Turnaround Strategy From Apple Veteran Ron Johnson So Far Fails to Overcome Shoppers' Addiction to Coupons

Former Apple Inc. AAPL -1.16% executive and current J.C. Penney Co. JCP -17.47%chief Ron Johnson is getting a taste of what it's like to run a retail operation without world-beating products, and so far it is not pretty.

Penney's shares plummeted 13% to around $29 in after-hours trading Tuesday when the retailer reported a $163 million loss, more than twice what analysts were expecting. The company also said it will suspend its quarterly dividend and not meet its previous annual earnings target thanks to additional restructuring charges and possible inventory write-downs as it jettisons certain lines of merchandise.

At an investor meeting in New York following the report, Mr. Johnson said the turnaround has been a lot harder than management expected. Company executives repeatedly referred to coupons as "drugs," and said the weaning of shoppers from their coupon addiction has hurt sales and store traffic more than anticipated.

At the meeting, Mr. Johnson emphasized that the transition would take four years to complete, but reiterated that the retailer plans to make money in 2012. "We're trying to convert the Titanic into 1,100 WaveRunners," he said.

The dour atmosphere of the event was in stark contrast to the jovial mood that permeated Mr. Johnson's unveiling of his strategy in January. No disc jockey was present. Gone were the trays of hors d'ouevres and servers. Investors whispered to each other about the "bloodbath."

The earnings report is a blow to Mr. Johnson, who said just three months ago that he was confident that management's turnaround plan would allow the company to hit its 2012 earnings goal.

The company missed nearly every financial target analysts had set for the latest quarter. Total sales declined 20% to $3.15 billion, while analysts were expecting $3.41 billion. Same-store sales slid 19%, when analysts expected a 13% drop. Gross margin narrowed to 37.6% from 40.5% due to the sales weakness and the impact of deeper seasonal markdowns to clear inventory.

Penney is in the early stages of a transformation led by Mr. Johnson, the former senior vice president of Apple's retail operations who took over the retailer last fall. Mr. Johnson, who won plaudits for reinventing the retail experience with Apple stores' clean lines and empty space, has laid out an ambitious yet risky plan that involves carving stores into a warren of specialty shops, turning the center selling space into an entertainment and hangout area, and eschewing constant "sales" in favor of lower prices every day.

The earnings report marked the first time that investors could gauge the impact of the new strategy. So far, some consumers don't seem to like the end of heavy discounting.

Earlier this week at Penney's Manhattan location, longtime customer Roxanne McKenzie, 52, said she used to shop at Penney each week, mostly for apparel for herself and her grandkids. Since the pricing change, she said she buys less. "I shop less now because I don't have a coupon," Ms. McKenzie said. In February, Fitch Ratings lowered its credit ratings on Penney to junk territory, citing risks of rolling out the new pricing strategy.

Last year, 40% of Penney transactions were for items on sale and the customer also used a coupon. "Coupons were a drug that drove traffic," said Chief Operating Officer Michael Kramer, when explaining the company's 10% drop in store traffic, 5% drop in conversion and 5% drop in average customer spend compared with a year earlier.

On the positive side, the company said it is making more progress than it expected with its cost-reduction programs. Initially, Penney said it aimed to reduce annual costs by $900 million by the end of 2013. Now, it said thanks to additional operational efficiencies it expects to exceed that mark at the end of this year.

In addition, while people are buying less than they were a year ago, they are buying at full-price more often. Last year, just one out of 500 items sold at Penney wasn't discounted. During the most recent quarter, 67% of items were bought at the company's new full prices.

The company also said more than 110 designers have applied for boutiques in its stores. Penney unveiled new boutiques it will launch such as Betseyville by Betsey Johnson, and a girls line by Cynthia Rowley

—Nathalie Tadena contributed to this article.

Hedge fund billionaire and Sears Holding Corp. (SHLD) Chairman Edward Lampert’s RBS Partners reported a major new investment in a California-based hardware chain.

RBS, known for large bets on the stocks of a small number of companies, held a total value of $6.48 billion, up 13.7% from three months earlier.

The biggest change to Lampert’s portfolio since the February report was the addition of Orchard Supply Hardware Stores Corp. (OSH), a specialty retailer based in San Jose, Calif. Lampert’s funds reported holding 2.17 million shares of Orchard’s 6 million shares outstanding.

Bruce Berkowitz’s Fairholme Capital also reported a new stake in Orchard Supply.

Lampert reported reduced positions in AutoNation Inc. (AN) and AutoZone Inc. (AZO). The reported stake in AutoNation, a network of new-car dealerships, fell by 13%, and the stake in AutoZone, an auto parts retailer, fell by 35%.

Lampert’s reported stake in finance company CIT Group Inc. (CIT) was slashed by 87%.

UPDATE: An earlier version of this post said Lampert cut his Sears Holdings stake. While RBS does hold a smaller stake, Lampert’s ESL bought the stake so Lampert holds the same amount.

In its ongoing effort to reinvent the traditional department store model, J.C. Penney is eliminating commission sales for groups of sales associates. The change will affect sales staff in fine jewelry, shoes, window coverings, men's suits, and some in its salon department.

The affected workers will be put on hourly wages with the changes taking effect this month.

Penney said in a statement released to news sources that the switch "enables our teams to be even more effective in winning the hearts and minds of our customers."

The statement added, "Our new business model requires that we move away from a commission-based environment so that every team member is motivated by meeting the needs of our customers. Therefore, our commission pay plans will move from a commission-based structure to a competitive hourly rate structure."

The move is just the latest in a series of changes at Penney under its new CEO Ron Johnson, who formerly ran Apple's stores and was a top executive at Target. In a bid to wean customers off coupons, Penney lowered its overall starting prices as part of its "Fair and Square" pricing policy. In the last month, Penney announced it was laying-off 1,000 employees at its home office and a Pittsburgh call center. The prior week, it indicated that it would let go an undisclosed number of store staff at its 1,100 locations, many of whom were in supervisory positions.

According to the Dallas Morning News, commissioned workers were promised that their hourly pay rate would be increased significantly under a new pay scale based on last year's averages. But several associates told the newspaper that they expected less pay overall given that they were told they would be given fewer hours and will no longer be full-time workers. According to the report, that means some will not be eligible for health insurance.

Penney spokeswoman Daphne Avila told the Dallas Morning News that the "pay changes" would result in no associates losing benefits eligibility in 2012, even if they start to average less than 35 hours a week.

An assortment of those midtier department stores and specialty retailers come out later this week, which could give another read on the health of household balance sheets.Cash-strapped consumers often look to big-box stores when getting supplies for painting the trim, or stocking up on summer sundries.

First up is Home Depot (HD) Tuesday morning. Analysts expect earnings to surge 30% to 65 cents per share. The consensus estimates call for revenue to rise 6.4% to $17.9 billion.

Shares edged slightly lower in early afternoon trading to 50.15.

Tuesday afternoon comes midtier department store J.C. Penney(JCP). Under CEO Ron Johnson, a former top executive at Apple's(AAPL) retail operations, it's in the midst of revamping offerings, stores and promotions to move away from its dowdy image. Analysts expect it to show a 10-cent per-share loss, from a 28-cents per-share profit last year. Revenue is expected to have slipped almost 12% to $3.48 billion.

Shares climbed almost 2% to 34.94.

Penney is trying to win back customers it's lost to Macy's (M) and Target (TGT).

Clues to whether it's hitting that bull's-eye could be in Target's first-quarter results Wednesday morning. That discount department store has already reported that Q1 sales at stores open more than a year climbed 5.3%. It cited a warmer spring and earlier Easter and said it was the strongest same-store gain in more than six years.

Analysts forecast a 2% hike in earnings per share, to $1.01. Revenue likely rose 5.6% to $16.83 billion.

Target shares edged slightly lower to 55.37.

On Thursday morning, the world's largest retailer, Wal-Mart Stores (WMT), posts its results. Analysts forecast EPS climbing 6% to $1.04. The consensus is for a 6% sales gain to $110.43 billion.

Shares slipped slightly in afternoon trading to 59.40.

Also Thursday comes Sears Holdings (SHLD). Analysts expect an adjusted per-share loss of 67 cents, up from a $1.39 per-share loss a year ago. They expect the company to post a 5.7% decline in revenue to $9.15 billion.

The company already pre-announced some first-quarter results, including a 1% same-store sales decline at its Sears shops, and a 1.6% decline at its Kmart stores. Shares were off 3% Monday in early afternoon trading to 52.95.

Other retailers out this week include T.J. Maxx, Marshalls and HomeGoods stores parent TJX (TJX) on Tuesday, office supply storeStaples (SPLS) on Wednesday, and both Dollar Tree (DLTR) and discount clothier Ross Stores (ROST) out on Thursday.

Other economic data out this week include the Commerce Department's measure of retail sales for April. Economists expect that Tuesday morning report to show just modest growth. Warmer winter weather and a much earlier Easter holiday this year probably pulled forward some traditional spring spending. So consumers may have taken a break in April.

Chicago-based mail-order firm went public in 1906, selling shares for more than $2,000 apiece in today's dollars

Even people who don't play the market are thinking this week about buying stock in Facebook's initial public offering of shares.

One hundred six years ago, Sears, Roebuck and Co. was its era's version of a hot tech company. Like Facebook, Apple or Amazon, it wasn't just a corporation — it was a revolution.

"The catalog was the Internet of the day," said James Schrager, a University of Chicago business professor. "Sears was Amazon."

The young Chicago mail-order company held its IPO in 1906, selling preferred shares at $97.50. That's more than $2,000 today, so it wasn't for the common man.

But the purchase of even one share would have been lucrative. Counting from 1924, when Sears entered the Dow Jones index, to 1996, and adjusting for stock splits, the Wall Street Journal calculated Sears shares soared 434,552 percent. The skyrocketing value was rivaled only by the story of the company itself — and the young Midwesterner who founded it.

Richard W. Sears was hailed in his Tribune obituary as a man "whose career typified the romance of American business." Mix the youthful risk-taking of Facebook's Mark Zuckerberg and the marketing instincts of Apple's Steve Jobs — that was Sears.

It started in 1886, when Sears was a railroad station agent in backwoods Minnesota, wrote historians Boris Emmet and John Jeuck in "Catalogues and Counters: A History of Sears, Roebuck & Company." A shipment of gold watches arrived for a local jeweler, who refused them.

The rebuffed wholesaler told 22-year-old Sears he could have the watches for $12 apiece. He said yes, pivoted, and offered them to agents along the line for $14. With that type of watch retailing for $25, there was room for the agents to profit, and Sears pocketed $2 for every one sold.

Within six months he had made $5,000, and his watch business started to outstrip his railroad salary. "The tail had begun to wag the dog," he said in a 1906 Tribune article.

Sears moved to Chicago, set up at Dearborn and Randolph streets, and hired a watchmaker "thin to emaciation," Alvah Roebuck. Their watch company grew rapidly into a general mail-order company that used high volumes to enable low prices.

It was a recipe perfect for the time, when millions of rural Americans were disgruntled with their general stores. A barrel of flour in 1891 was $3.47 wholesale, according to the company, but $7-plus at a country store.

Sears, Roebuck used comforting ads to overcome farmers' fears. "Don't be afraid that you will make a mistake," read one catalog. "We receive hundreds of orders every day from young and old who never before sent away for goods."

The company adopted a money-back guarantee and "send no money" became a famed tag line. Richard Sears delighted in writing his own ad copy and, typical of the time, often pushed the envelope. One offer advertised a sofa and chairs — "with beautiful plush" — for 95 cents. (By comparison, a John M. Smyth ad in a 1906 Tribune offered a single chair for $1.50.) Only when Sears' furniture arrived did the customer discover it was for dolls.

Later, Sears would tone down the ads and was said to have concluded: "Honesty is the best policy. I know because I've tried it both ways."

By 1905, Sears' sales had surged past $38 million, passing Montgomery Ward, the Chicago company that had invented the mass mail-order catalog. Sears needed more capital to grow. Julius Rosenwald, who had joined Sears as a partner, asked old banker friend Henry Goldman for a loan, according to Rosenwald's grandson and biographer, Peter Ascoli.

Goldman suggested an IPO instead, leading to Sears, Roebuck's sale of its stock in 1906. It aimed to raise $40 million, which proved crucial for surviving the Panic of 1907. For Goldman, co-managing the Sears IPO is still touted as a landmark for his bank, Goldman Sachs.

Only the rich could afford to buy stock in 1906, but Americans' disposable incomes were growing, and the company took full advantage. Its catalog, the "consumer's bible," made available everything from sewing machines to Encyclopaedia Britannicas to ready-to-assemble houses. "The story is the coming of the middle class," Schrager said, "and the desire of the middle class to have more things."

Sears retired in 1908 with a fortune estimated at $25 million. He died in 1914 more than a decade before the company he founded opened a single store.

Sears leapt into the retail store business in 1925, as rural customers moved to the cities. A December 1924 Tribune, in announcing Sears' branching out into brick-and-mortar stores, made note that "several mail-order houses have considered" such a move but, "heretofore they have confined themselves to their own method of merchandising." Sears promoted the new store at Homan Avenue and Arthington Street in the Homan Square/Lawndale area as "easy to shop for men" with a "whole square block of free parking."

The first Sears store on State Street, between Van Buren Street and Congress Parkway, opened to great fanfare in March 1932. By 1950, Sears had 650 stores nationwide, including eight major department stores in Chicago and stores in Joliet, Waukegan and Gary, according to the Tribune. By the mid-1950s, Sears would be international too, with stores in Mexico, Venezuela, Cuba, Colombia, Peru and Brazil.

Sears opened mall stores after World War II, as customers headed for suburbia, teaming with Marshall Field to build the Oakbrook shopping center, which opened in 1962. "Rosenwald and others had an uncanny ability to see which way things were going to go," said Ascoli, who lives in Hyde Park, blocks from the University of Chicago's Rosenwald Hall.

