Bruce Graham, architect of Willis Tower
and John Hancock Center, dies at age 84
By Blair Kamin - Tribune Critic - Chicago Tribune
March 9, 2010

Bruce Graham, the hard-driving architect of the WillisTower, once the world’s tallest building, and the John Hancock Center, the X-braced giant that became a symbol of Chicago's industrial might, died Saturday at his home in Hobe Sound, Fla., about 100 miles north of Miami.

He was 84 years old. The cause of death was complications from Alzheimer’s disease, said his son George.

At the peak of his influence, from the 1960s through the 1980s, Graham was the top man at Chicago’s biggest architectural firm, Skidmore, Owings & Merrill, and had the ear of the city’s leading business leaders and politicians. From that power base, he shaped a legacy that suggests the epitaph on the tomb of Sir Christopher Wren, who is buried in his masterpiece, St. Paul’s Cathedral in London: “Reader, if you seek his monument, look around you.”

Besides the Willis (originally Sears) Tower and the Hancock Center, which bracket the Chicago skyline like enormous black parentheses, Graham played a major role in designing such landmark Chicago structures as the Inland Steel Building, Three First National Plaza, One Magnificent Mile and the 1986 expansion of McCormick Place.
And Graham’s impact extended beyond individual designs. Though his name is often linked with the planning for the aborted 1992 Chicago World’s Fair, he helped produce the visionary Chicago 21 plan of 1973, which led to such improvements as the Museum Campus.

“He was the Burnham of his generation,” said the Chicago architectural historian Franz Schulze, referring to the legendary Chicago architect and urban planner Daniel Burnham.

Graham’s best designs lent a Chicago-style muscularity to the lean, crisp modernist look brought to perfection by Ludwig Mies van der Rohe.

Sears Tower and the Hancock Center became pop icons, their dark, big-boned look featured on everything from postcards to television news sets. In one measure of its broad-based appeal, the Hancock was nicknamed “Big John,” after London’s “Big Ben.”
Reviewing Sears Tower in 1974, the late Tribune architecture critic Paul Gapp called the skyscraper “a building whose exterior profiles are a bold, vital and exciting departure from orthodox mediocrity; a finely engineered piece of sculpture, even if its interior is largely nondescript in the big-corporation manner.”Graham’s detractors, who at first included Chicago architect Stanley Tigerman (the two later became allies), termed Graham a businessman rather than an artist. Yet few disputed that Graham was the most powerful Chicago architect of his generation or that he was a leader, along with the SOM structural engineer Fazlur Khan, in shaping supertall structures that were unthinkable to old-fashioned architects wielding T-squares.

Soaring more than a quarter of a mile into the sky, the 1,451-foot, 110-story Sears Tower epitomized Graham’s technical prowess. It reigned as the world’s tallest building from 1973, when construction workers raised a beam autographed by the late Mayor Richard J. Daley to the top of its structural framework, to 1996, when it lost its title to the spire-topped Petronas Twin Towers in Kuala Lumpur, Malaysia. The Chicago high-rise remains the nation’s tallest building.

Though Graham was slim and had a kindly, craggy expression, he invariably was described as tough, as forceful as a steamroller. At SOM, the office credo was: “If you disagree with Graham, shut up.”

Graham designed corporate headquarters, universities, hotels and other buildings in London, Barcelona, Cairo, Guatemala City, Seoul, Los Angeles, Houston, Boston, Atlanta, Kansas City, Milwaukee, Wichita, Nashville, Tulsa, Madison, Kalamazoo, Mich. and north suburban Deerfield (the Baxter Travenol Laboratories). He played a major role in planning for London’s vast Canary Wharf development.

Yet his most profound influence came in Chicago, where he sought to express the essence of a pre-high tech city that still forged steel in the mills along Lake Michigan and made clothing and other durable goods in the large loft factories around downtown.
“To my mind, American architecture, born in the Middle West, is an architecture born of people who know how to make things,” Graham said in a 1992 video about Chicago’s skyscrapers.

Born on Dec. 1, 1925 in La Cumbre, Colombia, a small mountain town outside the city of Cali, Columbia, Graham was the son of a Canadian-born international banker and Peruvian mother. He grew up in Puerto Rico, where he demonstrated an early interest in cities, making maps of unchartered slums. Spanish was his first language.

Graham originally came to the United States in the 1940s to study engineering. But during a stint in the Navy from 1943 to 1945, which included a stop at the wartime naval training center at Navy Pier, he discovered that his real interest was architecture.

After serving in the South Pacific, he got his bachelor of architecture degree from the University of Pennsylvania in 1948. He then journeyed to Chicago, the hometown of his first wife, and sought out Mies, the master of the steel-and-glass box.

Mies told him to work for Chicago architects Holabird, Root and Burgee because they still knew how to build “permanent buildings,” as opposed to the inexpensive, temporary buildings put up during the Depression and World War II.

Graham did his apprenticeship at the Holabird office from 1949 to 1951, then left for the up-and-coming firm of Skidmore, Owings and Merrill, which was filled with rising young talents, such as Walter Netsch, who would go on to design the Chicago Circle campus of the University of Illinois. At SOM, Graham and Netsch would start a long-running feud.
“Bruce Graham is very tough,” Netsch told the Tribune in a 1981 interview. “Seldom do you find a good guy who is a great architect.”

Graham replied: “If I had wanted to destroy Walter Netsch, I would have. I could have. As it was, I encouraged him.”

The two rivals will be forever linked because they both had a hand in one of SOM’s finest projects, the Inland Steel Building of 1957 at 30 W. Monroe St. Following the Depression and World War II, it was the Loop’s first office building in more than 20 years.

Graham inherited an early plan from Netsch, who was pulled off the project to work on the U.S. Air Force Academy campus in Colorado Springs, Colo.

The building turned out to be path-breaking, its open expanses of office space made possible by the placement of structural columns on the building’s perimeter and the consolidation of elevators and other services in an adjoining service tower. A leader in using silvery stainless steel as a cladding material, Inland Steel was an aesthetic triumph. The City of Chicago named it an official landmark in 1998, just forty years after its completion.

Elevated to design partner at SOM in 1960, Graham enjoyed other successes, such as the Equitable Building of 1965 at 401 N. Michigan Ave., an olive-colored essay in structural expressionism.

But Graham’s greatest triumph came in the 1970 with the completion of the mixed-use Hancock Center, which housed stores, parking, offices, apartments (now condo-miniums), an observatory and a bar and restaurant under its 1,127-foot-tall roof.
Located at 875 N. Michigan, the Hancock was originally conceived as a separate office building and apartment building. Upon hearing that the office space would be hard to rent because the site was far from downtown’s train stations, the project’s original developer, Jerry Wolman of Philadelphia, reduced the size of the office building and opted to place apartments on top of it. Graham and Khan did the rest, combining blue-collar muscle and black-tie elegance in a giant truncated obelisk.

Unlike earlier skyscrapers, in which an internal cage of steel carried most of the building’s load, the Hancock’s exterior columns, beams and X-shaped braces formed a rigid tube that did most of the heavy lifting and braced the building against the wind. The arrangement allowed the Hancock to be erected for the same cost as a conventional 45-story office building. And the stacked X-braces offered an instantly recognizable skyline image, quickly silencing detractors who had likened the Hancock to an oil derrick.

So deeply did the building become ingrained in the Chicago psyche that, in 1989, Mayor Richard M. Daley attacked the owner’s plan to fill in the tower’s sunken plaza and add a three-story retail atrium to its base. “Don’t put a skirt on Big John,” signs carried by protestors said. The plan was replaced by a belowground elliptical plaza that allowed the tower’s monumental synthesis of architecture and engineering to remain undefiled.

Though the Hancock shattered the fragile scale of the old Michigan Avenue and its low-rise, Beaux-Arts buildings, it paved the way for other tall mixed-use buildings, creating a dense, but thriving, high-rise district. “It really is easy to shop from the Hancock building, you just go down the elevators and you’re in the shopping center,” Graham told Betty Blum, who interviewed him in 1997 for the Art Institute of Chicago’s architects oral history project.

In 1999, the Hancock won the American Institute of Architects’ prestigious 25-Year Award, which is annually conferred upon a design of enduring significance that is 25 to 35 years.

Sears Tower offered an even taller variation on the tube theme, consisting not of a single tube, as at the Hancock, but nine interlocked tubes that created the world’s tallest building.

The tower was built for Chicago-based Sears, Roebuck and Co., then the world’s largest retailer, which originally had wanted a building of just 60 stories. (It was renamed the Willis Tower in 2009 in recognition of the British insurance brokerage company that has office space there.)

As Graham, a smoker, related the story of Sears Tower’s beginning, he went to lunch with Khan at the Chicago Club. At the table, he grabbed a handful of cigarettes, cupped some in his hands and placed a smaller group on top, demonstrating what came to be called the “bundled tube” concept. Khan, who is credited with developing the idea, later said that it “constituted a whole new architectural vocabulary.”

The 75-foot square tubes rose together until two dropped off at the 50th floor, two more stopped at the 66th, and three more at the 90, leaving only two to rise to a summit that frequently disappears in low-lying clouds.

The tubes at once delivered column-free office space and created a lightweight framing system that did not put a financial premium on height. They also allowed Sears to occupy the tower’s lower floors while renting the smaller, prestigious upper floors, with their uninterrupted views, to law firms and other tenants.

The tower brought the world’s tallest building title back to Chicago from New York, where the Empire State Building had held it for decades and the World Trade Center had grabbed it briefly in the early 1970s. And Sears won critical praise, at least initially, because its strong skyline profile broke out of the straitjacket of the steel-and-glass crackerbox.

But as time passed, Sears’ luster dimmed. It barren ground-level plaza was rarely used. Many Sears employees found their new home antiseptic compared with Sears’ old low-rise headquarters on the West Side.

“Sears workers used to brag about the fact that each light in the massive West Side complex was turned off at night in the spirit of corporate loyalty, but now a computer turned off the lights,” Donald R. Katz wrote in “The Big Store: Inside the Crisis and Revolution at Sears.” “Instead of the sound of children at play after school, a voice came over the intercom speakers at four o’clock every day to tell you if it was raining outside, because it was often impossible to tell from inside the upright city.

The final blow came when the Sears Merchandise Group left the tower in 1992 for a low-rise office complex in northwest suburban Hoffman Estates.

Graham rejected the idea that his design was inhumane. “I don’t care whether people say that or not, it doesn’t matter,” he told Blum. “The insults that all the big buildings have had to endure in the past makes me feel good.”

By the time Sears opened, a major revolt against modernism was underway in American architecture--one that would shake Graham and SOM’s dominance in Chicago.

With the advent of postmodernism in the 1970s, architects such as Philip Johnson and Michael Graves rejected the sterile, steel-and-glass boxes turned out by Mies and his followers and embraced decoration, whimsy and eclecticism, epitomized by the scooped-out “Chippendale” top of Johnson’s AT&T Building in New York City.

Graham responded with tentative departures from the Miesian mold, such as the slope-roofed 33 W. Monroe St. of 1980, the first office building with three stacked atriums.
A more definitive break came in the granite-clad Three First National Plaza of 1981, located at Dearborn and Madison Streets. Its sawtooth shape created numerous corner offices. In One Magnificent Mile, a 1983 trio of towers at 940-980 N. Michigan, Graham recycled the bundled tube concept of Sears, but dressed the structure in pink granite.
Yet the Quaker Tower of 1987 (now 321 N. Clark St.) marked a reversion to boxy steel-and-glass modernism. And the McCormick Place North expansion of 1986, with its diamond pattern expressing the building’s concealed truss system, represented “a faint echo” of Mies’ unbuilt Chicago convention hall project of the 1950s, according to the American Institute of Architects “Guide to Chicago.”

If Graham’s architectural influence was waning by the early 1980s, his urban planning impact was not.

He already had worked with SOM partner William Hartmann on the Chicago 21 Plan of 1973, which recommended several major public works that would subsequently transform Chicago’s lakefront: the rebuilding of once-rundown Navy Pier into a recreation attraction for families, the straightening of the notorious Lake Shore Drive “S” curve and the relocation of another section of the Drive to create the Museum Campus.

The plan, whose name reflected its desire to prepare Chicago for the 21st Century, was commissioned by the Chicago Central Area Committee, a powerful group of downtown business leaders that Graham himself would lead in the mid-1980s.

From 1980 to 1985, Graham was at the center of another controversial civic undertaking--the planned 1992 Chicago World’s Fair. Business leaders wanted Chicago to recapture the glory of the great Chicago world’s fairs of 1893 and 1933-34 and to demonstrate that Chicago was more than another aging Rust Belt city. Mayor Jane Byrne backed their plans for an extravaganza along the Near South Side lakefront.

With backing from the city’s business community, Graham and SOM, aided by Tigerman and other notable architects, drew up a master plan that included 500 acres of lakefill and huge exhibition buildings. The new lakefill would have created an archipelago of islands and lagoons, a proposal that civic groups had long advocated.

But community activists criticized the project, calling it a grab by downtown business interests for resources needed by the neighborhoods. The late Mayor Harold Washington was too busy fighting the white-ethnic block of aldermen in “Council Wars” to put much effort into a project started under Byrne. Illinois House speaker Michael Madigan delivered the final blow by withholding the state legislature’s financial support.

