money like what they plan to give SEARS and the CME should have the stipulation that they should be hiring US citizens and NOT cheap foreign labor.

Illinois "workers" are not benefitting by Illinois giving millions of dollars away to these corporations. AND - smaller corporations that are here are footing the bill by paying more in a corporate tax that has been foisted on them. Why not just repeal the tax for everyone?

I dissolved my Class C Corporation last year and if I re-incorporate, it will NOT be in Illinois.

Kimberly L. wrote:

I'm with N.N. As a small business, I'm still looking for some sort of break -anything! Remember the hiring tax credit? I hired three that year and only one counted, earning me less than $100. And if the business taxes don't cripple me, certainly any flow through to personal taxes will!

Rod D. wrote:

These companies had their tax rate raised by 66%. I don't think people realize these businesses and the thousands of jobs they create provide a huge stimulus to the local economy. Can you calculate the positive impact 9,000 jobs have on Hoffman Estates, Chicago and the surrounding communities? The other states which are trying to lure these companies away from Illinois are also offering huge tax breaks and incentive packages. Maybe something needs to done about states bribing businesses with taxpayer money to leave a state and take their jobs to another state.

James B. wrote:

Always funny reading the preposterous comments from shills for these politicians and corporations.

Let's be clear, these hundreds of millions are ANNUAL un-funded tax breaks which are being triggered by the whopping tax increases the dems shoved down our throats last year. And I'm sure they'll soon total over a billions dollars a year wen Cat, Kraft, Boeing and big pharma are done!

But I have to say I LOVE the increases! They are only accelerating the ultimate bankruptcy of the state and public employee pension plans. Then, when all of the dem sheeple stop receiving those lucrative, mostly unearned pensions for substandard work, they can take to the streets and pursue their street justice here in Madiganistan As for most of us, though, we'll be long gone laughing at you all.

David R. wrote:

I'm upset that people keep saying that Sears/Kmart is evil and they only care about themselves. Sears/kmart worked with Michele Obama and VP Biden with Heroes at Home/ rebuilding Together to help our Veterans http://www.youtube.com/watch?v=8tgT2iFmwZU and Kmart is the March of Dimes' number 1 corporate sponsor, raising over $71 million for stronger, healthier babies. Since 2006 they have also helped raise 8 million dollars for St. Jude and since 2008 over 1.5 million to the American Diabetes Association. They have over 6,000 associates at the Hoffman Headquarters. Those 6,000 contribute to homeowners, renters, restaurant eaters, tax payers. In addition thousands of hotel room renters. Those employees live in our neighborhoods, they pay taxes, and their kids go to our schools. You can take a look at the Detroit suburbs to see what happens to a town when a major company goes away. I don't want to see Elgin, Hoffman, Streamwood, Dundee, look like them.

Sears CEO seeks the courage to change
By David Schaper
Toronto Star
December 6, 2011

From his home in north Toronto, Calvin McDonald runs to work four days a week.

In the dark, the cold. The winter.

The new chief executive officer of Sears Canada is doing the same at work; running flat out to revive the struggling department store retailer.

From fixing the behaviours that no longer work to setting the goals for a three-year transformation, McDonald has his work cut out for him.

"We'd lost our way," McDonald said Tuesday in his first media interview since joining Sears six months ago.

Sales are down a whopping 7 per cent so far this year, and the company swung to a third quarter loss after writing down inventory.

"Our declining sales are greater than our ability to manage our costs," he acknowledges.

The company has been losing market share for several years in general merchandise to lower priced rivals, such as Walmart, and in clothing to hip new specialty retailers.

The company's brand positioning is unclear to customers.

But within the company, McDonald says, he found 'an incredibly refreshing' awareness of the challenges it faced.

He talks about fighting, winning, identifying 'hero' categories and focusing on them.

He's started by putting a sharper focus on major appliances and mattresses, he says.

He sees kids and mens dresswear as two other departments where Sears can shine.

"We've got to have the courage to change," he says. "We were simply doing the same things we did previously."

Joining Sears was a big change for McDonald after 18 years at Loblaw Cos. Ltd., where he started his retail career. Unless you count delivering the Sears Wish Book in his hometown of London, Ont., when he was 12.

Behind his desk in Sears head office, above its Eaton Centre store in downtown Toronto, he's had every Wish Book catalogue cover framed since the company's inception.

Hanging near his laptop is the Santa hat he wore for a photo shoot with the rest of the management team for an upcoming employee event.

McDonald is big on staff communication.

He held the company's first employee town hall in six years to communicate his vision.

He's keen on phrases like 'getting back to customer service' and 'item obsession' and 'value for money.'

And he declined to share the company's internal sales and profit goals for its three-year transformation plan.

However, the company has started making concrete changes, from the faces in the executive suite to its pricing strategy for Christmas.

Much of what customers see today was planned long before McDonald signed on.

But he has streamlined the flyer, cut 70 head office jobs, and outlined a plan for future growth.

Jane Cudmore, Larry's wife, dies at 75
Pocasset, MA
December 5, 2011

Pocasset – Mrs. Jane (Caldwell) Cudmore, formerly of Westborough, died Thursday, December 1, 2011 at home surrounded by her family. She was 75.

Jane was born on March 16, 1936 in Brockton a daughter of the late Lt. Col. Clyde and Mildred (Lindbolm) Caldwell. Raised in Brockton she was a graduate of Brockton High School. From a friendship that formed in the third grade with Laurence E. Cudmore to a courtship that tagged them high school sweethearts they married on February 4, 1956 in Brockton. In good times and in bad, in sickness and in health 55 years later he was by her side when she passed. They were each other's first and only love.

Laurence worked for Sears-Roebuck Company and his work took them to various parts of the country and a time in Oakville, Ontario. Life as family was spent in Newtown Square Pennsylvania, Westborough and eventual retirement while they resided in Chicago. They maintained a summer home in Pocasset which always served as a place for many family vacations and gatherings. In later years, they divided their time between the Cape and Venice, Florida. With a love for the ocean and golf they were longtime members of the Pocasset Golf Club and Waterford Country Club in Florida. They moved to Shrewsbury in August to be closer to family.

After raising and educating her family Jane worked for many years as church secretary at Good Shepherd Lutheran Church in Westborough.

Jane loved the arts and music and treasured time spent with her family. She was also a voracious reader and talented with yarn and needle she knitted many gifts for family and friends. While in Canada she was a member of the American Women's Club and offered countless hours of volunteer work with the homeless.

She is predeceased by her sister, Priscilla Stoll.

In addition to her husband of 55 years, Laurence E. Cudmore, she leaves her children, Kristina C. Callaway of Norwich, Vermont, Susan L. Powell of Shrewsbury, Andrew J. Cudmore and his wife, Jennifer, of Princeton and John C. Cudmore and his wife, Caroline, of Needham; her grandchildren, Benjamin and Sarah Callaway, Virgil, Abigail and Joshua Powell, Evan and Ella Cudmore, Elly and Jack Cudmore; her sister, Nancy Johnson and her husband, George, of Madison, Connecticut; nieces and nephews.

Family and friends will honor and remember Jane's life by gathering at The Pocasset Golf Club, 24 Clubhouse Drive, Pocasset, on Tuesday, December 13th where her Memorial Service will be celebrated at 11:00 a.m. The Rev. Kenneth Bean will officiate. A reception will follow. Interment will be private.

In grateful appreciation for the tender care given to Jane and her family in lieu of flowers please honor her memory with a contribution to Beacon Hospice, 5 Millbrook Street, Worcester, MA 01606.

Sears Holdings Corporation Stock Downgraded
By David Schaper
TheStreet Wire
December 5, 2011

NEW YORK (TheStreet) -- Sears Holdings Corporation (Nasdaq:SHLD) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

• SEARS HOLDINGS CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year.

During the past fiscal year, SEARS HOLDINGS CORP reported lower earnings of $1.24 versus $2.07 in the prior year. For the next year, the market is expecting a contraction of 288.3% in earnings (-$2.34 versus $1.24).

• The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Multiline Retail industry. The net income has significantly decreased by 93.1% when compared to the same quarter one year ago, falling from -$218.00 million to -$421.00 million.

• Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company.

Compared to other companies in the Multiline Retail industry and the overall market, SEARS HOLDINGS CORP's return on equity significantly trails that of both the industry average and the S&P 500.

• The gross profit margin for SEARS HOLDINGS CORP is currently lower than what is desirable, coming in at 25.60%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -4.40% trails that of the industry average.

• The share price of SEARS HOLDINGS CORP has not done very well: it is down 14.95% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter.

Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

Sears Holdings Corporation operates as a retailer in the United States and Canada. The company's Kmart segment operates stores that sell merchandise under Jaclyn Smith and Joe Boxer labels, as well as Sears brand products, such as Kenmore, Craftsman, and DieHard. Sears has a market cap of $6.45 billion and is part of the services sector and retail industry. Shares are down 22.1% year to date as of the close of trading on Friday.

Sears Considers Leaving Illinois For Better Tax Deal
By David Schaper
NPR
December 2, 2011

Sears Holding Corp., parent company to Sears and Kmart, is considering a move from its corporate headquarters after a tax incentive package failed to pass the state House of Representatives. More than 6,000 employees work at the Hoffman Estates, Ill., campus.

Thousands of jobs are on the line in a competition between states over the corporate headquarters of Sears. Several states are offering tax incentive packages to try to lure the company away from Illinois, including one bid from Ohio that's worth up to $400 million.

The Sears Holding Corp., parent company to Sears and Kmart, says it is seriously considering the offer after Illinois lawmakers failed this week to approve a package of tax incentives aimed at keeping Sears and another corporate giant from leaving.

The failed legislation would have also included tax breaks and credits for the parent company of the Chicago Mercantile Exchange, which is threatening to leave.

Illinois Gov. Pat Quinn says he is willing to make changes and hopes lawmakers will take the tax credit package up again before Christmas.

"I think that the proposed help for Sears is more than adequate to keep them here, and I hope we can put the movement together this month to get that job done," he says.

Quinn and his fellow Democrats who control Illinois' Legislature have been taking heat from the business leaders for raising the state's income tax rates last January to help close a gaping budget deficit.

Other States Make Their Offers

The tax hike led other states, including Indiana, Wisconsin and New Jersey, to launch ad campaigns in Illinois to try to lure businesses away.

The latest is Ohio, which Illinois officials say is offering $400 million in tax incentives to Sears. Republican Gov. John Kasich would not confirm the amount, but he told reporters last month that Ohio is upping its game in pursuit of Sears and other corporate giants.

"We're in there pushing and offering," Kasich said. "It's really good to have a CEO talk about the fact that we have been very, very effective in our offers; that's why we got their attention."

States are increasingly looking to take businesses away from one another as new job creation remains slow.

"We've received proposals from roughly one-third of the states in the union," says Sears spokesman Chris Braithwaite.

He says there's a lot more at stake than just the 6,000-plus employees working in Sears' corporate headquarters — more than 9,000 local vendors, contractors and businesses that provide goods and services to Sears.

"You're talking about 30,000 hotel nights and meals, 18,000 airline tickets in and out of O'Hare for associates alone, 100,000 people visiting our campus every year," Braithwaite says. "This is a company that definitely is providing value to the state, and obviously, as we've seen from the interest from other states, they see that too."

Backlash Against Corporate Incentives

But states are beginning to demand that companies that get tax breaks to stay or relocate live up to their hiring and employment promises — or even promise no layoffs — as part of the deal.

And the backlash against bank bailouts and corporate giveaways that is fueling the Occupy Wall Street movement is making some lawmakers, at least in Illinois, a little wary of incentive packages.

"We need to make clear that Illinois will not be held hostage by corporations threatening to exit," said Democratic Illinois State Rep. Jack Franks before casting his vote against the Sears deal.

Quinn says he won't get into a bidding war for Sears, and he insisted on some tax relief for small businesses and Illinois' working poor as part of the assistance package.

Sears says it needs that package to pass before the end of the year if the company is going to stay in the state it has called home for more than a century.

Investcorp Hires Scott Freidheim As CEO Europe
By Marietta Cauchi
Dow Jones Newswire
December 1, 2011

Bahrain investment firm expects to capitalize on opportunities across Europe

--Freidheim joins from Sears Holdings, formerly Executive Vice President at Lehman Brothers
--Investcorp had $11.8 billion in assets under management as of June 30

LONDON (Dow Jones)--Investcorp Thursday said it has appointed Scott Freidheim to the new position of chief executive for its European operations, as the Bahrain private equity firm seeks to capitalize on opportunities it sees opening up across Europe.

Freidheim joins Investcorp from Sears Holdings Corp. (SHLD), where he was an executive vice president. Previously he was chief administrative officer and executive vice president at Lehman Brothers Holdings (LEHMQ).

Investcorp invests funds on behalf of wealthy Middle Eastern investors buying assets and companies across Europe, the U.S. and other Middle Eastern countries. As of June 30, Investcorp had $11.8 billion in assets under management.

Unlike some private equity firms that are retreating from Europe because of challenging conditions, Investcorp believes the environment is creating investment opportunities. The company reckons the tough environment, tight financing and wholesale disposals of assets by European banks combined with the need for capital by good companies are creating a pipeline of "interesting" opportunities.

"Scott's combination of senior management experience in investment banking and top level operations experience in retail and consumer products is very relevant to us at this time," said Nemir A. Kirdar, Investcorp executive chairman and chief executive.

"More than ever at this challenging financial juncture, we believe there is considerable unrealized potential and overlooked value in companies in countries across Europe," he added.

Previous investments include Italian luxury group Gucci Group N.V. (GUCG) which it took public in 1995, U.S. high-end kitchenware retailer Sur la Table and French auto part distributor Autodistribution. Investcorp is currently vying with Permira in an auction for Turkish retailer A101.

D300, Sears, Hoffman Estates react to impasse in Springfield
By Emily McFarlan
Courier News
November 30, 2011

Although there remains agreement over a Sears tax break that would affect Community Unit School District 300, Tuesday’s legislative stalemate in finalizing that agreement led to differing reactions among the parties involved.

District 300 officials say they are confident the agreement will remain intact. But representatives for Sears Holdings Corp. and the village of Hoffman Estates expressed some anxiety Wednesday as they await final approval of an accord reached last month to extend the economic development area property tax designation around Sears headquarters in Hoffman Estates.

That approval was hoped for on Tuesday but did not occur as state lawmakers voted on the legislation during the General Assembly’s special session.

A Senate deal to extend the EDA — part of a tax-break package to keep Sears and other businesses in Illinois — passed that chamber but failed in the House. And the House did not call a vote on its scaled-back version of that package Tuesday because its sponsor, state Rep. John Bradley, D-Marion, said it would not have the support to pass it.

That sent Sears scrambling to “allay some … concerns” from associates Wednesday, according to company spokesman Chris Brathwaite.

An email from the company to those associates Wednesday morning said, “Our commitment to you remains the same: to be thorough in our review of all of our options. We hope that lawmakers will achieve a compromise very soon, as our timeline for making a decision about our future by the end of the year has not changed.”

Sears has said if tax breaks for the EDA — set to expire in 2012 — are not extended, relocation offers from Columbus, Ohio; Austin, Texas; and other cities would look more attractive. The company will decide whether to leave Illinois by the end of the year, it has said.

Hoffman Estates Mayor William McLeod said he also heard concerns Wednesday from residents and businesses within the village.

If Sears does decide to leave Illinois, McLeod said, that would put the office vacancy rate at 59 percent in Hoffman Estates. And Sears’ 90,000-square-foot office building near I-90 would be “a huge hole to fill,” he said.

“Obviously, you have people who work at Sears or jobs related to having Sears there, and their life is on hold,” he said. “They don’t know what will happen.”

Lawmakers indicated Tuesday that their opposition to the two deals had to do with income tax credit provisions and other pieces — which were unrelated to extending the EDA in Hoffman Estates. Sears said it received “solid support for our portion of the legislation.”

“We are disappointed that the legislature was not able to reach agreement and pass a package that will help us remain an Illinois company,” Sears said in Wednesday’s email.

Meantime, District 300 Superintendent Michael Bregy said in an email to district families and staff Tuesday night that the “good news” is the agreement finalized involving the district, Sears and Hoffman Estates was unlikely to change.

The Carpentersville-area school district has opposed extending the EDA since legislation first was introduced this spring, as it has said those bills would send up to $14 million in tax dollars meant for the district to the EDA instead. It has said it was “reluctantly satisfied” with the deals presented Tuesday by both the House and Senate.

District 300 leaders are prepared to “return to Springfield” whenever lawmakers do agree to a deal they feel could pass both the House and Senate, according to the superintendent.

“But we don’t know how soon that will be,” Bregy said. “It could be later this week, it could be early next week, or it could take even longer.”

And Sears said, “The fight is not over, and we continue to work toward a resolution. Yesterday was another step in this process. But a final decision has not yet been made.”

Sears reassures workforce, looks at next steps
By Anna Marie Kukec
Daily Herald - Suburban Chicago
November 30, 2011

Sears Holdings Wednesday issued an internal memo to Hoffman Estates employees, saying the retail giant is committed to looking at all options after legislators failed to agree on tax breaks for the company.

While leaving the door open for a possible move out of state, Sears executives in the memo held out hope for eventual approval of the tax breaks it is seeking and called the failure of the legislators to act on the issue Tuesday “another step in this process.”

Sears is seeking an extension of existing tax breaks with Hoffman Estates and says it has offers of tax incentives from other states. The company on Tuesday reiterated its intention to decide this year whether to leave Illinois. Lawmakers, meanwhile, are not scheduled to meet again until January.

Progress toward a deal broke down over tax breaks for the working poor that were included in the same legislative proposal.

“We received solid support for our portion of the legislation and are hopeful that the unrelated issues, including the earned income tax credit provision, will be resolved in short order by prudent leadership,” Sears’ memo to employees said.

“You should know that our portion of the bill was endorsed on the record by representatives of both Hoffman Estates and District 300. The fight is not over, and we continue to work toward a resolution.”

While the process continues, Sears said “a final decision has not yet been made. Our commitment to you remains the same: to be thorough in our review of all of our options.”

District 300, which would get more property taxes from the Sears property if the tax breaks are allowed to expire, protested strongly at first but this week signed on to a House version of the tax break deal.

While the battle continues in Springfield, Sears still must maintain stability in Hoffman Estates as it faces year-end holiday sales and struggles to keep its bottom line from bleeding further.

Sears maintains it has been wooed by at least 19 states, and The Columbus (Ohio) Dispatch reported Nov. 18 that Ohio Gov. John Kasich talked with Sears CEO Louis D’Ambrosio in an ongoing attempt to lure the company to move. But the story indicated that Kasich “doubts Sears will leave suburban Chicago.” Kasich also alluded to his conversation with D’Ambrosio that indicates Texas and Ohio still are in the running with Illinois as the home of the headquarters.

The Ohio governor’s deputy press secretary, Connie Wehrkamp, and Jobs Ohio economic development spokesman Marlon Cheatham both declined to comment. Texas officials didn’t immediately return phone calls.

The company now has to walk a fine line between its threat to move and its efforts to reassure its 6,100 Hoffman Estates-based employees, who might wonder if they’ll have jobs as they face the end of the year in a tough economy.

“They’re going to keep looking at their options, since it’s obvious that Illinois is fading away,” said John Melaniphy Sr., retail analyst and principal with Melaniphy & Associates in Chicago.

A possible scenario is relocating Sears’ top executives and select department heads and moving them to a business-friendly state like Texas, said Melaniphy.

However, moving is costly, Melaniphy pointed out.

Besides severance packages for employees and substantial moving costs, the property in Hoffman Estates would become an economic drain, Melaniphy said.

“Who would take that space? There’s no one standing in line for it,” Melaniphy said.

Lawmakers leave Sears-CME tax-break deal in limbo
By Kathy Bergen and Monique Garcia
Chicago Tribune
November 30, 2011

Illinois lawmakers adjourned Tuesday without reaching agreement on a tax-break package aimed at keeping two major employers from exiting the state.

In the end, the impasse on legislation that would provide relief to Sears Holdings Corp. and to CME Group Inc. stemmed more from partisan disagreement on broader relief for all businesses and for individual workers than on aiding the two corporations, though there was some opposition as well to singling out powerful firms for help.

A number of legislators and Gov. Pat Quinn felt strongly that the bill should include substantial tax relief for workers and families of modest means, while many House Republicans wanted it to focus solely on tax breaks for business that would lead to job growth. But they were unable to meet halfway, particularly on how much to increase the earned income tax credit for low- and middle-income families.

Legislators said they intend to revisit the issue in the near future.

"I'd say it'll be days or weeks, rather than months," said Rep. John Bradley, D-Marion, who co-sponsored a House version of the bill that never came up for a vote in the chamber.

"We're willing to be here and talk whenever," said House Republican Leader Tom Cross, of Oswego. "There would be more support if it contained solely job-related items."