By the 1970s, Sears was still the No. 1 retailer but Wal-Mart and others were on the horizon. Today, Sears Holdings is No. 10 and its CEO acknowledged recently that "you change or you die."

Sears still will probably have fared better than a company like Amazon when all is said and done, said Schrager, who likes to ask his students why Sears built the Sears Tower, which opened in 1973. "Because they could," he said. "They were unbelievably successful. I don't know if Amazon is ever going to build the tallest building in the world."

INFOBOX:
What Sears wrought
Sears, Roebuck created:
--WLS (World's Largest Store) radio
--Allstate Insurance
-- the Kenmore and Craftsman brands
--the Discover Card
--Sears Tower (now Willis Tower), at one time the world's tallest building, and still the tallest in the United States.

EXTENDED QUOTE BOX:
Richard Sears, king of ads
Historians Boris Emmet and John Jeuck recounted the tale of an anonymous young catalog editor who complained to Richard Sears about an exaggerated ad for stoves:
Sears received me graciously, saying he was glad to tell me of the plan behind his style of copy:
"Now," he said, "who would answer that ad?"
I said it would be someone who wanted a stove.
"Right," said he. "A man who wanted a saddle wouldn't answer the ad, would he?" I agreed.
Then he argued that he made the language strong purposely because he wanted to get every living soul who had the faintest notion of buying a stove wrought up sufficiently to write for his catalog. He said that just because of the big statements he made he was getting a tremendous response.
Knowing that we were selling an enormous number of stoves at that time, my protest fell flat.

Talk about sticker shock: Even with Medicare benefits, a 65-year-old couple retiring in 2012 will spend at least $240,000 in health-care costs during their retirement, according to a report from Fidelity Investments released Wednesday. That figure represents a 4% increase from last year, when the study estimated such costs would average at least $230,000.

The out-of-pocket estimate is based on the average life expectancy for a 65-year-old—82 for the husband and 85 for the wife.

But many people live longer: That 65-year-old couple may well need more than $240,000. And that figure doesn't include long-term care, over-the-counter medications or most dental care.

No wonder almost half of Americans who were close to retirement and had more than $250,000 in household assets said they were "terrified" about health-care costs, according to a recent survey byHarris Interactive HPOL -6.78% for Nationwide Financial.

Here is some advice from experts on how best to prepare.

Get your budget straight. If you still are in the retirement-planning stage, you might be envisioning lower living costs—no more commuting, buying business clothes or setting aside huge sums for retirement.

Prepare to see those costs replaced by others. Henry Hebeler, a 78-year-old formerBoeing BA -0.33% executive who founded the retirement-planning website AnalyzeNow.com, says he and his wife, despite being in good health, have experienced a couple of years of $40,000 out-of-pocket medical expenses.

A hypothetical 65-year-old couple, retiring in 2012 with $75,000 in household income, should expect to pay about $10,500 this year for health care, according to Fidelity—and that could hit $25,000 in 15 years.

Keep in mind that Medicare doesn't cover most dental work, hearing aids or long-term care.

Wait to retire if possible. If you can stay in the workforce until you turn 65 and become Medicare-eligible, your retirement savings will thank you.

A couple might pay as much as $30,000 a year for bare-bones health insurance if they retire before they are eligible for Medicare, Mr. Hebeler says.

Assume a higher inflation rate for medical costs. Health-cost inflation runs two to four times the consumer-price index, says Katy Votava, founder and president of Goodcare.com, a consulting firm that works with financial advisers and their clients to help them manage health-care costs. She assumes 6% to 8% annual increases.

Costs add up due in part to what isn't covered by Medicare, but Medicare premiums and co-pays aren't insignificant.

Some Medicare premiums are deducted directly from your Social Security checks. Medicare Part B—which covers doctor visits and other services not covered by Part A—costs a couple about $2,400 a year, and higher-income beneficiaries pay more.

You probably will want to buy Part D, which covers prescription drugs, too. Then there are Medigap policies to cover expenses not covered by Medicare. Premiums vary widely, but a couple might pay about $4,000 a year.

Shop wisely. Many Medicare beneficiaries are paying more than they need to, Ms. Votava says. Make sure the plan you choose covers all your medications and don't assume your former employer's plan is the most cost-effective. And shop around for your Medicare plan annually, she says—the costs change every year.

Record-keepers for skyscrapers are struggling to keep up as builders around the world create ever taller towers, stretching everything from the limits of architecture itself to the definition of a spire.

A nonprofit group in Chicago is recognized by much of the industry as the arbiter of which buildings are the highest, and its categories have proliferated: building with highest occupied floor, for example, or height from lowest entrance to architectural tip, or height from lowest entrance to the top, whether that be an architectural element or a movable antenna.

"There are many types of buildings, and those who want to be differentiated by height want to be able to compete within their category—somewhat like in boxing or sports in general," says Andrew Weiss, executive vice president of the Trump Organization, which built Chicago's Trump International Hotel & Tower, the second-tallest building in the U.S., after the Willis Tower, formerly known as the Sears Tower, also in Chicago.

The answers aren't always clear in the race to the top, as shown this week by the news that One World Trade Center, the tower being erected at New York's Ground Zero, may not qualify as the Western Hemisphere's tallest building because plans to encase a rooftop antenna in fiberglass and steel have been scrapped.

Last month, as the building soared over 1,250 feet, it passed the Empire State Building as New York's tallest. The Council on Tall Buildings and Urban Habitat in Chicago planned to count the 408-foot antenna atop the building as a spire. "The building is topped with an architectural spire which happens to encase an antenna," Council spokesman Nathaniel Hollister said Tuesday.Then it emerged that the building's developer, Durst Organization Inc., had ditched plans for the antenna's enclosure in January, which would leave a slimmer metal structure holding the antenna. Now the height of One World Trade Center is up in the air, since an antenna, unlike a spire, isn't ordinarily counted toward a building's height, in part because it can be moved. "Ultimately the final height is not determined until a building is complete," said Council spokesman Kevin Brass on Thursday.

The developers insist there is still a spire. Jordan Barowitz, a spokesman for Durst, said, "Regardless of [the council's] decision, the height of the building will be 1,776 feet to the top of the architectural spire." He was referring to the symbolic height the building is intended to reach.

Most builders, however, recognize the authority of the tall-buildings council, known as the CTBUH. Founded in 1969, it gained prominence in 1996 when deciding whether a pair of Malaysian towers—Kuala Lumpur's Petronas Towers—had eclipsed the Sears Tower as the world's tallest. The council decided the Malaysian towers' spires counted, as they were a deliberate piece of architecture, while the Sears antennas didn't. That made the Petronas Towers the world's highest buildings.

More such controversies have arisen as developers seized on the ruling to top their buildings with similar elements. "All of a sudden everyone wants to add a spire," says Georges Binder, managing director of the Belgian firm Buildings & Data and Belgium's representative to the council.

There are other disputed considerations in building records. James Newman, U.K.-based editor of the website Skyscrapernews.com, criticizes the council's decision to use entrances as a base of height estimates rather than ground level, as many buildings have entrances above ground level.

Antony Wood, CTBUH executive director, says it is up to users of the council's data to decide on record holders. "We don't choose the tallest, the numbers do," he says, adding, "We have no axes to grind, or bias. Our only goals are to be accurate and consistent."

For the moment, any debate about the world's tallest building has been put to rest by the Burj Khalifa complex in Dubai. Its central tower is 2,717 feet high, according to the CTBUH.

New challengers are on the horizon, though, to keep record keepers busy.

Technology has made it easier to build higher, says Karel Vollers, an assistant professor at Holland's Delft University of Technology: ultra-high-strength concrete, elevator shafts usable by more than one elevator at a time, and software allowing engineers to create structures more capable of withstanding earthquakes and heavy wind.

Prestige has been a motivation in going higher, but so have environmental concerns, Mr. Wood says. "Growing vertical offers the most efficient and sustainable way" to handle the growing global urban population, he says.

—Eliot Brown contributed to this article.

It's been a tough run for Sears lately, as Brigid Sweeney detailed in her excellent Crain's piece on the company's past and present. What once made the company great—bringing a cornucopia of inexpensive products to virtually everywhere—has been conquered by the infinite Sears catalog of the Internet. Today, a friend pointed me to a nice essay about one small but important part of that early legacy of making commercial inroads down the backways of America: how the Sears catalog, and its cheap guitars, gave Delta bluesmen the tools they needed to revolutionize American music:

The new breed of Delta musicians needed an instrument that was affordable, portable, and capable of producing a wide variety of musical timbres. The guitar could provide harmonic support, rhythmic propulsion, and enough sustain to draw out the long melismatic lines of African-American field hollers. A guitar played with a slide could reproduce the characteristic whine of the single-string didley-bow—a homemade instrument, cobbled together from boards, wire, and nails, that served as the first instrument for many Delta musicians.

Guitar quality kept improving while the price kept going down. Soon sharecroppers throughout the Delta were ordering guitars from Sears in hopes of supplementing their income on weekends. The catalog is frequently mentioned in the biographies of Delta bluesmen. In 1930 Muddy Waters purchased a used Stella, most likely originally purchased from the catalog, and began playing gigs. He quickly earned enough money to order a brand new guitar from Sears. B.B. King learned the rudiments of the instrument through an instructional book he ordered from the catalog. And of course, blues musicians weren’t the only ones to profit from the availability of cheap guitars: White country artists such as Roy Clark would get their first instrument from the same catalog that black bluesmen like Son Thomas would.

Not to mention Chet Atkins, whose first guitar was a now-legendary acoustic Sears Silvertone. In short, a Chicago company sold cheap guitars that could replace both the banjo and the didley-bow (and, with practice, could provide a decent rhythmic accompaniment as well), many manufactured in Chicago. A generation later, it came back up the Mississippi as the musical genre that defined the city.

But Delta bluesmen weren't the last demographic that would need cheap, loud guitars. Once the sound of the electric guitar became that of American music, teens in garages all over started picking up axes, and Sears was there to supply them:

Joe Fisher, 38, was a buyer for musical instruments at Sears. Nathan Daniel, 51, wants Sears to sign on with the Danelectro guitar line but Fisher would not be sold. He told Nate that without an amplifier included, no deal. So Fisher and Daniel put their heads together and come up with the "Electric guitar and carrying case with built-in 5-in speaker and amplifier." It would be a piece of the cheapest material available for the body, masonite. Stapled to the flat sides, spray painted and edged with vinyl. There's the body. According to Nat, bodies don't matter in an electric guitar (in direct opposition to the ideas of Les Paul, who believed a fine electric guitar should be made of fine woods and weigh more than a sack of fine potatoes). Nat put all his attention into the neck, and here no expense was spared. His pickups were odd then and now, not because of the lipstick tubes, but because he wired them in series. This, they say, is what produced the unique Dano/Silvertone sound now proudly owned by collectors and still played by some of the world's finest guitar players.

The "lipstick tubes" were, at first, literally lipstick tubes: surplus lipstick tubes used to house the magnets in the pickups as a cost-saving measure, to which Silvertones' jangly sound is credited. Here's how rockabilly artist Dexter Romweber describes his:

Silvertones are fascinating things. Other guitars are just way too clean for me. There are other artists that I like that play Gibsons and Fenders... but in terms of what I do, for me, Silvertone's where it's at. I love the sound I get out of that baby.... At other times I was using other guitars in the studio, but the 1448 has a sound that I always compared to an organ. It's a blues sound, it's a raw sound, it's a bassy sound, and like I said... it's not too clean.

(Cat Power bought her first guitar, a cheap Silvertone, because she had a crush on Romweber.)

Another cost-saving measure made the Silvertone's sound even more raw and appealing:

On guitars with more than one pickup, Danelectro used "concentric" stacked knobs. In order to save money, the same generic three-way toggle switch found in the single-pickup guitars was used as a pickup selector switch. This is the real reason Danelectro guitars had their pickups wired in series, producing a big punchy sound with more output and midrange than individual pickup settings and eliminating hum. Parallel wiring (as used by virtually all other manufacturers) would have required a slightly more expensive switch!

Here's a diagram and a bit more on how that works as compared to the legendary Les Pauls:

These classic Danelectro-made guitars used series wiring. When the three-way switch is in the middle position and both pickups are on, the current flows through one and then the other, i.e., in series. This results in a rather strong, ballsy sound. By contrast, a Les Paul's two pickups are wired in parallel. The resultant sound is less strong, but has a harmonic richness.

Elvis Costello used Silvertone guitars on much of When I Was Cruel:

I have known Sears Holding (SHLD) and its predecessor companies Sears Roebuck and Kmart for many years. I appreciated the strength of Sears as a retailer of hard lines including Kenmore appliances, Die Hard Batteries, and Craftsman tools – three leading brand names that were exclusive with Sears. Most of the luster of the company is gone and recent reports worry me and I wonder if the company can reverse its course and will survive. Essentially I ask myself if Sears is a dynamic merchandising company or an albatross in the making.

The distinguished history of this mail order house that turned into the largest department store company by building stores across the United States had the trust of its customers. Men like Edward Telling, Edward Brennan and Arthur Martinez gave new momentum to the company that eventually allowed for selling more fashion and attracting` more women shoppers to the stores.

By promoting the “Softer Side of Sears” and bringing to the store brilliant department store merchants like Robert Mettler the company veered away from its historic hard line path. Fashion model Cheryl Tiegs was the public spokeslady for the company. The effort to bring to the store more women shoppers worked. However, profits lagged, since management ignored the growth of big box low-margin retailers like Walmart, Home Depot, Lowe’s, Costco and Sam’s. Sears was competing with small hardware stores (Ace, True Value etc) rather than developing an aggressive attack on the competition.