The fair, which was declared dead in 1985, represented Graham’s last major Chicago undertaking.

In the late 1980s, Graham led SOM’s master plan for the Canary Wharf docklands area of London. He also handled the firm’s mix-used Broadgate complex in the same city.
Graham retired from SOM in 1989 and started the firm of Graham and Graham with his second wife Jane, who died in 2004. “My mother was an architect in her own right. She was in charge of the interiors department at SOM,” George Graham said. “My mother was his partner in more than just a marital sense. When he would design buildings, they would talk about them and she would critique.”

Graham was a fellow of the American Institute of Architects and a trustee of the Art Institute of Chicago, the Museum of Contemporary Art Chicago, Northwestern Memorial Hospital, the Urban Land Institute, and the University of Pennsylvania. He was chairman of the university’s board of overseers.

In his retirement, Graham lived in a low-slung modern house, set on stilts, in the Florida town of Hobe Sound. Marshes, pines and palmettos made up his “front yard.”

When a reporter from the Fort Pierce (Florida) Tribune called on him in 2004, nearly three years after hijacked jets toppled the twin towers of the World Trade Center in 2001, Graham demonstrated that he had lost none of his fire or self-assurance.

“If that plane would have hit the Sears Tower,” he told his visitor, “the plane would have fallen, not the tower.”

Survivors include his three children: George, of New York City; Lisa Graham Langlade-Demoyen of Paris; Mara Graham Dworsky of Altadena, Ca; his sister, Margaret Graham Lewis of Gibson Island, Md.; and six grandchildren.

A private memorial service will be held in Hobe Sound, Fla. A memorial service will be held in Chicago, at a date to be determined.
Posted at 04:54:37 PM

Comments

Fix the headline...He was the architect of the Sears Tower, later renamed the Willis tower.

BK: The building's name is Willis Tower. I am a journalist who deals in facts. I am not going to change the facts to suit your preferences. This is an obituary devoted to an important architect's career. Let's focus on that and not the name change.
Posted by: No Thanks | March 08, 2010 at 05:05 PM

Bruce Graham didn't design the Willis Tower, he designed the "Sears Tower" (which it will always be the Sears Tower). Not only did he design "Buck and Big John", but he helped to transcend the Skyline of Chicago, and to make it one of the premier architectural centers of the world. His gift of the "height, modernism and design" that he provided to Chicago, can never be overlooked, under-appreciated or never forgotten.
Posted by: kpchitownfan | March 08, 2010 at 05:36 PM

It should be of little concern what name we now call Sears Tower. What is more significant to me is the effect Mr. Graham had on the field and practice of architecture. Along with Fazlur Kahn, he defined a new vocabulary that influenced many great architects who worked with him. He will be missed. My condolences to his family and friends.
Posted by: Jon Miller, President - Hedrich Blessing Photographers | March 08, 2010 at 06:20 PM
He was an amazing talent.
Posted by: Wendy C | March 08, 2010 at 06:25 PM

Bruce Graham designed the SEARS TOWER, not the WIllis Tower. The difference is subtle, but to claim he desgned the Willis Tower is factually incorrect.
Posted by: CynicalSuburbanite | March 08, 2010 at 06:32 PM

Yeah . . . . he was a big time operator . . . . .but he ended up like all the rest of us will.
Posted by: Robert M Kraus | March 08, 2010 at 06:43 PM

I had the honor and pleasure of working for Mr. Graham in the early 90s. He was gruff and direct, but a great man and a true visionary. He and Mr. Kahn were great partners and produced some of the world's great architecture. That such a great mind was taken by such a horrible disease, is truly, a great tragedy.
And yes, it is the SEARS Tower.

Posted by: David L. Fisher | March 08, 2010 at 06:53 PM
BK, while I agree with the rest of the commentors that it is the Sears Tower...
This was quite an exceptional article and tribute to Mr. Graham. Well done.
Posted by: JJ | March 08, 2010 at 09:31 PM

I didn't realize Bruce Graham (The name we should remember - not worrying about a name of a building. Just like when Marshall Fields changed to Macy's - people were upset but we moved on. yes?) designed Inland Steel Building! Awesome.
Bruce Graham you will be missed :)
Posted by: Zora Mae | March 08, 2010 at 10:10 PM

BK-
Great column. One error though: the Sears Tower lost its title to the Petronas in 1998 not 1996.

BK: I'm sorry, but you're wrong. The title changed hands in 1996.
March 08, 2010 at 10:43 PM

Macy’s wrapping it up on gift-wrapping
By Sandra M. Jones, Chicago Tribune
March 5, 2010

The legacy of the department store as an oasis of customer service fell another notch this week when Macy's Inc. disclosed it is shutting down its gift-wrap department.

The retailer, like most these days, has been under pressure to cut costs. Staffing stores with clerks to cut paper and fold ribbons doesn't come cheap.

Department store services have been fading away for years. So it's no surprise that one more vestige of the traditional department store is going the way of coat checks, tea rooms and hair salons.

Still, there is something ironic in eliminating gift-wrapping in a culture where shoppers, even those on a budget, are short of time and looking for convenience.

"It's penny-wise, but pound-foolish," said Pamela Danziger, president of Unity Marketing, a luxury market research firm. "It doesn't make sense. In our research, people are willing to pay extra to get a good presentation. By the time you buy the ribbons and bags yourself, it's $5 to $10, and you still have to do the work to wrap it."

Macy's gift-wrap prices range from $5.95 for a small box to $15.95 for an extra-large box, said Macy's spokesman Jim Sluzewski. Bridal registry gifts are $7.95 for all sizes.

Macy's isn't alone. J.C. Penney Co. used to offer gift-wrap around the holidays but doesn't anymore. It stopped offering the perk six or seven years ago as a cost-saving move, said Ann Marie Bishop, spokeswoman for the midtier department store chain. Lord & Taylor also no longer offers gift-wrap.

On the other hand, Bon-Ton Stores Inc., a rival midtier department store chain that includes Carson Pirie Scott, has kept its gift-wrap operation intact, said spokeswoman Mary Kerr.

As far back as the 1960s, retail pundits started to worry that department store cost structures wouldn't be able to support all the perks that made them so enticing, from no-questions-asked return policies to valet parking. And indeed, by the 1980s, discount chains, including Target, Wal-Mart and Kohl's, began to take over the retail landscape, betting that shoppers would tolerate bare-bones service in order to get a good price.

One way to get around the expense of hiring gift-wrappers is to create a box and ribbon that sales clerks can package at the counter.

Nordstrom Inc., for example, stocks shiny, silver gift boxes and instructs clerks to wrap purchases carefully in tissue paper and walk around the front of the counter to present the finished package to shoppers. The gift box is free.

Even Neiman Marcus keeps it simple, with a silver box adorned with a bow and a special trinket, such as a key chain or small picture frame. The standard charge is $7.50, and for big spenders it's free.

Family-run Von Maur stands out as an exception. The Midwestern department store chain has been offering free gift-wrap since 1988 and has a separate gift-wrapping counter tucked away in a corner of the store, with eight separate choices of paper.

Macy's has been considering cutting out its gift-wrap operation for three years, said Sluzewski. The retailer tested the move in a few places before instituting the change at its more than 800 stores nationwide with a few exceptions, including Macy's flagship Chicago store, he said.

Macy's online wedding-registry service will also start offering engaged couples the option of asking their guests to send unwrapped gifts, Sluzewski said.

"There has been concern about the cost structure of department stores for many years, particularly the labor costs," said Homer Johnson, professor of management at Loyola University Chicago's school of business administration. "But they are between a rock and a hard place because their attraction was that they offered service, whereas the discounters didn't. So if they cut service, they cut out the very characteristic that made them attractive."

Opinion Declarations:  What a Disaster Looks Like
ObamaCare will have been a colossal waste of time
—if we're lucky.
By Peggy Noonan - Wall Street Journal
March 5, 2010

It is now exactly a year since President Obama unveiled his health care push and his decision to devote his inaugural year to it—his branding year, his first, vivid year.

What a disaster it has been.

At best it was a waste of history's time, a struggle that will not in the end yield something big and helpful but will in fact make future progress more difficult. At worst it may prove to have fatally undermined a new presidency at a time when America desperately needs a successful one. In terms of policy, his essential mistake was to choose health-care expansion over health-care reform. This at the exact moment voters were growing more anxious about the cost and reach of government.

The practical mistake was that he did not include or envelop congressional Republicans from the outset, but handed the bill's creation over to a Democratic Congress that was becoming a runaway train. This at the exact moment Americans were coming to be concerned that Washington was broken, incapable of progress, frozen in partisanship.

His political mistakes were myriad and perhaps can be reduced to this

There are all sorts of harm a new president can do to his presidency. Right now, part of the job of a new president in a hypermediaized environment is harm avoidance. This sounds defensive, and is at odds with the wisdom that presidents in times of crisis must boldly go forth and break through. But it all depends on what you're being bold about.

Why, in 2009, create a new crisis over an important but secondary issue when we already have the Great Recession and two wars? Prudence and soundness of judgment are more greatly needed at the moment. New presidents should never, ever, court any problem that isn't already banging at the door. They should never summon trouble. Mr. Obama did, boldly, perhaps even madly. And this is perhaps the oddest thing about No Drama Obama: In his first year as president he created unneeded political drama, and wound up seen by many Americans not as the hero but the villain.

In Washington among sympathetic political hands (actually, most of them sound formerly sympathetic) you hear the word "intervention," as in: "So-and-so tried an intervention with the president and it didn't work." So-and-so tried to tell him he's in trouble with the public and must moderate, recalibrate, back off from health care. The end of the story is always that so-and-so got nowhere. David Gergen a few weeks ago told the Financial Times the administration puts him in mind of the old joke: "How many psychiatrists does it take to change a lightbulb? Only one. But the lightbulb must want to change. I don't think President Obama wants to make any changes."

Sometimes when I look at the past three chief executives, I wonder if we were witnessing not three presidencies but three psychodramas played out on an intensely public stage.

What accounts for Mr. Obama's confidence and certainty?

Well, if you were a young progressive who'd won the presidency by a comfortable margin in a center-right country, you just might think you were a genius. You might not be surprised to find yourself surrounded by a cultish admiration: "They see him as a fabled figure," said a frequent White House visitor of some on the president's staff.

You might think the great strength you demonstrated during the campaign—an ability to stay in the game you're playing and not the game someone else is playing, an ability to proceed undistracted by the crises or the machinations of your opponents, but to just keep playing your slow and steady game—is a strength suitable to your presidency. If you choose to play health care, that's the game you play, straight through, no jeers from the crowd distracting you. If you were a young progressive who'd won the presidency against the odds, you probably wouldn't see yourself as someone who lucked out, with the stars perfectly aligned for a liberal victory. And you might forget we are more or less and functionally a 50-50 country, and that you have to keep your finger very much on the pulse of the people if you're to survive and prosper.

And now here are two growing problems for Mr. Obama.

The first hasn't become apparent yet, but I suspect will be presenting itself, and soon. In order to sharpen the air of crisis he seems to think he needed to get his health-care legislation passed, in order to continue the air of crisis that might justify expanding government and sustaining its costs, and in order, always, to remind voters of George W. Bush, Mr. Obama has harped on what a horror the economy is. How great our challenges, how wicked our businessmen, how dim our future.

This is a delicate business. You can't be all rosy glow, you have to be candid. But attitude and mood matter. America has reached the point, a year and a half into the crisis, when frankly it needs some cheerleading. It can't always be mourning in America. We need some inspiration from the top, need someone who can speak with authority of what is working and can be made to work, of what is good and cause for pride. We are still employing 130 million people, and America is still competitive in the world, with innovative business leaders and practices.

The president can't be a hope purveyor while he's a doom merchant, and he appears to believe he has to be a doom merchant to justify ramming through his legislation. This particular legislation is not worth that particular price.

All this contributes to a second problem, which is a growing credibility gap. In his speech Wednesday, demanding an "up or down" vote, the president seemed convinced and committed—but nothing he said sounded true. His bill will "bring down the cost of health care for millions," it is "fully paid for," it will lower the long term deficit by a trillion dollars.

Does anyone believe this? Does anyone who knows the ways of government, the compulsions of Congress, and how history has played out in the past, believe this? Even a little? Rep. Bart Stupak said Thursday that he and several of his fellow Democrats won't vote for the Senate version of the bill because it says right there on page 2,069 that the federal government would directly subsidize abortions. The bill's proponents say this isn't so. It would be a relief to have a president who could weigh in believably and make clear what his own bill says. But he seems to devote more words to obscuring than clarifying.

The only thing that might make his assertions sound believable now is if a group of congressional Republicans were standing next to him on the podium and putting forward a bill right along with him. Which, obviously, won't happen, for three reasons. First, they enjoy his discomfort. Second, they believe the bill is not worth saving, that at this point no matter what it contains—and at this point most people can no longer retain in their heads what it contains—it has been fatally tainted by the past year of mistakes and inadequacies.

And the third reason is that the past decade has taught them what a disaster looks like, and they've lost their taste for standing next to one.

President Launches Last Push on Health-Care Overhaul
By Laura Meckler and Janet Adamy - The Wall Street Journal
March 4, 2010

President Barack Obama opened the final act of a year-long drama over health-care legislation Wednesday, calling on Democrats in Congress to approve the sweeping bill despite political risks and Republican opposition.