A key question is whether Sears Holdings, the parent of Sears and Kmart, and CME Group, the parent of the Chicago Mercantile Exchange and the Chicago Board of Trade, will sit tight while the General Assembly tries to reach consensus.

CME Group declined to comment Tuesday evening.

Sears, in a statement, expressed disappointment at the impasse and hope that a compromise will be reached soon. "Our timeline for making a decision about our future by the end of the year has not changed," Sears said.

Two versions of a tax-break package were put forward, one by the House and one by the Senate, with the Senate version offering greater relief to individuals. It would have added $76 million a year to the House version, which had a price tag of $250 million a year.

The Senate passed its version, but it was shot down on a 99-8 vote in the House.

Senate GOP leader Christine Radogno, of Lemont, said a deal was not reached because of a "failure of leadership" on the part of Quinn.

"He was nowhere to be seen today," she said.

Quinn brushed aside the criticism and said, "I think everybody should probably take a step back and understand that if you're going to have any kind of tax relief package, it must have significant relief for working families raising kids and working hard. Unless that happens, there won't be any tax relief."

He also dismissed concerns that a failure to act would force the exchanges and Sears to leave the state, saying "there is ample time" to reach a deal.

Doug Whitley, president of the Illinois Chamber of Commerce, expressed disappointment at the outcome and suggested the problem was piling too many provisions into one bill.

"Any time there's a tax bill, it becomes a Christmas tree, and legislators can't keep themselves focused on the issue at hand," he said.

Tribune reporters Alejandra Cancino and Ray Long contributed.

Lawmakers adjourn without Sears deal
By Mike Riopell
Daily Herald - Suburban Chicago
November 30, 2011

SPRINGFIELD -- The Illinois legislature adjourned Tuesday with no agreement on a tax-break package that includes Sears Holdings Corp., raising questions about the company’s future in Hoffman Estates.

“At this point in time, we have reached a temporary impasse,” said state Rep. John Bradley, a Democrat from downstate Marion.

The retail giant says it’s sticking to its plans to decide by the end of the year whether to move its headquarters out of Illinois, and lawmakers don’t plan to return to the Capitol until a deal is ready — possibly not until next year.

“We are disappointed that, today, the legislature was not able to reach agreement and pass a package that will help us remain an Illinois company,” Sears spokesman Chris Brathwaite said in a statement.

“It is our hope that lawmakers will achieve a compromise very soon as our timeline for making a decision about our future by the end of the year has not changed,” he said.

Lawmakers echoed the hope they’ll eventually reach a deal.

“Unfortunately, that day is not today,” Bradley said.

After a dramatic day in which the House and Senate pushed separate versions of a tax-break bill but failed to agree on one, negotiations broke down over how much tax relief the state should give the working poor.

The proposal to extend Sears’ property tax deal with Hoffman Estates also is tied to tax changes for futures exchange CME Group and research and development tax credits for businesses across Illinois.

The Senate Tuesday approved a tax-break deal backed by Gov. Pat Quinn that included more valuable credits for the working poor than were included in the House version.

The credit can be earned by families whose incomes fall below a certain level.

In the House plan, the state earned income tax credit would have risen from 5 percent to 7.5 percent and stay there. The Senate would have raised the earned income tax credit to 7.5 percent for next year and to 10 percent the following year.

The Senate version would also have raised the standard income tax deduction for individuals, now $2,000, with the consumer price index every year.

The House rejected the Senate’s plan forcefully by a 8-99 vote, sending a clear message that more deal-making had to be done before anything could be approved.

The Senate approved their version of the plan Tuesday by a 36-18 vote. State Sen. Matt Murphy, a Palatine Republican, argued the tax increase approved by Democrats earlier this year is the cause of businesses’ cry for tax relief. But Murphy voted for the tax-break proposal anyway, saying businesses needed the help.

Critics like state Sen. Chris Lauzen said lawmakers weren’t doing enough for businesses across the state. Legislation aimed at keeping 4,000 Sears jobs in Illinois — the minimum proposed for the company to qualify for the tax breaks — shouldn’t be considered more valuable than 400 small employers with 100 workers each, he said.

“The little guy, the small businesses, continue to pay,” said Lauzen, an Aurora Republican.

The loggerheads come after months of protests by Community Unit District 300 came to an end this week, with Superintendent Michael Bregy saying he was “reluctantly satisfied” with the deals that were brewing to prevent Sears from pulling up stakes and taking 6,100 jobs to other states that have come courting, such as Ohio.

The school district had sought more property tax money from the Sears site.

But that show of unity was to no avail.

A statement posted on District 300’s website late Tuesday reflected the uncertainty that now surrounds the proposal.

“We have been told to be on alert that D300 leaders and supporters may need to return to Springfield at any moment, and we are certainly prepared to do so,” it read in part.

Hoffman Estates Mayor Bill McLeod couldn’t be reached for comment after the legislature adjourned late Tuesday.

Rep. Fred Crespo of Hoffman Estates said the Senate’s plan got too expensive and sought to downplay Tuesday’s rejection, saying it wasn’t a vote against Sears in particular.

“It’s just a vote against the package and how do we finance it,” he said. “It has to be a win, win for Sears, the state, for everyone.”

How suburban lawmakers voted on the Senate’s plan for tax breaks for Sears, income tax help for CME Group and credits for the working poor.

Yes

Sen. Pamela Althoff, McHenry Republican; Sen. Kirk Dillard, Hinsdale Republican; Sen. Susan Garrett, Lake Forest Democrat; Sen. Don Harmon, Oak Park Democrat; Sen. Linda Holmes, Aurora Democrat; Sen. Dan Kotowski, Park Ridge Democrat; Sen. Terry Link, Waukegan Democrat; Sen. John Millner, Carol Stream Republican; Sen. Matt Murphy, Palatine Republican; Sen. Christine Radogno, Lemont Republican; Sen. Arthur Wilhelmi, Joliet Democrat.

No

Rep. Fred Crespo, Hoffman Estates Democrat; Rep. Keith Farnham, Elgin Democrat; Rep. Rita Mayfield, Waukegan Democrat; Rep. Tom Morrison, Palatine Republican; Rep. Randy Ramey, Carol Stream Republican; Rep. Dennis Reboletti, Elmhurst Republican; Rep. Angelo “Skip” Saviano, Elmwood Park Republican; Rep. Ed Sullivan Jr., Mundelein Republican; Rep. Michael Tryon, Crystal Lake Republican; Rep. Sandy Cole, Grayslake Republican; Rep. Michael Connelly, Lisle Republican; Rep. Tom Cross, Oswego Republican; Rep. Mike Fortner, West Chicago Republican; Rep. Jack Franks, Marengo Democrat; Rep. Kay Hatcher, Yorkville Republican; Rep. Sidney H. Mathias, Buffalo Grove Republican; Rep. Rosemary Mulligan, Des Plaines Republican; Rep. Michelle Mussman, Schaumburg Democrat; Rep. Elaine Nekritz, Northbrook Democrat; Rep. Emily McAsey, Lockport Democrat; Rep. JoAnn Osmond, Antioch Republican; Rep. Sandra M. Pihos, Glen Ellyn Republican; Rep. Darlene Senger, Naperville Republican; Rep. Carol Sente, Vernon Hills Democrat; Rep. Tim Schmitz, Batavia Republican; Sen. Suzi Schmidt, Lake Villa Republican; Sen. Dan Duffy, Lake Barrington Republican; Sen. Tom Johnson, West Chicago Republican; Sen. Chris Lauzen, Aurora Republican; Sen. Michael Noland, Elgin Democrat; Sen. Carole Pankau, Itasca Republican; Sen. Ron Sandack, Downers Grove Republican.

Present

Rep. Chris Nybo, Elmhurst Republican; Rep. Linda Chapa LaVia, Aurora Democrat; Rep. David Harris, Arlington Heights Republican.

Didn’t vote

Rep. Franco Coladipietro, Bloomingdale Republican.

Sears deal grinds to a halt

Daily Herald - Suburban Chicago
November 29, 2011

SPRINGFIELD — The Illinois House and Senate today couldn’t agree on a tax breaks proposal that includes Sears Holdings Corp., raising questions about the company’s future in Hoffman Estates after the company has said it plans to decide by the end of the year whether to leave the state.

A dispute between House and Senate lawmakers over how much tax relief the state should give the working poor stalled the proposal to give tax breaks to Sears.

The Illinois Senate today approved a tax breaks deal backed by Gov. Pat Quinn that was different from a version that gained support in the House. The Senate plan included more valuable credits for the working poor than their House counterparts are considering, creating a sticking point that might not be quickly resolved.

The House rejected the Senate’s plan handily by a 8-99 vote.

The reaction of Sears officials was not immediately clear.

Lawmakers aren’t scheduled to meet again for the rest of the year, and Senate President John Cullerton has suggested the issue could wait until next year. But that clashes with Sears’ desire to make a decision about their headquarters before the end of 2011.

The sweeping proposal would have sent tax help to Sears and futures exchange CME Group, and offered several other business and individual tax breaks.

On those individual tax breaks, the House and Senate have offered competing versions.

So the fate of a large tax plan intended to try to keep Sears in Hoffman Estates now hinges on whether either House or Senate lawmakers give in on their positions over credits for the poor.

In the House plan, the state earned income tax credit would rise from 5 percent to 7.5 percent and stay there. The credit can be earned by families whose incomes fall below a certain level.

In the Senate plan, the credit would rise to 7.5 for next year and to 10 percent the following year.

The Senate version would also have the standard income tax deduction for individuals rise every year with the consumer price index. The House’s would not. It is now $2,000.

The whole Senate approved their version of the plan today by a 36-18 vote. State Sen. Matt Murphy, a Palatine Republican, argued the tax increase approved by Democrats earlier this year is the cause of businesses’ cry for tax relief. But Murphy voted for the plan anyway, saying businesses needed the help.

Critics like state Sen. Chris Lauzen said enough isn’t done in the plan for businesses across the state. Legislation aimed at keeping about 4,000 Sears jobs in Illinois, he said, shouldn’t be considered more valuable than 400 small employers with 100 workers each.

“The little guy, the small businesses, continue to pay,” said Lauzen, an Aurora Republican.

The loggerheads come after months of protests by Community Unit District 300 came to an end this week. Superintendent Michael Bregy has said he’s “reluctantly satisfied” with the new proposal.

“As you know, it’s been a rather trying time for the school district,” said state Sen. Michael Noland, an Elgin Democrat.

Quinn’s budget director praised the Senate plan, signaling that unlike the House proposal, the governor was poised to sign off on it.

“He thinks that’s a very important part,” said Budget Director David Vaught of Naperville.

But others suggested the proposal simply got too big in an effort to put something for everyone into the legislation.

“Why don’t we break it up into parts?” said state Rep. Jack Franks, a Marengo Democrat.

Sears lays off 70 from head office
By Dana Flavelle
Toronto Star
November 29, 2011

Sears Canada has cut 70 people from its head office in Toronto, effective Monday.

The department store retailer confirmed the reductions, saying it was part of a normal review.

The company, which employs 2,000 people in its head office, said the cuts were made in administrative and support positions.

The move comes two weeks after the retailer reported another quarter of declining sales.

It appears to signal the company's new president and chief executive officer, Calvin McDonald, is starting to put his stamp on the retailer.

"We are not pleased with our results this quarter and have significant work ahead of us," McDonald said on Nov. 15 after the company reported sales were down 7.1 per cent in the latest three-month period.

"The Sears Canada leadership team, with the support of all associates, is committed to making major improvements and has begun to implement new initiatives that are intended to lead the Company to reach its full potential," McDonald also said.

The net loss for the quarter was $46.6 million, or 44 cents a share, versus earnings of $20.8 million or 19 cents a share, a year earlier.

Much of the loss was due the cost of getting rid of excess inventory and restructuring its home services business unit. The company took a one-time $45.6 million pre-tax charge on non-operating activities.

Sears, Kmart Report on Black Friday Activity
By Judy Keen
Appliance Magazine
November 28, 2011

Sears stores opened their doors at 4 AM on Black Friday and reported customers lining up as early as midnight to take advantage of promotional discounts like a Kenmore washer/dryer set pair at $469.99.

Sears store deals included a Seiki TV for $199.99 and a Sylvania seven-inch tablet for $79.99. Consumer electronics were big sellers at both Sears and Kmart stores.

Other big sellers at Sears stores included:

• NordicTrack T5.7 treadmill at $499.99
• E 5.5 elliptical at $449.99
• Craftsman 19-volt cordless drill $39.99
• 42-inch Panasonic TV at $599.99
• 60-inch Sharp TV at $999.99
• Sony PS3 bundle pack at $199.99

Sears stores also reported more customers taking advantage of its integrated retail shopping channels.

Merchandise Pick-Up was busy on Black Friday with shoppers picking up purchases that had been made on Sears.com on Thanksgiving Day. Sears made Black Friday sale prices available online on Thanksgiving Day.

Sears said customers also used integrated shopping channels in-store. It said that, on some occasions, stores reported items as sold out, but Sears employees helped customers buy the items online.

Managers of Kmart stores, also part of Sears Holdings, reported a $199 Ario 32-inch TV and a $79.99 Sylvania seven-inch netbook were among the fast sellers in its stores on Thanksgiving Day, Nov. 24, 2011, and on Black Friday, Nov. 25.

Kmart has been open on Thanksgiving Day for the last 20 years for customers who need to pick up items for Thanksgiving dinner – and for those who wish to start shopping early. Kmart said it had shoppers as early as 2 AM on Thanksgiving Day.

Kmart, like many other retailers in the U.S., is promoting heavy discounts during the 2011 holiday season, including electronics, like a Leader i7 tablet priced at $99.99 and power tools at 50% off.

"Following the initial holiday rush, both Sears and Kmart stores across the country continue to experience a steady flow of foot traffic," said Tom Aiello, Sears Holdings.

Tax breaks could determine fate of Sears' headquarters
By Judy Keen
USA Today
November 28, 2011

HOFFMAN ESTATES, Ill. – If Sears Holdings moves its headquarters to another state, it would be catastrophic to this Chicago suburb, says Mayor William McLeod.

"Our office vacancy rate would be 59%," he says. Besides the 6,100 jobs at Sears' main offices, 9,000 ancillary jobs in the area would vanish, he says. McLeod is urging the Illinois General Assembly to approve an extension of state income tax credits and local property tax breaks to keep the retailer here.

Continuing Sears' tax breaks would be devastating, says Superintendent Michael Bregy of School District 300 in neighboring Carpentersville. The district has lost more than $100 million in local tax revenue since the original deal reduced Sears' property tax burden, he says, leading to budget cuts and high school classrooms jammed with up to 45 students.

Sears' incentives, he says, are being put "on the backs of the kids in our school district."

The issue could be decided when the General Assembly meets Tuesday. State Sen. Dan Kotowski, a Democrat, says the latest version of legislation would require the company to employ at least 4,250 people at its headquarters and repay the money if it fails to do so or leaves Illinois. The bill also would increase tax revenue to school districts and other taxing districts, he says.

"We need to do whatever we can to save jobs," Kotowski says.

The stakes are high as Illinois tries to cut its 10% unemployment rate and cope with an $11 billion budget deficit. The state has lost several employers to other states since corporate income tax rates increased Jan. 1 from 7.3% to 9.5%.

Sears spokesman Chris Brathwaite says everyone is eager "to see this come to a happy ending." The company needs the extension, he says, because when current incentives expire next year, Sears will have recouped only $75 million of the $200 million it spent on infrastructure here.

Sears "has received (relocation) proposals from nearly a third of the states," Brathwaite says. "Clearly, other states, and Illinois for that matter, see value in this company."

Incentives get second look

Some states are re-examining incentives as the unemployment crisis intensifies competition for employers, says Robin Boyle, an urban planning professor at Michigan's Wayne State University. "We're seeing a new day in terms of incentivization of business that is less generous" and gives more discretion to governments, he says. Activity elsewhere:

• Florida might ask companies that received incentives but didn't produce the promised number of jobs to reimburse the state. The state recently released details of 1,521 tax breaks and payments to companies since 1995. The incentives were supposed to generate 224,286 new jobs; 73,669 were created.

"When the people of our state are digging into their pockets to provide these tax incentives, we want to be sure they don't get ripped off," says Senate President-designate Don Gaetz, a Republican.

• The Oklahoma Legislature created a task force that's considering requiring the state auditor to examine every tax credit, from its draft stages to a year-to-year assessment after it is approved.

Legislation changing the process could be filed within 60 days, says Rep. Charles Key, a Republican who serves on the economic development committee. "When is it right for me and you and the average taxpayer to pay a larger share, which is what happens?" he asks. "It's never right and when times are tough it doesn't make any sense."

• In the past year, 15 companies that received tax credits from the state of Iowa created or saved 620 of the 904 jobs they promised, The Des Moines Register reported this month.

Indiana Commerce Secretary Daniel Hasler says incentives are just one tool that helped his state recruit more than 200 companies this year. "The tax incentives we offer are really icing on the cake," he says, and companies "receive them only after they have hired and paid a Hoosier."

Dublin, Ohio, this month approved incentives to keep Socius, a software consulting company, in the city until at least 2016. The deal requires the company to retain 23 jobs and create 13.

City Manager Marsha Grigsby says it's important not to "give too much away" when competing for employers. "The whole reason you want the companies here is for the tax base," she says.

Illinois roots

Sears was founded in 1886 and moved to Chicago in 1887. In 1989, the state gave the company incentives to discourage it from leaving Illinois. The company moved to Hoffman Estates in 1992, but its name remained on its iconic downtown skyscraper even after it vacated the building.

The Sears Tower was renamed the Willis Tower in 2009 as part of a leasing deal with Willis Group Holdings, an insurance brokerage.

Brathwaite acknowledges that company officials have visited potential headquarters sites in Texas and Ohio. They and other states "have made some great proposals," he says.

Bregy has participated in negotiations that he hopes will lead to a deal that shifts some money to school districts. If that doesn't happen, he says, "We don't know how we're going to survive."

McLeod's priority is keeping people working in this village of 51,895. "I'm dealing with reality here," he says. Sears "is by far our largest employer. ...I'm looking at an enormous loss of jobs."

Compromise struck to keep Sears and CME Group from bolting state: Bipartisan tax-break package to head off departures expected to be heard by lawmaker
By Alejandra Cancino
Chicago Tribune
November 26, 2011

Illinois House lawmakers Friday inched closer to a plan that would keep Sears Holdings Corp. and CME Group Inc. in Illinois, while delivering a number of other business-friendly changes to the tax code, a source said.

The compromise legislation, struck between Rep. John Bradley, a Marion Democrat, and Rep. David Harris, a Mount Prospect Republican, is expected to be heard in committee Monday, before the House and Senate convene Thursday.

To counter claims that legislative leaders are caving to wealthy and powerful corporations, the proposal also contains relief for low- and middle-income families. The change to the so-called earned income tax credit had been included at Gov. Pat Quinn's insistence.

The proposal, which has a hefty price tag of $250 million a year beginning in 2013, would be funded through the expiration of the federal bonus depreciation tax credit, which allows businesses to depreciate the cost of equipment.

CME Group, parent of the Chicago Board of Trade and Chicago Mercantile Exchange, has threatened to leave the state in protest of a temporary hike to the state's corporate income tax rate. The proposal would tax income from just 27.54 percent of electronic transactions on local exchanges, costing the state an estimated $100 million a year.

Sears, for its part, would see a renewal of a special taxing district in Hoffman Estates. This would allow Sears to continue to get a break on its local property taxes, although at a lower level. Under the deal, the retailer would also receive an incentive package from the state to retain jobs here, to include tax credits worth $15 million a year for 10 years, another $150 million in potential tax breaks.

The retailer would have the option to take its $150 million in potential credits against its corporate income tax liability, as has been typical of most incentive packages, or against employee income taxes due to the state. State officials could not be reached to confirm details of the plan.

Tribune reporter Kathy Bergen contributed.

Companies going to high-deductible health insurance plans
By Adam Belz
USA Today
November 23, 2011

As workers enroll in health insurance for the new year across the USA, many are discovering their companies are moving to high-deductible health plans.

Health care experts say the move reflects a larger shift toward what the industry calls "consumer-driven" health plans, in which lower premiums and a high deductible encourage consumers to be more conscious of medical-care costs and more cautious about undergoing expensive procedures, thus driving down costs for employers.

In general, consumer-driven plans have moderately lower premiums but twice the deductible of conventional health insurance, according to the Kaiser Family Foundation.

In plans where deductibles are covered by a health savings or health reimbursement account, workers have to pay an average deductible of $1,908, a 2011 Kaiser survey showed. Traditional health plans, on average, have deductibles well under $1,000.