In 2005 Edward S. Lampert merged Sears and Kmart into Sears Holding. Ed Lampert is the founder and chairman of ESL Investment, a Connecticut based private hedge fund. It was a puzzling combination. I believe that Lampert is a portfolio manager who understands real estate values more than the merchandising potentials of his company in a very hostile and competitive retail environment. Lampert is an enigma to me. He understands merging companies but avoids talking to analysts and investors who would support his quest. I think that he believes he can leverage his investments by selling periodically some of his assets, as he did recently.

I see Edward Lampert as an investor. Yet, I have no idea how involved he is about the content of his stores. I have known the company since Arthur Wood was president in the 1970’s, and my current observations are culled strictly from visiting stores.

Here are some of my observations:

Many Sears and Kmart stores that I visited recently are dingy and in need of upkeep. Stores have to be kept up. I wonder if the budget for renovations is being kept to a minimum.

Fashion merchandise has to be trendy. Lands’ End is much too conservative – at worst it is dull. The recent dress catalog was too restrained for my taste. Yet, Sears has many private labels that have great appeal. They include Jaclyn Smith, Joe Boxer, apostrophe, Everlast, Canyon Blue and others. A fashion message could be developed – be it Western or lifestyle.

There has to be proprietary merchandising. Macy’s carries many excellent private label brands that are exclusive with that company. By selling Kenmore, Die Hard and Craftsman to other competitors such as Costco and Home Depot. It robs the company of exclusivity and growth potential.

Innovation is important. I see very weak understanding of the female customer and her needs. She works and does much of her shopping on line from home. Sears must bring her back to the store with special events, special promotions, attractive values and exclusive looks.

The company must be creative. Retailing is always changing and Sears must be on the forefront with creative ideas that will bring customers back to the store.

Last week the company announced that the first quarter result (ended April 28) was profitable (despite a continuing decrease of sales in comparable stores), because Sears Holding sold 14 important Sears stores in the quarter for a profit of $270 million and $170 Million Canadian. The sale of quality locations in the US and Canada will reduce the future value of the company. Ed Lampert acted in the interest of his investors, disregarding the future of the merchandising momentum. I am sure that he will continue to sell more stores and book the profit as part of his earnings report. However, I see the merchandising swan slowly dying.

SHLD closed on May 7, 2012 at $55.12

12 month high $87.66 12 month low $28.89

Underscoring a strategic shift to online and mobile shopping, Sears Holdings Corp. today announced the creation of a nationwide hyper-local shopping site, SearsLocalAd.com, with hundreds of weekly geographic deals beyond the print ad circular.

Localization is pre-selected based on the shopper and can be changed to another store within the experience. Shoppers can search their nearest Sears store and browse deals by department, brand or price point, ensuring products are available before they go to the store. The site features additional deals, and also shows how many items are in stock at the chosen location.

"SearsLocalAd.com gives our ... customers unprecedented access and power," said Imran Jooma, senior vice president and president of online, marketing, financial services and pricing business units at Hoffman Estates-based Sears. "Giving our customers new services and conveniences like a real-time window into the selection and savings specific to their nearby store is a great example of how the future of integrated shopping is here today at Sears."

Shoppers can access tools such as ratings, reviews and product comparisons. They can also create and print shopping lists that they can send to their mobile devices and share with family and friends via email, the Shop Your Way Rewards program, Facebook or Twitter.

The new site also emphasizes Sears' Shop Your Way Program, which Sears Chairman Edward Lampert and CEO Louis D'Ambrosio described as the cornerstone of the company's emerging integrated retail strategy during the annual meeting. Rewards members will have access to additional savings and earn more points. The program has acquired tens of millions of members since it was introduced two years ago, according to Messrs. Lampert and D'Ambrosio.

Sears is banking on its online strategy to connect with shoppers who have abandoned the retailer in recent years. The announcement of millions of dollars in technological investment follows years of criticism that the company has underinvested in its stores, resulting in lower sales every year since Mr. Lampert combined Sears with Kmart in 2005.

Refrigerators! Riding mowers! Revolution!

Sears Holdings chief Eddie Lampert fancied himself a retail revolutionary as he obsessed over Web technology and imposed a quirky corporate structure on the aging Sears and Kmart chains that was inspired by radical capitalist ideology.

Company insiders say the number-crunching hedge-fund tycoon grills executives relentlessly over e-mail and at unwieldy meetings, fixing on questions about Web design and, for example, how to distribute iPads to sales associates.

But in more than a dozen interviews with The Post, former execs charge that Chicago-based Sears’ business has deteriorated as Lampert has displayed scant interest in the routine but far more crucial needs of the stores — even basics like planning the company’s holiday marketing and merchandise strategy.

INVESTORS COULD SOON DUMP SAGGING SHARES

Since Lampert merged Sears and Kmart in July 2005, shares are down a whopping 65 percent on a revenue drop of 15 percent for the once-iconic retailer.

In February, the company announced an asset sale to offset a $2.4 billion fourth-quarter loss.

“If I were shooting the movie about Sears, it would open at 7 a.m. in a video-conference room, with lots of people looking well-prepared with their laptops and talking very seriously,” a former top executive told The Post, adding that the image of Lampert, dialing in from his mansion in Connecticut, would be flickering on a large, wall-mounted screen.

“The punch line would come when [members of] the audience realized they were all talking about how wide a Web page should be.”

A current Sears executive who was made available by the company counters that the broad, day-to-day workings of Sears and Kmart aren’t Lampert’s main concern, and shouldn’t be.

“Eddie’s the chairman, he’s not the CEO,” the exec told The Post. “The one way to please Eddie is to get results. I don’t think anyone would have long-term success simply by focusing on what Eddie’s focused on.”

Nevertheless, others counter that Lampert’s fixation on “the new, shiny toys,” as one exec said, seems to occupy a lot of bandwidth in the C-suites — and is a reason behind the company’s revolving door, which in January claimed apparel chief John Goodman.

Last week, at Sears’ annual meeting, CEO Lou D’Ambrosio spoke at length about plans for an iPhone app, improving the company website and expanding a customer-loyalty program — all pet projects for Lampert that are getting an increasingly larger slice of the company’s budget at the expense of its run-down stores.

“It’s all about what excites Eddie,” according to a former senior manager. “It’s not as though he doesn’t want you to fix big problems. But it feels almost like a risk to not engage him and the things that interest him.”

It doesn’t help that Lampert regularly grills execs with tough questions at meetings, most often “why can’t we do this faster?” according to a former manager.

Bruce Johnson, who was interim CEO for three years until early 2011, “would take broad orders from Eddie like, ‘We need more inventory,’ and translate them in a way that minimized the damage,” a source said. Still, Johnson “mostly stuck to his knitting” in supply-chain issues.

Another key stumbling block has been the company’s byzantine structure. Lampert, a fan of radical capitalist thinkers like Ayn Rand and Friedrich Hayek, in 2007 divided Sears and Kmart into a handful of operating silos, including appliances, electronics and clothing — all of which competed for resources including floor space, advertising funds and workers.

“It was textbook Adam Smith,” said one former exec. “The idea was that if everybody has perfect information and acts within their own self-interest, you’ll get a better overall result.”

The structure worked well initially, driving better accountability, according to some execs. But when a unit’s performance lagged, Lampert was prone to divvy it up.

“Eddie would tell the manager, ‘You can’t run a $4 billion business, so let’s see how you do with a $2 billion business,’” according to a source.

By last year, Sears was fragmented into more than two-dozen silos. Weekly meetings had huge agendas, typically without clear ground rules for ending squabbles between managers — for example, over whether appliances or clothing would get a plug on the website’s home page.

“It got a little awkward — was it a majority vote, or was it like the UN, where one guy gets a veto?” an ex-manager said. “It got to the point where Eddie said, ‘We’re going to have subcommittees. You’re going to go into a room until you get an answer.’”

In January, Lampert hired former Brookstone CEO Ron Boire as chief merchant, giving him responsibilities that previously had been divided among six merchants.

“It seemed like Eddie was admitting defeat” about the company’s fragmented structure, an ex-exec told The Post. “Hiring a head merchant is not something he would have been inclined to do two years ago.”

Company officials on defensive after $3.14B loss in 2011

HOFFMAN ESTATES, Ill. — Sears executives tried Wednesday to ease concerns about the troubled retailer’s long-term outlook amid ever-sinking sales, emphasizing the company’s financial strength, increased liquidity and prospects to boost operational results.

Chairman Edward Lampert told shareholders at Sears Holdings Corp.’s annual meeting that the company is “not planning to just survive” but thrive as a result of actions it’s taking to not only win back disillusioned shoppers but get more productivity out of its real estate holdings.

“We’re not just sitting here thinking that things will magically get better,” Lampert said at a media briefing after the meeting at company headquarters in Hoffman Estates. “We’re taking a lot of actions.”

The company has been on the defensive with Wall Street after losing $3.14 billion in 2011 and because of the years-long decline in sales at its Sears and Kmart stores. Revenue at U.S. stores open at least a year, a key indicator of performance, fell 2.2 percent last year.

Sears had announced a day before the meeting that it expects to show much better results from the first quarter, including an operating profit and an overall gain helped by the sale of some of its 4,000 U.S. and Canadian stores.

It expects to raise $400 million to $500 million by spinning off its smaller Hometown and Outlet stores as well as some hardware stores — a deal announced in February. It also sold 11 of its stores to real estate company General Growth Properties for $270 million and plans to cut inventory by $580 million.

Lampert said that while the real estate sales might not seem consistent with efforts to “fix the business,” it was important to restore profitability to get shareholders’ confidence back.

Store design, online shopping initiatives among plans
Sears admits change needed
CEO warns that it must be done 'or you die'

Sears Holdings Corp. executives sought to reassure shareholders Wednesday about the company's retail and financial prospects, laying out a road map for restoring profitability that includes increased emphasis on store design as well as online shopping initiatives. Noting that more consumers' shopping habits are influenced by the Web and mobile devices, Sears executives, led by Chairman Edward Lampert, told the crowd of about 250 shareholders and employees at its annual meeting that innovation would fuel the company's transformation.

"The world is changing; we have to take advantage of that to bring this company forward," said Sears Holdings President and CEOLou D'Ambrosio. "If we don't do it, there are consequences. You change or you die."

Initiatives aimed at boosting Sears' sagging bottom line include investing millions of dollars in its Web and mobile-driven Shop Your Way Rewards loyalty program and arming associates with iPads to help customers shop more quickly and efficiently in stores and, ultimately, spend more money.

Sears is also trying out new store designs, which call for brightening up showrooms and streamlining presentation of merchandise. Hoping to tap the power of its brands, Sears is pursuing opportunities to sell its popular Kenmore and Craftsman appliance and tool brands in untapped foreign markets, D'Ambrosio said, although he wasn't specific about where.

The plans come after years of criticism that the company has underinvested in its stores since Lampert combined Sears with Kmart in 2005. Revenue at Sears Holdings has declined every year since 2007, reaching $41.6 billion in fiscal 2011. Last year, Sears reported a $3.1 billion loss.

Lampert and D'Ambrosio fielded questions from shareholders for more than an hour on directions for the company, including whether Lampert would take the company private or potentially spin off its Lands' End brand of clothing.

"I can't speak specifically to what we might do," said Lampert, who owns 62 percent of the retailer's shares.

Lampert said share repurchases will continue to be part of the company's strategy.

"You should expect us to do more of that at various times," Lampert said.

Sears has spent "hundreds of millions," on "customer engagement," D'Ambrosio said, namely on its Shop Your Way Rewards loyalty program that targets customers with personalized mobile coupons and encourages them to shop across Sears brands.

Consumers, for example, can earn points by purchasing a washing machine at a Sears and then redeeming them for, say, laundry detergent at Kmart. In the past year, membership in Shop Your Way Rewards has doubled, to the "tens of millions" D'Ambrosio said.

Acknowledging Sears' struggles, Lampert and D'Ambrosio insisted that a retail strategy that continues to encourage customers to shop online, from their mobile devices and in brick-and-mortar stores would boost Sears' bottom line.

"This is a great company with enormous assets. We've done some things very well, done some things poorly," D'Ambrosio said. "I think in the end you'll have a confidence of where we're taking this company."

Sears' financials have improved in recent months since the company announced plans to tighten its belt and raise cash, said Chief Financial Officer Robert Schriesheim. In the past year, store closings and inventory reductions totaling about $800 million have helped the company enhance liquidity, Schriesheim said.

The mood was upbeat during the nearly three-hour meeting. One attendee, who earlier had scolded Lampert for not making the company more transparent, later praised the chairman, saying: "This is the first time you brought it all together. … Please don't drop the ball."

Analysts at the meeting said they were impressed by the plan but added they were concerned about how fast and effectively Sears would execute it.

"In terms of what they say, they are trying hard," Credit Suisse analyst Gary Balter said. "The problem is, they start with such a disadvantage."

The company has a long way to go in implementing the plan across all stores and increasing customer service, Morningstar analyst Paul Swinand said.

In the past week, the company filed registration documents with the Securities and Exchange Commission indicating it plans to spin off its hardware and outlet stores. According to the filing, shareholders will get the right to buy one share in the new company, called Sears Hometown and Outlet Stores Inc., for each share of Sears common stock they own.

And Tuesday, Sears issued a forecast for a first-quarter profit that was bolstered by the sale of certain U.S. and Canadian stores, sending shares up by more than 15 percent.

Sears shares closed up 2 cents Wednesday, at $62.07.

Reuters contributed

HOFFMAN ESTATES, Ill. - Sears Holdings Corp Chairman Edward Lampert laid out a blueprint for boosting results, calling for everything from investing millions of dollars in the retailer's "Shop Your Way" rewards program to improving the layout and signs in its stores.