The president vowed to rally Americans and wavering lawmakers alike. White House aides said a pair of trips next week will be followed by a stream of public and private lobbying. The White House wants final votes by month's end.

"At stake right now is not just our ability to solve this problem, but our ability to solve any problem," Mr. Obama told a crowd of white-coated doctors and nurses in the East Room, where a year ago he started the drive for the legislation.

With polls showing that the legislation is unpopular and congressional Democrats bracing for big losses in this fall's elections, the president urged them to ignore the politics. "I do not know how this plays politically, but I know it's right," he said. "Let's get it done."

Democrats and the White House are balancing high risks and rewards. Passing the health overhaul would fulfill a decades-old Democratic dream, bringing insurance to some 30 million Americans, and represent the greatest expansion of coverage since Medicare was created in 1965. But if the public judges the overhaul harshly, it is likely to cost some Democrats their seats, and the party's majority in the House could be at risk.

The White House argues that, despite the negative poll numbers, Americans will like the measure if it becomes law, since the focus then could shift from the legislative process to the measure's impact. Polling does find stronger support for the bill's individual provisions than for the package as a whole.

Mr. Obama Wednesday also highlighted a handful of Republican ideas used in the legislation. Republicans dismissed the gesture as insufficient.

"You can't add a couple of Republican sprinkles on the top of a 2,700-page bill and claim that it's bipartisan," said House Minority Leader John Boehner (R., Ohio).

Rejecting Republican calls to start again, the president said that given the "honest and substantial differences between the parties," there was no point. "Everything there is to say about health care has been said," he said to laughter, "and just about everybody has said it."

For the first time, the president explicitly called on Congress to use a procedural technique that will let the Senate give its final approval with a simple majority vote. He didn't use the word for that technique—"reconciliation"—but characterized the process as a way of calling a simple "up or down vote" that has been used for big bills before.

Republicans say the reconciliation process was never intended for such major legislation. "History is clear: Big legislation always requires big majorities," Senate Minority Leader Mitch McConnell (R., Ky.) said on the floor Wednesday.

Democrats need to approve the changes in the Senate through reconciliation because they no longer have 60 Senate votes necessary to end a standard debate, due to the loss last month of the Massachusetts seat long held by the late Edward Kennedy. White House press secretary Robert Gibbs downplayed the significance of the reconciliation measure, calling it a set of "technical corrections" to the original Senate measure. The reconciliation version contains some significant differences from the Senate bill, including taxes on the wealthy and lower levies on high-value health-insurance plans.

Under the Democratic plan, the process would work like this: First, the House would vote on the bill that the Senate approved in late December. House leaders hope to pass both that Senate bill, and then the reconciliation package, by March 17. After that, the Senate would need to pass the reconciliation bill. By month's end, Democrats hope, the measure would go to the president to be signed into law.

The final push by Mr. Obama amounts to a critical test of his powers of persuasion. Democrats could face a tough decision, balancing the risk of passing potentially unpopular legislation against the risk of inaction and the stigma of having labored for more than a year to produce nothing. Democratic leaders say lawmakers who already voted yes once will be attacked no matter what, but will be in better shape politically if they have something to show for it.

White House aides vowed the president would use all tactics at his disposal to rally support. That includes speeches around the country, starting with a trip to Philadelphia on Monday, media interviews and direct communication with supporters.

He'll also be lobbying lawmakers directly, aides said, including at a White House reception Wednesday that includes a half-dozen Democrats who voted no last year and are being targeted to change their votes.

On Capitol Hill, Democrats have started writing the formal reconciliation bill and are close to a final agreement, aides said. They intend to send it to the Congressional Budget Office for evaluation by the end of the week, a leadership aide said.

To assure the House that the Senate actually will pass the reconciliation measure, senators are considering sending a letter next week with at least 51 senators' signatures promising action, a Senate leadership aide said.

House leaders face the tougher task in rallying support. Speaker Nancy Pelosi has said she will be able to corral the votes, but she hasn't yet secured them. It will require persuading several Democrats who voted no last year to change their votes to yes, to make up for supporters who have turned against the measure or left Congress.

Navigating reconciliation in the Senate poses its own hurdles. Republicans plan to make a series of rule-oriented challenges to the process in order to slow it down and stoke public unease. Republicans "will employ every strategy possible because we know that this will be a disaster for this country," said Sen. Orrin Hatch (R., Utah).

Some Democrats say the partisan rancor the process would generate could drain so much political will from the Senate that it will make it tough to complete other major legislation this year. "It would probably bring everything else to a stop," said Sen. Evan Bayh (D., Ind.).

The reconciliation process prevents Republicans from blocking the bill using a filibuster. But it doesn't stop them from introducing an unlimited number of amendments. Democrats say that, under a worst-case scenario, that could eat up weeks of time on the floor and force the Senate's parliamentarian to rule that the amendments weren't offered in good faith.

Wednesday's address capped two weeks of intense intervention into the health debate by the president, who has been criticized for staying too hands-off previously. White House aides say his steps were needed to propel the bill following the Massachusetts loss and hope it is enough to move the legislation over the finish line.

Paul Ryan v. the President
The Republican dissects ObamaCare's real costs. Democrats stay mute.
By Paul D. Ryan - Review & Outlook -  The Wall Street Journal
March 4, 2010

'Every argument has been made. Everything that there is to say about health care has been said, and just about everybody has said it," President Obama declared yesterday as he urged Democrats to steamroll his plan through Congress. What hasn't been heard, however, is even a shred of White House honesty about the true costs of ObamaCare, or its fiscal consequences.

Nearby, we reprint Wisconsin Republican Paul Ryan's remarks at the health summit last week, which methodically dismantle the falsehoods—there is no other way of putting it—that Mr. Obama has used to sell "reform" and repeated again yesterday. No one in the political class has even tried to refute Mr. Ryan's arguments, though he made them directly to the President and his allies, no doubt because they are irrefutable. If Democrats are willing to ignore overwhelming public opposition to ObamaCare and pass it anyway, then what's a trifling dispute over a couple of trillion dollars?

At his press conference yesterday, Mr. Obama claimed that "my proposal would bring down the cost of health care for millions—families, businesses and the federal government." He said it is "fully paid for" and "brings down our deficit by up to $1 trillion over the next two decades." Never before has a vast new entitlement been sold on the basis of fiscal responsibility, and one reason ObamaCare is so unpopular is that Americans understand the contradiction between untold new government subsidies and claims of spending restraint. They know a Big Con when they hear one.

Mr. Obama's fiscal assertions are possible only because of the fraudulent accounting and budget gimmicks that Democrats spent months calibrating. Readers can find the gory details in Mr. Ryan's pre-emptive rebuttal nearby, though one of the most egregious deceptions is that the bill counts 10 years of taxes but only six years of spending.

The real cost over a decade is about $2.3 trillion on paper, Mr. Ryan estimates, and even that is a lowball estimate considering how many people will flood to "free" health care and how many businesses will be induced to drop coverage. Mr. Obama claimed yesterday that the plan will cost "about $100 billion per year," but in fact the costs ramp up each year the program exists. The far more likely deficits are $460 billion over the first 10 years, and $1.4 trillion over the next 10.

What Mr. Ryan calls "probably the most cynical gimmick" deserves special attention, which is known in Washington as the "doc fix." Next month Medicare physician payments are scheduled to be cut by 22% and deeper thereafter, though Congress is sure to postpone the reductions as it always does. Failing to account for this inevitability takes nearly a quarter-trillion dollars off the ObamaCare books and by itself wipes out the "savings" that the White House continues to take credit for.

Some in the liberal cheering section now claim that this Medicare ruse isn't Mr. Obama's problem because it was first promised by Republicans and Bill Clinton in 1997. But then why did Democrats include the "doc fix" in all early versions of the bill to buy the support of the American Medical Association, only to dump this pricey item later when hiding it would make it easier to fake-reduce the deficit?

The President was (miraculously) struck dumb by Mr. Ryan's critique, and in his response drifted off into an irrelevant tangent about Medicare Advantage, while California Democrat Xavier Becerra claimed "you essentially said you can't trust the Congressional Budget Office." But Mr. Ryan was careful to note that he didn't doubt the professionalism of CBO, only the truthfulness of the Democratic gimmicks that the budget gnomes are asked to score.

Yesterday Mr. Obama again invoked the "nonpartisan, independent" authority of CBO, which misses the reality that if you feed the agency phony premises, you are going to get phony results at the other end.

The President also claimed the reason his plan is in trouble, and the reason Democrats must abuse the Senate's rules to ram this plan into law, is that "many Republicans in Congress just have a fundamental disagreement over whether we should have more or less oversight of insurance companies." So most of Mr. Obama's first year in office has been paralyzed over nothing more than minor regulatory hair-splitting. This is so preposterous that the President can't possibly believe it.

Congress's spring break begins on March 29, and Democratic leaders plan on jamming this monster through Congress before then. Americans have to hope that enough rank-and-file Democrats aren't as deaf to fiscal honesty as this President.

Dissecting the Real Cost of ObamaCare
By Paul D. Ryan - Opinion -  The Wall Street Journal
March 4, 2010

The following are remarks made by Congressman Paul Ryan of Wisconsin, the ranking Republican on the House Budget Committee, about the cost of the House and Senate health-care bills at President Obama's Blair House summit on health care, Feb. 25:

Look, we agree on the problem here. And the problem is health inflation is driving us off of a fiscal cliff.

Mr. President, you said health-care reform is budget reform. You're right. We agree with that. Medicare, right now, has a $38 trillion unfunded liability. That's $38 trillion in empty promises to my parents' generation, our generation, our kids' generation. Medicaid's growing at 21 percent each year. It's suffocating states' budgets. It's adding trillions in obligations that we have no means to pay for . . .

Now, you're right to frame the debate on cost and health inflation. And in September, when you spoke to us in the well of the House, you basically said—and I totally agree with this—I will not sign a plan that adds one dime to our deficits either now or in the future.

Since the Congressional Budget Office can't score your bill, because it doesn't have sufficient detail, but it tracks very similar to the Senate bill, I want to unpack the Senate score a little bit.

And if you take a look at the CBO analysis—analysis from your chief actuary—I think it's very revealing. This bill does not control costs. This bill does not reduce deficits. Instead, this bill adds a new health-care entitlement at a time when we have no idea how to pay for the entitlements we already have.

Now let me go through why I say that. The majority leader said the bill scores as reducing the deficit $131 billion over the next 10 years. First, a little bit about CBO. I work with them every single day—very good people, great professionals. They do their jobs well. But their job is to score what is placed in front of them. And what has been placed in front of them is a bill that is full of gimmicks and smoke-and-mirrors.

Now, what do I mean when I say that? Well, first off, the bill has 10 years of tax increases, about half a trillion dollars, with 10 years of Medicare cuts, about half a trillion dollars, to pay for six years of spending.

Now, what's the true 10-year cost of this bill in 10 years? That's $2.3 trillion.

[The Senate bill] does [a] couple of other things. It takes $52 billion in higher Social Security tax revenues and counts them as offsets. But that's really reserved for Social Security. So either we're double-counting them or we don't intend on paying those Social Security benefits.

It takes $72 billion and claims money from the CLASS Act. That's the long-term care insurance program. It takes the money from premiums that are designed for that benefit and instead counts them as offsets.

The Senate Budget Committee chairman [Kent Conrad] said that this is a Ponzi scheme that would make Bernie Madoff proud.

Now, when you take a look at the Medicare cuts, what this bill essentially does [is treat] Medicare like a piggy bank. It raids a half a trillion dollars out of Medicare, not to shore up Medicare solvency, but to spend on this new government program.

. . . [A]ccording to the chief actuary of Medicare . . . as much as 20 percent of Medicare's providers will either go out of business or will have to stop seeing Medicare beneficiaries. Millions of seniors . . . who have chosen Medicare Advantage will lose the coverage that they now enjoy.

You can't say that you're using this money to either extend Medicare solvency and also offset the cost of this new program. That's double counting.

And so when you take a look at all of this; when you strip out the double-counting and what I would call these gimmicks, the full 10-year cost of the bill has a $460 billion deficit. The second 10-year cost of this bill has a $1.4 trillion deficit.

. . . [P]robably the most cynical gimmick in this bill is something that we all probably agree on. We don't think we should cut doctors [annual federal reimbursements] 21 percent next year. We've stopped those cuts from occurring every year for the last seven years.

We all call this, here in Washington, the doc fix. Well, the doc fix, according to your numbers, costs $371 billion. It was in the first iteration of all of these bills, but because it was a big price tag and it made the score look bad, made it look like a deficit . . . that provision was taken out, and it's been going on in stand-alone legislation. But ignoring these costs does not remove them from the backs of taxpayers. Hiding spending does not reduce spending. And so when you take a look at all of this, it just doesn't add up.

. . . I'll finish with the cost curve. Are we bending the cost curve down or are we bending the cost curve up?

Well, if you look at your own chief actuary at Medicare, we're bending it up. He's claiming that we're going up $222 billion, adding more to the unsustainable fiscal situation we have.

And so, when you take a look at this, it's really deeper than the deficits or the budget gimmicks or the actuarial analysis. There really is a difference between us.