Roughly 180,000 Wells Fargo employees must choose between two high-deductible health plans for next year, said Justin Thornton, Wells Fargo's compensation and benefits manager. A third of Wells Fargo's 270,000 employees are already enrolled in a high-deductible plan by choice, Thornton said. The other two-thirds must choose by year's end.

General Electric introduced consumer-driven plans to its salaried workforce in 2010, and beginning in January the company will move all U.S. employees into some version of a high-deductible plan, said Ginny Proestakes, GE's director of health benefits.

"With annual cost increases at anywhere from two to three times the rate of inflation, we felt to remain competitive we needed to find a new benefits model," Proestakes said in a statement.

American Express went exclusively to high-deductible health plans for employees in 2008, company spokeswoman Caitlin Lowie said. John Deere has made the same move, according to the Employee Benefits Research Institute. So has Textron, which makes Bell helicopters, said Paul Fronstin, director of health research at EBRI.

High-deductible plans have been a popular option for young workers who rarely need medical care and want to pay lower premiums.

Forty-one percent of companies in the U.S. now offer Health Savings Accounts (HSA), the more popular of the two savings vehicles for high-deductible plans, according to a 2011 report by Towers Watson. Another 12% of companies plan to add an HSA option in 2012, the report says. The other option is a Health Reimbursement Account. (HRA).

In high-deductible plans tied to an HSA, the insured saves money tax-free and uses it to help cover his or her deductible and other medical costs. It carries over year to year and from one job to another. In plans with Health Reimbursement Accounts, a designated amount is paid by the employer to cover the deductible and other medical expenses. Only the employer can pay into it. Reimbursements for medical expenses are tax-free, and it carries over year to year. It cannot be carried to a different company.

According to Kaiser, average premiums are higher for programs with HRAs, but deductibles are lower, and companies contribute more to HRAs, on average, than HSAs.

The percentage of workers enrolled in either type of high-deductible plan has quadrupled since 2006, to 17%, according to Kaiser.

"It's safe to say we expect enrollment in consumer-driven health plans to continue to grow," said Dan Kueter, CEO of UnitedHealthCare of Iowa and Central Illinois.

UnitedHealthCare has 3.8 million people enrolled in either HSA or HRA plans, a spokesman for the company said.

Wells Fargo has offered consumer-driven plans since 2004, and a third of employees have already chosen to go with one of the two plans. The majority of those have chosen the HRA, because the company pays $1,000 each year toward a $2,000 deductible under that scheme, Thornton said.

"We would expect most employees to go with the HRA," he said.

13 comments

rocky167
8:03 PM on November 22, 2011
Only a fool lets it employer take care of them.

ShockerX
8:14 PM on November 22, 2011
And only a bigger fool relies on their government.

cjg
8:16 PM on November 22, 2011
Tell me about it. My health plan has a $3000 deductible. Even the high premium plan has a $1500 deductible. This is supposed to be coverage? Its more like im covering my own expenses.

mvt
10:24 PM on November 22, 2011
I've been on High Deductible/HSA plan for about five years and I love it. I just recently recalculated the costs involved for my family of five while enrolling for next year. The HDHSA plan costs me $2K/yr in premiums and my employer pays an additional $500/yr into my HSA, so that's a net cost of $1500. The next least expensive plan costs $5100/yr in premiums for a family of five, so I'm on the plus side of the equation until my family hits $3600/yr of deductible expenditures. That has happened only once in those five years and even then it probably came out about even. The difference has built up a balance in the HSA of around $10K, and that's MY money that I tap for any medical related expenses, tax free. HDHSA plans are exactly the way insurance should work.

ktel
11:27 PM on November 22, 2011

'Bout time we had a real consumer free market in health care. It has been de facto socialist medicine for far too long. What aspects of medicine are not directly or indirectly priced by the government?

SirVivor
11:40 PM on November 22, 2011

This is all about reducing the employer's cost. The welfare of the employee is not a factor in the decision making process.

In 1970, the most common deductibles were $50 or $100. Many of the plans were basic and integrated major medical. These plans had benefits that were paid before the deductible, then the deductible applied and then the major medical come into play. The monthly cost for a family plan was between $30 and $50 depending where in the country you were located.

If the deductible was increased by the CPI, it would be in excess of $1,000 today and so would the monthly cost.

Part of the problem is wages have not increased at the same rate. Employers love today's scenario where there is a high rate of unemployment because they can treat their employees oppressively. Do it my way now or get out. People are lined up waiting for your job.

leocox18
12:59 AM on November 23, 2011
Hell, at the moment,health care threatens to grow to consume the entire economy of not just the United States, but most of the developed world. If you want to use your go to example of Europe, they too face rising health care costs.

nmanley
2:47 AM on November 23, 2011
This comment is hidden because you have chosen to ignore nmanley.

The problem with these plans is that they are NOT lowering the premiums for employees AT ALL!!! Mine actually went up as well as the deductible. And it's not like my company is suffering as it's a Contractor for the ARMY.

Jackov
November 23, 2011
I dropped coverage, & keep fit (no meds, or health issues). My auto insurance covers medical for accidents.

Jackov
6:39 AM on November 23, 2011


ShockerX
8:14 PM on November 22, 2011
And only a bigger fool relies on their government.
------------------
Private insurers and Big Pharma maxmize profits, and encourage sickness.

Sears Rebound Vanishing in Swaps With Jobless: Corporate Finance
By Lisa Abramowicz
San Francisco Chronicle
November 22, 2011

(Bloomberg) -- Debt investors are losing faith that hedge-fund manager Edward Lampert can revive Sears Holdings Corp., the 125-year-old retailer, after 19 straight quarterly sales declines.

The cost of protecting the Hoffman Estates, Illinois-based company's bonds from default soared to the highest level in more than two years on Nov. 17. Standard & Poor's lowered its rating on the company, which hedge-fund manager Edward Lampert acquired six years, to B from B+, citing "intense competition" and "weak consumer demand in the fragile economic recovery," according to a Nov. 18 statement.

Sears, which sells items ranging from clothing and cosmetics to televisions and tires, reported earnings last week that were below analysts' forecasts as the October jobless rate held at 9 percent, the seventh straight month it failed to drop below that level. Mortgage applications in the U.S. fell for the first time in a month, with fewer Americans buying or refinancing homes.

"Sears has high exposure to the home-improvement market relative to other traditional department stores," CreditSights Inc. analyst James Goldstein in New York said in a telephone interview. "People are not renovating as much, not selling houses as much, not moving as much. A lot of Sears's sales focus is on big-ticket items."

Loss Widens

Net loss at Sears widened to $421 million, or $3.95 a share, from $218 million, or $1.98, a year earlier, the company said in a Nov. 18 statement. Sales fell 1.2 percent to $9.57 billion, with Canadian stores leading the decline.

Credit-default swaps on the retailer climbed 280.7 basis points last week, to 1,096.8 basis points, Bloomberg data show. They reached 1099.1 basis points on Nov. 17, the highest since March 2009.

The derivatives, which rise as investor confidence deteriorates, pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

The cost to protect Sears's debt from default using the swaps reached 20.7 percent upfront yesterday, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. That's in addition to 5 percent a year, meaning it would cost $2.07 million initially and $500,000 annually to protect $10 million of Sears's debt.

The implied chance of default rose to 64 percent, with a 40 percent recovery assumption, from a 47 percent implied chance of default at the end of October, CMA data show.

Stock Options

Traders of equity options are paying the most in more than two years to protect against losses on Sears stock.

Implied volatility, the key gauge of options prices, for puts to sell the shares rose to 9.89 points above calls on Nov. 18, the widest gap for the price relationship known as skew since February 2009, data compiled by Bloomberg show.

Sears shares have fallen 18 percent this month, compared with a 0.1 percent decline at Wal-Mart Stores Inc. and a 1.6 percent rise at Macy's Inc., Bloomberg data show.

The retailer's $987.4 million of 6.625 percent notes due October 2018 have fallen 7.38 cents this month to 79 cents on the dollar, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority, raising their yield to 11.1 percent. The company has $1.43 billion of bonds, including $130 million of bonds coming due next year, $190 million of term loans and has drawn $1.75 billion of its $4.2 billion of revolving credit lines, according to data compiled by Bloomberg.

Competition

Kimberly Freely, a Sears spokeswoman, declined to comment on the movement in the company's bond prices. She wrote in an e- mail that Sears "has assets no other retailer can claim," including leading brands, its geographic diversity and a home- services division with 12 million visits a year.

When Lampert merged Sears with the Kmart chain in 2005, he said the new entity would have the geographic reach and scale to compete with Wal-Mart. Sears service and products are "every bit as good as any of the competition," Lampert said when announcing his plan to buy Sears in November 2004.

Lampert, who along with his hedge fund owns about 60 percent of Sears, has since closed 171 of its large U.S. stores and overseen losses in five of the past six quarters. The chain is on its fourth chief executive officer.

The company probably won't be upgraded in the "near to immediate term" and may be downgraded if profitability declines more than analysts expect, according to S&P.

Slow Sales

The company's sales will likely remain slow "as persistently high unemployment pinches consumer spending and demand for large-ticket items such as appliances remains weak," wrote S&P analysts led by Ana Lai in New York.

The pace of the U.S. economic recovery has been "frustratingly slow," and unemployment is still "far too high," Federal Reserve Chairman Ben S. Bernanke said in a Nov. 2 press conference in Washington. The Federal Reserve cut its growth forecasts for 2012 and said unemployment will average 8.5 percent to 8.7 percent in the final three months of next year, up from a prior range of 7.8 percent to 8.2 percent.

The Mortgage Bankers Association's index decreased 10 percent in the period ended Nov. 11 from the prior week, the Washington-based group reported on Nov. 16.

"The current economy does not leave much leeway for poor execution at retailers," CreditSights' Goldstein wrote in a Nov. 18 report. Unless Sears can significantly improve earnings, "it is a name to avoid."

-With assistance from Mary Childs and Lauren Coleman-Lochner in New York. Editors: Mitchell Martin, Alan Goldstein

Consensus Advisors: New CEO Facing Uphill Battle to Transform Penney
By Douglas Stebbins
Retail Wire
November 22, 2011

Through a special arrangement, presented here for discussion is a summary of a current article from Consensus Advisors, a boutique investment and advisory firm specializing in the retail industry.

With the NBA lockout dragging on forever, All-Star Deron Williams of the New Jersey Nets has decided to play professionally in Turkey for Besiktas. While I am sure Mr. Williams is thrilled to be playing basketball (even without his $17 million salary), there certainly will be times when he will wake up during a bus trip to Trabzonspor and long for the luxuries of the NBA.

Similarly, as Ron Johnson officially transitioned at the start of November from the head of retail at Apple to the CEO of J.C. Penney, he awoke in a cold sweat wondering how he ever gave up a situation where he was in charge of a retail chain like no other. Mr. Johnson has left a position where his stores were located in the most coveted retail locations, carried a few dozen SKU's, had a single captive vendor, a passionate and dedicated workforce, a parent with a bottomless bank account and an obsessive customer base that accepts the fact that his products are never discounted and think nothing of sleeping out all night to buy a replacement for a product they had slept out to purchase only a few months earlier.

Great products and a fanatical customer base is a dream combination and can transform a technology company into the world's most remarkable retailer.

Penney is everything the Apple store isn't. A department store is predicated on the ability to attract consumers by offering a wide variety of merchandise under one roof. For decades the breadth of selection attracted affluent consumers to department stores. With an endless merchandise selection only a few clicks away, consumers are increasingly turning to the internet to locate hard to find merchandise. As e-commerce has exploded, department stores have seen their share of consumer spending deteriorate over the years, and Penney is no exception.

Penney's sales-per-selling square foot has dropped 15 percent over the past four years. Today the company operates 1,100 stores, about the same number of stores it had in 1928. Mr. Johnson seems ready for the challenge of turning around this once proud retailer. "In the U.S., the department store has a chance to regain its status as the leader in style, the leader in excitement," he said in an interview in June with The New York Times. "It will be a period of true innovation for this company."

Discussion Questions: Has Ron Johnson set himself up for criticism by announcing he plans to transform the department store and not simply improve its performance? How do you think Mr. Johnson will or should be looking to improve J.C. Penney?

Discussion Questions: Has Ron Johnson set himself up for criticism by announcing he plans to transform the department store and not simply improve its performance? How do you think Mr. Johnson will or should be looking to improve J.C. Penney?

Instant Poll

What's the likelihood that J.C. Penney will regain its momentum under the leadership of Ron Johnson?
Very likely
Somewhat likely
Somewhat unlikely
Very unlikely
Not sure/No opinion

Comments:
I find it interesting that on the same day we are discussing Ron Johnson's decision to transform J.C. Penney the NRF Foundation/American Express Customers' Choice survey lists them as one of the top ten retailers that excel on service. Admittedly I am not a Penney's customer, so have no firsthand experience but that would seem to be a great base to build on.

Will he be able to achieve the same level of devotion from Penney's customers that Apple has? No, but no one rationally would expect that he could. The question is can the strategy (started by his predecessor) of purchasing brands such as Liz Claiborne and offering them exclusively at Penney's and whatever new strategies Ron has yet to announce succeed in elevating Penney's to a higher level. I wouldn't bet against it.

Steve Montgomery, President, b2b Solutions, LLC

Ron Johnson and the team that he is hiring have impressive backgrounds, but turning around JCPenney won't be easy. It's one thing to start with a blank slate (The Apple Store) and a narrow assortment of most-wanted merchandise. It's another thing entirely to turn around a company with an entrenched way of doing business in a very competitive space. Rather than promising to reinvent the department store experience, Mr. Johnson and his team will be smart to focus on one key improvement at a time...in particular, the over-assortment of lackluster private brands putting JCP at a competitive disadvantage vs. Macy's and Kohl's.

Richard Seesel, Principal, Retailing In Focus LLC

If I remember correctly, Bob Nardelli was going to "transform" Home Depot and he did, much to the delight of the folks at Lowe's.

The department store format has always, conceptually at least, had an advantage over other formats. Prior to e-tail, it was specialty stores. Beyond the concept, however, are the realities of high payroll costs, intense price competition, and a customer base that buys only on promotions.

I admire Mr. Johnson for taking on the challenge. If nothing else, he is about to get a good lesson in humility.

Bill Emerson, President, Emerson Advisors

J.C. Penney is clearly a retailer in severe need of transformation. They are currently in survival mode and tweaking things will not solve the problem.

While Penney's does not have the same ingredients for success that Apple enjoys, it does possess a loyal shopper base and a strong reputation for customer service.

The recipe may be quite different, but a new focus on innovation and improving the customer shopping experience will certainly be worth a shot.

The alternative will be to follow Sears' path.

Raymond D. Jones, Managing Director, Dechert-Hampe & Co.

I have no idea what he will do and how he will do it. Penney's could have hired me for a lot less.

Just like the airline industry, the department store model is broken and it is going to need new thinking to make it work.

Mel Kleiman, President, Humetrics

Mr. Johnson is an inspirational leader. He absolutely should aspire to transforming the department store experience. Evolve or die. Lead with innovation or do nothing new. Your physical store needs to be one of the 6-7 doors visited per average mall visit. For JCP, apparel is king. The female shopper will be the final judge of success or failure. Will they flock to the store like Apple fans? I doubt it. But, should their associates aspire to be as popular? Yes.

David Slavick, VP, Retail Consulting, Customer Communications Group

According to the NRF Foundation/American Express Customers' Choice survey, JC Penney has created a customer friendly environment which puts them at the top with many consumers. All they need to do now is add the 'personal' element to their service model which will not only solidify their position as a customer favorite, but may also help them distance themselves from the discounter slugfest.

I hardly believe that Ron Johnson awoke in a cold sweat wondering why he gave up his position at Apple. He's no fool! I believe he sees that all the pieces are in place for the transformation that he has promised. All he needs to do is add "a passionate and dedicated workforce," which I believe based on his past performance, he is more than up to the challenge.

Marge Laney, President, Alert Technologies, Inc.

At RSR, we're looking at the slow death of the category killer and wondering if the department store isn't next. With online putting pressure on both numbers of stores and overall size of each store, and providing an endless assortment that a department store will never be able to match, I think it's very timely to think big about the future of the format. Is Ron the right guy? I don't know, but at least he's trying.

Nikki Baird, Managing Partner, RSR Research

It's an interesting challenge. Department stores are very hard to shop unless you're bullish on one brand or another. I read a stat somewhere that said the average consumer shops 1.2 departments when in a store, so there's no particular synergy.

If JCP can change that paradigm, it would be profound...but it's really a complicated problem. If he solves it, he's a hero. If he just gooses sales, he'll be a quasi-hero.

Paula Rosenblum, Managing Partner, RSR Research

EVERYONE wants to know what Ron Johnson will do.

A quick visit to a Penney's store reveals a riot of merchandise. Some of that merchandise is terrific!...but the overly large selection reveals a lack of focus and a desire to be all things to all people. Whatever he tries, it's certain to be slavishly copied by his competition.

Cathy Hotka, Principal, Cathy Hotka & Associates

I have to admire the courage of Mr. Johnson for taking on Penney's. It will be interesting to see what he can do to make it a frequent place to shop, instead of Kohl's or Macy's. Improved variety in clothing and super sharp deals that the customers actually want will determine the future success of the company.

Years ago, my mom and I always went to Penney's, and it will take a huge campaign to make it happen again. With online clothing and aggressive competitors, Ron has his work cut out to prove any success for Penney's. Good luck!!

Tony Orlando, Owner, Tony O's Supermarket & Catering

J.C. Penney, like Macy's, is a house of brands, heavily weighted toward private and proprietary brands. Unlike Macy's, J.C. Penney hasn't done a great job of differentiating its brands or making them relevant outside of its stores, even as it shoehorns new ones in on a regular basis. Ron Johnson's biggest opportunity is to stop the brand procurement madness and leverage its existing brand's equity on a massive scale and across an exploding number of touch points. Basically, apply exponential math to Apple's mono-brand model.

Another possibility would be to take a page from Eddie Lampert at Sears and externalize its high-equity owned brands (which soon will describe Liz Claiborne).

Carol Spieckerman, President, newmarketbuilders

Let's be realistic; in it's current state, JCP is doomed to fail. It's an old business model with tired merchandise on lousy real estate. It may take 30 years, but they're doomed. And in my book, Johnson saw this light (or darkness) at the end of the tunnel and was able to sell his vision to the right people.

The only way to change a behemoth of this nature is with revolutionary thinking, and that's pretty much what he's saying his strategy is -- to change the game completely. FWIW, I agree with him and applaud his bold steps so far and those of the board who hired him in the first place.

JCP has tried just about everything you can think of on the incremental side over the last 15 years but accomplished very little. They NEED to go for it; take big shots. It's a matter of survival. Now, with this aggressive strategy, at least they'll have a chance.

Lee Peterson, EVP Creative Services, WD Partners

I should add that I am a loyal JCP credit card holder and participate in their JCP Points program. At present, they are couponing me to death. We are talking about direct mail at a weekly frequency with the same tired offers week in and week out -- threshold based, "bonus" rewards, shop these select days only, go online and get more savings/use this coupon code. Plus, there are email communications with similar offers. It is the most aggressive form of retail couponing and I am certain the competition sees it and is reacting with similar offers. (Sears in particular has kicked back in to direct mail after a relatively long hiatus.) The end result? Lower margin on goods sold. To engender loyalty and impact the store experience a la Apple will indeed take a long time -- do they have that luxury let alone the patience at senior level management to achieve it?

David Slavick, VP, Retail Consulting, Customer Communications Group

It might be simpler to improve performance and bring back core consumers and increase the frequency of visits. However, this would be a short-term solution in which the retailer would constantly be playing catch-up to keep up with the competition.

Setting himself up for criticism, creating PR and excitement for a transformed J.C. Penney brand will differentiate the retailer and potentially create a long term franchise that will be more inclusive to customers currently not considering the retailer.

I think innovation for a brand that has lost definition is a long-term better solution.

Carlos Arαmbula, Managing Partner, Arαmbula-Phillips Communications, Inc.

It is typically an advantage to bring a leader in from outside your world to inject some "out-of-the-forest-through-the-trees" ideas. Lou Gerstner came from Amex and Nabisco and did a phenomenal job helping save IBM in the 1990's. I say give Ron a chance to make the department store evolve into a 21st Century retailer.

Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

I agree with a previous poster that JCPenney has too many private label brands which do not enjoy significant popularity or recognition among consumers. JCPenney needs to find a connection to a reputable brand, as Kohl's has linked to Ralph Lauren through the Chaps brand. Otherwise, people who want lower-priced name brands will go to Kohl's and the less brand-conscious will save money by shopping Walmart and Target.

Dan Berthiaume, Editor, Independent consultant

Sears Leaving Illinois? Gov. Quinn: Ohio Offered Retailer $400 Million
Huffington Post Chicago
November 21, 2011

Sears has reportedly been offered $400 million by the state of Ohio to move their headquarters out of Illinois.