The plans, unveiled at Sears Holdings' annual meeting on Wednesday, come after years of criticism that the company has underinvested in its stores, resulting in lower sales every year since Lampert combined Sears with Kmart in 2005.

"We are not here to just survive. We are here to transform," Lampert, who is Sears' largest shareholder, said at the meeting at the company's headquarters in Hoffman Estates, Illinois.

Asked if its Lands' End brand was for sale, Lampert said he was not actively shopping for buyers, but there was always a possibility that the business "could be separated." The New York Post reported in March that Lampert was exploring the sale of Lands' End.

"We intend to evaluate other opportunities to separate parts of our portfolio into separately owned companies," Lampert said in a letter to shareholders in February.

Lampert and his funds together own roughly 62 percent of Sears Holdings.

Sears Chief Executive Lou D'Ambrosio and Lampert estimated that membership in Sears' "Shop Your Way" program had more than doubled over the past year to tens of millions of people. Reward points can be used across Sears' brands. For example, points earned from buying a Kenmore appliance can be used at Kmart or Lands' End. Members can also return items without a receipt.

"We are going to spend what we can afford to spend," Lampert said, adding that "Shop Your Way" was a significant investment. Sears did not say how much it has invested in the program.

"We live in a world that's rapidly changing," D'Ambrosio said. "You change or you die."

Chief Merchandising Officer Ron Boire said Sears was focusing on improving inventory management, having the right fashions and being more customer friendly.

Sears is working on indoor signs, store layout and placement of goods, making changes like putting Craftsman-branded apparel beside Craftsman tools. It has also given iPads to employees in many stores to do things like facilitate checkout.

Analysts at the meeting said they were impressed with the transformation plan, but concerned about how fast and effectively Sears would execute it.

Credit Suisse analyst Gary Balter said, "In terms of what they say, they are trying hard. The problem is they start with such a disadvantage."

The company still has a long way to go in terms of implementing the plan across all stores and increasing customer service, Morningstar analyst Paul Swinand said.

The annual shareholder meeting came a day after the retailer surprised some on Wall Street by issuing a better-than-expected outlook for earnings before interest, tax, depreciation and amortization for the quarter ended April 28.

Shares of Sears edged up 2 cents to $62.07 on Nasdaq.

LICENSING DEALS

Sears recently appointed Leveraged Marketing Corp of America as its exclusive global licensing agent to increase sales of Kenmore appliances, Craftsman tools and DieHard batteries outside its own stores.

D'Ambrosio and Lampert have often spoken about the potential for Sears to sell its brands elsewhere and keep their cachet, much as it has done by selling some Craftsman tools in Ace Hardware stores.

Sears has also been stepping up online efforts and taking its marquee brands like Craftsman to other retail outlets, such as Costco Wholesale Corp's warehouse clubs.

It has licensed its DieHard brand to flashlight and battery maker Dorcy International, allowing the Ohio-based company to sell rechargeable batteries and flashlights under that name to retailers in the United States, Puerto Rico and the Caribbean.

Outlook of $155 million to $195 million profit includes gain from sale of some stores, better combined sales at Sears, Kmart

Shares in Sears Holdings Corp.soared Tuesday after the Hoffman Estates-based retailer issued a forecast for a first-quarter profit, bolstered by the sale of certain U.S. and Canadian stores.

Shares rose as high as 22 percent, hitting $65.70, before closing at $62.05, up $8.27, or more than 15 percent. Since January, shares have climbed 95.25 percent. The retailer, which will hold its annual shareholders meeting Wednesday, said it expects to earn between $155 million and $195 million, or $1.46 to $1.84 per diluted share, from continuing operations in the fiscal first quarter, which ended Saturday. That compares with a loss for the same period last year of $165 million, or $1.53 per diluted share.

The profit outlook includes a gain of about $235 million from the sale of certain U.S. and Canadian stores, the company said. Sears also said it expects combined sales at Kmartand Sears stores open at least a year to slide 1.3 percent, an improvement on the 3.6 percent decline a year ago.

While Sears and Kmart reported gains in apparel and footwear, the improved performance was not enough to offset sales declines in consumer electronics and appliances, the company said.

Sears also said it expected to report earnings before interest, taxes, depreciation and amortization — a measure of cash flow — of $135 million to $195 million, excluding special items, for the first quarter. That compares with EBITDA of $58 million in 2011.

The earnings forecast surprised some analysts, who said they were looking for an improvement in EBITDA later this year.

"While these results are a nice recovery from the fourth quarter, they still do not point to the cash flow trends necessary to finance the business without selling additional assets," Credit Suisse analyst Gary Balter said.

Added Imperial Capital Managing Director Mary Ross Gilbert: "The results are certainly encouraging; there's no doubt about it. We were expecting the vast majority of the improvement to come in the fourth quarter."

Balter and Gilbert said they were worried about the company's future cash needs, especially in 2013 when Gilbert said Sears' pension costs will more than double.

"The pension plans were terminated ages ago, but they still have this ongoing cost they have to fund," Gilbert said.

Since Chairman Edward Lampert took control of Sears and combined it with Kmart in 2005, the retailer has cut investments in its physical stores in favor of pouring money into its online business. As the stores deteriorated, so did the company's sales, with shoppers bypassing Sears and Kmart for such rivals as Target, Wal-Mart and Best Buy.

To shore up its business, Sears has launched a number of strategies. Late last year, it said it would shutter up to 120 poorly performing stores. In February the retailer said it planned to raise roughly $400 million to $500 million in cash by selling some prime real estate and spinning off its Sears Hometown and Outlet businesses and certain hardware stores.

Last month, Sears said it completed the sale of 11 Sears mall stores toGeneral Growth Properties Inc., raising $270 million.

Tuesday's news signals that the retailer's efforts to "improve operations" and "change the direction of the company" are working, according to an email Sears Holdings President and CEOLou D'Ambrosio wrote to employees Tuesday.

"As I've said to you in previous communications, if we execute with a focus on our customers and take actions to improve operations we can change the direction of our company. We are doing that and we're starting to see the results," he wrote. "While we still have a lot of work to get done, we saw clear progress in our first quarter results, driven by a focus on operational discipline and innovation around our customers."

Sears will report first-quarter earnings around May 17, the company said.

HOFFMAN ESTATES, Ill. /PRNewswire via COMTEX/ -- In advance of its annual meeting of shareholders to be held on May 2, 2012, Sears Holdings Corporation ("Holdings," "we," "us," "our," or the "Company") SHLD +12.94% today announced its expected first quarter 2012 results as follows:

Net income from continuing operations attributable to Holdings' shareholders for the first quarter of 2012 of between $155 million and $195 million (between $1.46 and $1.84 per diluted share from continuing operations) versus a net loss from continuing operations attributable to Holdings' shareholders of $165 million ($1.53 loss per diluted share from continuing operations), for the first quarter in 2011. The above range includes approximately $235 million, after tax and minority interest, of gains from the sale of certain U.S. and Canadian stores. These transactions generated $440 million of cash proceeds.

Adjusted EBITDA of $135 million to $195 million for the first quarter of 2012 versus $58 million for fiscal 2011. The increase in Adjusted EBITDA reflects an improved margin rate, particularly in appliances, and reduced expenses.

Domestic comparable store sales for the first quarter ended April 28, 2012 for its Kmart and Sears stores were as follows:

Quarter Ended April 28, 2012
Sears Domestic -1.0%
Kmart -1.6%
Total -1.3%

While Sears Domestic experienced an overall sales decrease, Sears achieved double-digit increases in its apparel and footwear categories. These increases were offset by declines in the appliances and consumer electronics categories. Kmart's comparable store sales decrease reflects increases in the apparel and footwear categories, offset by declines in the consumer electronics category.

Sears Canada expects to report a comparable store sales decline of 6.2% for the quarter. The decline is primarily due to sales decreases in electronics, home decor, hardware and apparel, partially offset by increases in major appliances and mattresses.

We currently expect to end the first quarter with approximately $8.9 billion in merchandise inventories (domestic of $8.1 billion and $0.8 billion at Sears Canada) as compared to $9.7 billion of inventory last year.

Adjusted EBITDA

The Company expects to report total Adjusted EBITDA of $135 million to $195 million in the first quarter (domestic of $165 million to $195 million and Sears Canada of $(30) million to $0 million), which is computed as follows:

expected net income from continuing operations attributable to Holdings' shareholders of $155 million to $195 million;

plus income statement line items not included in EBITDA consisting of income attributable to noncontrolling interest, loss from discontinued operations, income taxes, other income (loss), interest and investment income, interest expense, depreciation and amortization expense and gains on sales of assets of $(80) million to $(100) million;

plus pension expense and closed store / severance costs of approximately $80 million, which we do not include in Adjusted EBITDA.

In the first quarter of 2011, we reported Adjusted EBITDA of $58 million (domestic of $73 million and Sears Canada of $(15) million). For further discussion of the reconciling items, see the Company's press release on fourth quarter and full year 2011 results issued on February 21, 2012.

Transaction Updates

On April 17, 2012, the company closed the previously announced transaction with General Growth Properties to sell 11 properties (six owned and five leased) for $270 million in net cash proceeds. In addition, Sears Canada, a consolidated, 95%-owned subsidiary of Sears, completed its transaction with The Cadillac Fairview Corporation Limited to surrender and early terminate the leases on three properties for $170 million Canadian in cash proceeds on April 20, 2012.

The Company issued a press release on April 30, 2012 related to our previously announced plan to separate its Sears Hometown and Hardware and Sears Outlet businesses.

Share Repurchase Activity

During the first quarter of 2012, we had no share repurchase activity. At April 28, 2012, we had $504 million of remaining authorization under our common share repurchase program.

We expect to release first quarter results on or about May 17, 2012.

Public offering could raise up to $500 million for struggling retailer

Aiming to raise up to $500 million in liquidity for the struggling retailer,Sears Holdings Corp.filed registration documents Monday with the Securities and Exchange Commission indicating it plans to spin off its hardware and outlet stores.

According to the filing, shareholders will get the right to buy one share in the new company, called Sears Hometown and Outlet Stores Inc., for each share of Sears common stock they own. Sears said it expects the shares to trade under the ticker SHOS on the Nasdaq exchange.

That will give Chairman Edward Lampert, who owns roughly 62 percent of Sears Holdings, parent of Sears and Kmart stores, a stake of at least that much in the new company, according to the filing.

Lampert took control of Sears in 2005 and combined it with Kmart. He cut investments in the physical stores in favor of pouring money into its online business and share repurchases. As the stores deteriorated, so did the company's sales.

The public offering to spin off the more than 1,100 hometown and 122 outlet stores should raise $400 million to $500 million, the company said.

Sales at Sears hardware and outlet stores have remained relatively flat, at $2.3 billion, since 2009. Earnings over that period, however, have declined, from $60.1 million in 2009 to $33 million in 2011. In its filing, the company said it plans to close six Hometown stores and nine hardware stores in the first half of the year.

Hometown stores are small hardware stores, usually operated by independent retailers. Outlet stores, which thrived during the recession, sell Sears merchandise at a discount. Sears announced its intention to spin off the stores in late February, the same time it reported, in its latest filing, a fourth-quarter loss of $2.4 billion, or $22.47 a share, compared with net income of $374 million, or $3.43 per share, a year earlier. Sales fell 4 percent, to $12.5 billion.

Sears shares fell just over 1 percent Monday to close at $53.78.

As the slow, painful-to-watch decimation of Sears continues at the hands of Eddie Lampert, chairman of Sears Holdings (NAS: SHLD) , it seems investors have finally gotten the message that the company is not long for this world. After experiencing a high of $87.66 on March 16, the stock closed the week at $54.33 -- not great, but not as bad as its low of $28.89 on Jan. 5.

It's been a crazy ride, with investors bidding the stock up and down, sometimes for no apparent reason. Some things have changed recently, however, that make me think this downward spiral may be Sears' last.

Sears is being picked apart, one bit at a time Sears must be dizzy with all the spinning off of its various parts that has occurred lately. Lampert sold 1,200 Sears stores just two months ago and recently closed the company's deal with General Growth Properties (NYS: GGP) for 11 locations, including a prime Honolulu site, for $270 million. The mall in which the Honolulu Sears resides is one that brings in the big bucks -- $1 billion in yearly sales -- so the price that General Growth paid looks like a bargain. The extra cash hasn't helped Sears, though, which continues to flounder.

More recently Sears' Canadian holdings have been put on the chopping block, and its three stores were sold back to the original developer for $170 million. Sears is also selling Cantrex Group, which it bought out in 2005, though it will keep Corbiel Electrique, which was part of the original deal. Now, Land's End, the outdoor-apparel company that Sears purchased in 2002, looks as if it could also go up for sale. Less than a year ago, Sears Holdings CEO Louis D'Ambrosio identified Land's End as being a "priority" that would help save the company.

Land's End isn't the only brand from which Sears would like to squeeze additional profit. The company has hired a consultant to help it license the Kenmore, DieHard, and Craftsman names to other vendors in an effort to expand their horizons and, at the same time, bring in more cash for Sears. Not that there's anything wrong with that, but it does seem the company is looking to others to do what it's unable to do: market itself, and its brands, successfully.

Part of the licensing move could be interpreted as an attempt to stand firm against Home Depot (NYS: HD) and Lowe's (NYS: LOW) , the two big-box retailers that Sears considers its greatest competition in the appliance business, which accounted for 16% of the company's 2011 revenues. Of course, the fact that both Home Depot and Lowe's have bright, clean, modern stores compared with Sears' neglected, shabby ones might have something to do with shoppers' reluctance to buy appliances at Sears. The hiring of Steve Haber, formerly of Sony, is meant to shake up the appliance sector, but his expertise seems misplaced, to say the least.