. . . [W]e've been talking about how much we agree on different issues, but there really is a difference between us. And it's basically this. We don't think the government should be in control of all of this. We want people to be in control. And that, at the end of the day, is the big difference.

Now, we've offered lots of ideas all last year, all this year. Because we agree the status quo is unsustainable. It's got to get fixed.

It's bankrupting families. It's bankrupting our government. It's hurting families with pre-existing conditions. We all want to fix this.

But we don't think that this is the . . . the solution. And all of the analysis we get proves that point.

Now, I'll just simply say this. . . . [W]e are all representatives of the American people. We all do town hall meetings. We all talk to our constituents. And I've got to tell you, the American people are engaged. And if you think they want a government takeover of health care, I would respectfully submit you're not listening to them.

So what we simply want to do is start over, work on a clean-sheeted paper, move through these issues, step by step, and fix them, and bring down health-care costs and not raise them. And that's basically the point.

 

Jeep enters Sears store
By Connie Duvall - Moberly Monitor-Index - Moberly, Mo.
March 3, 2010

Moberly Police Department Public Information Officer Commander Kevin Palmatory released the following information to the Moberly Monitor-Index Wednesday morning about a vehicle being driven into the local Sears building.

On Wednesday, March 3, about 8:10 am, Moberly Police were dispatched to the Sears store at 643 North Morley Street in reference to a vehicle that had struck the building.
The accident occurred when a 1998 Jeep Cherokee, driven by Richard Hill, 76, of Moberly, was southbound on the parking lot and Hill started to slow. Hill inadvertently depressed the accelerator pedal instead of the brake which startled him and he turned the steering wheel causing his vehicle to cross the sidewalk, strike a propane tank storage compartment, containing tanks commonly used for barbecue grills, and continued through the glass store front.
Hill sustained a facial injury from the air bag deploying on his vehicle, but declined transport for medical attention.
An odor of propane was detected, which was found to be from a returned tank. As a precaution, Moberly Fire Department personnel ventilated the area which dissipated the odor quickly, eliminating the danger of a fire or explosion.

Moberly police were assisted by the Moberly Fire Department, Randolph County Ambulance District and the Randolph County Sheriff’s Office.

Cheri Galaske, co-owner of the local Sears, spoke to the Moberly Monitor-Index Wednesday and said there was product damage at the front of the building which included front load washers and a lawn tractor. “The vehicle shifted the support frame of the front of the building,” says Galaske. She was glad there were no injuries and says the building will be secured by tonight and they will be open for business on Thursday.

Sears finally focuses on retailing
By Laura Heller - Wallelt Pop.com (blog)
Filed under: Shopping
March 2, 2010

Sears may be allowing brands like Craftsman to be sold in rival stores, but there's at least one product category being re-emphasized. And it has nothing to do with a softer side.

Sears is aggressively building its electronics business, an area that people haven't traditionally associated with Sears. In fact, according to Karen Austin, president of Sears Home Electronics, a good number of customers didn't even realize Sears carried consumer electronics. "We're known for our appliances and tools," says Austin. "So we launched Sears Blue Electronics Crew in August (2009) to drive awareness." That campaign used spokesman Brett Favre during the NFL season to remind people of Sears participation in the category.

According to Austin, there were a lot of misperceptions about Sears electronics programs that needed to be cleared up.

Such as real time price matching, a program that lets Sears' customers in the stores compare prices at rival retailers. This eliminates the need to bring in advertisements touting competitor sale prices. Sales associates will even call other stores to check prices, says Austin.

"Everything on sale, is on sale at Sears." Sears reputation, however tarnished, makes building an electronics business a logical move for the retailer.

Sears is also expanding online. A prototype store called "mygofer" opened last year in Joliet, Ill., in a former Kmart store and is letting Sears experiment with and fine tune a virtual and physical retail experience. Shoppers can order online and pick up at the store within a very short period of time -- two hours in many cases.

There are initiatives like TV Matchmaker and Camera Matchmaker that ask a series of questions and make suggestions based on a shopper's' answers. There are active discussion boards with moderators on hand answering questions. Sears is even using Facebook and Twitter to communicate and connect with customers.

As old school as Sears may be, online efforts are a good fit for the retailer. Sears' legacy as a catalog retailer with an established distribution network make online retailing a natural extension. According to retail consultant Neil Stern, programs like TV matchmaker, real-time price matching, online ordering and in-store pickup, are all natural fits for Sears. "They're establishing themselves as leaders in e-commerce, which is a really good place to play," says Stern. "It's the one undeniable growth area."

Some of the better publicized initiatives, like selling Craftsman tools at Ace Hardware stores or licensing the Die Hard name for branded power accessories, are designed to add revenue to the parent company, Sears Holdings. Letting rival retailers sell Sears best brands may just give shoppers more reason NOT to go to Sears stores, but building up these other product categories and sales programs actually speak to Sears strength as a retailer.

Inside Eddie Lampert's Brain:
His Plan to Make Sears Both Bigger and Smaller
By Mike Duff - BNET
March 1, 2010

Eddie Lampert says less is more when it comes to Sears.

The Sears chairman rarely discusses what he thinks of the country’s fourth-largest retailer, so the shareholder letter he writes in the annual report is always keenly awaited. In this year’s version, Lampert makes the case that the retailer can generate new revenues without big investments as it pays down debt.

In the letter Lampert describes the strategy of “creating lasting relationships with customers by empowering them to manage their lives,” in part by selling a whole bunch of new or reconfigured goods and services. Among the most important:

1. Sears’s international shipping option incorporates a filter that allows customers to select only the items that are available for shipping to their selected destinations. It also tallies duties, VAT taxes and shipping as part of the checkout process, all of which can be accomplished in a range of currencies. Third-parties work with Sears, with an outfit called FiftyOne shipping products to Brazil, for instance.

2.  Marketplace adds more products to the Sears online assortment, and also provides access for other sellers who cut the retailer in on the money they make via its website. The Home Furnishings section of Sears.com, for example, includes products available through UnbeatableSale.com. Click on the website name and Sears.com provides a rating of the merchant with a description and information about its return policy. The company began testing Marketplace in July and has now launched it. (It didn’t take long for Walmart to announce a similar service.

3.  The expansion that rendered ManageMyHome.com as ManageMyLife.com remains anchored to ideas that work in and around the house but extends to areas such as gardening and electronics. The site provide forums, expert advice and product manuals, and connects with a wide range of services offered by Sears and affiliated providers such as home renovation contractors.

In addition, Lampert noted:
We created or expanded marketing programs including ShopYourWay, “Life. Well spent,” Sears Blue Appliance Crew, Sears Blue Electronics Crew, Sears Blue Tools Crew and “there’s smart, and there’s kmart smart.” We grew our online engagement platforms, MySears.com and MyKmart.com, allowing our customers to interact with each other and us, and get advice before they buy. We launched the ShopYourWay Rewards program at Kmart and Sears that will provide even more value and opportunities for our customers. We also re-launched a Christmas Club program at Sears and Blue Light Specials at Kmart to offer more convenience, value, and excitement for our customers.

What it comes down to, is that Sears is building new revenue streams directly, by providing services through its Blue crews, and indirectly, by offering social networks that tune customers in to its product and service pitches. Even when one of its retail brands is slated to appear in actual buildings, Sears won’t be footing the bill for the real estate. That, at least, is the case with the expansion of Sears Automotive Centers, which are being offered on a franchise business largely to former car dealers who were left out in the cold by retrenching in the auto sector. Developed as independent businesses, these operations could be sold off or reconstituted with alternative ownership arrangements.

Finding new ways to generate more dollars from existing operations is theoretically sound, of course. The difficulty is to monitor and maintain standards. Yet, by offering Automotive Center franchises to former car dealerships, Sears is bringing in partners with expertise and reputations. Also, the company’s previous work with outside contractors in its home business provides a framework it can apply to newer operations.

Whether the eventual idea is to sell the real estate on which Sears sits, or simply to keep costs down, structuring sales and service functions that act independently of stores makes sense. But it is tough to manage.

Though the letter was generally optimistic in tone, Lampert complained about the “reckless expansion of retail space leading to lower profitability for many retailers and to low or negative returns on the investment required to expand space.”

He added, “In other industries, consolidation rather than expansion has led to a more sensible competitive environment and better returns for shareholders.” Sears has been doing its own consolidation, closing 60 stores last year, with more to come.
In a sense, Lampert is moving in two directions at once, contracting the number of stores, while expanding their operations. If he gets it right, Sears will become a more valuable, and less leveraged, business, and therefore one more likely to fetch a good price when Lampert’s hedge fund, ESL Investments, eventually puts it — or at least profitable parts of it — up for sale.

Look for more from the Lampert letter in future posts.

Tags: Sears Roebuck & Co., Eddie Lampert, Retail, Financial Accounting, Automotive, Finance, Mike Duff

Mike Duff has written about retail and related fields over 20 years. His work has appeared in publications as diverse as Retailing Today, Drug Store News, Supermarket Business, Consumer Digest, MarketingWeek, American Food a
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Lampert Bets Sears Brands to Win Bigger for His Hedge Fund

BNET Retail - 6 days 4 hours 5 minutes ago
So now America has one less reason to go to Sears (SHLD), and maybe one more reason to try to get into Eddie Lampert’s ESL Hedge Fund. Sears has struck an agreement that will make its exclusive Craftsman tool line a little less exclusive. Ace Hardware will beginning selling the Sears popular private label – among the foremost store brands...

Craftsman Tools, as related in this blog yesterday, Eddie Lampert, Sears Holding (SHLD) chairman, and chairman of the ESL hedge fund that owns the retailer, looks like he is cashing in assets. In the short term, the Craftsman deal is likely to dilute the value of the Sears brand because a bunch of...

With new name, tenants and amenities,
the shine is back on Willis Tower
By: Andrew Schroedter - Chicago Business
March 01, 2010

Willis Tower was still recovering from a post-Sept. 11 swoon that pushed its vacancy rate to almost 22% when one of its largest tenants, Ernst & Young, announced in 2008 that it would let its lease expire.

With a tough economy forcing so many other tenants in the 3.8-million-square-foot building to downsize, the announcement was the haymaker in a decade-long series of blows that had stripped the once-iconic skyscraper of its luster.

Still, amid the worst office real estate market in memory, the tower has mounted an improbable comeback. With lower rents and investments in attention-grabbing upgrades that followed a recent refinancing deal, Willis Tower last year added leases totaling 880,000 square feet with new and existing tenants — marquee name United Airlines among them — and halved its vacancy rate to almost 10%. Then, of course, there is the new name.

"It was time for a change," says Katherine Scott, a managing director at Chicago-based U.S. Equities Realty LLC, which took over the property's leasing and management from CB Richard Ellis Inc. in 2007. "In our opinion, the building needed to wake up."

The question now is, can the 37-year-old edifice at 233 S. Wacker Drive, still known to most Chicagoans as the Sears Tower, secure its hard-won revival? Given the rough economy and sleek, new competition around town desperate for tenants, not everyone is convinced it can.

"They've made some improvements and done significant leasing," says Christopher Wood, managing director of the Chicago office of tenant-representation firm UGL Equis. "But some people are still skeptical."

Since its completion in 1973, the tower's financial history has been rocky. That was especially true in the wake of Sept. 11. Recurring fears that the tower was a terrorist target rocked its reputation in the years that followed, hurting its ability to charge competitive rents and keep its space filled.

"People were afraid of being in that building," says tenant rep David Stein of Chicago-based Steinco Inc.

By mid-2008, there was talk that key tenants nearing the end of their leases might walk away, leaving vast portions of the building vacant.

Some have. Ernst & Young US LLP, whose 387,000-square-foot lease expires in 2012, is moving to a new tower at 155 N. Wacker.

Luring United and Willis Group Holdings Ltd., the London-based insurance broker that negotiated the name change along with its 142,000-square-foot lease, plugged much of the gap; including those deals, the tower is about 90% leased, Ms. Scott of U.S. Equities says. That fourth-quarter vacancy rate easily trumped the overall downtown rate of 16.2%.

Willis has moved 500 employees to the building, while United, which signed a 15-year lease for up to 450,000 square feet, plans to begin reassigning 2,800 workers there this fall.

The tower's owners got plenty of help landing United, including a $25-million city subsidy for the airline. The fact that the tower's size and vacancies made it one of the few Loop buildings with enough available space also played a major role.

"Even at Willis, it was a challenge putting it all together," says David Matthews, a managing director at Jones Lang LaSalle Inc., who represented United. "There aren't six existing options downtown that have 500,000 square feet."

In announcing the move last August, Glenn Tilton, CEO of United parent UAL Corp., said, "This facility — both from an economic perspective and a quality-of-work-life perspective — was the best facility in the running."

The biggest challenge now may be keeping the tower's momentum alive, says John Huston, an executive vice-president at Skokie-based American Landmark Properties Ltd., which joined New York investors Joseph Chetrit and Joseph Moinian to buy the building in 2004 for $840 million.

Among the big factors in the building's headline-grabbing revival are the recent updates to the 103rd-floor Skydeck, as well as plans for an adjacent hotel and a $350-million project to "green" the building and its operations.

But the biggest factor in its makeover may be a purely financial one. Willis Tower has slashed rents, which ran more than $30 per square foot on some upper floors, tenant reps say. The $14.50-per-square-foot rent that Willis Group pays, albeit on lower floors, is said to be closer to the new reality. Ms. Scott of U.S. Equities declines to comment on rents.