With the Illinois state legislature still deliberating a tax incentive package to lure both Sears Holdings Corp. and the CME Group to keep their operations in the state, an offer from another state referenced by Gov. Pat Quinn serves as a stark reminder of how high the stakes are.

Quinn told WJBC that Ohio, one of the states rumored to be wooing Sears away from Illinois, offered the retailer $400 million if they make the move. Sears is among the state's largest employers.

"We aren’t offering anywhere close to that," Quinn admitted to WJBC, "but I think Sears understands that being in Illinois is the best place to be in the Midwest."

Ohio Gov. John Kasich doesn't appear too confident Sears will accept his state's offer, the Capitol Fax blog pointed out Monday morning. He told WTAM he expects Illinois will do "whatever they needed" to keep the retailer at their Hoffman Estates, Ill. base.

State Rep. John Bradley, D-Marion, state House Revenue Committee chairman, told Crain's Chicago Business that the state has "got to figure out a way to work this out" and keep CME Group, Sears as well as CBOE Holdings, which has also threatened to leave, in Illinois. The details of the offer for the companies are expected to be unveiled Wednesday.

The previously proposed tax cut package for the companies ballooned to an estimated $850 million a year in reduced revenue for the financially-hobbled state due to the addition of tax breaks for smaller businesses and an extension of the earned income tax credit.

The tax breaks for the companies have been criticized as "corporate welfare" and "an exercise in pure, unadulterated corporate greed" by progressive group Stand Up! Chicago and members of the Occupy Wall Street movement.

Meanwhile, Illinois' unemployment rate increased for the sixth-straight month in October and has now inched up to 10.1 percent, a full percentage point above the national average.

Lawmakers are due to return to Springfield to discuss the matter and continue their already busy fall veto session Nov. 29.

Sears' bad bet on business park spurs push to extend tax breaks: Special taxing district in Hoffman Estates failed to bring in as many businesses as planned
By Dan Hinkel and Melissa Harris
Chicago Tribune
November 20, 2011

If everything had gone according to plan, businesses would have flocked to Prairie Stone business park, filling up more than a square mile along Interstate 90 where the northwest suburbs begin giving way to farm fields.

Instead, two decades after the special taxing area was created, some 200 acres remain undeveloped in the 780-acre park anchored by Sears Holdings Corp.'s headquarters. A swath of land that was supposed to generate $50 million in property taxes in 2012 raised only $25 million in the past tax year.

Hoffman Estates Mayor William McLeod was on the Village Board in 1989, and he supported the creation of a development area the size of a small city intended to prevent Sears from leaving the state. The forecast of a packed business park cultivating enough revenue to pay off the project's costs within 23 years made sense at the time, he said.

"It didn't work," McLeod said bluntly.

The shortfall is key to understanding the still-developing negotiations over Sears' latest threat to leave the state if the special taxing district is allowed to expire next year. The lack of revenue means Sears hasn't recouped $125 million the company put into costs related to the development of the park, including infrastructure and bond payments.

Talks over a potential extension have focused on lengthening the taxing area's life to reimburse Sears, and proposals under consideration would give the parent of Sears and Kmart stores additional state tax breaks that might compete with other states' enticements.

"We're asking to be reimbursed, but, by the same token, in exchange for that we are making a commitment," said Jim Terrell, vice president of real estate for Sears Holdings.

The ambitious project's inception came at the pinnacle of "euphoria" over a booming commercial real estate market, said John McDonald, who teaches land economics and real estate at Roosevelt University. But that party ended with the economic slowdown of the early 1990s, and the market, he said, has not rebounded. There is no "desperate need for office space anywhere right now," he said.

"People in the real estate business need to learn that this happens," McDonald said. "There are boom and bust cycles, and they are quite severe."

While the development has attracted projects other than the Sears headquarters, including a Marriott hotel, a hulking Cabela's retail store and about 80 other businesses, McLeod acknowledged the difficulty of convincing major tenants to move into the park. The village has spent hundreds of thousands of dollars in recent years trying to attract companies to Hoffman Estates, he said.

McLeod cited a troubled economy as one reason companies haven't jumped to put up new buildings. He also pointed to the park's location, "within spitting distance" of Kane County, he said, where businesses would benefit from lower property tax assessments.

Indeed, the tax structure is one of the reasons Lincolnshire-based developer Van Vlissingen and Co. passed on the idea of building in the park, instead putting up a still-in-the-works mixed-use project in Hampshire, which sits in Kane County, said Chuck Lamphere, the company's president.

Terrell, from Sears, agreed that the location may have hampered development.

"You go a mile and half to the west, you're out of Cook County, so they have an economic advantage out there just on the property tax alone," Terrell said.

The inability of the park to pull in the predicted revenues underlies the battle over Sears' future. The fight has largely centered on Community Unit School District 300, a financially strapped taxing body whose officials claimed it stood to lose more than $10 million in revenue per year under the original plan to extend the taxing area's term.

Plans have changed. A compromise that remains under debate would sunset the taxing area once Sears recouped its $125 million plus interest. Talks have also allowed for Sears potentially taking a state credit that would be worth $150 million over 10 years.

The parties and legislators are continuing to discuss whether Sears would be required to keep some 4,000 of the roughly 6,100 jobs at its headquarters well into the future. The potential consequences should the company not meet that condition remain unclear, said Hoffman Estates Corporation Counsel Arthur Janura.

A compromise could also double the yearly take of District 300, turning about $3 million into $6 million, and other taxing bodies, including Elgin Community College and the Forest Preserve District of Cook County, agencies that have largely been content to let District 300 lead the fight over tax revenues.

Asked whether Sears deserves extra time to recoup money spent on a business decision that didn't develop as planned, McLeod said he's not interested in moral arguments about repaying the company. He is more concerned about the jobs at stake, he said. The village estimates that the disappearance of Sears would directly or indirectly cost the state 15,000 jobs.

Hoffman Estates' interest in the extension can be traced to those jobs, Janura said.

"If the continued employment here was not an issue, then it would make no sense to make Sears whole on this investment that they went into with their eyes open," he said.

McLeod acknowledged that the park isn't as full as the original forecasts suggested it might be, but he noted that the property would likely have gone undeveloped without the project, bringing no revenue to anyone.

"It's worked out very well for everybody. Was it as good as we hoped for? No," he said.

The taxing area around the park could be headed for a reprieve that would reimburse Sears and give the village time to hunt for new occupants, but industry experts suggested the commercial real estate market likely won't make that easy.

"It is awfully friggin' slow," said Chris Schubel, director of research for real estate firm Paine/Wetzel.

The Chicago area is "overbuilt," experts said, and that surplus continues to bog down the market for office space. The plentiful stock provides a challenge to anyone looking to convince businesses to build, Lamphere said. His contention, if correct, would appear salient to a village looking to fill 200 acres of land.

"Existing space can be bought cents on the dollar for what it would cost to construct a new building," he said. "Until that gap is narrowed dramatically, there simply is not going to be a need."

Tribune reporter Kathy Bergen contributed.

Tentative Sears agreement terms emerge
By Mike Riopell
Daily Herald - Suburban Chicago
November 19, 2011

SPRINGFIELD -- Officials trying to craft a final deal over what kind of tax breaks Sears Holdings Corp. should be given-- and at whose expense -- have reached a “tentative agreement,” but the stakeholders are cautioning that a lot can still change.

According to the basics of the agreement obtained by the Daily Herald, a plan to extend Sears’ property tax breaks in Hoffman Estates would mean about $11.5 million a year for Sears. Carpentersville-based Community Unit District 300 would get $5.9 million a year — a significant increase from what it currently collects from Sears — and Hoffman Estates would get $5 million, the same as what it collects now.

Both the company and other local governments in the Economic Development Area that gave Sears the tax break in the first place nearly two decades ago could get more if property values rise.

About $6 million is a far cry from the $17 million District 300 officials had hoped for, but Superintendent Michael Bregy, a chief critic of talks up until this week, said compromise now is possible.

“So we’re very pleased about that,” Bregy said. “I would have liked to have seen more money to the school district.”

The district now gets about $2.9 million a year from the Sears tax deal, which is set to expire in about a year.

The company has threatened to decide by the end of next month whether to leave Hoffman Estates if it doesn’t get a good tax deal from Illinois.

In the tentative proposal, the company would collect the tax break until it recoups $125 million in costs it has paid over the last 20 years building roads and bridges near the company’s headquarters. Sears also could get another $45 million if it wins a Cook County property tax appeal. When the $125 million figure is reached, the tax deal could expire, a development that would send even more money to local schools and governments.

Still, negotiators emphasized that the deal isn’t done yet and details could change in the coming days, before legislation is written next week.

“There’s still a lot of work to be done,” Sears spokesman Chris Brathwaite said.

At a public hearing Friday, state Rep. John Bradley, a Democrat from downstate Marion, announced the groups had reached a “tentative agreement.” State Rep. David Harris, an Arlington Heights Republican, agreed, with some reservations.

“I think, regarding Sears, it’s going very well,” Harris said. “There may be some details to be worked out.”

The details obtained Friday also reflect the school district’s request that Hoffman Estates not be allowed to use any money from the property tax deal to operate the Sears Centre. And village officials have asked for a guarantee that District 300 not sue them over the overall agreement.

Like other officials, Hoffman Estates Mayor William McLeod on Friday declined to comment on specifics, saying details are constantly changing.

“I can’t agree to something if I don’t know what’s in it,” McLeod said.

An agreement between Sears, Hoffman Estates and District 300 could go a long way toward easing lawmakers’ concerns over the deal, as many are hesitant to grant a local property tax break when some affected local officials loudly protest.

But the difficulties extend beyond simply approval among the local parties involved in the Sears deal; the deal itself is tied politically to several other big tax-incentive proposals that could end up costing the state as much as $850 million a year. Those include tax breaks for financial exchange CME Group, research and development credits for businesses, and tax breaks for the working poor.

If the final plan is scaled back, supporters of any particular component that is reduced or eliminated could withdraw support, endangering the greater package.

A final plan might be drafted next week.

“We obviously don’t know what will be in that proposal,” Bradley said.

So even if local officials agree to a Sears solution, lawmakers concerned about an already stressed state budget might balk at handing out big tax breaks to the retail giant and others.

“This is not the endgame in itself,” said Rep. Fred Crespo, a Hoffman Estates Democrat. “We still have other components.”

Among those other components, in fact, is a separate Sears request for millions of dollars in income tax credits similar to what have been awarded to Motorola Mobility in Libertyville and Navistar in Warrenville -- two other large companies that threatened to leave Illinois but that Gov. Pat Quinn enticed to stay with tax breaks.

The lawmakers who attended Friday’s hearing left Springfield knowing that Thanksgiving week could be critical to making the deal happen.

Lawmakers return to Springfield Nov. 29 to possibly vote on the matter. The deadline for finishing negotiations already has been extended once; with Sears threatening to make a decision by the end of the year, there wouldn’t be much time to extend it again.

“It is very difficult,” Harris said about finding a proposal enough lawmakers will agree to approve in such short order.

“If,” he added, “anything gets done.”

Daily Herald staff writer Eric Peterson contributed to this report.

S&P Downgrades Sears A Notch On Weaker-Than-Expected 3Q
Dow Jones Newswire
November 18, 2011

Standard & Poor's Ratings Services downgraded Sears Holdings Corp.'s (SHLD) credit rating a notch further into speculative grade following much weaker-than-expected operating results in the retailer's latest quarter.

S&P, which has Sears at B--five notches into junk territory--said the outlook is negative on expectations that the company's operating results and sales will remain under pressure into next year.

A cautious U.S. consumer has added to the retailer's woes in recent quarters, which have seen sales drift lower as its namesake department stores and the Kmart discount chain lose market share to rivals.

S&P analyst Ana Lai said a combination of negative sales trends, intense competition and subpar execution could result in much lower-than-expected earnings this year and further deterioration of its credit quality.

A further downgrade is possible if Sears profitability declines more than the credit-ratings company expects, if its liquidity weakens or its financial policy becomes more aggressive. A positive rating action is unlikely in the near to intermediate term, S&P said, but would be possible if the company's operating trends and debt leverage improve.

Moody's Investors Service in July cut Sears' ratings to three notches below investment grade and warned of further downgrades if its earnings continued to erode.

Sears on Thursday posted posted a wider-than-expected loss in its fiscal third quarter as margins narrowed and sales slipped, particularly at the company's Canada stores.

Shares were down 1.7% at $64.10 in recent trading. The stock has retreated 13% this year.

Sears Holdings Posts Loss on Weakness in Sales
By Karen Talley and Mia Lamar
Wall Street Journal
November 18, 2011

Sears Holdings Corp. posted a wider loss in its fiscal third quarter, weighed down by weakness in its Canadian stores, soft electronics sales and weakness in clothing and pharmaceutical sales at its Kmart unit.

In a holiday shopping season when all retailers are worried about luring customers into their stores, Sears Holdings faces an extra challenge: Some of its stores are dumps. Miguel Bustillo has details on Lunch Break.

A cautious consumer mood in the U.S. has only compounded headaches for the retailer in recent quarters, which has seen sales drift lower as its namesake department stores and the Kmart discount chain lose market share to rivals.

Domestic same-store sales in the latest period edged down 0.8% overall, including a 0.7% decline at Sears domestic stores and a 0.9% decline at Kmart stores. Sears Canada Inc. earlier this week reported same-store sales dropped 7.8% in the latest period.

For the quarter, gross margin declined $110 million to $2.4 billion. Kmart's gross margin rate declined 60 basis points mainly due to increased markdowns in apparel and home, as well as declines in other categories. Sears Domestic's gross margin rate fell 50 basis points primarily due to reduced margins in the home appliance and consumer electronics categories. Sears Canada's gross margin rate lost 290 basis points as a result of clearing inventory, the company said.

Sears also said Thursday that top-line results were affected by having fewer Kmart and Sears full-line stores in operation. Sears, controlled by billionaire hedge-fund investor Edward Lampert, has sought to control costs by closing some stores rather than revamp older locations.

Sears reported another quarter of disappointing results, "hurt by previously reported very weak Canadian results, anemic comps at its core businesses and an inability to further reduce what appears to be already bare bones cost structure," said Gary Balter, retail analyst at Credit Suisse.

For the quarter ended Oct. 29, Sears reported a loss of $421 million, or $3.95 a share, compared with a loss of $218 million, or $1.98 a share, a year earlier. Excluding pension expense and other items, the loss widened to $2.57 a share from $1.71 a year ago.

Revenue slipped 1.2% to $9.56 billion. Analysts polled by Thomson Reuters expected a loss of $2.29 a share on $9.6 billion in revenue.

Gross margin fell to 25.6% from 26.4%, driven by narrower margins at Kmart, Sears Domestic and Sears Canada stores.

Sears Loss Hits $421 Million, and Gap's Profit Is Off 36%
New York Times
November 18, 2011

BLOOMBERG NEWS -- The Sears Holdings Corporation, the retailer controlled by the hedge fund manager Edward S. Lampert, reported a steeper third-quarter loss than a year ago on Thursday as sales declined in Canada.

The net loss widened to $421 million, or $3.95 a share, from $218 million, or $1.98 a share, a year earlier, Sears said. Sales fell 1.2 percent to $9.57 billion, the 19th consecutive quarterly decline.

Comparable-store sales for Sears Canada fell 7.8 percent in the quarter, and declines in consumer electronics and apparel at the Kmart chain further hurt results, Lou D'Ambrosio, the chief executive, said in a statement. Same-store sales, those at stores open at least 12 months, fell 0.7 percent at Sears in the United States and 0.9 percent at Kmart. Comparable-store figures are made up of same-store sales and online sales, which rose 19 percent from the previous year.

The quarter included a tax-related one-time charge of $100 million.

Stock in Sears, which is based in Hoffman Estates, Ill., fell $3.11, or 4.6 percent, to $65.19 a share.

Another big retailer, Gap, said third-quarter profit declined 36 percent as sales dropped at its Gap unit and at its Old Navy chain.

Net income fell to $193 million, or 38 cents a share, from $303 million, or 48 cents a share, a year earlier, the company said. Analysts projected income of 37 cents, the average of 24 estimates compiled by Bloomberg. Revenue fell 1.9 percent to $3.59 billion.

The chief executive, Glenn Murphy, said the company was "intensely focused" on improving sales through changes to merchandise assortments and marketing plans. Third-quarter comparable sales declined 6 percent at Gap North America and 4 percent at Old Navy.

The company announced early this month that it planned to open about 1,000 stores on Thanksgiving to lure shoppers. Locations that will be open include about 800 Old Navy stores and 116 Gap stores.

Companywide comparable sales, which include online revenue, declined 5 percent compared with an increase of 1 percent a year earlier, Gap said. Sales fell at each of its three units. Banana Republic is the third.

Gap, which is based in San Francisco, reported its results after the close of market trading, and in the after-hours session its stock was unchanged.

Canadian chill hurts Sears' third quarter
By Sandra M. Jones
Chicago Tribune
November 18, 2011

Sears Holdings Corp. posted a wider loss in the third quarter as continued sales declines at its stores, particularly in Canada, overshadowed a growing online business.

The Hoffman Estates-based retailer said sales at stores open at least a year — a key retail metric — fell 0.7 percent at Sears stores in the U.S. and dropped 0.9 percent at Kmart. Sears Canada, once a steady performer, posted a 7.8 percent decline in comparable-store sales, a decline that would have been even bigger if not for changes in the Canadian foreign exchange rate, the company said.

Lower sales of appliances and consumer electronics at Sears' U.S. stores hurt the company's overall performance, even as sales of apparel climbed, helped by Lands' End and the new Kardashian clothing line. Meanwhile, at Kmart, sales of clothing, home goods and prescription drugs dipped, while grocery and household goods revenue rose.

The weak performance at Sears Canada was particularly noteworthy as the division "used to provide the consistency for this declining chain," said Gary Balter, an analyst at Credit Suisse, in a report Thursday after Sears reported its results.

A fleet of U.S. retailers are opening stores for the first time in Canada, including cheap-chic discounter Target Corp., which is slated to arrive in early 2013. Minneapolis-based Target has said it expects to generate close to $6 billion in sales from as many as 200 Canadian stores over the next decade.

"The Canadian economy has weakened this year but not nearly as much as Sears Canada's results," said Balter. "With Target moving in over the next few years, the prospect for improvement is not appealing."

Still, there are glimmers of improvement. While appliance sales declined in the third quarter, Sears gained market share in overall appliances and with its Kenmore line, said Lou D'Ambrosio, CEO and president of Sears Holdings.

"While we are not satisfied with our performance, we saw improvement in some core areas," said D'Ambrosio. "Sears' full-line stores saw improvement, as Sears apparel achieved both comparable-store sales and margin rate increases in the quarter."

Sears lost $421 million, or $3.95 per share, for the three months ended Oct. 29. A year earlier, it lost $218 million, or $1.98 a share. Adjusting for pension expense, store closing charges and other one-time items, Sears lost $2.57 a share. Quarterly revenue slipped 1 percent to $9.57 billion from $9.68 billion.

Analysts expected a smaller loss of $2.29 a share on higher sales. The disappointment sent Sears shares tumbling 4.6 percent to $65.19. The stock is down 12 percent so far this year.

Online sales, a bright spot, increased 19 percent from the same period last year, giving a slight lift to U.S. same-store sales. Starting in the first quarter of 2011, Sears has been including online sales from Sears.com and Kmart.com in its domestic same-store sales figures.

Since hedge fund guru Edward Lampert took control of Sears and combined it with Kmart in 2005, the company has cut back investments in the physical stores in favor of pouring money into its online business. Some experts predict Sears will eventually become an e-commerce retailer with fewer, smaller storefronts to display its online wares.

In a memo to employees Thursday, D'Ambrosio told workers that Sears is reinventing itself to "move beyond multichannel to truly integrated retail."

"We're in the midst of an exciting transformation of our company, much in the same way Sears reinvented itself from a straight catalog merchant to opening its first department stores in the 1920s to take advantage of the disruptive technology of the time — the automobile," D'Ambrosio said. "Now we have a new set of disruptive technologies — digital, social and mobile — and are reinventing ourselves again."

Sears' cash on hand fell to $632 million as of Oct. 29, from $806 million as of Oct. 30, 2010. The company's total debt rose to $4.6 billion from $4 billion in the same time frame.

Sears Holdings operates more than 4,000 stores, including 500 Sears stores in Canada.

Sears, Kmart felled by tightfisted Lampert
By James Covert
New York Post
November 18, 2011

Oracle of Omaha, meet the Grinch of Greenwich.

Eddie Lampert — the Connecticut hedge-fund tycoon who took control of Sears and Kmart six years ago — has long idolized billionaire Warren Buffett as a professional role model.

But while Lampert dazzled with early returns and has mimicked Buffett's folksy letters to shareholders, critics say the similarities end there — with disastrous results for the two iconic retail brands of Sears Holdings.