The real plan? Take the money and run

What is Lampert really up to? In my estimation, he's squeezing all the value out of Sears that he can, piece by piece. He understood the value of the company's real estate holdings early on and knows that selling off assets a little at a time will net him more than selling the whole ball of wax at once, intact.

Much of what Lampert says doesn't jibe with the actions he takes. For instance, many analysts see his parsing out of Sears' saleable parts as a bid for increased cash flow. By the same token, Land's End, for which Lampert paid nearly $1.9 billion, was responsible for $1.7 billion in revenues in 2011. Yet Lampert claims, in his most recent chairman's letter, that Sears has a profit problem, not one of liquidity. How, then, does it make fiscal sense to sell off the company's most profitable assets?

Taking a look at Sears' past five years' worth of financial statements is depressing, as it reflects a continuous downward march toward instability. The company's most recent annual report shows decreasing revenues each year since 2007, as well as decreasing assets. It certainly looks as if Lampert has been picking Sears' bones clean since he acquired the once vital retail giant.

It seems clear to me that Lampert is working toward liquidating the best parts of Sears and then tossing the rest to the wolves. Even the current plans to license the most marketable Sears brands makes sense in that light, since the better known and more profitable those names become, the more value will be wrung from them when the time comes to sell.

Expect Lampert to continue to sell off real estate, as the recent hiring of David Lukes to the company's real estate development arm is surely meant to expedite. After all, Lampert's letter claims that Sears still has more than $20 billion of assets, mentioning specifically real estate holdings and below-market lease contracts. It appears that Lampert still has a way to go before Sears is drained completely -- enough time, one hopes, that investors who are beginning to see the light can get out without being drained as well.

Who's really changing the face of retail? Well, we can be sure it isn't Sears.

QUINCY, Mass., April 25, 2012 /PRNewswire via COMTEX/ -- Scrubology, an innovative new "store-within-a-store" concept, is expanding into a total of 91 Sears and Kmart stores nationwide.

Scrubology was developed in conjunction with Work 'N Gear, the largest retail chain in the U.S. specializing in work apparel and uniforms for professionals in industrial, service and healthcare fields.

In collaboration with Sears and Kmart, 39 Scrubology "stores" in total had been opened to date. The concept has proven to be popular with customers so Sears and Work 'N Gear have teamed up to launch an additional 52 stores in Chicago, Los Angeles, Minneapolis, New Jersey, New York, Philadelphia, San Francisco and Washington D.C.

The stores, which sell apparel and footwear for health professionals, are inside Kmart and Sears locations

Hoffman Estates-based Sears Holdings Corp. will add 52 Scrubology stores — "stores-within-stores" that sell apparel and footwear for health professionals inside Kmart and Sears locations — by the end of this month.

The struggling retailer said 39 of the stores have opened to date and have generated a strong following through social media among a young, affluent demographic. The company's Facebook page had about 25,000 "likes" Thursday.

The concept was developed in conjunction with uniform retailer Work N' Gear, a retailer specializing in work apparel and uniforms for people who work in industry, service and health care. Scrubology met or exceeded expectations in the fourth quarter, Sears said.

"We're very proud of the tremendous results Scrubology has generated for not only Work 'N Gear but also Sears Holdings," said Work 'N Gear CEO Anthony DiPaolo.

Named for the simple, loose-fitting health apparel commonly referred to as scrubs, Scrubology sells apparel under its own name as well as the Cherokee, Dickies, Carhartt, Med Couture and Koi brands.

The new stores will be in Chicago, Los Angeles, Minneapolis, New Jersey, New York, Philadelphia, San Francisco and Washington, D.C.

At 7 a.m., 10 senior Sears executives gather in a sixth-floor conference room in Hoffman Estates for a daily meeting — or, as some refer to it, a "daily beating" — with Edward "Eddie" Lampert.

Via teleconference from his home base in Greenwich, Conn. (and, at least one time, via a call from his yacht in Italy), the famously mercurial Sears Holdings Corp. chairman listens to updates on everything from the company's market segmentation strategy to its IT issues. Some days, he barely glances up from his laptop. Other days, he rips into executives before they've gotten through the second screen of their PowerPoints.

But not knowing whether it's going to be a good Eddie day or a bad Eddie day is just the beginning of the uncertainty that plagues the hallways of Sears' northwest suburban corporate complex.

"You never know what the strategy or the plan is," says one executive who requested anonymity because of a confidentiality agreement. "What are we building? What are the criteria for success?"

Sears soon may face more fundamental questions. After the second-worst year in the company's history, and with its annual shareholders meeting two weeks away, there is open discussion of a once-unthinkable proposition: Will this 126-year-old company, which helped define modern America, continue to exist?

"The challenges the company faces today are far worse than ever before, but they're very much self-inflicted," says Arthur Martinez, who served as CEO from 1995 to 2000.

From its origins peddling watches to Minnesota farmers, Sears Roebuck & Co. morphed into one of America's corporate juggernauts. Along with a handful of other corporations — General Motors Co., IBM Corp., General Electric Co. — Sears created the cultural and economic context of the American Century. But even more than those other companies, Sears reflected everyday Americans' way of life.

In its early years, the Sears catalog offered a previously unimaginable cornucopia of merchandise to a rural nation lacking many creature comforts. Those pages of baby buggies and dresses, shoes and sewing machines — even violins and ready-to-build homes — helped conjure dreams of a better life.

As both Sears and America flourished, the company's goods transformed those dreams into middle-class realities. Sears' best-selling Craftsman tools, Kenmore appliances and DieHard batteries built, furnished and ran the American household. By the 1960s, 1 out of nearly 200 U.S. workers received a Sears paycheck, and 1 out of every 3 carried a Sears credit card. By catering to prosaic daily needs, the retailer grew into a behemoth that defined not only the Chicago economy but American business.

For nearly a century, the company was able to anticipate important changes in the marketplace and profit from them. It mastered mail-order when America was young and rural. Foreseeing the rise of the automobile and the shift to cities, it began building stores. Next came the suburban shopping mall revolution of the 1960s: Sears seemingly anchored every last one.

But like so many other once-unbeatable companies, Sears eventually turned inward, intent on maintaining its success by repeating what had worked before. As a mall-based mass merchant, Sears failed to specify a niche and articulate the well-defined identity necessary to compete with 21st-century rivals. Its mall-heavy real estate portfolio suffered as Americans flocked to stand-alone big-boxes like Target, Wal-Mart and Costco, while its stores, starved of capital investment, often felt dingy. It also failed to listen to customers — or to keep an eye on new competitors springing up in places like Bentonville, Ark.

By the time Sears realized the danger poised by Wal-Mart Stores Inc., Best Buy Co. and Home Depot Inc., it was too late. Transformation efforts through the 1990s and early 2000s showed early promise but failed to gain traction. Ironically, what began as an attempt to keep pace with the big-boxes by buying bankrupt Kmart stores ultimately led to the 2005 Kmart-Sears merger under hedge-fund manager Mr. Lampert. Since his arrival, things have spiraled from bad to worse. Today the mood in Hoffman Estates is described by some former employees as toxic and defeated, as even high-level executives lack the chairman's trust and approval to implement strategic transformations.

In February, in the face of a monstrous $2.4 billion fourth-quarter loss and mounting concerns about the company's liquidity, Sears announced it would sell 11 stores to General Growth Properties Inc. for $270 million and raise $400 million to $500 million more by spinning off its Hometown franchise plus its outlets and some hardware stores.

In his annual letter to shareholders that day — one of the only vehicles through which Mr. Lampert comments publicly on Sears — the chairman hinted that more asset sales may follow. "We intend to evaluate other opportunities to separate parts of our portfolio into separately owned companies," he wrote. Since then, there has been speculation that Mr. Lampert is shopping the Lands' End clothing division for $2 billion. He's also hired a company to license Kenmore, Craftsman and DieHard for sale at other retailers.

Sears spokeswoman Kimberly Freely says the company's leadership is going to "accelerate the transformation of Sears Holdings" by using technology to integrate its bricks-and-mortar store experience with its web and mobile shopping. Counting both real-life and virtual trips, she says Sears and Kmart clocked more than 1 billion shopper visits in 2011.

Ms. Freely also says licensing the company's flagship brands "will drive long-term value" by "allow(ing) us to reach new customers and create new brand enthusisasts."

Wall Street remains skeptical. "We continue to believe that Sears will sell off or spin off assets in a controlled liquidation of its chain, monetizing the assets least tied in with Sears' U.S. stores first," New York-based Credit Suisse analyst Gary Balter wrote in a note. However, "over time, selling off the profitable assets is unlikely to be a winning strategy."

That's a scary thought for Sears' 293,000 employees, including 6,000 at its Hoffman Estates headquarters. But the thought of a nation without Sears also is one more sign that the economic archetype of 20th-century America, built on manufacturing and distributing hard goods to an expanding middle class, is winding down.

"Sears was so powerful and so successful at one time that they could build the tallest building in the world that they did not need," says James Schrager, a professor of entrepreneurship and strategy at the University of Chicago's Booth School of Business. "The Sears Tower stands as a monument to how quickly fortunes can change in retailing, and as a very graphic example of what can go wrong if you don't 'watch the store' every minute of every day."

RETAIL PIONEER

Like so many other stories of the American Century, the tale of Sears begins with the railroads.

In 1886, at a terminal in rural Minnesota, 23-year-old Richard Sears bought a shipment of gold pocket watches for $12 apiece and began selling them for $14 to men who previously had kept time by the movement of the sun. Thanks to both the recent introduction of time zones and the watches' hint of modern sophistication, those timepieces netted Mr. Sears $5,000 in six months. He promptly moved to Minneapolis, founded R.W. Sears Watch Co. and began to sell by mail-order, placing ads in farm publications.

The following year, he relocated his burgeoning company to Chicago and hired a watch repairman, Alvah Roebuck, to fix returned merchandise. In 1893, the two co-founded Sears Roebuck & Co., published a catalog featuring watches and jewelry, and pulled in sales of more than $400,000. Two years later the 532-page catalog featured the famously wide range of merchandise, and sales exceeded $750,000.

Mr. Sears wasn't the first entrepreneur to enter the catalog business: Chicagoan Aaron Montgomery Ward had established his own book in 1872. But Sears grew rapidly, posting $10 million in sales in 1900, versus Montgomery Ward's $8.7 million. Along with Montgomery Ward, Sears Roebuck saved farmers from high-priced rural general stores and, moreover, created a book of dreams for people in remote places.

"The catalog was pure brilliance at a time when (America) was a far-flung nation without a lot of stores," Mr. Schrager says. The catalog was "really the Internet of the day — a place where anyone, at any time, in any place could take a look, say, 'Oh my gosh, I need that' — and get it." The rapidly expanding company quickly outgrew its original five-story building in current-day Greektown and moved into a sprawling 40-acre campus on Chicago's West Side in 1906.

Two decades later, Sears' leadership recognized that stores were poised to usurp mail-order as America's population became increasingly urban. It opened its first store within its headquarters in 1925.

Soon there were hundreds. During one 12-month period in the late 1920s, the company opened an average of one store every other business day.

In 1931, Sears' retail sales topped mail-order for the first time, accounting for 53.4 percent of total sales of more than $180 million. That same year, recognizing America's increasing reliance on the automobile, Sears launched Allstate Insurance Co. and soon opened sales locations inside its stores. (The company was spun off in 1995.)

Sears' first downtown Chicago store, on State Street between Van Buren Street and Congress Parkway, opened in 1932, when the country was deep into the Great Depression. Local newspapers reported that 15,000 shoppers visited the store on its first day, and several thousand flooded its employment office. Despite the Depression, Sears continued to open stores, establishing more than 600 by the time the U.S. entered World War II.

Under Chairman Robert Wood, Sears smartly anticipated the postwar boom and the growth of the suburbs. From 1946 to 1952, the company opened 92 stores and either expanded or relocated more than 200 others. By 1951, Sears sold $2.8 billion worth of merchandise, more than twice as much as Montgomery Ward.

"Sears' history is one of both adapting and leading as American culture changed, and that served them extremely well right up to the 1990s," says Steve Kirn, who ran the company's "Sears University" through much of the 1990s. "Sears began placing stores in what would become the suburbs. In the 1960s, when the first enclosed shopping malls started going up, Sears was a key anchor for just about every one that was built."

The 110-story Sears Tower (now Willis Tower) became the world's tallest building at 1,454 feet when it was completed in 1974. But Sears' aura of invincibility was fading even as the massive monument to its success was going up.

After expanding so rapidly through the '60s, the company was hit hard by the 1974 recession. Profits declined by $170 million that year, and layoffs began almost immediately after Sears took possession of its namesake building. Newly unemployed workers exiting the skyscraper crossed paths with workmen carrying up hundreds of thousands of dollars' worth of houseplants to decorate it, according to David Katz's authoritative history, "The Big Store."

Like the larger American economy, Sears' performance was stagnant through much of the '70s. The company's core clientele — postwar blue-collar families who relied on Sears to outfit their households with appliances and their children in sturdy, if unexciting, clothing — had aged and was no longer buying as much.

At the same time, competition was increasing. Within malls, Sears' smaller specialty neighbors began grabbing market share. Operating under the assumption that retailing's profit margins would never again measure up to those of the emerging financial services sector, Sears acquired stock brokerage Dean Witter Reynolds and real estate firm Coldwell Banker in the 1980s.

In a move reminiscent of its omnibus catalog days, the company boasted that middle-class Americans could come to Sears not only for clothing and appliances but for investment advice and a mortgage. In 1986, CEO Edward Brennan oversaw the introduction of the Discover Card, the first major bank credit card launched in two decades.

The strategy boosted revenue, but it sucked attention and resources from Sears' traditional merchandising core, which continued to languish. Ironically, the company, historically so adept at anticipating and adapting to fundamental market shifts, was caught flat-footed by the big-box revolution.