The ownership group appears to have given itself plenty of leeway to make deals. It refinanced its debt in 2007, before the credit markets froze, securing a $780-million fixed-rate loan from Swiss bank UBS A.G.

The 10-year mortgage, reportedly at an interest rate of 6.29%, replaced $825 million in mostly floating-rate debt that financed the 2004 acquisition but became a liability as short-term rates began to outstrip long-term ones.

Through the first nine months of last year, the most recent financials available, Willis Tower had net operating income of $55.4 million, plenty to cover debt payments of $31.7 million and capital expenditures of $3 million, according to a loan report.

On an annualized basis, the building's net operating income was projected at $73.9 million last year, which would be an increase of 8.2% from 2008.

Unlike most Loop office buildings, the tower has significant revenue streams aside from rent. Radio and television stations pay to put their transmitters on the roof, and the Skydeck attracts more than 1 million paying visitors annually.

That number could increase this year thanks to the Ledge, a series of glass bays that allow Skydeck visitors to look straight down 1,353 feet. Opened in July, the attraction has generated positive publicity and more foot traffic.

Still, major obstacles loom.

A 228,000-square-foot lease held by Sonnenschein Nath & Rosenthal LLP expires in 2014. The law firm hired Jones Lang in 2008 to advise on a possible move. "We are looking at different options, including continuing to talk to Willis Tower as well as others," a Sonnenschein spokesman says.

On another front, Mr. Moinian, of the ownership group, has run into financial trouble with some of his New York properties. A spokesman for his company, Moinian Group, referred questions to U.S. Equities and American Landmark. Mr. Huston, of American Landmark, downplayed the significance, saying the "ownership structure is solid." Mr. Chetrit did not return calls seeking comment.

Observers say that trouble pales in comparison to the two biggest threats the tower faces: stiff competition from newer skyscrapers such as 155 N. Wacker, which lured Ernst away, and lingering safety fears.

Nearly a decade after Sept. 11, tenant reps say, memories of bomb- sniffing dogs in the lobby and concrete barricades blocking the entrance are too fresh in the minds of some office-space seekers.

Still, as the tower buffs up its image, there are signs that the anxiety is fading. OfficeLinks opened its first location outside New York in the tower last year. On the 86th floor, the firm subleases designer office space to small firms, which haven't voiced concerns about safety, says OfficeLinks General Manager Lori Ziesmer.

"We are past 9/11 for the most part. It rarely comes up," she says. "If there is a better building in the city, I would like someone to tell me what it is."

Eddie Baeb contributed.

Women buying clothes for themselves again
By Sandra M. Jones, reporter - Chicago Tribune
February 26, 2010

Women’s apparel market slowed its decline to 3 percent in the fourth quarter from a year ago, encouraging retailers as spring approaches

Women are starting to buy clothes for themselves again, an encouraging sign for retailers as spring approaches.

A new report suggests that women, middle-income ones in particular, finally are feeling good enough about the economy that they will splurge on a piece of clothing.

The women's apparel market slowed its decline to 3 percent in the fourth quarter from a year ago, better than the 5.1 percent drop in total U.S. apparel sales, according to NPD Group.

Women's clothing purchases have been in the doldrums for the past several years as the recession took hold and family budgets focused on food, car payments, medical bills and clothing for children.

"For the fashion industry this is a very important sign," said Marshal Cohen, chief industry analyst at NPD, a Port Washington, N.Y.-based market research firm.

Women account for more than half of fashion industry sales — a basket of goods that includes clothing, shoes and accessories for men, women and children. Women also are behind the buying decisions for an additional 25 percent of fashion industry items, according to NPD.

"Without them, a true recovery will not occur," Cohen said.

For 2009, total U.S. apparel sales fell 5.2 percent to $188.5 billion, the report said. Women's clothing made up the bulk of the market and fell 4.9 percent to $104 billion.

Even as consumer spending retreated last year, there were a few bright spots: Sales of dresses rose 2.3 percent, tights rose 2.4 percent and bras gained 1.1 percent. Sales of jeans for both men and women were strong as well, rising 3.5 percent.

Sears has designs on West Coast: Sears Holdings Corp. opened a design office in San Francisco, headed by newly hired apparel and home chief John Goodman.

The 25,000-square-foot office at 760 Market St. in the historic Phelan Building will focus on merchandising for Sears and Kmart stores, according to Sears spokeswoman Kimberly Freely. Sears has yet to determine how many workers the West Coast outpost will employ, Freely said. Its primary focus will be on buying and merchandising.

Tara Poseley, a former Gap Inc. executive who joined the Hoffman Estates-based retailer as president of Kmart apparel this month, also will be based in that office.

Sears opened its first design studio in the SoHo neighborhood of New York City in 2006 where it employs about 200 workers. The center, which focuses on designing Kmart apparel, will continue to operate under the leadership of Lisa Schultz, another former Gap executive who is executive vice president of apparel design at Sears Holdings.

Goodman returned to Sears Holdings in November in a new role as executive vice president of apparel and home with the understanding that he would establish a San Francisco beachhead. The former head of Gap Outlet stores had served as chief apparel officer of Sears Holdings for a short period after Kmart bought Sears in March 2005. In May 2005, Goodman took a job as head of Levi Strauss & Co.'sDockers business and subsequently held CEO posts at Mervyns LLC and Charlotte Russe Holding Inc.

Both Schultz and Goodman did apparel stints at Kmart.

Goodman said that "by creating a presence in California, we will greatly enhance our ability to attract talent."

Separately, Sears disclosed the downtown Chicago location for its Kenmore pop-up shop, first reported in the Tribune on Sunday. The Kenmore Live Studio, a temporary venue for showcasing the brand's newest products, will open at 678 N. Wells St. on March 11.

Book Excerpt: Denial at Sears
By Richard S. Tedlow - Business Week Online
February 26, 2010

From Denial: Why Business Leaders Fail to Look Facts in the Face—and What to Do About It, Richard S. Tedlow tells how the retailer let ego get the best of it

Beware the monument.

Please bear with me for a moment and read the following short poem that Shelley published in 1818, entitled Ozymandias:

I met a traveler from an antique land
Who said: Two vast and trunkless legs of stone
Stand in the desert. Near them, on the sand,
Half sunk, a shattered visage lies, whose frown,
And wrinkled lip, and sneer of cold command,
Tell that its sculptor well those passions read,
Which yet survive, stamped on these lifeless things,
The hand that mocked them, and the heart that fed.
And on the pedestal these words appear quot;
My name is Ozymandias, King of Kings:
Look on my works, ye Mighty, and despair!"
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare
The lone and level sands stretch far away.

Ozymandias was a heavy hitter in days gone by. He built a huge statue of and to himself. If the meaning of the statue was not clear enough, he had inscribed on the pedestal that he was such a big shot that "ye [other] Mighty" were reduced to despairing at his magnificence.

But, look! The ruins of the statue were all that survived, and it has become nothing more than a "colossal wreck." Whatever the "works" were that should have caused despair to the mighty have now disappeared into the sands of time.

Gordon Metcalf became CEO of Sears in 1967. Odds are, he had never read Shelley's poem. "Being the largest retailer in the world," he said, "we thought we should have the largest headquarters in the world." So, just as cracks began to appear in the armor of Sears—despite a seemingly robust bottom line, some metrics, like return on equity and employee productivity, had begun to flag—Metcalf decreed that Sears would construct the world's tallest building. The 110-story Sears Tower, renamed Willis Tower in 2009, came to be known as "Gordon Metcalf's last erection."

On the surface, Metcalf's explanation for building the Tower seems to make sense. But when you really think about it, it doesn't. The two clauses have nothing to do with one another, and the declaration cannot survive one single word: Why? Why is it that the world's largest retailer should have the world's largest headquarters?

In 1993, when Intel was experiencing its spectacular growth, CEO Andy Grove, like the rest of the company's employees, had not an office but a cubicle. It was tiny. Fortune, in a clever variant of a classic retail metric, conducted a return to the shareholders survey that year. It measured return to the shareholders per square foot of the CEO's office. Grove led the pack by far, as Intel returned $1.64 per square foot of his cubicle.

It was not apparent that Intel needed a giant building to celebrate how wonderful it was. Why was it so obvious at Sears?

Building monuments deserves a file drawer along with trash talking when you are looking for companies in denial. I recall interviewing top executives in the Sears Tower in the summer of 1980. The pictures on their walls were quite beautiful. I wondered whether the average Sears customer could have afforded the frames. The furniture was plush. It didn't look like it came off the floor of a Sears store.

I remember looking out the windows. The view up Chicago's lakeshore was spectacular. And there was not a competitor in sight. The people down below looked like ants. Those ants were supposed to be Sears's customers. Of all industries, it is most important for a retailer to keep his or her ear to the ground. The Tower was a symbolic denial of that reality.

The year the Tower was dedicated, 1973, was the first year of the chairmanship of Arthur Wood. Writer Donald Katz described him as "patrician," "elegant," "the consummate old-world gentleman-businessman." His opulent office included works from his private art collection by Degas and Monet.

Wood was unlike Kmart's great merchant Harry Cunningham. An even bigger problem is that he was the antithesis of the incomparable Sam Walton.

Just prior to the first oil shock in 1973, retail sales in the United States began to decline in real terms. Sears's economist (this is prior to the oil shock) felt the country was looking at a severe recession the following year. A "senior officer" of the company, according to Katz, told the economist that if he publicized an official forecast to this effect, he would be fired. There appears to be a persistent belief in once-great companies that have lost their way that if you simply avoid speaking the blunt truth, all the problems will just go away. It is almost as if by telling the truth, you are endowing problems with a reality that they would not otherwise have. It is this brand of magical thinking that leads to shooting the messenger.

Sales in 1974 actually increased seven percent, which would not have been bad if the company had not forecast a rise of fifteen. Profits were off almost a quarter, a dramatically steep slide. Here indeed is the essence of the problem of denial. Reality is always just around the corner.

Sears wandered in the wilderness amid intermittent signs of life from 1973 until it was bought by Kmart owner Eddie Lampert in 2005. The company abandoned its Tower in 1992, a year in which it lost almost $4 billion, and relocated outside of Chicago to a town called Hoffman Estates. Kmart adopted Sears's name and the combined company is today called Sears Holdings.

Sears began to hire consultants in the 1970s, but they were no more helpful than the homegrown executives. Sears convinced itself that its market was "saturated." The way to grow, therefore, was to enter whole new lines of business. The company bought the real estate franchise Coldwell Banker and the financial broker Dean Witter. Why the company's CEOs thought they would do better managing businesses in industries they did not understand than they would in general merchandise retailing remains one of life's mysteries.

In fact, there was a fortune to be made in the very classes of trade in which Sears made its name. We know this—and everyone at Sears should have known it at the time—because Wal-Mart's spectacular success was no secret. Sam Walton had become the richest man in the world. He dressed in a grass skirt and did the hula on Wall Street itself in 1984 because Wal-Mart's stock had so outperformed what he had bet it would be. You had to be wallowing pretty deeply in denial to miss this.

Sears executives should have been focused on nothing else. Instead, they were playing around with the "store of the future" and telling themselves they would succeed selling "socks and stocks."

For the sake of symmetry, we should note that Walton did not pay much attention to Sears. In his autobiography, he only mentioned it once, and not very flatteringly. "One reason Sears fell so far off the pace is that they wouldn't admit for the longest time that Wal-Mart and Kmart were their real competition," he wrote. "They ignored both of us, and we both blew right by them."

It has often been observed there are no mature markets, only tired marketers. Unfortunately, nobody at Sears was making that observation, and there is no company which it described—or which demonstrates the pitfalls of denial—more perfectly.

Adapted from Denial by Richard S. Tedlow by arrangement with Portfolio, a member of Penguin Group (USA), Inc., Copyright © 2010 by Richard S. Tedlow.

Tedlow is the Class of 1949 Professor of Business Administration at Harvard Business School. His previous books include Andy Grove, Giants of Enterprise, and The Watson Dynasty.

Kohl's Commands A Lead As An Expansion-Minded Retailer
By Karen Talley of Dow Jones Newswires
February 26, 2010

NEW YORK --Kohl's Corp. (KSS) is expanding while its rivals are remodeling stores to get through the recession.

Kohl's will open 30 stores this year, as the retailer takes further advantage of real estate opportunities and while other department stores like J.C. Penney Co. (JCP) and Wal-Mart Stores Inc. (WMT) use much of the time for refurbishments in order to please existing customers and hopefully draw in new ones.

For Kohl's, it's a matter of building off of success, as its fourth-quarter profit rose 28%, the company said Thursday.

"Our goal is to gain," said Chief Executive Kevin Mansell in an interview with Dow Jones Newswires. "Customers will be choosing a certain number of stores (to shop at this year) and we're going after market share."

While the same "market share" mantra was being heard from other retailers this week as they posted results, virtually all said they planned to make their U.S. stores more appealing aestetically, not to expand into new locations. Mansell is not even ruling out moving into some of the 21 sites Sears Holdings Corp. (SHLD) will leave this spring, as the retailer has declined to renew leases. Kohl's has taken over abandoned Sears stores in the past, Mansell said. It all depends on whether it is a geographic fit with Kohl's existing footprint. Finding the right place is also a way of keeping the strategy from blowing up as Kohl's opens locations at a time when consumers still are not doing a lot of shopping.