Yesterday, the two aging retail chains reported a wider-than-expected quarterly loss of $421 million — nearly twice as steep as a year ago — fueling a sharp drop in the company's once-healthy cash reserves.

Sears blamed steep markdowns across its stores on clothing, electronics, home goods and appliances. Revenue in the quarter fell 1.2 percent — the company's 19th straight quarterly revenue drop.

The real culprit, critics charge, is the 49-year old hedgie's stubborn refusal to spend money on updating stores.

The result is a dilapidated chain that has sent shoppers and nearly $4 billion in sales fleeing to rivals like Walmart, Home Depot and Best Buy since 2005.

That strategy is very un-Warren Buffett-like, says Douglas Kass of Seabreeze Partners Management, which for years invested in Buffet's Berkshire Hathaway conglomerate.

"Buffett is always looking to support a dominant franchise by pushing for more capital expense, making its protective niche even deeper," according to Kass, who cites Coca-Cola, Kraft and Procter & Gamble as examples. "Lampert does just the opposite — he lets the franchise go."

Lampert declined to comment. But in a rare 2004 interview with Businessweek, he said he made a pilgrimage to Omaha in 1989 to meet Buffett, and studied Buffett's acquisition of the Geico insurance company as part of a self-guided "learning process."

Perhaps Lampert missed the part where Buffett poured cash into Geico after he bought it and backed management as it mounted an aggressive expansion. Lampert, by contrast, ousted the execs at Sears and Kmart after merging the companies.

The prickly financial whiz quickly gained the reputation of a micromanager as he slashed costs and used the proceeds to buy back company's shares at inflated prices — another Buffett no-no, Kass notes.

Lou D'Ambrosio, a former IBM exec who Lampert named Sears CEO in February after the post had been vacant for three years, said that the retailer was "not satisfied" with its disastrous results.

"As we examine every part of our business and take actions to improve our near-term performance, we are also investing in our future," said D'Ambrosio, citing technology initiatives.

That sounds like the same empty boilerplate Sears has been pushing for years, said Mark Cohen, a Columbia Business School prof and ex-CEO of Sears Canada.

In February, Lampert said Sears was "building closer relationships with customers" while analysts said it was getting harder to find help at a store.

"The objection I have is not that [Lampert] is busy selling off the desks, the chairs, the stores, the buildings and the brands," Cohen said, predicting Lampert will eventually liquidate the chain, as opposed to arming it for growth, Buffett style.

"What bothers me is that Lampert is completely disingenous about it."

Can Apple Business Model Save J.C. Penney?
By Jeff Reeves
RetailWire.com
November 16, 2011

NEW YORK (InvestorPlace) -- Ron Johnson is the new J.C. Penney (JCP) chief executive officer, taking the reins of the iconic retailer Nov. 1. And if his recent comments to analysts are any indication, the new CEO is looking to draw heavily on the big ideas from his days at tech icon Apple (AAPL) to breathe new life in to the struggling department store.

You might think iPhones have little to do with selling housewares. But to hear Johnson tell it, it's all about the mindset and how a company approaches its customers. In a conference call, there were plenty of distinctively Apple-esque phrases used -- "re-imagine," "think differently" and "work creatively" to name a few.

Of course, judging by J.C. Penney's significant fiscal third-quarter loss, some innovation might be sorely overdue . Outlet store closures, early retirement plans and other restructuring resulted in big one-time expenses -- but even without those charges, a 5% sales decline shows J.C. Penney has plenty of other bad news.

And let's not forget that while JCP stock has stabilized, it hardly is on a growth curve. JCP shares are off an ugly 60% in the past five years.

But Johnson -- the former retail chief of Apple who helped preside over iPhone launches at Apple stores nationwide -- remains focused on the potential of the company and the power of connecting with consumers.

"I get more excited every day about the potential of J.C. Penney," he said.

A glass-half-full attitude is refreshing, and the enthusiasm Johnson exudes undoubtedly will help with morale -- at least in the short term. After all, it appears J.C. Penney has no where to go but up.

The retailer has been locked in a battle with retail rivals Macy's(M) and Kohl's (KSS) but can't seem to get a leg up. Macy's set the tone this earnings season with strong numbers and continued success with its effort to localize stores despite its massive footprint. Meanwhile, Kohl's saw success of its own thanks to exclusive product lines and big brand names.

J.C. Penney hasn't had much success, in large part because it can't figure out how to reinvent itself to connect with consumers with much less to spend.

Retail Sears May Be Leasing Out Its Future
By Jeanine Poggi
TheStreet.com
November 17, 2011

NEW YORK (TheStreet) -- Exclusivity has become the golden gem for retailers, with companies scrambling to form branded partnerships, acquire unique merchandise and localize their products. But in true Sears'(SHLD) fashion, billionaire Edward Lampert is doing the complete opposite.

The flailing department store is allowing other retailers to sell its storied brands like DieHard and Craftsman. Shoppers no longer even need to step into a Sears store to pick up what are still considered high-quality brands. Craftsman tools can be found in Ace Hardware and Costco Wholesale (COST), while DieHard car batteries can be found at Meijer.

There's also talk that Sears is looking to sell secondary Kenmore products at Costco. This would be the first time in the brand's 84-year history that it would be carried at a retailer other than Sears and Kmart.

Our strategies for "externalizing" the brands center on reaching new customers and generating new brand enthusiasts who will fully realize their loyalty and commitment to our brands at Sears," said Sears spokesperson Chris Brathwaite.

Sears has also taken to leasing out space in its massive fleet of 3,700 department stores to retailers like Forever 21, Whole Foods Market(WFM), Edwin Watts Golf Shops and Work 'N Gear, as wells as grocery and fitness clubs. It is marketing its real estate portfolio online at SHCRealty.com.

"The ISL [in-store lease] program is an opportunity for Sears Holdings to optimize the customer shopping experience and leverage our valuable real estate portfolio by providing third-party tenants with the opportunity to lease selling floor in SHC's retail real estate holdings," Brathwaite said.

While less than 1% of Sears' square footage is being leased out, the company is making more money on a per square-foot as a landlord than as a retailer, said Craig Johnson, president of Customer Growth Partners.

In the near-term, these moves are expected to boost earnings and cash flow to Sears, which reported a wider-than-expected loss in its third quarter as sales slipped. But ultimately, this could turn out to be just a short-term fix that will only speed up what appears to be the company's deep descent into irrelevance.

"It's a move of a raving lunatic," said Howard Davidowitz, chairman of Davidowitz & Associates, a retail consulting and investment banking firm. "In the near-term it will help sales and earnings, but for the long-term it is a disaster."

Deal nears to keep Sears from moving
By Melissa Harris, Ray Long, and Dan Hinkel
Chicago Tribune
November 17, 2011

Sears Holdings Corp., the village of Hoffman Estates and a local school district made significant progress Wednesday toward a legislative agreement that would keep the company in Illinois and increase revenue for education, according to sources with knowledge of the discussions.

The three sides, in Springfield for a legislative hearing, met for two hours in the office of House Speaker Michael Madigan and unexpectedly came away with the framework for a deal that would extend a tax break for Sears but for a shorter time period. Sears would give up some tax relief, allowing cash-strapped Community Unit School District 300 to get about $34 million more over a decade.

Lawmakers have been grappling with the outlines of a major tax break deal that would address the demands of two significant companies, Sears and CME Group Inc., to receive incentives in return for agreeing to stay in Illinois. Both have been talking about moving operations out of state in the wake of Illinois' decision early this year to raise the corporate tax rate for the next few years.

While Sears and CME are seeking different tax relief measures, negotiators have been working at cobbling together a larger bill that also would give a range of breaks to other businesses and individuals. It's not clear whether a Sears agreement, if it holds together, would be brought to a vote separately, though lawmakers have made clear that any broad deal needs to include some revenue to pay for it.

House Majority Leader Barbara Flynn Currie, D-Chicago, went in and out of the Sears meeting, and sources said legislators were looking for the three sides to settle their differences so legislation could go forward. Currie could not be reached for comment.

Sears Holdings, parent of Sears and Kmart, has its headquarters in an 800-acre economic development area in Hoffman Estates that sits in the school district's boundaries. Sears and Hoffman Estates want to renew the special taxing district, allowing Sears to recoup money it spent on infrastructure for its headquarters, while the village would continue to receive administrative fees. The school district did not want to extend the tax breaks because it would mean the loss of millions of dollars in revenue annually.

The school district has since agreed to an extension of the economic development area. Sears agreed to give up some money, and Hoffman Estates is close to signing on to the deal, too, though it would be required to give up some revenue.

Under two options being considered by Hoffman Estates, District 300 would see its revenue from the special taxing district jump to about $6.2 million a year from $2.9 million. The economic development area would dissolve once Sears recouped the money it spent on infrastructure for its headquarters facility. Sears is owed about $125 million, according to the company.

Under that scenario, the taxing district could end in 10 to 12 years, three to five years earlier than previously proposed. Sears would also receive a state tax incentive package, sources said.

"We are very positive," said Superintendent Michael Bregy. "This is the first time we feel our voices have been heard." Bregy declined to comment further.

Hoffman Estates had been asking for a 15-year extension and additional revenue, while Sears was asking for it to remain in place until the company recoups its $125 million.

Village officials could not be reached for comment. Sears spokesman Chris Brathwaite acknowledged that company officials met with other players in the battle over the tax breaks, but he said he couldn't discuss the content of the meetings.

A key lawmaker on state tax policy said one of the biggest challenges to putting together a major tax package that would help Sears and CME Group is figuring out how to pay for it.

That piece of the equation will "in some ways dictate just how much you can do," said Rep. John Bradley, D-Marion.

Sears Holdings Posts Loss on Weak Sales
By Mia Lamar
Dow Jones Newswire
November 17, 2011

Sears Holdings Corp. posted a wider-than-expected loss in its fiscal third quarter as margins narrowed and sales slipped, particularly at the company's Canada stores.

A cautious consumer mood in the U.S. has only compounded headaches for the retailer in recent quarters, which has seen sales drift lower as its namesake department stores and the Kmart discount chain lose market share to rivals.

Domestic same-store sales in the latest period edged down 0.8% overall, including a 0.7% decline at Sears domestic stores and a 0.9% decline at Kmart stores. Sears Canada Inc. earlier this week reported same-store sales dropped 7.8% in the latest period.

The company also noted Thursday that top-line results were affected by the effect of having fewer Kmart and Sears full-line stores in operation. Sears, controlled by billionaire hedge-fund investor Edward Lampert, has sought to control costs by closing some stores rather than revamp older locations.

For the quarter ended Oct. 29, Sears reported a loss of $421 million, or $3.95 a share, compared with a loss of $218 million, or $1.98 a share, a year earlier.

Excluding pension expense and other items, the loss widened to $2.57 a share from $1.71 a year ago.

Revenue slipped 1.2% to $9.56 billion. Analysts polled by Thomson Reuters expected a loss of $2.29 a share on $9.6 billion in revenue.

Gross margin fell to 25.6% from 26.4%, driven by narrower margins at Kmart, Sears Domestic and Sears Canada stores.

Sales at Sears Holdings have dropped every year since it was created in 2005, and retail experts estimate it has spent considerably less on remodeling and updating its aging stores than competitors such as Macy's and Wal-Mart Stores Inc.

Sears Suffers as It Skimps on Stores: Renovations Are Rare and Modest, Making Outlets Seem Like 'Dead Man'
Miguel Bustillo
Wall Street Journal
November 17, 2011

DALLAS-—In a holiday season when all retailers are worried about luring customers into their stores, Sears Holdings Corp. faces an extra challenge: Some of its stores are dumpy.

The chain has scrimped on remodeling its aging stores since hedge-fund billionaire Edward S. Lampert merged Sears and Kmart stores six years ago, and its bare-bones aesthetic was on full display Wednesday morning at the Sears in Dallas's Southwest Center Mall.

A red "real joy guaranteed" poster on the door was the only semblance of holiday cheer outside. Inside, small artificial trees leaned slightly sideways. There appeared to be only one customer in the store, and she was making a payment on an appliance she had bought previously.

By contrast, the Macy's Inc. store next door was festooned with fake presents, oversized red bows and wreaths and prominently featured Christmas stockings for sale right at the door. Customers were streaming in.

Sales at Sears Holdings have dropped every year since it was created in 2005, and retail experts estimate it has spent considerably less on remodeling and updating its aging stores than competitors such as Macy's and Wal-Mart Stores Inc.

Maintenance and renovations are important for a fresh atmosphere that signals to shoppers that products are up-to-date and worth buying. Even Wal-Mart, a company known for Spartan operations, spent billions on remodeling in recent years.

Macy's just announced a $400 million renovation of its flagship Herald Square store notes Craig Johnson of consultancy Customer Growth Partners. By comparison, that's only slightly less than what Sears spent—$441 million—on capital expenditures last fiscal year. The retailer has roughly 2,200 full-line stores as well as more than 900 smaller locations.

While retail experts estimate that store chains traditionally spend $6 to $8 per square foot on annual maintenance, Sears is spending a fraction of that amount, said Matthew McGinley, managing director of International Strategy & Investment Group, an investor research firm.

"With roughly 250 million square feet domestically, [Sears] is spending about $1.90 a foot, which is a quarter of what you need to maintain share and keep it as an acceptable place to shop," Mr. McGinley said.

Spokesman Chris Brathwaite said Sears believes most of its stores are in fine condition, and has been sprucing up bathrooms and toy departments, even if it hasn't spent as much remodeling as its rivals.Its Sears Canada division reported a $45.8 million quarterly loss Tuesday.

"Will you find a handful of stores that need some attention? Of course," he said. "But we have our store standards."

The Hoffman Estates, Ill., company notched $316 million in losses over the first half of this year and burned through nearly half the $1.2 billion in cash it had a year ago, negative trends that analysts expect will continue Thursday when it reports third-quarter results. Its Sears Canada division reported a $45.8 million quarterly loss Tuesday.

Close.To be sure, some of Sears's newer mall locations have a prettier patina, but Mr. Johnson of Customer Growth Partners said the overall Sears fleet is the most rundown in U.S. retailing.

"With these 'dead man walking' stores, the objective of the parent company is not to maximize [store] productivity but milk it for what little it has left before it can sell the property," Mr. Johnson said.

Mr. Lampert, who serves as company chairman and whose ESL Investments Inc. controls more than 60% of Sears shares, hasn't given a media interview in more than three years. But he has previously denied his endgame was to dismantle Sears and sell off real estate.

Still, the company has closed 171 full-size stores since the Sears-Kmart merger six years ago, and his Web initiatives and branding ventures have failed to make up for the revenue losses of its shrinking store empire.

Jaire Quezada, 30, said she visited a Sears on Houston's Main St. to retrieve a fitness ball she had ordered online. The once palatial art deco department store, which preservationists said was the first in Texas with escalators when it opened in 1929, had had its display windows bricked over.

"I bet half of Houston does not even realize it is still open," Ms. Quezada recalled.

Halley Blythe, 25, said she visited a grand old Sears in Oakland in search of a vacuum cleaner and had a hard time finding a sales associate—or anyone else for that matter.

Maintenance and renovations are important for a fresh atmosphere that signals to shoppers that products are up-to-date and worth buying. The hardware department in a Sears store at the Eagle Ridge Mall, Lake Wales, Fla.

"We could have played Frisbee in there," she said. A security guard eventually apologized, and an associate arrived 20 minutes later, she said, adding, "This was a Saturday afternoon."

In a bid to broaden its sales base, Sears has begun selling some of its most venerable brands, including Craftsman tools, at rival retailers such as Costco Wholesale Corp. and Ace Hardware Corp. Sears said it is confident that its plan to offer its core brands elsewhere, which includes a move to license its DieHard name to a company that is selling the car batteries at Midwest retailer Meijer Inc., won't cannibalize sales.

Skeptical former executives and retail experts question whether that gives customers one less reason to step inside Sears this Christmas.

"This plan to farm out the brands does nothing but accelerate the decline of the stores," said former Sears Canada Chief Executive Mark Cohen, now a professor at Columbia University. "There is no viable retail strategy here. In retailing, when your stores get dark, dirty and grim, you are past the point of no return."

Sears grapples with excess inventory, restructuring in Q3
Financial Post
November 16, 2011

TORONTO — Sears Canada Inc. lost more money in the third quarter as the retailer grappled with excess inventory and restructuring the flagging business under the stewardship of its new chief executive, Calvin McDonald.

In the three months ending Oct. 29, Sears posted a net loss of $46.6-million, or 44’ per share, compared with net earnings of $20.8-million (19’) in the same period of last year. Revenue fell 7.1% to $1.113-billion from $1.199-billion a year ago, and the critical retailing measure of same-store sales, measuring volume at stores open for more than a year, slid 7.8%. The net loss included a $45.6-million charge related to disposing of excess inventory and internal restructuring costs in its home services business unit.

"We are not pleased with our results this quarter and have significant work ahead of us," Mr. McDonald, in his first full quarter as president and CEO, said in a statement. He was hired last June, after years as an executive in varying roles at Loblaw Cos., by Sears Canada, 93.9% of which is owned by Sears Holdings Corp. of Hoffman Estates, Ill.

John Williams, partner and retailing consultant at J.C. Williams Group in Toronto, said Sears Canada has some great strengths in categories such as hard goods, tools and exercise equipment.

"But with the exception of core departments like appliances, Sears is getting pounded. It appears they have lost their relevance for a lot of consumers who find [that merchandise] in a lot of traditional competitors like Walmart, or in new competitors like Joe Fresh and for cosmetics, Shoppers Drug Mart," he said.

"Their president has been refreshingly candid about the fact they need a total makeover. But it might be too late to change consumers' perceptions about Sears being a highly desirable place to shop — that has slipped away."

Sears also lost money in the first nine months of the year, with a net loss of $98.8-million (94’) compared with net earnings of $32.5-million (30’) in the first nine months of 2010. Sears Canada net earnings per share fell 56% in 2010 and has seen its share price tumble 36% in the past year.

"Management is under pressure to improve operating processes and sales performance before 2013 when the largest and best-located Zellers stores in Canada will reopen as Target or Walmart stores," said analyst Keith Howlett of Desjardins Securities, who had been anticipating profit of 3’ per share in the third quarter, in a note to clients. He was anticipating a same-sales decline of 5%.

Wal-Mart sees a happy holiday ahead
By Aaron Smith
CNN Money
November 15, 2011

NEW YORK (CNNMoney) -- Wal-Mart's same-store sales crept up in recent months, reversing last year's losses and trumping expectations, prompting the world's largest retailer to provide a sunny forecast for the holidays.

Wal-Mart (WMT, Fortune 500) said that U.S. sales at its namesake stores open a year or more -- also known as same-store sales -- were up 1.3% in the fiscal third quarter ended Oct. 28, reversing a decline of the same percentage. Same-store sales at Sam's Club outlets rose 5.

"I'm pleased that the sales momentum positions us exceedingly well for the holidays," said Mike Duke, chief executive of Wal-Mart Stores Inc., in the quarterly report.

Wal-Mart announced last week that it will begin its Black Friday sales at 10 p.m. on Thanksgiving Day. "The holiday season is under way and we're aggressively going after the business this season," said Bill Simon, chief executive of Wal-Mart's U.S. stores,

This increase is more significant when compared to last year's decline in sales. In the third quarter of 2010, total same-store sales slipped 0.7%, tripping up Wal-Mart's reputation as the go-to retailer in tough economic times.

Simon attributed the increase in same-store sales to "our focus on expanded assortment, product innovation and local relevance."

These elements "improved merchandise offerings throughout the store and customers responded," he added.

"Local relevance" is an apparent reference to Wal-Mart's push to sell locally produced goods.

In May, Duke surprised attendees at a business breakfast by the claiming that the majority of Wal-Mart's products are made in the United States.

Retail sales: Consumers still spending

Company spokesman David Tovar later clarified that comment by explaining that 54% of the total sales come from groceries and household goods such as detergent and paper towels, and that most of those products are American-made.

For the third quarter, Wal-Mart's net sales rose 8.2% to $109.5 billion.

Supreme Test for Health Law: High Court Agrees to Landmark Review of Federal Powers; Ruling Due Amid Election
By Jess Bravin
Wall Street Journal
November 15, 2011

The Supreme Court agreed Monday to review President Barack Obama's health-care overhaul, in a landmark case that could define not only Mr. Obama's presidency but the scope of federal power well into the 21st century.

The case is likely to be heard in March, and reflecting its significance, the court ordered an extraordinary 5½ hours of argument, compared with the 60 minutes typically allotted. A ruling is expected by June 30, in the midst of an election campaign where perceptions of the Patient Protection and Affordable Care Act, Mr. Obama's signature legislative achievement, could be pivotal.

The justices ordered arguments on several contested provisions of the health law, but the flashpoint is its requirement that most Americans carry health insurance or pay a penalty along with their income taxes.