Wal-Mart, created by Sam Walton in Arkansas in 1962, came of age in the 1980s. Sales grew from $1 billion at the beginning of the decade to $32 billion in 1990, when it surpassed Sears as the world's largest retailer. By 2001, Wal-Mart's sales were six times those of Sears.

"Sears wasn't even tracking Wal-Mart as a competitor until the '80s, because we were Sears — come on," Mr. Kirn says. "These people were in Bentonville, Ark., for crying out loud. But suddenly Wal-Mart is breathing down our neck, and then passing us."

Sears' retail profits dropped by almost 8 percent a year in the second half of the 1980s, despite the renovation of hundreds of locations into gleaming, neon-colored "Stores of the Future."

As business declined, so too did the once-proud, tightly knit corporate culture.

When Mr. Brennan stepped down in 1995, Sears no longer owned the Sears Tower. The company found it difficult to rent out the cavernous building, which was built under the assumption that massive 1970s-era computers would take up dozens of floors. As the value of the building fell dramatically, Sears negotiated a 20-year state tax break worth an estimated $75 million to move its headquarters to Hoffman Estates rather than North Carolina. (This year, the deal was extended for another decade, worth $150 million in tax savings.) It changed addresses in 1992 and handed ownership of the tower over to a mortgage trust two years later.

Mired in a major funk, Sears turned to Arthur Martinez, a former Saks Fifth Avenue executive, to quarterback a turnaround.

When he became CEO, "Sears still had many very useful assets," Mr. Martinez says. "It still had a high standing with the consumer. It had a well-deserved reputation for quality and satisfaction. It had a store footprint that was very appropriate at the time."

Inside the walls, though, "it was a very dispirited place. The smell of failure pervaded the company, and it had a culture that didn't know how to look outside itself," he says. Mr. Martinez considered his biggest task to be overcoming what he calls "the morass of desperation."

Embarrassed employees removed their ID badges before going out to lunch. During one team-building exercise in which workers were asked to write Sears' story as though they were Wall Street Journal reporters, many turned in blank sheets of paper or penned obituaries.

Mr. Martinez made quick inroads. The retail veteran and Harvard Business School alum (whose Westport, Conn., home used to share a fence with Martha Stewart's) immediately shut down the catalog, which by the 1990s was a relic that employed 50,000 people and lost $150 million a year.

He also oversaw the Young & Rubicam-produced "Softer Side" ad campaign in 1993 that helped Sears return to the black with stronger sales in apparel and home goods. In addition to a memorable jingle, the initial commercial featured a woman wearing "this spangly, flirty blue dress that everyone on the face of the planet wanted," according to Mr. Kirn. The only problem? Sears, surprised by the overwhelming response after years as an afterthought in the apparel business, didn't even carry it.

The success of the Softer Side campaign, along with a face-lift of the stores and introduction of new clothing brands, reinvigorated Sears for a few years.

But despite the intermittent success, the clothing lines started to slump again by 1998.

More store closings and key departures have some wondering if the long-struggling icon is finally going away. Despite turnaround efforts, it is dying -- slowly. Here's why.

NAME LAST  CHNG  % CHNG
SHLD 55.66  -0.35  -0.62
WMT  61.75  -0.31  -0.50
TGT  56.79  -0.59  -1.03
IBM  199.51 -0.62  -0.31
SNE  16.70  -0.19  -1.12

Founded as a catalog business by a railway clerk in 1886, Sears firmly held its ground as an iconic retailer in the lives of U.S. households for more than a century.

Any kitchen in middle-class suburbia may well have a Kenmore appliance humming in the background. The car in the garage might fire up with a kick from a trusty DieHard battery. I'll always keep my Craftsman tool set as a reminder of my father, who gave it to me for a birthday present years ago. Besides, those tools are good.

Now though, thanks to a combination of neglect, mismanagement, a weak economy and the ever-changing dynamics of retail, the unthinkable may happen. After years on death watch, Sears Holding (SHLD -0.62%, news) may actually fall -- joining the ranks of retailers like Borders and Blockbuster as mere entries in the archives of Wikipedia.

A new round of store closings was recently announced. Key executives are leaving. Sales have been in steady decline for years. These are not good signs.

"I don't think Sears is viable. I don't think they can survive in their current state," says veteran retail sector financier Howard Davidowitz of Davidowitz & Associates, who has advised retail greats like Wal-MartStores (WMT -0.50%, news) founder Sam Walton over the years. "Too many things have gone off track. Too many customers have been lost, and it's too expensive to bring them back."

In short, under the management of hedge-fund kingpin Eddie Lampert of ESL Investments, which took over the show in 2005, a lot of sins have been committed at Sears. Redemption may not be possible.

"It's too late. Something different has to happen to the company, and I honestly don't know what it can be," says Davidowitz.

Goldman Sachs analyst Adrianne Shapira has a $27 price target on Sears stock, which recently changed hands for $59. In other words, Shapira is forecasting a decline of more than 50% from here -- because she's not convinced a turnaround will play out, despite a smattering of reforms by the retailer.

Of course, Sears has a different view. The company believes using technology to improve the shopping experience, such as arming sales staff with iPads to carry out research on the floor for customers, a new loyalty program called "Shop Your Way Rewards," and improving merchandise, among other things, will bring its core customers back.

And there's value in those powerful brands: Craftsman, Kenmore, DieHard and Land's End. As for bankruptcy -- a clear risk at a retailer that's posted six straight years of sales declines -- Sears believes financial wizardry will keep the wolf from the door.

Some investors agree; Sears was actually the best performing S&P 500 stock in the first quarter of 2012.

They may be right, but such financial wizardry -- or the use of tactics like asset sales and balance-sheet adjustments to drain off cash -- goes only so far. It's also a big part of what got Sears in trouble in the first place.

For the past seven years, Sears and Kmart (also owned by Sears Holding) has been in the hands a of hedge fund manager whom many consider to be a financial genius, Eddie Lampert.

The problem is, he's been treating Sears more like a hedge fund than a retailer, say critics. And that simply doesn't work in the highly competitive world of retail. Instead, it leads to one sin after another, and the sins build on each other until - poof! -- an iconic retailer hits the endangered-species list.

Now, I don't think Sears will go bankrupt or close its doors overnight; Lampert has the financial clout and skills to keep it going. More likely, the retailer may simply keep getting whittled down, as Lampert continues to hive off stores, leases, brands and other assets to try to deal with ongoing sales declines. Sears announced 120 store closings late last year, and more than 60 more last month.

But in retail, you can't shrink your way to success. This is why retail experts like Davidowitz now question the viability of Sears.

Here's a look at the five sins of Sears, and how the company is trying to repair the damage.

Sin No. 1: Cutting investments in stores too much

Soon after taking over, Lampert started reducing investments in stores to support cash flow at a time when the recession was hitting cash flow hard at many other companies. From 2007 to 2009, capital investments at Sears declined 37% to $361 million, but cash flow held steady. This may have been some great financial wizardry, but it left stores in shambles -- and customers noticed, say critics. They stopped going.

"Lampert said it was a bad investment to invest in the stores," says Paul Swinand, a Morningstar analyst who covers retail stocks. "That's like saying in the airline business, it's bad to buy planes. That's the wrong way to run a business." in 2010, Sears was investing an industry low of $1 to $2 a square foot in stores, calculates Swinand.

Lampert used the cash to buy back Sears stock, and a lot of the purchases were at prices much higher than where it now trades. "Sears, Kmart -- they're both wrecked," says Davidowitz. "This was a guy running a hedge fund, not a retail company. The long-term impact of what he is doing is catastrophic."

As another way to generate cash, Lampert has sold off several of the better Sears stores, says Columbia Business School professor Mark Cohen, who was CEO of Sears Canada until mid-2004 and chief marketing officer and president of soft lines in the U.S. before that. A lot of the remaining stores are in economically challenged areas, or in older, declining malls. "Most retailers have come out of the recession with some manifestation of recovery," says Cohen. "But Sears continues to decline, and there's no reason why it should show any positive performance because there's been no strategy or investment. This has been an asset strip."

In fairness to Sears, capital spending has picked up 23.4% over the past two years, to $432 million last year, points out David Trainer of New Constructs. Trainer still considers Sears a dangerous stock because of poor returns on investment and because shares look expensive, given the company's prospects, after such strong performance this year.

Sin No. 2: Prices that are too high

Another problem for Sears is that it rarely offers regular discounts and low pricing like Wal-Mart and Target (TGT -1.03%, news) do. "Lampert decided that price doesn't matter; he's going to go for profit margin," says Davidowitz. "In retail, you don't start with profit margin, but in Lampert's world you do. So Sears was not price-competitive and still isn't." Again, customers noticed and went elsewhere.

"We believe it is not just solely about price when it comes to value to our customers," responds Sears spokeswoman Kimberly Freely. Sears also provide value through special offers inside a membership program, a guarantee to process returns in five minutes, free shipping on some products at certain times and "best in class brands at both Sears and Kmart."

Sin No. 3: Hiring CEOs without solid retail experience

Sears needs a CEO with solid retail experience to shake things up by clearly defining a direction and trying out new concepts in test stores, says Davidowitz. Instead, the CEO who joined in February 2011, Louis D'Ambrosio, comes from Avaya, a tech company. Before that, he worked with IBM (IBM -0.31%, news). "He has no retail experience, and there's no reason to believe he is anything more than the latest puppet," says Cohen, at Columbia Business School.

Before that, Sears had an interim CEO for a few years, W. Bruce Johnson, who was promoted from inside the company, where he was in charge of supply chain and operations -- more of a tactical than a strategic leadership position. Sears has also had a lot of top management turnover in recent years, which also makes it more challenging to set a clear strategy, says Morningstar's Swinand.

In defense of Sears, it recently put Ron Boire, a solid retail veteran, in the position of chief merchandising officer. Boire had been the CEO of Brookstone and the president of U.S. Toys, North America for Toys R Us. He had also worked in Sony's (SNE -1.12%, news) consumer division.

Sin No. 4: Regular sales declines

A combination of the sins above, plus a weak economy, has led to the cardinal sin in retail -- regular sales declines. The key metric to watch in retail, says Davidowitz, is "same-store sales." This gauges sales at stores open more than a year, to strip out the effect of store openings and closings. "That is the most important thing in retail. It proves your viability," says Davidowitz.

Unfortunately, Sears' same-store sales have been in decline for six straight years. The trend continued in the fourth quarter, when U.S. same store sales fell 5.2%. "In other words they are shrinking their market share," says Davidowitz. As a result, the company lost $4.52 per share last year, after accounting adjustments.

In its most recent conference call, Sears outlined several tactics it believes will help reverse the negative trends. It's "arming" sales associates with iPads so they can better help customers figure out which products are right for them. This makes sense with big-ticket appliances. Sears is rolling out a shoppers' loyalty program, and new Kenmore and Craftsman products. It's revamping store layouts to mix up merchandise so that customers who go in for one thing pick up other stuff as they move through stores. Work clothes, for example, have been moved closer to tools.

And Sears' customer-satisfaction level has been improving, says Claes Fornell, a University of Michigan business school professor who tracks these things. But that might be because the most dissatisfied customers have mostly left, which mathematically pushes up the average ratings of remaining customers who are polled, says Fornell. Still, it's a reversal.

Sears also recently announced it is hiring Leveraged Marketing of America to explore how to extend its popular Kenmore, Craftsman and DieHard brands to new products and new regions of the world.

Despite all these efforts, things don't look good for Sears, say analysts. A sluggish economy, a weak appliance market and high gasoline prices, combined with Sears' self-inflicted wounds, suggest sales will continue to shrink at least this year, if not beyond, they say. Wall Street analysts predict a 5% overall sales decline this year and a 2% decline next year, according to Thomson Financial.

Sin No. 5: A credit scare

Those weak sales trends have been worrying Sears' lenders. Back in December, Fitch Ratings downgraded Sears' debt, explaining that those weak sales, and the possibility that one measure of cash flow could turn negative this year, may force Sears to increase borrowing. Fitch also cited "competitive pressures, inconsistent merchandising execution, and the lack of clarity about the company's longer-term retail strategy." Then in January, a financial firm called CIT Group (CIT +0.40%, news) said it would stop acting as an intermediary between Sears and its suppliers.

This was bad news, because small developments like these can quickly snowball, drying up credit for a retailer, says Davidowitz. Lampert reacted quickly. He announced the sale of 11 stores, the spinoff of Hometown and Outlet stores, and improvements in inventory management. Together, these steps should raise mroe than $1 billion. "Lambert's reaction the minute trouble started was magnificent," says Davidowitz. "No one has ever accused him of not knowing finance."

But it also may foreshadow what really may be in store for Sears, as those negative sales trends continue.

So what's the endgame?

Sales trends suggest Sears is dying. Current efforts could turn it around, but the recent track record isn't good, and a big part of the game plan remains store and asset sales to generate cash. Tellingly, a big part of the most recent conference call with investors covered this kind of financial wizardry, as opposed to the basic block and tackle of retail.

"I think it all comes apart. It dissembles," says Cohen, the former Sears Canada CEO. "(Lampert) will continue to sell off pieces and parts. There is no meaningful strategy to manage the business successfully in any conventional way."

That kind of scenario won't necessarily help shareholders. But another option might. Swinand, at Morningstar, thinks Lampert could eventually take Sears private to try to fix it up inside his hedge fund.

Such a move would mean a premium for shareholders as Lampert buys their stock.

The catch is, there's no telling how much the stock might sink between now and when this scenario plays out, if it does. So there's little point in buying Sears now, hoping the stock will jump in a take-under.

For shoppers, the hedge-fund manager's financial wizardry may mean your neighborhood Sears will disappear. They won't all go at once, but they're already going. Of course, retailers go away all the time.

But icons shouldn't.