Kohl's is also doing very well at managing to demand, with inventory up about 1% at the end of its fiscal year that closed on Jan. 1, after being down 10% the year before as it had, like other retailers, to engage in markdowns to get rid of the items.

Now, with low inventories, Kohl's is demonstrating it can meet demand, and with ongoing supply chain improvements, get fresh merchandise into its 1,058 stores more quickly, Mansell said.

The retailer is also going after the Internet and private brands in a big way, with its own lines of apparel and those of names like skateboarder Tony Hawk. Its private label and exclusive offerings now account for almost 45% of entire offerings and will grow in 2010, including a hole-filling hip line for teen boys, Mansell said.

So far, Kohl's strategy is paying off. The retailer as of the fourth quarter has passed J.C. Penney to become the nation's third-largest department store based on sales, said Craig Johnson, president of Customer Growth Partners, a retail research firm.

"Perhaps more notably, this year Kohl's became the nation's largest department store based on operating earnings," Johnson, said, with operating income of $1.71 billion, exceeding No. 2 Macy's Inc. (M) at $1.06 billion and once-dominant Sears at $713 million.

Unlike most of its competitors, Kohl's is pursuing a strategy of holding down costs, providing full merchandise lines and service that customers want, and driving demand and traffic by increasing advertising and marketing spending, Johnson said.

Shares of Kohl's, despite offering conservative first-quarter guidance, are up 5.1% at $54.19.

Sears to offer first 3D capable TVs: report
By Chuck Ross - Chicago Business
February 25, 2010

(Crain’s) — In March the first 3D capable TV sets will be available in the U.S. through Sears outlets, the New York Post reports.

The sets will be manufactured by Samsung, and two models will be available — one 46-inches, one 55-inches.

The 46-inch TV will go for $2,599; the 55-inch set will be priced at $3,299, the report says.

Glasses will be required to get any 3D effect. And the only 3D programming, initially, will be exclusively from DVDs.

And those DVDs won't be available until the spring, the report says, adding that a 3D disc of the hit movie "Avatar" is expected in November. DirecTV has said it will have a 3D channel up and running later this year. Also, "ESPN says it will be ready this summer to broadcast some World Cup soccer games in the new format," the report says.

(This story originally appeared on ChicagoBusiness.com’s sister site TVWeek.com.)

Judge Rings Up Former Kmart CEO For $10M
By Eric Morath - Dow Jones Newswires
February 25, 2010

There will be no Blue Light Special discount for former Kmart chief executive Charles Conaway, who was ordered Thursday to cough up more than $10 million for misleading statements he allegedly made to investors in the months before the retailer filed for Chapter 11 protection in 2002.

In a 70-page decision, U.S. Magistrate Judge Steven Pepe required Conaway to repay a $5 million loan he received from the company, plus interest and fines, the Associated Press reported. Last year, a jury found Conaway liable in a federal civil trial.

The Securities and Exchange Commission said Conaway hid Kmart’s crumbling finances by failing to tell investors that the retailer was delaying payments to suppliers in order to stock pile cash.

The charges mainly stemmed from Conaway’s call with Wall Street analysts in November 2001 and the company’s quarterly filing with regulators.

In that call, Conaway reported sliding sales but did not disclose the changed vendor payment policy or an ill-timed purchase of $800 million in merchandise. In court, Conaway said that it never crossed his mind that he was withholding critical information.

Investors’ negative reaction to the quarterly report “would have been significantly worse” had Conaway made disclosures about “the magnitude of the liquidity crisis including its extensive slow-pay systems,” the judge wrote.

Pepe denied the SEC’s request to bar Conway from serving as an officer at another public company, saying the fines and damage to his reputation were deterrent enough from committing future violations.

Conway was forced out of Kmart as the company emerged from bankruptcy protection in 2003 under the control of investor Edward Lampert. The following year Kmart merged with Sears, Roebuck and Co., creating Sears Holdings Corp.

Wal-Mart Sets Plan To Cut Gas Emissions
By Miguel Bustillo - Dow Jones Newswires
February 25, 2010

Wal-Mart Stores Inc. said it plans to cut 20 million metric tons of greenhouse-gas emissions by 2015.

However, Wal-Mart will make its suppliers do the dirty work of reducing the carbon footprints of their global supply chains.

The retailer has a separate effort to reduce energy use and cut the environmental impact of its 8,400 stores world-wide.

The pledge, equivalent to taking more than 3.8 million cars off the road by the company's estimate, comes after Wal-Mart last year unveiled a plan to reduce the overall environmental impact of products it sells.

Wal-Mart stated that it will now select the product it sells in part by judging whether manufacturers are on board with its green initiatives, suggesting that those who are not will have an increasingly hard time getting products on shelves. But company executives downplayed any friction Thursday, arguing that the goals could be achieved without burdening business partners.

"Reducing carbon in the life cycle of our products will often mean reducing energy use," Chief Executive Mike Duke said in a webcast with Fred Krupp, head of the Environmental Defense Fund, which helped develop the plan.

"That will mean greater efficiency, and with the rising cost of energy, lower costs, making our business stronger."

Wal-Mart, based in Bentonville, Ark., didn't estimate the total carbon footprint of its far-reaching global supply chain. and conceded that the reductions wouldn't dramatically curtail its current overall contribution to the heat-trapping gases many scientists have linked to climate change. Instead, the company estimated that the reduction of 20 metric tons would be one and a half times the anticipated growth of its global carbon footprint during the next five years.

The 20 million metric tons represents the amount of greenhouse gases the products would release over their entire life, it said.

To check whether reduction claims are legitimate, Wal-Mart said it is asking measuring expert ClearCarbon Inc. and auditor PricewaterhouseCoopers LLC to verify the claims.

Sears's Lampert Is Feeling Testy
Despite Profit, Chairman Vents on Amazon, Taxes, And 'Simplistic' Analysis
 By Michael Corkery - Deal Journal - Breaking Insight
WSJ.com
February 24. 2010

Home Depot Undergoes Renovation
Chain Retools Business Practices After Lowe's Chips Away at Market Share
By Miguel Bustillo - Wall Street Journal
February 24, 2010

Home Depot Inc. is regaining momentum after belatedly tackling its biggest fix-it task to date: remodeling itself.

The world's largest home improvement chain—which on Tuesday reported its first rise in sales at stores open at least a year since 2006—is redesigning the way it ships merchandise to stores, answers customers' questions, and showcases its wares on the Internet.

The goal is to improve productivity and expand profits by revamping a slew of business practices that never changed during the company's mushrooming growth in the 1980s and 1990s, and that look primitive compared to current trends in retailing.

The most dramatic change is that Home Depot is phasing out the antiquated practice of having suppliers send dozens of half-empty trucks directly to its more than 2,200 stores.

A network of "rapid deployment" warehouse centers being completed this year will combine shipments, trim costs and cut truck trips to stores by up to 50%. That will let more of Home Depot's orange-apron-wearing workers shift from shipping docks to store aisles, in hopes of tackling a festering reputation for bad service.

"We realized we were dissatisfying a fair number of our customers," said Chief Executive Frank Blake in an interview, adding that he believes the company has found "the path to fix it."

Wall Street's big question is why it has taken Home Depot, which until recently had lost market share to rival Lowe's Cos. for years, so long to hammer flaws in its foundation.

"It's fair to say we took our eye off the ball," said Chief Merchandising Officer Craig Menear.

Mr. Blake, a former Deputy Energy Secretary under George W. Bush who fell into the chief executive position three years ago following the ouster of predecessor Robert Nardelli, tries to accentuate the positive, arguing that a "late-mover" advantage will allow Home Depot to avoid the costly mistakes that other retailers made modernizing operations.

Lowe's, which reported a 27% jump in fourth-quarter earnings Monday, has seen its stock double in the past decade, whereas Atlanta-based Home Depot saw its shares lose half their value over the same period. Lowe's Chief Executive Robert Niblock said the company was confident its supply chain would continue to give it a competitive edge.

"We have a sophisticated distribution network that has better capabilities than what Depot is putting in," Mr. Niblock said. Lowe's is based in Mooresville, N.C.

Home Depot executives concede that the company's supply chain still won't be state of the art after the upgrade, though it will be a big step forward.

Analysts believe Home Depot will struggle to regain all the business it ceded to Lowe's, due in part to a lingering reputation for lousy service that sprung up during Mr. Nardelli's reign as the retailer slashed full-time jobs.

Mr. Nardelli, now an adviser at Cerberus Capital Management LP, declined comment, citing terms of his separation from Home Depot.

Some analysts say Home Depot may be poised to reap more benefits when the housing market bounces back. Home Depot reported a profit of $342 million, or 20 cents a share, for the quarter ended Jan. 31, compared to a loss of $54 million, or three cents a share, the year before.

"That's pretty impressive when you considered how mismanaged they have been," said Gary Balter of Credit Suisse Group.

To tackle the perception that Home Depot workers are always too busy to help customers, the company is spending $60 million on hand-held devices that will help workers check on the spot if something is in stock. Marvin Ellison, a former Target Corp. executive who is Home Depot's executive vice president of U.S. stores, conceded there was no good reason it took so long to devise the devices, which replace consoles resembling EKG heart machines that workers would constantly leave customers to go use.

The important thing, he said, is that progress is being made: Home Depot said its internal customer rating scores have shown improvement for 14 straight months.

Some consumers remain skeptical. Mitch Ross, a network engineer and former home builder in Richardson, Texas, said he wished customer service were better at Home Depot, because it is closer to his home than Lowe's.

"I have no ax to grind one way or another, but I find that shopping at Lowe's is much more pleasant," he said. "Both have cut back on the number of customer service people, but for some reason Lowe's people go out of their way to help. I have a hard time finding anyone at Home Depot."

Home Depot's Mr. Ellison said that it "takes time to change any retail environment, but if you look now compared to two years ago, it is a huge difference."

Communication was also a problem at Home Depot. Mr. Ellison said he was stunned to discover that store managers were drowning in hundreds of emails from headquarters.

So Mr. Ellison says he cut it to one email a week, on Monday, and set up a hotline for managers to complain if the edict is violated. In addition to its supply chain fixes, Home Depot is waking up to the Internet.

Chief Financial Officer Carol Tome said she was embarrassed that Amazon.com Inc. sold more drills online than Home Depot, which initially operated its Web site as a separate business that, by design, sold Xbox videogame consoles and other items not found in stores.

Now the company is building a site that not only sells what stores do, but features do-it-yourself videos to help customers with projects. "We're now building a site that fixes people's problems," Home Depot online president Hal Lawton said.

—Ann Zimmerman contributed to this article

Sears Holdings delivers its best profit in 3 years
By Sandra M. Jones, reporter - Chicago Tribune
February 24, 2010

Sears Holdings Corp. posted its best quarterly profit in three years, fueled by improved sales at Kmart and cost cuts.

The owner of Sears and Kmart earned $430 million, or $3.74 a share, during its fiscal fourth quarter. That's more than double the profit of $190 million, or $1.55 a share, during the same period last year. Excluding one-time items, including $336 million in charges from the year-ago quarter, earnings rose to $3.69 a share from $2.94.

Revenue for the quarter ended Jan. 30 fell 0.2 percent, to $13.2 billion, from a year ago. Sales at U.S. stores open at least one year, a key retail metric, fell 2.5 percent.

Kmart same-store sales rose 1.7 percent, helped by holiday toy sales, home goods and the benefit of assuming footwear operations from a third party in January 2009. It was the second consecutive quarter of improvement at the discount chain.

Sears fared worse. Same-stores sales at the company's namesake U.S. stores fell 6.1 percent, weighed down by declines in its core home-appliance business, along with a falloff in lawn and garden and home electronics sales.

The watershed quarter comes as the Hoffman Estates-based company seeks to bolster declining sales by selling some of its in-house brands, including Craftsman and DieHard, through rival retailers. This month, for example, Sears agreed to sell some Craftsman hand tools at 100 Ace Hardware stores starting in May.

"I recognize that our financial results, while substantially improved from 2008, remain well below where we would like them to be," Sears Chairman Edward Lampert said in his annual letter to shareholders.

Lampert, the majority shareholder in Sears, rarely speaks publicly, making his yearly letter one of the few times investors hear his point of view.

The 13-page letter highlighted Sears' online business and its proprietary brands as worthy of investment for future growth.

Lampert, a billionaire hedge-fund manager, also praised Amazon and eBay for their retail prowess and suggested that online merchants have an unfair advantage by not having to collect sales tax, a debate the retail industry has been having for years.

Moody's Investors Service issued a report Tuesday praising Sears' attempts to sell its brands through outsiders, but also noting it is waiting to see how the move affects traffic at Sears stores and how well Sears will be able to protect the quality of its brands through third parties.

"While the company's overall performance surpassed our expectations, the company's low operating profitability continues to weigh heavily on its credit metrics," the Moody's report said.

Since Lampert engineered the combination of Sears and Kmart in 2005, Sears has dramatically cut back spending on maintaining and improving its stores.

Sears closed 27 stores in the fourth quarter and 62 stores for the full fiscal year. It is closing unprofitable Kmart and Sears stores while adding smaller format Sears dealer stores and investing in its online business.