The individual mandate has emerged as the new crucible of states' rights, with the principal case pitting 26 Republican state attorneys general and governors against the administration.

Both sides previewed their 2012 campaign arguments over the law Monday.

The Obama administration says it has already expanded coverage to more than a million young people whom the law allows to stay on their parents' plans until they are 26 years old.

Republicans have pledged to repeal the law if they win the 2012 election. Senate Minority Leader Mitch McConnell (R., Ky.) said it "represents an unprecedented and unconstitutional expansion of the federal government into the daily lives of every American."

Democrats initially hoped the mandate to carry health insurance, conceived as a private-sector alternative to the public single-payer system many on the left preferred, would draw Republican support. Instead, conservatives seized on it as exemplifying federal overreach, saying in a string of lawsuits that Congress had asserted powers far beyond its constitutional authority to regulate interstate commerce.

The state coalition, led by Florida's attorney general, prevailed in August before the 11th U.S. Circuit Court of Appeals in Atlanta. It ruled the mandate unconstitutional in a 207-page opinion, declaring it "breathtaking in its expansive scope.

That decision proved to be the outlier among the four appeals courts to hear separate challenges to the mandate. In Richmond, Va., the Fourth Circuit dismissed a suit as premature, holding that challengers must wait until the mandate takes effect in 2014. The Cincinnati-based Sixth Circuit and the District of Columbia Circuit in Washington both handed the administration outright victories, upholding the mandate as a rational exercise of congressional authority to regulate the national health-care market.

Those decisions particularly stung the right, because they included opinions from influential conservative judges whose records show little ideological affinity for the Obama administration. With his June concurring opinion, Sixth Circuit Judge Jeffrey Sutton, one of several young conservatives selected by former President George W. Bush, became the first Republican-appointed judge to uphold the mandate. Last week, Judge Laurence Silberman of the District of Columbia Circuit not only upheld the mandate, but embraced the New Deal-era precedents that expanded the power of the government to regulate the economy.

While a new and "intrusive exercise" of congressional power, Judge Silberman likened the mandate to other transformative federal laws the Supreme Court has upheld—including the Civil Rights Act of 1964, the Controlled Substances Act of 1970 and the New Deal agricultural program that generated a landmark ruling, Wickard v. Filburn, affirming congressional power to address national economic problems.

Public opinion was almost evenly divided on the law for more than a year after its passage, but has recently turned. A poll released last month by the nonpartisan Kaiser Family Foundation found that 51% of respondents had an unfavorable opinion and only 34% felt favorably about the law. That was the first time since March 2010 that a majority in the monthly poll said they disliked the law as a whole.

Ohio voters last week approved a declaration against mandatory participation "in a health-care system," a protest move because a state cannot nullify federal law.

In addition to the individual mandate, the court said it would review the law's expansion of the federal-state Medicaid program, which states said violated their sovereignty. It also will consider whether the balance of the law would stand even if the individual mandate were voided, as the 11th Circuit ruled.

The justices also will consider the administration's argument that the mandate falls within Congress's taxing power, as the penalty for noncompliance is collected by the Internal Revenue Service. No appeals court adopted that view, although one judge did.

And the Supreme Court even left open the possibility that it might not rule on the merits of the law at all, saying it would consider arguments endorsed by one appellate court that any suit should wait until the mandate goes into effect in 2014.

The administration has long presented the individual mandate as just one of a set of rules designed to provide health coverage to many of the 50 million Americans who lack it.

The act prohibits insurance carriers from discriminating against those with pre-existing medical conditions, and it requires that coverage be universally available. Those features are only feasible, the government says, if the individual mandate expands the insurance pool to include younger, healthier Americans who might otherwise forgo carrying insurance until they fall ill or are injured.

Insurance rates have continued to rise since portions of the law have taken effect. The Kaiser Family Foundation estimated in September that employee premiums rose 8% in 2011 for individual workers, and 9% for workers who purchased family plans.

Mercer, a human resources consulting firm, estimated around the same time that the average cost of employee health coverage will go up another 5.4% in 2012.

Critics concede that Congress could establish a public program expanding Medicare to all Americans and raising the money through a tax like the one people already pay to provide Medicare to those 65 and older. The reason is that the Constitution gives Congress power to tax and spend to promote the nation's "general welfare."

But challengers assert that the Affordable Care Act, far from regulating commerce, compels those who prefer to stay entirely outside the marketplace to enter it, thereby impinging on their liberty. The government maintains that because everyone can be expected to need health care, the measure simply regulates the method for financing it.

The health-insurance industry has maintained that the individual mandate is an essential component of the law, but representatives have long refused to speculate on what might happen if the individual mandate is removed from the law. "There was widespread agreement throughout the health-care reform discussions that the insurance market reforms in the Affordable Care Act could only work if all Americans have health-care coverage," said Robert Zirkelbach, a spokesman for the America's Health Insurance Plans association.

If the court strikes down the mandate, the vote is likely to be 5-4. Based on their prior writings, the four liberal justices will almost surely consider it to be a policy choice for Congress rather than a question of individual liberty.

The suspense resides on the court's right wing, where scholars say that based on prior writings, only Justice Clarence Thomas is virtually certain to consider the mandate unconstitutional.

Most speculation surrounds Justice Anthony Kennedy, who has sometimes sided with liberals, and Chief Justice John Roberts, who last year joined liberal Justice Stephen Breyer in affirming broad federal authority over policies Congress deems "necessary and proper."

While a ruling isn't likely to change partisan views of the law, it could influence independent voters, said Bruce Cain, director of the University of California Washington Center.

"A win at the court has a bit of a halo effect for Obama," Mr. Cain said, but a loss could damage his credibility with independent voters.

--Louise Radnofsky contributed to this article.

It pays to work at Discover: Job-sharing, generous vacation and fitness center among employee benefits
By Becky Yerak
Chicago Tribune
November 15, 2011

It's easy to forget, but 25 years ago the Discover card was introduced by Sears, Roebuck and Co. during the 1986 Super Bowl.

The commercial included a rising sun and a message: "Few things cost you nothing to get and pay you back every day. But now the Discover card does."

Making the debut even sweeter, Sears' hometown Chicago Bears won that championship game, routing the New England Patriots 46-10.

So when it came time earlier this year for Discover Financial Services to celebrate its 25th anniversary, the Riverwoods-based credit card company brought in four Bears players from the Super Bowl XX team, including Dan Hampton and Gary Fencik, to celebrate with employees.

Hampton's "head was the size of my body," Discover President Roger Hochschild recalled recently. But the 13-year Discover veteran was also struck by his guests' intangible qualities.

"You could see they still got along as a team," he said of the former Bears.

When it comes to collaboration, Discover isn't too shabby either. It ranks No. 6 among large companies on the Chicago Tribune's annual Top Workplaces survey, conducted by Exton, Pa.-based consultancy WorkplaceDynamics.

Discover has about 2,700 workers on its 80-acre campus, which includes a 1.8-mile running trail, a fitness center that offers chair massages, and outdoor sand volleyball and basketball courts. After cutting about 500 jobs in 2009, Discover has been back in hiring mode. It's looking to fill more than 200 jobs locally, ranging from associate positions to senior management posts in such areas as analytics, information technology and consumer banking.

Many workers who are happy at Discover say their employer enables them to have a life outside work, noting the company's flexible scheduling options.

Job-sharing, for example, will enable two executives to each work three days a week, overlapping Wednesday. Where appropriate, Discover will also allow employees to work part time.

"One of our most successful executives … worked a couple of years part time, came back full time and is now on the management committee," Hochschild said of Julie Loeger, now senior vice president of brand management.

As soon as workers are hired, they receive 25 days of paid vacation and sick time. That's in addition to the usual paid holidays.

The dress code is business casual, and workers can wear jeans on Fridays. The campus also includes dry-cleaning services and a sick bay with a full-time physician's assistant.

Several employees said they felt empowered to make decisions, their opinions were respected and they were recognized for good work.

Hochschild said Discover, which was spun off from Morgan Stanley as an independent company in 2007, tries to fill at least two-thirds of its open positions from within.

"It's important to provide opportunities for our own employees," he said.

Discover's market share rose for the third-straight year in 2010, to 7.05 percent, according to the Nilson Report, which tracks the credit card and payment industries. Its 10-year high, though, was 8.22 percent of outstanding credit card balances in 2000.

Kim Holmes, a Discover technology director, appreciates the benefits.

"I love the fitness center," added Holmes, who lost 15 pounds recently.

She also characterizes Discover's culture as open. Her previous employer had a hierarchical structure, with top managers often retreating to the executive dining room for lunch. But top Discover executives, including Hochschild, regularly eat with employees in the cafeteria.

Hochschild is a particular fan of the Indian food, made by Manpasand restaurant in Arlington Heights and brought into the 800-seat dining hall Wednesdays and Fridays.

As if to vouch for the camaraderie, Holmes noted: "Roger drinks white milk."

Black Friday: Best Buy, Staples, Sears
By Hayley Tsukayama
Washington Post
November 14, 2011

More deals appear online every day as retailers race to leak their own Black Friday deals ahead of the biggest holiday shopping day of the year. Best Buy, Staples and Sears have leaked their holiday deals.

So far, the best tech deals on the ads from each store include a $200 Sharp 42-inch television (normally $800) from Best Buy, $300 off the BlackBerry PlayBook for a $199 price from Staples and a $99.99 Sony Speaker Dock for the iPhone and iPod from Sears.

Best Buy is also offering a Verizon Wireless HTC Thunderbolt for free with a two-year activation, game titles such as Battlefield 3, Arkham City and Uncharted 3 for $29.99 each, and an 8 GB iPod Touch for $194.99 and bundled with a $50 gift card. The store is also offering an event for Black Friday shoppers: a showing of Harry Potter and the Deathly Hallows, Part 2. The screenings will take place at 120 stores across the country, starting at 9 p.m. Thanksgiving Day.

Staples also has a gift care bundle — a Nook Color for $199 plus a $25 gift card — and savings on HP laptops and hard drives.

Sears also announced that it will honor other Black Friday ads with its holiday price match policy, and also offer "Cyber Monday Now" prices on its Web site.

Supreme Court to hear challenge to Obama's health-care overhaul
By Robert Barnes
Washington Post
November 14, 2011

The Supreme Court said Monday it will hear a challenge to the health-care overhaul act passed in 2010, with a decision on President Obama's most controversial domestic achievement likely to come in the summer of his reelection campaign.

Opponents have called the massive new law, with its central mandate that almost all Americans have health insurance by 2014 or pay a penalty, an unprecedented expansion of the national government.

The administration says it is confident the act will be upheld as a valid exercise of federal power, just as Social Security and the Civil Rights Act were found to be constitutional.

Challengers to the law went to court within minutes of Obama signing the bill in March 2011. More than 30 lawsuits eventually were filed, and more than half the states have objected to the act, which was passed by a Democratic-controlled Congress.

Both the challengers and the administration urged the court to take the case, saying uncertainty about the law's constitutionality needed to be resolved as quickly as possible.

Lawmakers, Sears, leaders still hoping for deal
By Mike Riopell
Daily Herald - Suburban Chicago
November 14, 2011

SPRINGFIELD — The major players trying to finish a deal to keep Sears Holdings Corp. in Hoffman Estates wanted to present the company with a tax-incentive package by the end of last week, originally scheduled as the 2011 close of business for the Illinois legislature.

That didn't happen.

So now, with leaders of the retail giant saying they want to decide by the end of the year whether to stay in Illinois or move to another state that's offering tax breaks, lawmakers will return to the negotiating table to try and get done what they couldn't do before.

The new deadline is Nov. 29, an additional day tacked onto the fall legislative session at the last minute to try and work through obstacles on the Sears deal as well as other major tax proposals to which it has become linked politically.

The fates of all eventually will be determined by top legislative leaders and lawmakers throughout Illinois, many of whom have no local connection to Sears. Over the next few weeks, more initiatives could get tacked onto a massive deal. Or parts, like tax breaks for Sears, could be separated out.

Sears is asking for an extension of its 20-year-old property tax deal with Hoffman Estates, as well as state income tax credits. Carpentersville-based Community Unit District 300 opposes proposals so far, saying tax breaks cut into revenue for schools.

With hearings set for next week, the Daily Herald asked suburban lawmakers closest to the negotiations what has to happen for a deal to get done. Here's what they said.

Sen. Matt Murphy, Palatine Republican

"It's been rolled into a broader package. Whether that package is too large for the individual pieces to pass, I don't know. They may have a better opportunity breaking it back out."

"Generally, down here (in Springfield), when you want you want to see something move, you have different interests from around the state. And when people's different interests are addressed, they have a stake in the bill."

"Including a lot of other tax relief into this is something that's only been discussed in the last couple weeks. So I think there's a natural hesitancy to not move too quickly and be rash."

Rep. Fred Crespo, Hoffman Estates Democrat

"At this point, we have to figure out who supports what. How do we pass this thing?"

"There are no bad people here. Everyone's out there advocating for their own needs."

Proposals have been filed in both the Illinois House and Senate.

"From my perspective, we have a couple vehicles to get this done."

"Hopefully it's enough, and hopefully it's in time. The longer you wait, more things can happen."

Sen. Dan Kotowski, Park Ridge Democrat

"I think we have a framework in place," Kotowski said, referring to a proposal crafted by suburban lawmakers that would extend Sears' property tax breaks, penalize the company if it left Illinois, and send more money to local governments like District 300.

"We've factored in the 15 different points of view. And we've been able to make sure there are provisions in place to keep the jobs here and penalties in place if Sears leaves. We'll have to see the feedback over the next couple weeks. ... It looks like there's general support for an overall package, but we'll have to see the feedback in the House."

Sen. Michael Noland, Elgin Democrat

"Well, it's about the money. If we're to vote on that (Sears) separately, I believe that we would be able to get the school district to the table in negotiations."

"This really has less to do about Sears than it does about Hoffman Estates. I represent Hoffman Estates. I want them to prosper and to do well. But not at the expense of their neighboring community, Carpentersville."

"We want there to be an understanding between the school district and all the other taxing bodies and Hoffman Estates."

"They all have to be at the table."

Lampert Fix for Sears Not Your Parent's Department Store: Retail
By Lauren Coleman-Lochner
Business Week
November 14, 2011

(Bloomberg) -- Edward Lampert is remaking Sears Holdings Corp. to be quite unlike the department store Americans have known since 1893.

Billionaire chairman Lampert is lessening his company's dependence on full-size locations, where sales have fallen. In his latest attempt to turn around the largest U.S. chain of its kind, Lampert is turning to smaller store formats, Web sales and the lure of its brands to re-ignite growth.

Sears has closed 171 of its large U.S. stores since Lampert merged the chain with Kmart in 2005. It's ramping up franchising efforts -- including the Sears Hometown and Sears Auto stores. It's leasing space to such retailers as Forever 21. And departing from a strategy that has prevailed for most of Sear's history, it's allowing other retailers to sell the popular DieHard, Craftsman and Kenmore products and looking to license those brands.

The brands "still have equity, they still resonate" with consumers, said Robert Passikoff, president of Brand Keys, a New York brand-equity consulting firm. He has a proposition more radical than the company's current strategy: "Close down the stores and just license the heck out of the brands."

When Lampert merged Sears with Kmart in 2005, he said the new entity would have the geographic reach and scale to compete with Wal-Mart Stores Inc. Sears service and products are "every bit as good as any of the competition," Lampert said when announcing his plan to buy Sears in November 2004.

Four CEOs

Lampert, who along with his hedge fund owns about 60 percent of Sears, has since presided over 18 consecutive quarters of declining sales. Four chief executives have come and gone. While the shares soared in the first few months, the company's market value has since tumbled to $7.9 billion, a 36 percent drop from the $12.3 billion acquisition price. The shares rose 2.1 percent to $74.34 in New York on Nov. 11.

Few retailers have tried and abandoned as many initiatives in so short a time. An initial push involved converting 400 Kmart stores to a format called Sears Essentials that featured grocery and convenience items. Sears Grand, another concept, hewed to a superstore model. Now it's the franchised Hometown outlets, which sell tools, appliances and outdoor goods.

"I don't know how they could materially turn this around in a way that could make Sears a viable retailer over the long term," said Matthew McGinley, a managing director at New York- based International Strategy & Investment Group, which recommends selling the shares. "It's almost too late now."

Dwindling Cash

Analysts are predicting a decline in sales and an adjusted loss of $1.28 a share excluding some items in the current quarter. The company, which is scheduled to report earnings Nov. 17, has posted losses in five of the past six quarters. Cash had dwindled to $658 million at the end of the last quarter, compared with $1.2 billion a year earlier. Sears earned $133 million last year.

"We have assets no other retailer can claim," including "award-winning online service," spokesman Chris Brathwaite said in an e-mail. "We will continue to seek to bridge the digital and physical worlds to create the most positive shopping experience for our customers."

In his last two annual investor letters, Lampert identified the smaller Hometown and Sears Outlet stores as sources of growth and profit. The company opened 122 of those so-called "specialty" stores last year, he said in his 2011 letter, and now has 945 -- less than a quarter of the total.

Meantime, many of the larger stores are suffering. Sears owns or occupies about 2 percent of existing retail space in the U.S., McGinley estimates, and missed the opportunity to cash in by selling locations when the economy was stronger. Now, with retailers such as J.C. Penney Co. and Macy's Inc. slowing or halting expansion, "that ship has completely sailed," he said.

Decade Wait

The company doesn't have the funds to shut stores, which requires payments to landlords for truncating agreements and severance costs to employees, he said. Instead, Sears can wait a decade or more until leases run out.

Many of those stores are dimly lit and have old fixtures and broken flooring, according to McGinley, who estimates Sears is spending less than a quarter of the $8 a square foot that retailers typically invest to maintain stores. Since 2005, Sears has plowed $6 billion into buying back shares, or twice what it has spent on capital improvements, according to his firm.

An August report from his firm ranks Sears and Kmart at the bottom of the list of a dozen retailers ranked by sales per square foot and operating profitability.

McGinley estimates that about a quarter of the company's full-size stores are consuming cash, and predicts that the company's cash use will accelerate to $500 to $750 million this year, from $300 million last year.

Surprise Visits

Brathwaite said the company has added scheduled and surprise visits by executives to check store appearance and conditions, and introduced a new scorecard to track customers' experiences. Sears has also put money into sprucing up restrooms, lighting, flooring and other elements, and is testing or adding new fixtures and signage to several merchandising areas, he said.

Sears' best assets may be its DieHard, Craftsman and Kenmore brands. The latter two continue to lead their categories. Craftsman has lost market share to private-label rivals, while Sears as a whole has ceded some appliance sales to the likes of Home Depot Inc., although it remains the leader.

Sears has cut deals with such retailers as Costco Wholesale Corp., and Ace Hardware to sell Craftsman tools in their stores. And it has circulated a proposal for third parties to pay Sears a fee to use its brand names on products, a person familiar with the situation said in October.

No Experience

New CEO Lou D'Ambrosio, hired in February, is ramping up Web operations. Lampert cited D'Ambrosio's technology background after recruiting him. Still, D'Ambrosio has no retail experience, unlike J.C. Penney's new CEO, former Apple Inc. retail chief, Ron Johnson. v Online sales via Sears' various websites grew 30 percent year-over-year in the second quarter of this year, and 22 percent in the first quarter. To jog that growth, Sears has given salesmen in 450 of its stores more than 5,000 iPads and 11,000 iPod Touches to help them track inventory and customer orders, and added free wireless access.

Sears is finding its footing, including boosting Web sales, less clearance inventory in stores and efforts to leverage its valuable brands, said Paul Swinand, an analyst at Morningstar Inc. in Chicago.

With competitors such as Home Depot closing stores, Sears can build on its position as the leading appliance seller when the economy improves, Swinand said.

"They actually have a shot at turning the retail business around," he said. That said, he added, "I can't point to anything that's the key that's going to turn it around."

--Editors: John Brecher, Robin Ajello, Kevin Orland

Sears won't open on Thanksgiving: Customers didn't want 'to get up at midnight'
By Sandra Guy
Chicago Sun-Times
November 11, 2011

Sears stores will open at 4 a.m. the day after Thanksgiving, reversing last year's decision to open on Thanksgiving Day. Sears stores will remain closed this Thanksgiving Day to give their store employees and their families the ability to celebrate the holiday, the company announced Friday.

"Sears listened to customers who said they didn't want to be forced to get up at midnight to get the best deals," said Tom Aiello, a spokesman for Hoffman Estates-based Sears Holdings Corp., which owns Sears and Kmart. "Also, with more customers going online to do their holiday shopping, we've seen an increased use of our online tools like the 'buy online, pick up in store' function, which let customers pre-purchase items — and access Black Friday deals — from the comfort of their homes and conveniently pick them up in-store."