At the time of publication, Michael Brush did not own shares of any company mentioned in this column.

HOFFMAN ESTATES, Ill., PRNewswire via COMTEX -- Sears Holdings Corporation announced today the completion of the sale of eleven Sears full line store locations to General Growth Properties for $270 million. Sears has received the sale proceeds and the stores will continue to operate as Sears locations into 2013 or 2014 with final closing dates to be determined and announced later this year.

Each of the Sears stores was part of an existing General Growth property. The transaction included the list of owned and leased stores listed below.

1450 ALA MOANA BLVD Honolulu HI Leased
1481 CORAL RIDGE AVE Coralville IA Owned
1201 LAKE WOODLANDS The Woodlands TX Owned
20 BELLIS FAIR PKWY Bellingham WA Leased
1751 MADISON AVE Council Bluffs IA Leased
9405 W COLONIAL DR Ocoee FL Owned
1001 APACHE MALL Rochester MN Leased
2000 N NEIL ST Champaign IL Leased
6191 S STATE ST STE 300 Murray UT Owned
2501 W MEMORIAL RD Oklahoma City OK Owned
1200 TOWNE CENTRE BLVD Provo UT Owned

(Reuters) — Hard-pressed Sears Canada Inc. will focus on strengths such as appliance and tool sales under its three-year turnaround plan, Chief Executive Calvin McDonald told the company's annual meeting in Toronto on Tuesday.

McDonald said that four stores are now being renovated and will emerge with a concentration on Sears' strong categories. The Toronto-listed department store chain is majority-owned by U.S. retailer Sears Holdings Corp.

Parts of McDonald's strategy have been trickling out since he was appointed in June, but at Tuesday's meeting he laid out his plans in more detail.

McDonald said Sears would bring its Quebec-based Corbeil appliance banner to Ontario, with four pilot stores in the Toronto area. He did not say when the test stores would open.

"We view this as an effective way to maintain our strength in major appliances," he said.

McDonald also linked recently announced store closures to the renewed focus on hard goods. Three major downtown locations in Vancouver, Calgary and Ottawa will close this fall, the company said in March. Sales at those outlets have skewed heavily to sales of clothing and other soft goods.

McDonald did not say when the turnaround plan would yield improvements in financial performance. In February, Sears Canada reported more than a 50 percent drop in quarterly earnings as sales tumbled, but McDonald said then that the business had begun to stabilize.

Also in February, the chain said it had cut regular prices on more than 5,000 items in a bid to stay competitive.

Other initiatives underway are meant to improve service. McDonald said 20,000 staff were trained on "new expectations" this month. The company said that it will launch a new "customer promise," which will include changes to its returns policy, in May.

It's spring and life is cheerful, though one must accept certain grim realities like mortality, paper cuts and the demise of our local Sears store. I will miss our Sears, which had come to be like a friend to me that brought back memories of the old Sears-Roebuck & Co. store I knew when I was a boy.

That store had creaky wooden floors and was filled with toys, sporting goods, sewing machines and appliances. The sale clerks were middle-class working people who knew my parents by name and everyone agreed that Eisenhower should nuke Russia into a flat piece of glass. It was there my father purchased my first bicycle and the clerk took me out back and helped me learn to stay upright on a moving two-wheeled object. A wonder, like the Trinity, suddenly made clear by kindness. You don't get that type of instruction on the Internet.

Imagine America in the 1880s. There were only 38 states and about 65 percent of the people lived in rural areas. Only a dozen or so cities had 200,000 or more residents. One day, a Chicago jewelry company accidently shipped some watches to a jeweler in a Minnesota hamlet who did not want them.

Richard Sears was an agent of the Minneapolis and St. Louis railway station in North Redwood, Minn. When he received a shipment of watches — unwanted by the Redwood Falls jeweler — Sears purchased them himself, sold the watches at a profit and ordered more for resale. In 1886 Sears began the R.W. Sears Watch Company in Minneapolis, which expanded into other merchandise and became one of the first mail order houses in America supplying catalogues that contained about the only view of the world many people ever saw outside their own community. Old catalogues were carried to the outhouse where they doubled as reading material and a torn page crinkled and held just right was the foundation of American hygiene.

As a child I lived for the Sears-Roebuck Christmas catalogues. The catalogue's arrival announced the holiday season and my mother would place the new catalogue on my bed so I would see it first thing when I came home from school. You were allowed to choose three items from it for Christmas, but one item had to be clothing. Bummer. I would lay across the bed propped on my elbows and slowly turn each page and marvel at the new wonders of the year. The book was a holy document and each picture was a prophecy of the coming of Santa Claus. Today's Internet pictures have no holiness or wonder. They're just pixels. And you can't use them for hygiene.

The Sears company was founded by a romantic who dreamed of quality goods and service, but in the early 1980s it fell into the hands of rapacious bandits who tore its heart out, refused to update the stores, streamlined the name to "Sears" and treated employees like outhouse catalogues.

And so I mourn the loss of my childhood and with it the loss of an icon of the American economy. Closing the local Sears makes me sad and I want to grab an old beat-up guitar, sit on the front porch while wearing dark sunglasses and strum some old blues chords and sing:

"I wanted to buy some things today.

So I went down to Sears with my pay.

But the door was locked, a sign was in my way. I heard it on the evening news.

She's now lost to me and to you.

And that's why I got these Sears closed-up-and-shut-down blues."

Did you know? Were you aware? What's this about bargains on bling bling for your fingers, ears, wrists, neck and feet? Most importantly, how exactly can you get your greatest value out of an insane deal?

Believe it or not, if you haven't visited a Sears lately to outfit your young tween or teen from head to toe for a bargain, then you must get out more often. You are probably thinking that your young lady or young gentleman only dares to don the most "in the moment" fashions and that you walking through the juniors' racks at Sears is the furthest concept from your mind.

Maybe at one point in time that thought may have been justified, but it is no longer. Sears has begun to attract a new customer with new brands that are relevant for today's youth, such as UK Style by French Connection, the addition of the Kardashian Kollection, and while still continuing the momentum of their key brand BONGO (all with "increased consideration.")

This season, Sears is offering big, bold, bright hues of oranges, greens, and reds, chunky accessories, pieces that are great for layering, handbags, jewelry, hats, and a girl's all-time best friend next to diamonds...shoes!

Sears has shoes that are so beautiful that you will display them on your dresser top like a highly coveted perfume bottle. Sears has both shoes and fashions, which are perfect for juniors who are active and energetic, fashion divas, the young preppies, the classy classics, and of course. the trailblazing trendsetters.

As a DC Fashion Bargain Examiner, finding fine fashions at a bargain is an intense hunting sport. However, Sears had somehow slipped the radar, but is now in full enhanced view, which is why we are providing a peak-a-boo into their Spring/Summer fashions in a three part series for juniors(part one), misses/misters (part two), and children (part three).

Sears is now a fully-blossomed department store containing many must wear houses of fashions. In many ways it has undergone a style enhancement and a special word of thanks goes to Ms. Deserie Miller, the Sears marketing and events manager for the Southeast Region for this pure enlightenment.

Ms. Miller is formerly a Sears's store manager from Cleveland, Ohio (now working locally) and is very knowledgeable on fashion trends and the many offerings at Sears. She now directly works with 18 stores and is very excited and motivated with its developments on creating new customer relationships.

She states "I am personally drawn to UK Style by French Connection. It allows a little more give in certain areas because of the European influence. American cuts are a little slender and the European cuts are somewhat fuller. I wear a lot of their great layering pieces. There are clothes here that I don't mind seeing my 12-year-old daughter Jada wearing."

According to Ms. Miller, "Our goal [at Sears] continues to gain more relevance among a younger audience and those looking for contemporary fashions while retaining our core customers (we have introduced Lara Scott who will maintain our relevance to our loyal customer base over 40) and our traditional customers that are used to classic looks, the quality of Sears products, and our guarantee that we offer with our products. Joe Boxer continues to serve as an iconic lifestyle brand, which is fantastic for fitness and intimates!"

For some, Sears is solely associated with its Kenmore appliances, Portrait Studio, Sears Optical, or Sears Auto Center.

When asked about its apparel and soft lines, Ms. Miller states, "Apparel is a top priority at Sears! We have invested and committed to recruiting and retaining top buyers in the industry, since our spring launch in 2011. We have over 200 buyers in our downtown San Francisco offices along with 200 plus (full figure) designers in our Soho Design Center."

Sears is known for connecting with families in the community for their great bargains. Teens and tweens are able to be outfitted in the latest trends with great value known as insane deals.

Starting this Spring/Summer season, Sears will be connecting with the families during their family-fun events to include their fashion show events (found at www.sears.com ) on April 21, 2012 Sears at Landmark Mall; April 28, 2012 Sears at Bowie Town Center; April 29, 2012 Sears at Dulles Town Center; May 5, 2012 Sears at Fairfax; May 6, 2012 Sears at Falls Church; and May 20, 2012 Sears at St. Charles.

Departure Comes as CEO Ron Johnson Begins Major Overhaul of the Retailer

J.C. Penney Co. said Chief Financial Officer Michael Dastugue will leave the department-store chain on Friday, the latest management shake-up as the company undergoes a vast operational overhaul. Mr. Dastugue, who spent 15 months in the CFO post, will be replaced temporarily by Chief Operating Officer Michael Kramer while a search for his successor is conducted.

Mr. Dastugue's departure comes as Penney undergoes an operational transformation under Ron Johnson, who took over as chief executive in November. Mr. Johnson, who formerly ran Apple Inc.'s retail stores, is aiming to mold the stodgy department store into a place of excitement and innovation by turning Penney's floor plan into an array of shops-within-shops.

As he has moved forward, Mr. Johnson has been populating Penney's upper ranks with former colleagues. Mr. Kramer had spent time as chief financial officer of Apple's retail unit, along with serving for three years as president and chief financial officer of Kellwood Co. Other Apple alumni who have joined Penney include Chief Talent Officer Daniel Walker and Chief Technology Officer Kristen Blum. President Michael Francis came from another previous employer of Mr. Johnson's, Target Corp., TGT +0.92%where Mr. Francis served as marketing chief.

Last week Penney said it was letting go 600 employees at its Plano, Texas, headquarters and another 300 as it closed a call center in Pittsburgh. Mr. Johnson said at the time Penney will operate more like "a start-up," cutting layers of management and creating more accountability.

"We thank Michael for his many years of service," Mr. Johnson said in a written statement Wednesday. "Over his 20-year career, Michael served in a variety of finance roles of increasing responsibility, culminating with his appointment as chief financial officer."

Mr. Dastugue, who has worked for Penney since 1991, took over as the financial chief in January 2011. He took home a salary of $575,000 last year, and his total compensation, including stock and options awards and other perquisites, was valued at $4.3 million, according to a Securities and Exchange filing last month.

Terms of Mr. Dastugue's severance haven't yet been disclosed.

J.C. Penney plans to reduce annual costs by $900 million by the end of 2013, including $200 million in savings from corporate headquarters, $400 million in store operations and $300 million in advertising. The retailer has been in heated competition with rivals such as Macy's Inc. M +1.78%and Kohl's Corp. KSS +1.20%

In February, J.C. Penney turned in a loss for its fiscal fourth quarter, as it shouldered heavy costs tied to its revamped pricing strategy.

—Maxwell Murphy and Ben Fox Rubin contributed to this article.

Mark Bonchek, SVP of Communities and Networks for Sears Holdings, has been a pioneer in social engagement since the 1990s when he received the first Ph.D. granted by Harvard on the subject of social media. Since then he has worked with organizations ranging from IBM to The Economist to the U.S. Department of Education. His current focus is the transformation of Sears as an integrated retailer and social enterprise.

Brandon Gutman: Mark, there's a lot of talk these days about social media. Is it just a lot of hype, or is there really something revolutionary going on?

Mark Bonchek: There is something revolutionary going on, but not in the way people often think. This is about a lot more than generating Likes on Facebook and followers on Twitter. We are in the midst of a fundamental shift from mass communication to mass collaboration. This is the first time in our history that we can work together on a global scale. This type of communication revolution doesn't happen very often. The last one was Gutenberg's printing press over 500 years ago. Gutenberg democratized information, enabling mass communication to an audience. Radio, newspapers, and television were variations on this theme. With social technologies, we are not only consumers of information, but producers and co-creators. This democratization of collaboration and creation is the real social revolution.

How well are companies adapting to this social revolution?

Most companies are still stuck in old ways of thinking. But you really can't blame them. It took three hundred years for Gutenberg's revolution to play out. The democratization of information led to the Renaissance, the Scientific Revolution, and eventually the Industrial Revolution. This in turn led to the modern corporation as we know it. At this point, we are only about a decade into the social revolution, and it will take a while to adjust our mental models from audiences to communities and re-design our institutions from hierarchies to networks.

What does this mean for brands and marketing?

In the past, brands could control the message. But not any more. Marketing has become like a political campaign. Every message gets thrown into the social spin cycle. This is a big change for marketers trained in traditional advertising, with its focus on segments and channels. Marketing is now more about sociology than psychology. Brands need to focus on the social context of their customers' lives. Do they create a sense of social identity? Can they create social currencies that help customers connect with each other?

How is this changing the relationship between brands and customers?

The relationship is becoming more peer-to-peer. You can see this on Facebook. With the latest changes, brand pages look a lot like personal pages. As brands become more like peers, they need to behave more like people: personal, reciprocal, and authentic. It's the difference between being a speaker on a stage and the host of a dinner party. A good host doesn't lecture or talk too much about themselves. They focus on sparking the conversation and connecting people. They keep the party buzzing. A social brand does the same for its community.

At the last Brand Innovators Summit, you created some buzz yourself with the concept of customer orbits. Can you elaborate?