Sears Holdings operated 3,921 stores as of Jan. 30, up from 3,918 a year ago. Sales for the year fell 5.9 percent, to $44 billion.

Sears shares on Tuesday fell 1.9 percent, to $93.80.

Retailers Profits Rise, but Customers Hold Back
By the Associated Press - New York Times
February 24, 2010

CHICAGO (AP) -- A fleet of the nation's biggest merchants reported mostly better fourth-quarter profits Tuesday after a holiday season marked by cautiously stocked shelves and well-managed markdowns.

But the rosier results mask a tough reality: To build on their halting improvements, retailers will need shoppers who are willing and able to spend more. That's not happening yet.

''They have a bit of momentum to carry them into 2010 and they have the right formula,'' said Morningstar retail analyst Kim Picciola. ''But they're just waiting on the consumer to come back.''

They may have to keep waiting if Tuesday's surprisingly steep drop in consumer confidence figures offers any insight. The measure fell in February its lowest level in 10 months, according to a private research group, largely precipitated by mounting worries about job security.

''The economy is not out of the woods yet,'' The Home Depot Co. Inc. CEO Frank Blake told investors during a conference call Tuesday to discuss the home improvement retailer's results, which went from a loss last year to a profit of $342 million, or 20 cents per share. ''We're not projecting robust growth. Our expectation is that 2010 will be a transitional year.''

From Sears to Macy's to Target, profits rebounded in the fourth-quarter after a downright dismal 2008 holiday season.

The increase -- more than double the previous year's figures at Sears; a 54 percent boost at Target; and a reversal of last year's loss at Macy's -- came from cost cutting and carefully ordered merchandise. That let retailers sell without drastic markdowns that were standard the year before.

But sales were mostly stagnant, ranging from a 1 percent decline in Macy's department store to a 3 percent gain at cheap-chic Target. Shoppers will stay cautious until the nation's economy and job outlook is rosier, experts said.

Unable to keep waiting out that return, retailers are trying everything they can to make their stores and their products more inviting to customers.

''We're now getting to a point where retailers are going to have to break a stalemate,'' said Wendy Leibmann, CEO of consulting firm WSL Strategic Retail. ''They're going to have to now invest in getting shoppers back into the store and not just invest in cutting their expenses. And if they don't start innovating and being aggressive in their marketing again, shoppers are just going to continue to sit on their hands.''

At Target Corp., which earned $936 million, or $1.24 per share, in the quarter, there's a push toward marketing low prices and expanding grocery selections. The company is also rolling the dice on a new store format starting in April that will feature spruced-up home furnishings, larger grocery sections and better video game displays.

''We believe that collectively this set of innovations will be a powerful catalyst for future market share growth,'' Target chairman, president and CEO Gregg Steinhafel said during a conference call Tuesday to discuss the fourth quarter's results.

At Sears Holdings Corp., which is blanketing the marketplace with its latest e-commerce experiments, Chairman Edward Lampert said he's confident the owner of Sears and Kmart stores will be able to leverage online presence and well-known brands like Kenmore, Craftsman, Diehard and Lands' End.

Last week, Sears said it would begin selling some of its famous brands at other retailers, including some selected Craftsman tools at Ace Hardware locations.

Its profit -- its best in three years -- was $430 million, or $3.74 per share, although revenue dipped.

''Sears has a long tradition of building lifetime relationships with our customers, and the focus that we have on updating and improving our service businesses continues that tradition,'' Lampert, who acquired Kmart out of bankruptcy in 2003 and Sears two years later, wrote in a lengthy annual letter to investors.

Meanwhile, Macy's Inc. CEO and Chairman Terry Lundgren said the department store chain plans to capitalize on the success of its holiday shopping season and is carefully planning its 2010 sales and discounts. Sears shares fell $1.86, or 2 percent, to close Tuesday at $93.80, while Target's stock dropped 58 cents, or 1.2 percent to $50.06.

Macy's climbed 20 cents to $18.67 while Home Depot added 43 cents, or 1.4 percent, to $30.75.

Shares of Barnes & Noble, whose results were short of Wall Street forecast, fell $1.28, or 6 percent, to end at $20.23.

------ AP Retail Writers Mae Anderson, Michelle Chapman and Anne D'Innocenzio contributed to this report from New York.

Why Sears Is Rebranding Kenmore
By Elaine Wong - Brandweek Magazine
February 24, 2010

Sears Holding Corp. has undertaken a huge task: To completely revamp and relaunch approximately 450 Kenmore appliance models. The move is part of a larger effort for the home appliance brand, which is sold exclusively at Sears. Right now, the changes are rolling out on washing machines, and soon, on refrigerator units. Kitchen appliances will follow later this year. The goal is to contemporize Kenmore, an 83-year-old, iconic American brand, said Betsy Owens, Kenmore vp and general manager. Female consumers, primarily, saw Kenmore as a brand that their grandmothers and mothers bought, but that didn’t necessarily speak to them, Owens said. So to update the brand and its image, a new television, in-store and social media campaign was launched. The push also includes a new visual brand identity and a Web site, with features that speak to this modern female demographic. Despite the unstable economy, Owens said now is the perfect time for the rebranding and the related campaign. “We have a product for every pocket, and from a value [standpoint, the Kenmore brand is so aligned with where Americans are right now that I don’t think we could’ve picked a better time to do this,” she said. What follows are excerpts from Brandweek's conversation with Owen, who further discussed the rebranding.

Brandweek: Sears Holding Corp. is relaunching Kenmore in a downturn. Why so? Betsy Owens: Kenmore is one of those great, iconic American brands. It’s been around forever. It invented many of the categories it competes in today and it has been the leader in appliances for many, many years. It’s always been a highly innovative brand: It was the first one to bring front-loading washing machines to the U.S., the first to introduce color on [these] machines, the first to [introduce] induction on freestanding ranges. It has a lot of firsts behind it. But even great brands like Kenmore need to adopt and adjust and reinvent themselves periodically, and that is really what we’re doing [in this campaign].

BW: So how did consumers perceive of the brand before this?
BO: We’re hearing from customers that “My grandmother and my mother had Kenmore. I grew up with Kenmore. I love it for that reason, but it doesn’t necessarily speak to who I am.” So, we saw an opportunity to reach out to consumers with a more stylish product.

BW: Define that customer more precisely.
BO: It’s more women, although we recognize more and more often now, males are involved in the purchasing decisions. But first and foremost, it’s women from their 20s—when you’re first setting up a house—all the way up to their 50s. What we’ve done differently than in the past is we really focused on attitudinal segments, so our sweet spot for the core consumer is someone we’re calling the “savvy mom.” We see her as someone who is true to the Kenmore spirit. She’s practical and resourceful, but she’s also someone who doesn’t feel that she should have to trade off among style, performance and price. She is someone who believes she can get it all and not make any compromises. We think we’ve got the sweet spot in terms of a product that will appeal to her at that level. She is also someone who sees stylish design and technology as a way to make a statement about who she is and her home. She is someone who prioritizes her role as mom and wife, but she feels younger than her mom did at that same age.

Sears logs best quarter in 3 years,
Chairman Lampert answers critics of his strategy
By Monée Fields-White - Chicago Business.com
February 23, 2010

(Crain’s) — Sears Holdings Corp. posted its best quarterly profit in three years amid rising sales at Kmart Corp. and ongoing cost-cutting throughout the retail chain.

The Hoffman Estates-based parent of Sears and Kmart said it earned $430 million, or $3.74 per share, during the fourth quarter. That's up from a profit of $190 million, or $1.55 per share, during the same period last year. Excluding one-time items, the company's fourth-quarter profit amounted to $3.69 per share.

Revenue for the three months ended Jan. 30 declined less than 1% to $13.25 billion, the company said. Same-store sales, a key industry performance gauge, declined 2.5% overall. Comparable sales at Sears stores dropped 6.1%, while Kmart posted a 1.7% gain.

“I am pleased to report that we delivered both stability and progress,” Sears Chairman Edward Lampert wrote in his annual letter to shareholders. "While this may be surprising to some, it isn't to me." Sears’ shares were down nearly 2% to close at $93.80 on Tuesday.

For the full year, Sears earned $235 million, or $1.99 per share. That's significantly up from its 2008 profit of $53 million, or 42 cents per share. Full-year revenue slipped 5.8% to $44.04 billion, down from $46.77 billion last year.

Mr. Lampert’s 13-page annual letter is one of the rare moments, outside of the company’s annual meeting, when shareholders get to hear from the billionaire hedge fund manager who combined Sears and Kmart in 2005.

In this year's message, he continued to defend his company’s strategy against critics who've said he’s reduced expenses to the point where a large chunk of his more than 3,500 stores are in poor condition.

The company has begun liquidating 21 of its underperforming stores, including eight Sears’ locations and 13 Kmart stores.

Last week, Sears announced it will begin selling a selection of Craftsman-brand tools at Ace Hardware stores. In recent weeks, the retail chain reached a licensing deal to allow sales of some DieHard-brand products at non-Sears stores, and it plans to franchise its Sears Auto Centers to car dealerships. Mr. Lampert also has been investing heavily in his company’s online business.

“We have chosen to invest primarily in areas of our business that we believe will yield long-term growth and attractive returns,” he said. Mr. Lampert also railed against the credit-rating agencies. “When we inquire why our ratings are not higher than some competitors with credit metrics that are weaker than ours, one factor cited is that some analysts prefer their business models," he said.

He added that "we increased our earnings, while many others have seen their earnings decline. We have a diversified business portfolio and a significant revenue base and scale. Obviously, we don't agree with all of the critical qualitative conclusions and the quantitative metrics speak for themselves."

Mr. Lampert offered his views on federal regulation and policies relating to issues such as job creation. He even criticized local governments for allowing rival Amazon.com to continue to sell its products without charging sales tax in most states.

"Either we all collect taxes or nobody collects taxes," Mr. Lampert wrote. "If state and local governments are going to require retailers like Sears and Kmart to collect sales taxes and not retailers like Amazon.com, they should recognize that over time their sales tax base will erode significantly and that they place companies who have chosen to locate stores locally at a competitive disadvantage."

Sears Profit More Than Doubles
By The Associated Press - New York Times.com
February 23, 2010

Sears has best quarterly profit in 3 years
By Sandra M. Jones - Chicago Tribune.com
February 23, 2010

Sears Holdings Corp. posted its best quarterly profit in three years, fueled by improved sales at Kmart and year-earlier write downs.

The owner of Sears and Kmart says it earned $430 million, or $3.74 per share, during the fourth quarter. That's up from a profit of $190 million, or $1.55 per share, during the same period last year. Sears hasn't had such a strong quarter since the fourth quarter of 2006, when it earned $820 million.

A 1.7 percent increase in Kmart same-store sales marks the second consecutive quarter of improved performance at the discount chain. Kmart sales rose as cash-strapped shoppers bought more toys and home goods. It also reflects a sales boost from assuming footwear operations from a third party in January 2009. .

In contrast, same store sales at Sears stores in the U.S. fell 6.1 percent, driven by declines in its core home appliance business along with a fall off in lawn and garden and home electronics sales.

"I recognize that our financial results, while substantially improved from 2008, remain well below where we would like them to be," said Sears Chairman Edward Lampert in his annual letter to shareholders.

Lampert, the majority shareholder in Hoffman Estates-based Sears, has no investor relations department and rarely speaks publicly, making his yearly letter one of the few times he puts forth his point of view.

The 13-page letter highlighted Sears online business, one of its bright spots and discussed pension reform, a steady thorn in Lampert's side, given Sears' large pension expense. It also took the credit agencies to task once again for not giving Sears a higher rating and advocated for less government regulation as a way to create jobs.

Lampert also praised Amazon and eBay for their prowess and suggested that online merchants have an unfair advantage because they don't have to collect sales tax -- a debate the retail industry has been having for years.

Under Lampert's aegis, Sears has dramatically cut back spending on maintaining and improving its stores. But, the hedge fund manager outlined areas he sees worth investment that he believes "will yield to long-term growth and attractive returns." They include the online business, home services, the marquee Kenmore and Craftsman and Lands' End brands, as well as the smaller format Hometown, or dealer, stores and outlet stores.

Sears closed 27 stores in the fourth quarter and 62 stores for the full fiscal year.

"Most of those stores have underperformed for some time and, despite focused efforts to improve them, we felt that we could no longer afford to wait for those stores to turn around," Lampert said in the letter. "With expiring leases, we have been able to reduce our money-losing stores while at the same time generating cash from the liquidation of inventory."

Excluding one-time items, the company's fourth-quarter profit amounted to $3.69 per share. Revenue for the three months that ended Jan. 30 dipped less than 1 percent to $13.25 billion.

Analysts surveyed by Thomson Reuters expected the merchant to earn $3.54 per share on revenue of $12.90 billion.

Those estimates typically exclude one-time items.

Cash at year end increased to $1.7 billion from $1.3 billion.

Credit Suisse analyst Gary Balter said in a Tuesday report that in spite of the improved quarterly performance, rivals Home Depot and Lowe's -- which have been spending money to improve their stores, are still gaining share from Sears.