Sears joins other retailers opening their doors in the wee hours the day after Thanksgiving to attract bargain seekers and shoppers intent on maintaining holiday store camp-out rituals.

After the 4 a.m. Friday opening, Sears stores will close at 9 p.m. on the day after Thanksgiving.

Kmart, which has opened on Thanksgiving Day for 20 years, will do so again this year. Kmart stores will open from 6 a.m. to 9 p.m. on Thanksgiving Day and from 5 a.m. to 11 p.m. the day after Thanksgiving.

In the past week, several retailers have announced they will open Thanksgiving evening, hoping to attract shoppers who've finished Thanksgiving dinner and cannot wait to use their coupons or race each other for the hottest toy in limited quantities.

Wal-Mart will open at 10 p.m. Thanksgiving evening.

Among retailers announcing midnight openings Thanksgiving night and into Friday morning are Macy's, Kohl's, Target, Best Buy, Hhgregg and Carson Pirie Scott. Black Friday is so named because it's traditionally when many retailers see the red ink on their books turn a profit, or go into the black.

A survey by Harris Interactive for e-tailer Ebates found that 87 percent of Americans buy most of their holiday gifts in December rather than around Thanksgiving.

Wal-Mart's Home Gets Artsy: Town Hopes Walton-Funded Museum Will Draw Crowds to Its Corner of the Ozarks
By Miguel Bustillo
Dow Jones Newswire
November 11, 2011

BENTONVILLE, Ark.—This company town has few tourist attractions besides a seven-foot statue of a Confederate soldier and the Sam Walton five-and-dime that started the Wal-Mart Stores Inc. empire.

That changes Friday with the opening of the Crystal Bridges Museum of American Art, an elaborate edifice built with Walton money that is luring boutique hotels, trendy restaurants and art galleries to this corner of the Ozark Mountains.

"I'm a big believer that this will completely change the nature of Bentonville," said Steve Wilson, who is opening a 103-room art-themed hotel just off the town square.

Never mind that no one has any idea how many people will trek to northwest Arkansas to see an art collection, even a world-class one that includes everything from a Gilbert Stuart portrait of George Washington to an Andy Warhol rendering of Dolly Parton.

Museum officials and civic boosters—who hope for 300,000 visitors a year—say Crystal Bridges already has helped add hundreds of hotel rooms and spur an airport expansion in an economically vibrant region. Thanks to the headquarters of Wal-Mart and Tyson Foods Inc., unemployment in Bentonville is about 7.5%, according to the state, well below the national average.

"I know from my past professional life that the outside perception of Arkansas was not flattering," said Mayor Bob McCaslin, who came to Bentonville as a liaison to Wal-Mart for Kraft Foods. "But I think visitors will see we have a lot to offer."

It may be a challenge to lure tourists. Bentonville, a town of 35,000, is far from anywhere by car, and the business-oriented flights to the nearby regional airport can be prohibitively expensive for those unable to charge them to expense accounts.

Crystal Bridges, which spans a creek called Crystal Spring, seemingly emerges from woods within walking distance of the town square. The striking complex of curved buildings with copper-topped roofs, which resemble armadillo shells, was bankrolled to the tune of $1.2 billion by heirs to the late Mr. Walton, notably his daughter, Alice, one of the world's richest women. Admission is free.

Because it was born of such largess, the museum didn't bother to conduct the economic-feasibility studies common at cultural institutions. That baffles consultants from other regions, said Arkansas tourism director Joe David Rice, who keep asking him to see evidence it can work.

"We think it's analogous with the Clinton library," Mr. Rice said, referring to the William J. Clinton Presidential Center in Little Rock, which attracts roughly 300,000 visitors annually. "The difference, though, is that with Crystal Bridges, we might get some Republicans up there as well."

Cultural draws can yield big economic benefits, many studies have found, though such studies typically define the impact broadly. Oklahoma City's National Cowboy & Western Heritage Museum, for one, has a positive economic impact of $45.7 million a year, a study found.

Some of Bentonville's more optimistic boosters hope to emulate Santa Fe, N.M., where the art and culture industry employs one out of six workers, according to a study by Jeffrey Mitchell, a University of New Mexico economist. But Mr. Mitchell said creating such an arts industry in Bentonville could be difficult.

"You may get day visitors, but for the life of me I don't see how that is going to generate a long-term benefit [like that seen in Santa Fe] unless you get other art attractions," he said.

Crystal Bridges plans to subsidize visits by schools, said deputy director Sandy Edwards, and will try to boost attendance by attracting football fans visiting the University of Arkansas in Fayetteville, 30 miles away.

Local entrepreneurs are optimistic, counting on a mixture of regional visitors and well-heeled art tourists from around the world. Restaurants such as Tusk & Trotter American Brasserie, serving crispy pig-ear salad and applewood-smoked rabbit, are opening on the town square, which is centered on the Confederate statue.

"It's going to be a big deal," said Alex Browning, a cook at a more low-brow option that rolled into town sniffing opportunity: a grilled-cheese truck called the Grillenium Falcon.

Hoffman mayor makes plea for Sears tax deal
By Mike Riopell
Daily Herland - Suburban Chicago
November 10, 2011

SPRINGFIELD — Hoffman Estates Mayor William McLeod Thursday urged House lawmakers to consider how important Sears Holdings Corp.'s jobs are to the local economy.

And, he argued, the village needs more money to provide police, fire and other services to the Sears area than the $5 million some proposals would allow them.

"We'll be upside down," McLeod said.

The mayor's testimony wrapped up a tense week of talks about how best to approve tax incentives for the retail giant, whose officials have said they plan to decide before the end of the year whether to move out of Hoffman Estates.

Lawmakers have scheduled meetings later this month to take the issue up again, with today likely to see little action on Sears incentives.

Officials from Community District Unit 300 have been in Springfield all week to oppose tax breaks for Sears, saying it needs the property tax revenue the corporation generates.

That tension was on full display Thursday morning.

"I don't want to be the referee of a wrestling match here," said Rep. David Harris, an Arlington Heights Republican.

"This has become emotional at times, and we're not going to let anything get out of hand here," said the House committee's chairman, Rep. John Bradley, a Democrat from downstate Marion.

McLeod addressed school district criticisms that the new proposal would allow money generated by the Sears tax deal to be used to operate the village-owned Sears Centre Arena.

McLeod said that even if that is allowed, they wouldn't have enough money from the deal to do it.

"Whether we theoretically could or not, there's no money," McLeod said.

District 300 Superintendent Michael Bregy testified again Thursday, as well, and continued to press lawmakers to change the plans that have been outlined so far.

"Unlike a corporation, a financially strapped school district doesn't have the opportunity to leave the state to satisfy its own shareholders," Bregy said.

At one point, with the committee short on time for its scheduled meeting, Bradley tried to cut district officials' speeches short.

"We're not going to have the same speeches made at every hearing," he said.

For its part, Sears officials presented an economic study from March detailing Sears' impact on the state economy.

"Our significance to the state economy is undeniable," said Misty Redman, Sears' director of government affairs

New Penney CEO Is Tapping Former Apple Co-Workers
By Dana Mattioli
Dow Jones Newswire
November 9, 2011

In a little over a week as chief executive of J.C. Penney Co., Ron Johnson is already shaking up the department-store chain's management and tapping former Apple Inc. colleagues to help shape his new team.

Penney is close to bringing on Michael Kramer, now chief executive of Kellwood Co., as chief operating officer, people familiar with the matter said. Mr. Kramer previously reported to Mr. Johnson at Apple, where Mr. Kramer was the chief financial officer of Apple Retail from 2000 to 2005. Mr. Johnson ran Apple's retail operations from 2000 until this October.

Mr. Kramer will start at Penney on Dec. 1, the people said. Penney declined to comment. He follows on the heels of another high-profile hire former Target Corp. marketer Michael Francis, whom Penney recruited as its president in October. Messrs. Johnson and Francis worked together at Target, where Mr. Johnson won plaudits for shaping up the discounter's merchandise with exclusive lines of designer goods.

With Mr. Johnson's management team shaping up, the question turns to what he plans to do to spark up a midtier retailer that has posted three straight monthly declines in sales at stores open at least a year.

Mr. Johnson is credited with building out Apple's retail network, which emphasized clean lines and uncluttered shelves that highlighted the company's iPhones and Macintosh computers. But that approach isn't likely to work with Penney's much larger product assortment and dowdier past, which present fresh challenges.

Mr. Johnson believes brands are important and that the store needs to attract more designer labels to its permanent collection to appeal to a broader consumer base, a person familiar with his thinking said.

Former Chief Executive Myron Ullman brought in exclusive lines such as Liz Claiborne and cut deals with brands such as makeup producer Sephora and fast-fashion apparel company Mango to set up shops within Penney's stores.

The moves have helped sales and have attracted younger customers, but industry watchers are anxiously waiting to see what sorts of innovations Mr. Johnson can bring to the department-store format.

To round out his new team, Mr. Johnson has been relying on another former Apple executive, Daniel Walker, people familiar with the matter said. Mr. Walker worked at Apple from 2000 until 2005, with his last position as vice president of human resources. He was the executive who recruited Mr. Johnson to lead Apple's retail operations.

Mr. Kramer's current company, Kellwood, designs and manufactures a portfolio of fashion brands including Rebecca Taylor, Baby Phat and Vince. Kellwood is owned by private-equity firm Sun Capital Partners Inc.

Kellwood didn't reply to requests for comment.

As Kellwood CEO since 2008, Mr. Kramer pared back a bloated portfolio and shed low-margin brands to focus on higher-end, higher-margin labels. Mr. Kramer also oversaw the acquisition of luxury brands such as Rebecca Taylor, Adam and Scotch & Soda.

Mr. Kramer's thinking aligns well with Mr. Johnson's goal of bringing higher-caliber designers to J.C. Penney, a person familiar with the matter said.

Sears Holdings enters the future of shopping with mobile walls: Toys can be purchased by scanning QR codes
By Gail Hoffer
Drug Store News
November 9, 2011

HOFFMAN ESTATES, Ill. — Sears and Kmart have entered the future of staying connected to consumers introducing mobile shopping walls in high-traffic areas.

The shopping walls, which will feature top toys that customers can purchase from their smartphones by scanning the products' QR code, will be available in select malls across the United States, and, for Kmart only, in movie theater lobbies in major markets. Additionally, shoppers can find the Sears and Kmart mobile walls in airports in Chicago, Dallas, Denver and Puerto Rico, and at bus shelters nationwide.

"With the hectic holiday season, we know how important it is to make shopping as convenient as possible, which is why we are bringing the Sears and Kmart shopping experience to places that correspond with our customers' everyday routines," said Hugo Malan, SVP and president fitness, sporting goods and toys. "As more shoppers head online to do their holiday shopping, consumers are now able to be more productive during their wait time. For example, customers can literally do all their holiday toy shopping while they wait for the bus or a delayed flight home."

Shopping for items via a virtual wall may be a new concept for Americans, but as Retailing Today pointed out in Walmart News Now issue in August, it already is a popular way to shop in Asian markets. For example, Tesco has developed an interesting shopper marketing solution that appeals to time-starved Korean commuters.

Tax break package ballooning, with business interests trying to lead the legislation
By Kathy Bergen
Chicago Tribune
November 6, 2011

Negotiations on a broader package have been under way since a more narrowly focused bill aimed mostly at relief for the exchanges, backed by Senate President John Cullerton, D-Chicago, stalled during the first half of the veto session in late October.

In June, Illinois legislative leaders launched what was intended to be an orderly review of the state's business tax structure after temporary corporate income tax rate hikes led to exit threats by some of the state's largest employers, including Caterpillar Inc., CME Group Inc. and Sears Holdings Corp.

Now, under intense pressure for immediate tax relief for Chicago's financial exchanges, including CME Group, owner of the Chicago Mercantile Exchange and the Chicago Board of Trade, legislative leaders are attempting to craft a bill laden with goodies to please as many constituencies as possible and to trundle it along a fast track during the remaining days of the veto session this week.

If the resulting proposal doesn't sink under its own weight, it likely will include lots of provisions desired by the business community, and that, too, continues a tradition that has significantly shaped the way the state taxes its corporate denizens.

Manufacturers, for instance, lobbied for and received a major restructuring of the tax code that went fully into effect in 2000, and it's a change that costs the state an estimated $100 million a year and has not triggered promised job growth.

That revision was "basically a back-door corporate tax cut through a method so arcane, most people don't understand what's going on," said Michael Mazerov, senior fellow at the Center on Budget and Policy Priorities, a research organization that focuses on how tax policies affect the poor.

And now, legislators are poised again to delve into fairly esoteric tax code revisions, many favored by business interests.

Negotiations on a broader package have been under way since a more narrowly focused bill aimed mostly at relief for the exchanges, backed by Senate President John Cullerton, D-Chicago, stalled during the first half of the veto session in late October.

The bedrock proposition attempts to limit financial exchanges' taxes to income stemming from Illinois-based transactions, the standard that applies for most businesses in the state. Currently, the tax applies to income from all transactions because they are processed here, but the exchanges say this is unfair because many trades now are placed electronically by out-of-state parties.

The proposal would tax income from just 27.54 percent of electronic transactions, which would cut the exchanges' corporate income tax bills in half and cost the state more than $100 million a year. Other states wooing CME Group are offering even bigger breaks, sources said, with some offering to tax only about 4 percent of electronic trades.

Gov. Pat Quinn is suggesting that everyday taxpayers should get a break too, and he is floating various add-on suggestions, from increasing the earned-income tax for low- and middle-income families to expanding the personal income tax exemption.

And Republicans have balked at the exchange proposal, saying they want broader relief that would help small and mid-size businesses. They are suggesting giving relief on estate taxes, extending the research and development tax credit for more than the currently proposed five years and reinstating companies' ability to use past net operating losses to offset tax liabilities — a break that has been temporarily suspended to help ease the state's budget crisis. Many business interests favor such steps.

The GOP push appears to be tapping a vein of anger among some business owners who feel stung by the corporate income tax hike as well as by tax break packages awarded to larger companies to get them to retain or add jobs in the state, companies such as Motorola Mobility Holdings Inc., Ford Motor Co. and Sears Holdings, which is negotiating renewal of breaks it has had for nearly two decades.

"They get the incentives and we get the bill," said Randy Truckenbrodt, owner of several small businesses, including Randall Industries Inc. in Elmhurst, which leases construction equipment. "It's all about grandstanding, all about the headlines." Or, as Mike Nobis, president of Quincy-based JK Creative Printers & Mailing, put it: "I have only 35 employees. I can't call the governor or the mayor and say 'I'll pull out if I do not get a better tax break.' They'd just say, 'Take off.'"

Loading up the tax relief bill for financial exchanges with a broader range of breaks would be a costly proposition for the financially struggling state, and that is triggering some resistance.

"It's never enough," said House Majority Leader Barbara Flynn Currie, D-Chicago. The add-ons pushed by the Republicans could bring the annual tab close to $600 million, she said, adding "that's money we don't have."

Currie notes that Sears is seeking renewal of tax breaks it has had in place for nearly 20 years, and the cost of that package is yet to be determined.

Lawmakers are looking to cover the costs of a tax relief package by pulling back other tax breaks, perhaps decoupling the state from a federal break that allows companies to accelerate their deductions for capital investments. A specific proposal has not yet emerged.

Asked what it would do if a relief package fails to emerge next week, the CME stated in an email, "We hope to remain in Chicago. But we are obligated to do what is right for our business and shareholders, and are reviewing proposals from a number of other states."

The Chicago Board Options Exchange, which also has threatened to move operations, declined to comment on the legislation.

Business interests played a key role in the most significant restructuring of the corporate income tax code of the past decade or so, when the state restricted the tax to profit stemming from in-state sales and eliminated property value and payroll size from the formula.

The move cut tax bills of Illinois-based manufacturing giants and other multinationals, whose sales are spread worldwide. The cost to the state has been an estimated $100 million annually, Currie said.

Proponents had projected the change would spur 285,000 new manufacturing jobs. Instead, the sector's employment shrank to about 600,000, down from as many as 800,000 when the legislation took effect.

"At the end of the day, I don't think our manufacturing share improved in any dramatic way," Currie said.

The Illinois Manufacturers' Association, which led the push for the change, said manufacturing job loss is hardly unique to Illinois and that the state's losses could have been worse without the tax change.

"For companies looking to stay in Illinois or expand in Illinois, this is a selling point," said Mark Denzler, chief operating officer of the organization.

The state's current approach of striking deals with specific industries and companies is drawing concern from a number of observers.

"The state has not published an updated or new economic development strategy, so it's at a severe disadvantage when trying to assess individual companies' requests for tax relief," said Laurence Msall, president of the Civic Federation, a fiscal research organization.

Quinn, who has accelerated the use of tax incentive packages to individual companies, has defended the strategy as essential for preserving and adding jobs in tough economic times. And his staff said a sector-based approach is in place, focusing on industries that have growth potential, including manufacturing, life sciences, production technology and medical innovation.

The governor has defended the temporary increase in corporate and personal income tax rates as a necessary stopgap measure to try to stabilize the state's finances. He is advocating a broader review of the tax code in the coming year.

Meanwhile, competing interests are aiming to hang myriad tax provisions on the financial exchange bill, adding breaks for all businesses and breaks for the average individual taxpayer.

"The experience I've seen in Illinois and elsewhere is that public policy usually comes in No. 3," said Fred Ackerson, a tax attorney with McDermott Will & Emery LLP. It generally trails a state's need for revenue and businesses' desire to push back taxes, he said.

"In terms of a coherent policy that shapes it all so it makes sense, that happens maybe once every other generation," he said.

Sears deal now tied up in bigger tax package
By Mike Riopell
Daily Herald - Suburban Chicago
November 5, 2011

SPRINGFIELD — After months of debate on a package of tax incentives intended to keep Sears Holdings Corp. in Hoffman Estates, the fate of that deal could now rest with a new proposal that will affect businesses across the state.

The terms of Sears’ deal are now being negotiated by legislators at the same time as proposals aimed at the Chicago Mercantile Exchange and tax credits for small businesses and the poor.

Like Sears, CME has threatened to leave Illinois if it doesn’t get some tax help. But Republicans and Gov. Pat Quinn have asked for other credits to be approved in exchange for helping the big companies.

All the tax ideas have been lumped together in an effort to find broader support, and Sears has been added to the list.

“There’s just so many moving parts,” said Rep. Fred Crespo, a Hoffman Estates Democrat. “And there’s so much at stake.”

How being linked to the broader package will affect Sears’ interests is a question that could be answered when lawmakers return to Springfield on Tuesday.

“We’re doing our part in our smaller universe,” Crespo said.

The General Assembly is scheduled to be in session only through Thursday, then recesses for the year. Sears has said it intends to decide by the end of this year whether to stay in Illinois or accept incentives to move to another state.

Sen. Dan Kotowski, a Park Ridge Democrat, said he thinks the greater package has appeal for people with various tax concerns and should draw widespread support.

Still, “I don’t know what everyone else is thinking about the package,” Kotowski said.

Some lawmakers oppose giving tax breaks for specific companies because they argue doing so allows the state to pick winners and losers.

For Sears, the finer details of the negotiations remain fluid. But in general, Sears would get its current property tax deal with Hoffman Estates extended as well as job-creation tax credits from the state.

In addition, Community Unit District 300, based in Carpentersville, would get double the tax money from Sears that it gets now, though the school district has asked for more.

Sears and Hoffman Estates would have to give up some of what they’re asking for to make it work.

“We’ll see what comes out of this,” said Hoffman Estates Mayor William McLeod.

District 300 has been the loudest critic of a plan to extend Sears’ 20-year-old tax deal, and officials there say they won’t comment on any of the proposals until they see specifics in writing.

They argue that the district could get $14 million in new money if Sears’ deal isn’t extended. But they’ve advanced a proposal suggesting they’d settle for less under the right circumstances.

District spokeswoman Allison Strupeck on Friday criticized the district’s absence from recent talks.

“There has been literally no follow-up with District 300,” Strupeck said.

Sears officials have been in contact with local lawmakers, but McLeod says he’s watching Springfield to see what happens next.

“It’s going to be what it’s going to be,” McLeod said.

Macy's Proves It Remembers Herald Square With a $400 Million Upgrade
Rick Moss
Forbes.com
November 3, 2011

Macy’s Inc., under the leadership of chairman, president and CEO Terry Lundgren, has pulled some gutsy moves in the last half decade, and it seems to be paying off. “Wall Street is high on Macy’s (M)” according to the most current Forbes earnings preview. Some of the most recent enthusiasm is possibly being inspired by the announcement earlier this week that the company will invest $400 in a remodel of its flagship Herald Square store.