In a social age, people don't like to be pushed. Brands need to find creative ways to attract customers. Imagine a solar system with your brand at the center. Just as gravity keeps planets in orbit around the sun, companies can create gravitational fields to keep customers in orbit around their brand. This gravitational field is not about advertising. It's about creating real value that goes beyond the products you sell. Some examples include Google's search engine, Apple's iTunes software, and Nike's FuelBand. These are gravity generators that deliver high-frequency, high-value interactions.

How do you create this kind of gravitational field to pull in customers?

First, start with the 3 P's: Purpose, Platforms, and Partners. Find a shared Purpose around which you can deliver services that create value for your customer. Then create an engagement Platform to deliver that value. Social networks and mobile technologies make it possible to create these platforms with incredible ease. There are many sources of value around which to build your engagement platform. The most common are content, conversation, collaboration, contribution, and commerce. Finally, look for collaborative Partners who can bring additional credibility, resources, or reach.

How is Sears putting these ideas into practice?

We start by recognizing that social technologies are fundamentally transforming retail. Our customers want to shop anytime, anywhere. It is no longer about choosing between shopping online or shopping in the store; it is increasingly about both. We therefore must deliver an integrated retail experience across all channels. But this is only table stakes in the new world of retail. We must evolve beyond a transactional relationship with our customers to a social experience that is personal, engaging and rewarding.

As an example, our FitStudio community is build around our market-leading position in fitness equipment. In our stores, interactive technologies and expert consultants help customers find the right equipment. Online, the FitStudio community helps people achieve their fitness and weight loss goals. As an orbit strategy, FitStudio combines shared purpose (fitness), engagement platforms (store and online community), and collaborative partners (trainers and wellness experts).

Do these ideas apply to smaller companies? If so, how should they get started?

Remember that social is about building human relationships. Take an inventory of your social assets (knowledge, values, and relationships) and look for ways of creating social currencies (things people can share). Also keep in mind what each type of social technology is good for. Facebook is about conversation. Think about what your customers like to talk about, and about which you have something to contribute to the conversation. Twitter is about notification. What do your customers want to be informed about related to your business? As an example, a restaurant might put out a daily Tweet with the daily special, and create a Facebook page where they post favorite recipes or items they are considering adding to the menu. In general, there are lots of places to start. The key is to be less transactional and more human, and do less pushing and more pulling.

HOFFMAN ESTATES, Ill. -- Sears Holdings today announced that its Kenmore, Craftsman and DieHard business unit ("KCD") has appointed Leveraged Marketing Corporation of America (LMCA) as its exclusive global licensing agent. The agreement with LMCA supports KCD's global initiatives to extend the Kenmore®, Craftsman® and DieHard® brands to new product categories and geographic markets, both within Sears Holdings and externally. LMCA will work closely with KCD to identify, evaluate and manage licensing opportunities around the world.

"This global licensing initiative for Kenmore, Craftsman and DieHard is aligned with our plans to strategically utilize our brands and other key assets to increase their long-term value," said Lou D'Ambrosio, Sears Holdings' chief executive officer and president. "We will continue to focus on delivering the quality and value of three of America's most iconic brands to our customers and members, enhancing our company's position as a leading integrated retailer."

"Our strategies to build the strength of Kenmore, Craftsman and DieHard brands center on outstanding quality and reaching new customers and creating new brand enthusiasts, both in the U.S. and abroad," said Michael Castleman, president of KCD. "LMCA is a long-time leader in corporate trademark licensing, and their experienced senior team and global reach will help us execute this component of our strategies," Castleman said.

"Kenmore, Craftsman and DieHard are three of America's most respected and trusted brands," said Allan Feldman, president and CEO of LMCA. "LMCA is very excited to be working with KCD, Sears Holdings and these great brands. We believe some of the most successful and innovative companies in the world will be interested in licensing them. With over 70 percent of the Fortune 500 already licensing their brands to create new revenue streams more efficiently, this is a very logical step for KCD."

Kenmore - For 99 years, the Kenmore brand has been a leader in home appliances. Today, the Kenmore brand is found in the homes of more than 100 million Americans. The Kenmore brand delivers smart and stylish innovations that help customers do things quicker, easier and better. Kenmore continues to raise the bar with industry-leading products across not only large and small appliances but also floorcare, housewares, patio and home environment.

Craftsman - For nearly 85 years, the Craftsman brand has been synonymous with trust, inspiring brand loyalty among customers for its hand tools, power tools, lawn and garden and other products. Not only is Craftsman the number one brand for quality according to American men, it also stands for innovation in the development of tools that increase both productivity and safety. In 2011 alone, the Craftsman brand was honored with 19 recognitions, including "Power Tool Brand of the Year" by the Harris Poll 2011 EquiTrend® study and, for the third consecutive year, "Top Hand Tool Brand" by the Popular Mechanics Reader's Choice Award. In addition, Popular Science magazine bestowed its "Best of What's New" recognition on the revolutionary Craftsman Quick Boost Charger.

DieHard - For more than 45 years, the DieHard brand has built a legacy of innovation. Today, DieHard is the "Most Trusted" and "Most Preferred" automotive battery brand in America. Introduced in 1967, the DieHard automotive battery was designed to produce 35 percent more usable starting power than other similar batteries. During testing, not a single failure was reported in over 26,000 starts in temperatures ranging from sub-zero to more than 100 degrees, hence the name "DieHard."

J.C. Penney Co. moved forward Thursday with its broad restructuring, letting go about 14% of staff at its Plano, Texas, headquarters.

The company's goal is "to operate like a start-up," Chief Executive Ron Johnson said in a written statement, with the retailer aiming to cut layers of management and create more accountability.

Penney is undergoing a vast transformation under Mr. Johnson, who came to the company from Apple Inc., in November and brought along several colleagues. The goal is to go from a promotionally driven department store-chain to one focused on presentation and everyday value for its merchandise.

Mr. Johnson in January laid out an ambitious plan that involved carving stores into a warren of specialty shops. Penney revealed additional details of the strategy Thursday, saying locations will contain stores-within-stores, shops and boutiques, with new merchandise offered on a monthly basis.

The approach, which includes editing brands and assortments and fine-tuning merchandising and planning and allocation teams, "will enable us to quickly take advantage of a variety of expense savings opportunities while enhancing our profit formula for the long term," Chief Operating Officer Mike Kramer said. The retailer is adopting three pricing tiers: everyday prices, monthlong values, and best prices—or clearance on the first and third Fridays of the month.

But overhauling the chain's fleet of 1,100 stores poses costly challenges. Penney has been in heated competition with rivals such as Macy's Inc. and Kohl's Corp., and recently announced it is adding products from Martha Stewart Living Omnimedia to its roster, a move that spawned a lawsuit from Macy's, which said it has exclusive rights to Martha Stewart merchandise.

The company Thursday dismissed 600 of the 4,400 employees at its corporate headquarters. Mr. Johnson had foreshadowed staff cuts in the January presentation to the investment community.

Penney plans to reduce annual costs by $900 million by the end of 2013, including $200 million in savings from the corporate headquarters, $400 million in store operations and $300 million in advertising. In February, Penney said it swung to a loss in its fiscal-fourth quarter, as the retailer shouldered costs tied to its revamped pricing strategy.

The company announced the job cuts on a day when it would normally release same-store sales numbers for March along with other retailers, but Penney said last month it won't report monthly sales as it overhauls operations.

—Ben Fox Rubin contributed to this article.

LAMPERT’S VIEW ON REINVENTION AND ADAPTING:

Edward Lampert, founder and chairman of ESL Partners and chairman of Sears Holdings Corp., believes retail is in need of reinvention. “I think companies, especially in retail, are finding themselves in the need of reinvention. J.C. Penney is in the need of reinvention. Sears is in the need of reinvention.…And that means that you’re going to have to try new things and if you’re unwilling to try new things and to fail and learn, you don’t have a shot,” he said during a segment on CNBC’s “Squawk Box” Wednesday morning.

Lampert said the same thing about change in the media business. “Whether it’s television, print media, online, mobile — people are trying to figure it out. It’s helpful to figure it out while you’re making a lot of money. If you’re not making a lot of money, your options become much more limited.”

He also noted, “People are adaptable. Companies are adaptable. You either adapt or die.…I think retail [is] going to be great and it has been great for the American consumer. The question [is] is it good for business? I think a lot of businesses will have profitless prosperity and we’ve got to adapt.”

Lampert thinks risk is coming back into the markets, and that people now want a return on their money rather than just worrying about a return of their money.

His comments were made during an interview by guest host Barry Sternlicht, chairman and chief executive officer of Starwood Capital Group. The interview was on the impact of legendary dealmaker Richard Rainwater on their careers to raise awareness of the degenerative disease PSP. Progressive supranuclear palsy is an incurable brain disorder that’s a cross between Lou Gehrig’s disease and Parkinson’s, with which Rainwater has been diagnosed.

Also commenting in the same interview was David Bonderman, founder of TPG. Bonderman, whose firm took J. Crew public and then private again, noted that what’s been changed by the Internet are distribution methods.

“What hasn’t changed is the value of brands....You can only buy J. Crew merchandise from J. Crew....The point is, you’re in one position. If you’re J.C. Penney and selling other people’s brands, you’re in a different position primarily because that person who controls the brand may choose to distribute in many different ways, including over the Internet, the Gilt Groupe. If you don’t have a brand and you’re dependent on someone’s else’s brand, you’re getting disintermediated by the distribution system,” Bonderman said.

Sears Holdings one of the top performers in the stock market this year, but that's not because its outlook is bright. What's the end game?

It can almost be said that Sears Holdings Corp. (SHLD) is one of the best and worst stocks today. The Hoffman Estates, Ill.-based retail conglomerate has been battered amid declining sales and profits. But as CEO Eddie Lampert scrambles to raise cash and calm investor fears, shares have more than doubled so far this year, making the stock one of the top performers in the S&P 500 in 2012 after falling sharply last year.

Analysts and traders have speculated about the fate of Sears Holdings countless times since Lampert combined Sears and Kmart in 2005. Investors have endured wild swings in the stock as the retailer has navigated its way through the recession, only to emerge battered and bruised, but still intact.

However uncertain the future of the once successful mail-order brand, there are certain scenarios more likely to transpire than others:

Bankruptcy

Anything is plausible, but no serious analysts are saying Sears will go under. If anything, the stock's remarkable surge partly signals that investors think, indeed, anything could happen but likely not bankruptcy.

A full turnaround

Again, this is unlikely, at least anytime soon. For six years in a row, sales have declined at stores open for at least a year. The retailer lost $3.1 billion in 2011 amid criticism that stores had gotten too shabby and customer service lagged.

Sears has been ramping up efforts to reverse its sliding sales. However, it is counting on certain strategies that haven't quite taken off. Most recently the retailer unveiled a loyalty program called Shop Your Way Rewards, which provides customers freebies for repeat purchases so long as they agree to share personal shopping data with the company. This might sound promising, but such efforts alone will certainly not turn the company around. Even the Kardashian Kollection, introduced last summer, can't make a dent in the red ink.

In a way, Sears has the economy against it. And as the retailer looks hard at how it needs to do business differently, it will need to fiercely re-evaluate the way it runs its extensive appliance, hardware and home business. Last month, the company hired an executive from Sony (SNE) to restore its flagging home-appliance business. It remains to be seen what comes of that.

Sears has suffered disproportionately from the recent economic downturn, partly because of the retailer's popularity among lower-income households -- those being pinched the most -- and its historical strength in sales of home appliances, according to a January report by Morningstar analyst Paul Swinand. He forecasts that 2012 could be another rocky year for the retailer. Higher gas prices and a continually slow housing market could weigh on Sears, even if the company can leverage some of its assets.

Going private

Not a bad idea, but pretty much a long shot at this point. Earlier this year, speculation swirled that Bruce Berkowitz's Fairholme Capital, Sears' second-biggest shareholder, and Lampert could take the company private.

The stock rallied on rumors, which came days after a major business lender stopped making loans that Sears' suppliers relied on to sell goods to the company. Speculation of a leveraged buyout also came around the time Lampert, Sears' biggest shareholder who owns about 60% of the company directly and through various related entities, bought roughly $159 million worth of shares of Sears for his ESL Investments hedge fund.

A Sears spokesperson said the company doesn't comment on market speculation, but it's hard not to wonder if Lampert might want to buy up shares to eventually make the company all his and go private. After all, shielding Sears from the pressures of shareholders could make it easier for executives to really give the company a complete makeover.

But going private seems virtually impossible, at least in the near term, while Sears works to make vast improvements in its business.

Slow liquidation

This is likely where Sears is headed as it buckles down in survival mode. Last week, The New York Post reported that Lampert was quietly shopping around a Sears property, the clothing retailer Lands' End, to private equity firms as part of a plan to raise up to $2 billion in cash.

To stay afloat with enough cash flow, the retail chain has been trying to sell off or spin off its stores – something that Credit Suisse analyst Gary Bather says will likely continue "in a controlled liquidation of its chain." In February, the retailer said it planned to sell 11 stores, spin off its Sears Hometown, among other efforts that altogether are expected to add about a $1 billion cushion to its balance sheet. While the move sent its stock soaring more than 20% and put rumors of bankruptcy to rest, it's likely that Sears will eventually fall short of cash again. After all, it was only two months earlier when it secured $350 million by closing up to 120 Kmart and Sears stores and reduce inventory.

"Selling one's best stores and operating assets is not a success story, it is a survival strategy," Bather wrote to clients in a March 19 report.

In a later report on March 29, he added that he expects Sears to fall about $850 million short of cash flow in 2013, leading to sales including Lands' End to finance operations. He notes that Lands' End and Sears Canada "are the most separable assets in the chain."

Needless to say, Sears can't run a business by selling off its assets. It will eventually need to address fundamental problems of its chain, or else face the worst.