With the Macy’s acquisition of May Department Stores in 2005, the pattern was set for a no holds barred style of management. Under fire from May loyalists across the country for dropping their beloved local banners for the Macy’s logo, Mr. Lundgren insisted on sticking to his guns. In actions seemingly designed to convince doubters that Macy’s was not killing the regional charm of stores such as Strawbridges, Loehmann’s and, most notably, Marshall Fields, it introduced its own, data-driven brand of localization know as My Macy’s. Meanwhile, in 2009, it centralized its buying offices, something one might think would homogenize offerings across the country, but the company has been praised by some industry watchers for applying consumer insights in a methodical approach to local merchandising customization.

Now comes news of the mammoth store remodel, demonstrating a distinctly different side of the Macy’s brand — tradition.

Macy’s Herald Square is perhaps the country’s most famous individual department store, high on the list of tourists, and site of the retailer’s annual Thanksgiving Day parade.

“The excitement, size and scale of this remodel reinforces our conviction that Macy’s Herald Square is and will remain a retail store in a class by itself,” said Terry Lundgren in a press releases. “It is our company’s most productive store, and experience shows that improvements in this location consistently result in higher customer traffic and sales volume. Our upcoming top-to-bottom remodel represents an investment in the future growth of our business as New York City continues to evolve as a world capital and shopping destination.”

Among the changes planned at the Herald Square store are an additional 100,000 square feet of selling space. (The current store is 1.2 million square feet.) Macy’s plans to use space currently dedicated for offices and stock while extending the mezzanine level in the store.

Macy’s is also looking to create the world’s largest women’s shoe department, add a new hall of luxury brands, restoring the “great hall” on the first floor with new presentations for cosmetics and jewelry.

The Herald Square store will feature technology and new media upgrades, including interactive store directories, live video feeds of Macy’s events and more. The eighth and ninth floors will continue to house home merchandise complete with an upgraded demonstration kitchen and the De Gustibus Cooking School.

“Our design of the new Macy’s Herald Square reflects how a new generation of customers prefers to shop. In many cases, product will be organized by lifestyle to help customers create looks and build wardrobes across categories. On every floor and across departments, our shopping environment will be new, fresh, interesting and entertaining,” Mr. Lundgren said.

Paying homage to the store’s history will be the restoration of the “Memorial Entrance” on 34th Street. Windows along 34th Street, Broadway and Seventh Avenue that have been covered up for years will be reopened. All but one of the store’s 43 wooden escalators will be preserved.

In an online discussion this week on RetailWire.com, members of the BrainTrust panel of retailing experts found much wisdom in the move, emphasizing how essential flagships can be to brands.

“There is now a Macy’s in almost every major city in the U.S., so it runs the risk of losing some cachet as the most famous New York-based department store in America,” wrote Richard Seesel, principal, Retailing In Focus. “It’s a smart idea to refresh its flagship store in Manhattan, not only because of the enormous volume driven by the Herald Square store to begin with, but also because of the ‘halo effect’ on the rest of the company.”

“The industry continues to consolidate; most would agree that Macy’s has emerged as one of the big winners,” commented Mark Baum, partner, MARCAT Group, on RetailWire. “There is much work to be done in upgrading their culture and customer service, but they have already made strides in their designer/celebrity partnerships, assortment, merchandising, and technology capabilities. The flagship store is an iconic destination in American culture, and surely this remodel will be used to herald (no pun intended) in a new era in Macy’s history.”

Others on the BrainTrust, however, saw irony in the grandiose remodeling plans and, apparently, remain unconvinced of the effectiveness of Macy’s localization tactics.

Ted Hurlbut, principal, Hurlbut & Associates, wrote, “It’s an interesting juxtaposition, to say the least, to be investing so much in assuring that Herald Square remains unique and distinctive when the rest of the chain settles into a numbing sameness punctuated by poor execution and poor customer service.”

Spun in a more positive direction, Mr. Seesel imagines that Macy’s might use the Herald Square project as a model for other of its prime locations. “The Union Square store in San Francisco, the State Street store in Chicago and others can use more razzle-dazzle along with some rethinking of the department store experience,” he wrote. “Macy’s certainly has one eye on Nordstrom and another eye on JCPenney’s new management team as it develops innovative new strategies.”

David Friedman Will Stay Through Holidays to Assist With Transition
Advertising Age
November 3, 2011

David Friedman, Sears Holdings' chief marketing officer, will be leaving the company in January, at the end of the company's fiscal year. His departure was announced in tandem with the news that Imran Jooma, senior VP-president eCommerce at Sears Holdings, will take responsibility for the online, marketing, financial services and pricing business units.

CEO Lou D'Ambrosio made the announcement in an internal memo, noting that management will continue to hone the organization to better deliver "excellence."

"These areas share complementary and synergistic elements and deliver important value to our customers and company," Mr. D'Ambrosio wrote. "Providing consistent leadership across these business units will enable us to move with greater speed to drive results."

"Dave's leadership has been critical, as we have continued to develop the Shop Your Way Rewards program, established Targeted Interactions and continued to improve our marketing capabilities," Mr. D'Ambrosio added in a note to the marketing team.

Mr. Friedman joined the retailer from Razorfish in September of last year to manage the marketing business unit. Both the Sears and Kmart marketing teams reported to him. It's not clear whether Mr. Friedman's role will be eliminated following his departure. "We're looking at a variety of options tied to his departure," said a Sears Holdings spokesman. "That said, David is very committed to helping Imran and the team through this transition. David and the marketing leadership team will be working closely with Imran to deliver an exceptional holiday shopping experience for our customers."

The news of Mr. Friedman's impending departure likely presents questions about the future of the company's agencies. Already the retailer is on the hunt for a Kmart CMO. And Monica Woo just joined as the CMO for Sears Roebuck in August. Rumors have swirled around the stability of the Kmart account, particularly in regard to DraftFCB, which has handled creative for the retailer since 2007. Ad Age reported in May that Minneapolis-based Peterson Milla Hooks took some of the business that DraftFCB had, namely the apparel and home business. But Kmart has done its best to squash those rumors. Last month, the retailer told Ad Age that DraftFCB remains Kmart's lead strategic agency.

The Kmart agency moves happened separately from a larger Sears review earlier this year. McGarryBowen was appointed lead creative agency on the Sears brand, which had been at WPP's Y&R Chicago since 1993. Y&R remains on the roster for the Craftsman, Kenmore and Die Hard brands, as well as some other Sears business units.

Wal-Mart to leak its own Black Friday deals
Jessica Dickler
CNN Money
November 3, 2011

NEW YORK (CNNMoney) -- Wal-Mart is giving shoppers an early look at its Black Friday deals for the first time this year, well before Thanksgiving.

The retailer, which usually waits until the week of Thanksgiving to release its highly anticipated circular, said this year it will offer those customers who sign up at Walmart.com or Facebook.com/Walmart an early preview of its Black Friday deals on an array of electronics, toys, household items and clothing.

Britt Beemer, retail analyst and chairman of America's Research Group, called the move a clever way to figure out who the retail giant's core customers are.

"They might get a half a million or a million people to sign up so it could be a very successful strategy for them," he said.

The company did not say when those previews would begin, but said it "will reveal the specials soon."

The retailer also said it would roll out "Super Saturday" sales at stores nationwide starting at 11 a.m. on Nov. 5.

According to the retailer, Wal-Mart's Super Saturday event will include offerings such as a 42-inch Sanyo LCD TV for $398, marked down from $448; a color Nook e-book reader for $199, down from $249; an Xbox 360 250GB console for $399, plus a $50 gift card; a 10-cup coffee maker for $39; and Transformers Ultimate Optimus Prime for $59.88.

Those deals will be available while supplies last or until midnight Saturday, Wal-Mart (WMT, Fortune 500) said.

To further lure shoppers this season, the retailer announced a holiday price guarantee last week. Wal-Mart said it will offer shoppers a refund on the difference if they find the same product they purchased at a Wal-Mart store advertised for a lower price elsewhere.

Wal-Mart has also announced a number of other shopping incentives, including layaway on purchases over $15, free shipping on most Walmart.com products, no interest on Wal-Mart credit card purchases if they are paid for in full within six months, and a 10-cent discount on each gallon of gas bought at participating Murphy USA or Wal-Mart stations.

As the holiday shopping season kicks off, retailers will have to fight even harder for sales in the face of continuing economic uncertainty and growing concern among consumers about job stability, according to Matthew Shay, president and CEO of the National Retail Federation (NRF).

According to a recent NRF report, 62.2% of Americans said the economy will impact their holiday spending plans -- and most people said sales or price discounts were the most important factors when making purchases this year.

"We know shoppers are watching every penny this season, so we're sharing our Black Friday specials early this year so they can plan ahead and deliver a wonderful Christmas for their families," Duncan Mac Naughton, chief merchandising officer of Walmart Stores Inc., said in a statement.

Sears Marketing President to Leave
REUTERS
November 3, 2011

Retailer Sears Holdings Corp.'s president of marketing, Dave Friedman, will be leaving the company to pursue other opportunities, a source familiar with the matter told Reuters.

The news came just a little more than a year after the parent of Sears department stores and the Kmart discount chain appointed Friedman to the top marketing position.

The retailer has also named Imran Jooma to lead its online, marketing, financial services and pricing business units a separate memo from Chief Executive Officer Lou D'Ambrosio showed.

"These areas share complementary and synergistic elements," D'Ambrosio wrote in the internal memo that was obtained by Reuters.

Jooma was most recently president of e-commerce at Sears. Under his leadership, the online business unit has grown 22 percent and 30 percent in the first and second quarters respectively of this year, D'Ambrosio said in the memo.

Friedman has agreed to support Jooma during the transition and assist during the important holiday season, the source said, adding that the changes are effective immediately.

The news comes at a time when the retailer, home to brands such as Craftsman tools and Kenmore appliances, faces tremendous pressure to boost sales.

Sales at the company, where hedge fund manager Edward Lampert is chairman and the biggest shareholder, have fallen every year since it was formed through the merger of Sears and Kmart in 2005. Lampert has been investing less in Sears and Kmart stores and spending more on the retailer's online unit.

Sears has seen an array of recent management changes. In early August, it named former FreshDirect executive Monica Woo as its vice president and chief marketing officer, filling a post that has been vacant since January 2010.

Just weeks later, the retailer named former Hewitt Associates Chief Financial Officer Robert Schriesheim as its CFO.

CEO D'Ambrosio himself joined the company only in February, ending Sears' three-year search for a new chief executive.

Sears has had trouble hiring executives since Lampert is seen as being difficult to work with and does not want to pay too much, Morningstar analyst Paul Swinand told Reuters in early August.

Sears shares were down 2 percent to $77.80 in early Thursday afternoon trading on Nasdaq.

Penney bets on finer offerings for holiday season
REUTERS
November 1, 2011

NEW YORK (Reuters) - J.C. Penney Co Inc is adding more expensive items to its holiday selection this year, betting its efforts to become a more fashionable retailer will bring in shoppers willing to spend more.

For instance, the retailer will offer its most expensive handbag yet under its exclusive Liz Claiborne brand and offer fancier watches made of rose gold.

Other new additions include national toy brands such as Mattel Inc's Barbie dolls for the first time in 20 years.

Analysts expect the battle to be fierce this holiday season among department stores that cater to middle class shoppers such as Macy's Inc , Kohl's Corp and Penney, whose new CEO, former Apple Inc executive Ron Johnson, takes the reins on Tuesday.

But shoppers are spending again, especially those with more discretionary cash, and Penney is wooing them.

One Liz Claiborne leather handbag was priced at $80, far pricier than the handbags the retailer has typically sold, said Lorraine Hitch, a Penney senior vice president, as she gave Reuters a tour of the chain's Manhattan store last week.

"There are definitely some more luxury touches to items- customers are responding," Hitch said.

In the last few years, Penney has sought to remake itself into a hipper retailer, able to draw younger, fashionable women willing to spend, and rely less on its traditional shopper, who is more vulnerable to the ups and downs of the economy.

Penney now operates some 300 Sephora cosmetic outlets within stores, with more to come, and is also opening more of the higher end Mango by MNG fast fashion stores within its doors.

It also recently bought the Liz Claiborne brand after being its exclusive department store retailer for just over a year.

But the chain's transformation is still very much a work in progress, analysts said.

Penney's October same-stores sales, to be reported on Thursday, are expected to rise, but lag those of Macy's, Kohl's and Dillard's Inc , according to Thomson Reuters data.

"I don't think they've really succeeded in changing over their customer -- they'd love to have a slightly younger, more fashion forward customer," said Paul Lejuez, a Nomura analyst. "That takes a long time."

Penney's same store sales rose 4.5 percent last holiday quarter and have continued to rise since. But on several occasions, it has missed monthly same-store sales forecasts after having to slash prices. In September, same-store sales unexpectedly fell.

Penney has also introduced a holiday store within a store called Wrapt and begun selling cookware by Calphalon, a Newell Rubbermaid Inc brand. And it is giving prominent display space to Keurig single-serve coffee makers.

The idea, Hitch said, was for Penney to be the "one place you can shop for all your gift needs," especially more expensive ones. Still, beyond the Claiborne items and its private label clothing, few items are exclusive to Penney.

And Penney remains a "promotional" chain, reliant on bargains.

That $80 Liz Claiborne bag Penney touted was regularly priced at $120. And many items in the Wrapt display were 30 to 40 percent off, even though the holiday shopping season has not started in earnest yet.

"The problem is that they still have a price sensitive customer," said Morningstar analyst Paul Swinand.

It's crunch time for a Sears incentive plan
By Mike Riopell
Daily Herald - Suburban Chicago
October 27, 2011

SPRINGFIELD — With top Sears Holdings Corp. executives saying they’ll decide whether to leave Hoffman Estates by the end of the year and state lawmakers scheduled to meet just three more days in 2011, the pressure is on to craft a compromise this week to keep the 125-year-old Chicago-area retail institution in Illinois.

Lawmakers will try to mold terms that would provide tax incentives to keep the company from moving out of state while still finding a way to distribute more money to Carpentersville-based Community Unit District 300, whose parents, officials and even students have protested tax breaks for Sears that limit school revenue.

But time to meet Sears’ self-imposed deadline is fading fast. Lawmakers return to Springfield Nov. 8 and recess for the year on Nov. 10, leaving a little more than a week to craft a compromise proposal and then three days to get legislative approval.

“If I’m them, that’s what the end of the year means to me,” said state Rep. Fred Crespo, a Hoffman Estates Democrat who’s among the lawmakers trying to broker a deal.

Sears says it’s weighing offers to move to several other states.

Crespo and Sen. Dan Kotowski, a Park Ridge Democrat, say they intend to merge suggestions from Sears, District 300 and Hoffman Estates into a proposal that’s palatable to them all. Republican Sens. Matt Murphy of Palatine and Pam Althoff of Crystal Lake are the GOP lawmakers working closest to the issue.

“Everybody’s going to get something out of this,” Kotowski said. “I’m confident.”

Without giving away many details, Kotowski laid out what he calls a “framework” for an eventual agreement.

First, Sears’ 20-year-old tax deal with Hoffman Estates would be extended so the company could recover some of the millions it says it has spent on roads and bridges in the area. Whether Sears would have to give up any of the $125 million in total tax benefits it’s seeking is unclear as the company keeps some of the details of its proposal secret.

Then, Sears would be penalized if it left for another state while the deal was still in effect.

And finally, more money would be sent to District 300. How much is still unclear, as money the school district would get might have to come at the expense of other local governments or Sears.

“We had very productive meetings in Springfield this week, and we are encouraged by the progress thus far,” Sears spokesman Chris Braithwaite said in a statement. “We appreciate the efforts of Sens. Kotowski and Murphy and Rep. Crespo on behalf of Sears, its employees and other members of the community to find a solution that keeps jobs in Illinois, further benefiting schools, public safety agencies and local governments.”

District 300 has been the most vocal opponent of Sears getting its current tax deal extended, mixing months of sharp rhetoric with a protest at the Capitol last Monday.

“I think it went very well on our part because we are truly alone in this battle,” Superintendent Michael Bregy said Friday. “It is very clear to us that Sears and Hoffman Estates are working very closely together. When you have a corporate giant and powerful village working together, we’re the odd man out, and that’s very difficult for us.”

The school district argues that if Sears’ deal expired, schools would get $14 million in new money a year.

Bregy says district officials will “change tactics” when it comes to their Springfield presence when lawmakers meet next.

Though those three days in November represent the apparent deadline to get legislation done, deadlines in Springfield sometimes can be pliable. But with thousands of Sears jobs at stake, some lawmakers are likely to be unwilling to wait.

Sen. Michael Noland, an Elgin Democrat and ally of District 300, takes the opposite view. He suggested lawmakers should wait until the end of the year and see what other states offer Sears.

“Why shouldn’t we wait and see what Texas and Ohio are offering Sears and see if we can better the offers?” Noland said.

But it’s clear Kotowski and Crespo want to go forward.

Even if they come up with legislation that satisfies Sears, District 300 and Hoffman Estates, the Democrats need to find votes under the Capitol dome in Springfield. And there’s likely to be at least some opposition.

Opponents to company-specific tax breaks say the government is using its power to pick corporate winners and losers.

Gov. Pat Quinn would have to sign off, too. Part of what Sears wants is tax credits tied to creating jobs. Quinn has made handing out those kinds of credits to companies threatening to leave Illinois — Navistar in Warrenville and Motorola Mobility in Libertyville, for example — one of his biggest talking points.

But Quinn spokeswoman Annie Thompson wouldn’t shed light on Quinn’s thoughts about the rest of the Sears talks.

“Our discussions with Sears are ongoing,” she said.

But probably not for much longer, as deadlines near.

“Timing is critical,” Crespo said. “In business, time is money.”

Sears Shells Out $5.2 Million for Racial Harassment
By Naeesa Aziz
BET
October 27, 2011

Former Sears employee Medro Johnson said he suffered physical abuse, racial slurs and a co-worker that told his family, "He calls me 'masta.'"

Some say that workplace racism today is less overt and more subtle than in the past, however, one man from Sacramento, California, found out that isn't always the case.

A Sacramento Superior Court last week awarded former Sears Home Improvement Products employee Medro Johnson $5.2 million in damages after he endured humiliating racial slurs, physical abuse and harassment by a co-worker who received no reprimand for his actions.

The incidents began in 2008 when Johnson, 49, attended a company barbeque with his family. At the event, co-worker Paul St. Hilaire walked up to the Johnson family and told Johnson's wife and children, "Medro calls me 'masta.'"

Johnson says he was humiliated and complained to supervisors about the comment, but no action was taken. Johnson said that he was told that if he brought his complaint to the attention of human resources, he would be fired.

Later, when Johnson and St. Hilaire exchanged tense words on a separate occasion, St. Hilaire threatened, "I'm going to get you and you're not going to see it coming."

The final straw for Johnson came in December of 2008 when St. Hilaire repeatedly "bashed" Johnson with his shoulder during breaks in a company training session. St. Hilaire called Johnson the "N" word and criticized him repeatedly, and at one point knocked Johnson's hot cup of coffee down the front of his shirt.

In retaliation, Johnson struck St. Hilaire in the lip with the back of his hand. The company fired Johnson two days later. No disciplinary action was taken against St. Hilaire, who was known as one of the company's top sales producers.

"I've been in a constant struggle since 2008," Johnson told The Sacramento Bee. "Once we depleted all our savings, our retirement, our kids' college fund, then it got really tough. It's scary before you get down to the end. Then it's tough when you try to figure out how you're going to make ends meet and, at the same time, fight this battle against this huge corporation that doesn't really care about you."

The breakdown of the $5.2 million award includes $2.2 million to compensate for lost earnings, pain and suffering and $3 million for punitive damages, because the jury found that Sears' policymakers and managers conducted themselves "with malice, oppression or fraud" in failing to investigate or to act on Johnson's complaints.

"I feel like justice was served, and I would hope that the award will send a message to Sears and that they will change their behavior so no one has to suffer like I had to suffer over these years," Johnson said.

Sears had no comment except to say that it was "very disappointed in the verdict" and that it planned to explore post-trial options, including an appeal.

BET Member comment: As a current Sears employee, I believe Brother Johnson 100%. Sears not only has turned a blind eye to racial issues between associates, it also fosters an environment of fiscal racism. I attended a district sales meeting, where one of the execs quipped "when we shop, we like to buy from people who LOOK like us". I wanted to shout out "so THAT'S why I am not making any money" but I was outnumbered, as in the ONLY brother in the 50-something associate meeting. I actually lead my store in sales per hour as a PART-TIMER but I cannot tell you how many times I have been told by a customer that they didn't need help only to see them fully engage a Caucasian associate literally seconds later. Sears has always been concerned about making the sale and will continue to turn a deaf ear to the voice of the associate when it comes to matters of race. Real companies know that diversity sells and they go out of their way to inform the customer that they celebrate a diverse workplace. Meanwhile, Sears continues to cater to Ma and Pa and allows one of the most damaging forms of racism: that which stymies one's ability to feed their family.