"If one were to read Mr. Lampert's letter accompanying Sears' earnings release this morning, one would sense a tone of victory throughout the letter," Balter said in the report. "While we will resist the temptation to compare it to the U.S. hockey team declaring a similar victory despite only winning a preliminary round game, we would just say that both may be overconfident.

"The road for Sears from here is quite different than the road we believe Home Depot, Lowe's and other cheaper (stocks) will take over the next few years," he said.

Sears had an easy comparison with the year-ago quarter when $336 million in charges related to asset impairments and costs associated with stores closings and severance cut into profit. Operating income was $749 million in the quarter ended Jan. 30 compared to $325 million for the year-ago quarter.

Sears Holdings operated 3,921 stores as of Jan. 30 up from 3,918 a year ago.

The number of Kmart stores fell to 1,327 from 1,368 and full-line Sears stores shrunk to 908 from 929, while the number of specialty Sears, or small format, stores have risen to 1,284 from 1,233.

-- The Associated Press contributed to this report

ObamaCare at Ramming Speed
The White House shows it has no interest in compromise.
Review & Outlook - The Wall Street Journal
February 23, 2010

A mere three days before President Obama's supposedly bipartisan health-care summit, the White House yesterday released a new blueprint that Democrats say they will ram through Congress with or without Republican support. So after election defeats in Virginia, New Jersey and even Massachusetts, and amid overwhelming public opposition, Democrats have decided to give the voters what they don't want anyway.

Ah, the glory of "progressive" governance and democratic consent.

"The President's Proposal," as the 11-page White House document is headlined, is in one sense a notable achievement: It manages to take the worst of both the House and Senate bills and combine them into something more destructive. It includes more taxes, more subsidies and even less cost control than the Senate bill. And it purports to fix the special-interest favors in the Senate bill not by eliminating them—but by expanding them to everyone.

The bill's one new inspiration is a powerful federal board that would regulate premiums in the individual insurance market. In all 50 states, insurers are already required to justify premium increases to insurance commissioners, who generally have the power to give a regulatory go-ahead, or not. But their primary concern is actuarial soundness and capital standards, making sure that companies have enough cash to pay claims.

The White House wants to create another layer of review that will be able to reject any rate increase that is "unreasonable or unjustified." Any insurer deemed guilty of such an infraction by this new bureaucracy "must lower premiums, provide rebates, or take other actions to make premiums affordable." In other words, de facto price controls.

Insurance premiums are rising too fast; therefore, premium increases should be illegal. Q.E.D. The result of this rate-setting board will be less competition in the individual market, as insurers flee expensive states or regions, or even a cascade of bankruptcies if premiums are frozen and the cost of the care they are expected to cover continues to rise. For all the Dickensian outrage about profiteering by WellPoint and other companies, insurance is a low-margin business even for health care, and at least 85 cents of the average premium dollar, usually more, is devoted to actual health services.

Price controls are always the first resort of national health care—i.e., Medicare's administered prices for doctors and hospitals. This new White House gambit is merely a preview of ObamaCare's inevitable planned medical economy, which will reduce choice and quality.

The coercive flavor that animates this exercise is best captured in the section that purports to accept the Senate's "grandfather clause" allowing people who like their current health plan to keep it. Except that "The President's Proposal adds certain consumer protections to these 'grandfathered' plans. Within months of legislation being enacted, it requires plans . . . prohibits . . . mandates . . . requires . . . the President's Proposal adds new protections that prohibit . . . ban . . . and prohibit . . . The President's Proposal requires . . ." After all of these dictates, no "grandfathered" plan will exist.

Meanwhile, the new White House plan further vitiates the remnants of cost-control that remained in the House and Senate bills. Now the highly vaunted excise tax on high-cost insurance plans won't kick in until 2018, whereas it would have started in 2013 in the Senate bill, and this tax will only apply to coverage that costs more than $27,500.

Very few plans ever reach that threshold, and sure enough, this is the same $60 billion deal the White House cut in December with union leaders who have negotiated very costly benefits. Now it is extended to all to avoid the taint of political favoritism.

While the White House claims to eliminate the "Cornhusker Kickback," the Medicaid bribe that bought Nebraska Senator Ben Nelson's vote, political appearances are deceiving. As with the union payoff, what the White House really does is broaden the same to all states, with all new Medicaid spending through 2017 and 90% after 2020 transferred to the federal balance sheet. Governors will love this ruse, but national taxpayers will pay more.

And more again, because the White House has adopted the House's firehose insurance subsidies. People earning up to 400% of the poverty line—or about $96,000 for a family of four in 2016—will qualify for government help, and, naturally, this new entitlement is designed to expand over time.

The Administration also claims to have discarded the House's 5.4-percentage-point surtax on joint-filers earning more than $1 million a year, but it sneaks it back in by expanding the Senate's expansion of the 2.9% Medicare payroll tax to joint income about $250,000. The White House would now apply that tax for the first time to income from "interest, dividends, annuities, royalties and rents," details to come.

***

The larger political message of this new proposal is that Mr. Obama and Democrats have no intention of compromising on an incremental reform, or of listening to Republican, or any other, ideas on health care. They want what they want, and they're going to play by Chicago Rules and try to dragoon it into law on a narrow partisan vote via Congressional rules that have never been used for such a major change in national policy. If you want to know why Democratic Washington is "ungovernable," this is it.

Sears Holdings 2009 Results
Chairman's Letter
February 23, 2010

Sears Profit Soars on 2008 Items;
Kmart Improves Again
By Karen Talley and Nathan Becker - Dow Jones Newswires
February 23, 2010

Sears profit more than doubles, revenue slips
February 23, 2010

Sears Closing 8 Namesake Stores,
13 Kmarts Across US
By Karen Talley - Dow Jones Newswires - New York
February 22, 2010

"The investment question is not will Sears make money from the third party extension; they likely will," said Credit Suisse analyst Gary Balter. "The question is at what costs to the core? Sears and Kmart's sales per square foot points to it being one of the least visited stores in retailing, with these brands the few bright spots."

Sears Pitching Kenmore To Competitors
By Alan Wolf -- TWICE,
February 22, 2010

Hoffman Estates, Ill. - Sears is looking to sell its Kenmore appliances through other retailers.

According to a report in the Chicago Tribune, the chain has already approached local majap competitor Abt Electronics about carrying its venerable private-label appliance line.

Abt passed on the opportunity, the newspaper reported.

The effort is part of a larger strategy, announced two years ago, to sell Sears' proprietary brands through other retail outlets. At the time, chairman Eddie Lampert said the plan would increase market share and "create value," and brought in former Proctor & Gamble executive Guenther Trieb to spearhead the effort as president of brands.

The strategy gained momentum this month after Ace Hardware agreed to begin carrying Craftsman tools in May, and Sears licensed out its Diehard brand for an open line of power accessories.

"Our mission is to develop a brand-building factory that grows the business, the brand equity and shareholder value of Craftsman, Kenmore and DieHard," Trieb reportedly wrote in an internal Sears publication obtained by the Chicago Tribune.

To help promote Kenmore, the company plans to showcase the line in a temporary storefront called the "Kenmore Live Experience Studio" next month in Chicago, the newspaper reported.

Credit Suisse retail analyst Gary Balter gave the company kudos for literally "thinking outside the box," but said that selling its house brands in competitors' stores could further weaken traffic for Sears and Kmart.

"The investment question is not will Sears make money from the third-party extension. They likely will," Balter wrote in a research note. "The question is at what costs to the core? Sears' and Kmart's sales-per-square-foot points to it being one of the least visited stores in retailing, with these brands the few bright spots. It has already tried to move Craftsman and other brands to Kmart but with little success. How much pain will the core stores suffer as a customer goes to Ace instead of to Sears to buy a Craftsman tool? Time will tell."

On the other hand, he argued, "Expanding distribution ... to other retailers could boost sales of those products, help Sears gain greater scale with its suppliers, boost brand recognition and grow the base of loyal customers for those brands, and in doing that, perhaps even drive some consumers back into Sears or Kmart stores over time to shop the full line of products its own stores will continue to offer."

Sears will report its fourth-quarter and full-year earnings for 2009 on Tuesday.
 

Sears' Eddie Lampert moves closer to long-awaited cash-out
By: Monée Fields-White - Chicago Business
February 22, 2010

Edward Lampert is finally giving investors a taste of what they expected when he bought Sears Holdings Corp.

Investors flocked to Sears after Mr. Lampert's $11-billion takeover, largely in the belief that he would extract cash from the company's most valuable assets: vast real estate holdings and popular consumer brands.

Five years later, Mr. Lampert is making moves that appear to be aimed at exactly that. In recent weeks, Sears announced a licensing deal to allow sales of some DieHard-brand products at non-Sears stores. Last week, the Hoffman Estates-based retail chain said it would franchise its Sears Auto Centers to car dealerships.

Mr. Lampert also has been investing heavily in online merchandising — including an initiative to let other merchants sell through Sears' Web site — and he has created a new warehouse concept, MyGofer, where consumers can pick up items they bought online or from a catalog.

All of those moves could hurt store sales. But they also could help generate higher and higher-profit sales from Sears brands and reduce the company's reliance on stores. That could lead to store closings and real estate sales.

"It is definitely a beginning of attempting to monetize assets of the company," says Neil Stern, a partner at Chicago retail consultancy McMillan Doolittle LLP. Mr. Lampert "has been limited with the recession in terms of how much he can actually do. As we emerge, it's reasonable to expect more deals."

Investors seem to agree. Since the DieHard licensing deal's announcement on Feb. 11, Sears shares are up 6.3%. They could get another boost this week if the company's fourth-quarter earnings beat analysts' expectations, as many predict.

To be sure, Mr. Lampert, 47, a hedge fund manager who became chairman of Sears when he merged it with Kmart Corp. in March 2005, has never publicly acknowledged any grand plan to unload real estate. In fact, while he has eliminated about 90 stores since late 2008, Sears' overall store count has gone up to 3,530 under his leadership. Last week, he announced plans to close another 21 stores.

' It is definitely a beginning of attempting to monetize assets of the company.' — Neil Stern, partner, McMillan Doolittle LLP And selling stores — especially low-earning mall sites — in the current real estate market would be difficult. Mr. Stern says any meaningful divestiture is likely several years away.

The total value of Sears' real estate ranges between $10.05 billion and $23.16 billion, according to Deutsche Bank estimates.

WINNING CHANCE

Wall Street still views the stores as a burden on Sears' balance sheet. A report from New York-based Morgan Stanley analysts estimates that between Sears and Kmart, Mr. Lampert has "several hundred" stores that produce negative cash flow. The closure of up to 400 sites could boost free cash flow by as much as $200 million, they estimate. "The organization could find renewed vigor and heart by focusing on assets that have a chance at winning," the report says.

Mr. Lampert has talked openly about finding new ways to capitalize on Sears' best brands: DieHard, Craftsman, Kenmore and Land's End. With DieHard, Sears begins its first foray into selling a segment of its key brands outside the retail chain.

The licensing agreement with Mount Prospect-based Schumacher Electric Corp., a maker of car battery accessories, includes DieHard battery chargers, jump-starters and power inverters. Sears declines to specify which retail chains would carry the products.

For the first time, Sears will allow a New Jersey-based car dealership to open the first Sears Auto Center franchise. Starting in March, it will sell the same auto parts and services that are found at Sears' 850 auto centers.

This is all "great for the brands, but it does nothing for the retailer," says Steven Keith Platt, director of Hinsdale-based industry research firm Platt Retail Institute.

Sears retools brand plan, will sell Craftsman at Ace stores
By Sandra M. Jones, reporter - ChicagoTribune
February 21, 2010

When Sears Holdings Corp. inked its first deal to license DieHard battery chargers and other accessories to a little-known Mount Prospect company this month, the response from Wall Street was underwhelming.

DieHard batteries, the big prize, wasn't a part of the deal.

Now, the company's attention is turning to Craftsman, the tool and lawn equipment line that appears to hold the best hope of making it outside of Sears and Kmart walls.

Sears signed a deal with Ace Hardware Corp. to sell Craftsman tools at 100 Ace stores starting in May, marking the first time a retailer other than Sears, and more recently its sister division Kmart, has sold the 83-year-old brand, the Chicago Tribune reported late Friday. By June, Ace plans to promote Craftsman products to its 4,500 Ace stores, independent dealers that are part of a cooperative.

Sears has been talking to midsize hardware store chains across the country for the past year about carrying Craftsman products in their stores, holding discussions with Oak Brook-based Ace, Do-It-Best Corp. of Fort Wayne, Ind., and Tractor Supply Co. of Brentwood, Tenn., to name a few, according to people familiar with the discussions.

The move follows an edict made two years ago when Edward Lampert, Sears' chairman and majority shareholder, publicly raised the possibility of selling Sears' exclusive in-house brands through rival retailers. Lampert grouped Sears' marquee brands — Kenmore appliances, Craftsman tools and DieHard car batteries — into a separate brand business unit in 2008 and hired former Procter & Gamble Europe executive Guenther Trieb to run it.

"Our mission is to develop a brand-building factory that grows the business, the brand equity and shareholder value of Craftsman, Kenmore and DieHard," Trieb said in an internal publication for Sears employees. "We believe this will be the next big thing in corporate America."

The strategy runs counter to what most retailers are doing these days. Rivals from Wal-Mart to J.C. Penney to Kohl's to Home Depot are expanding their in-house brands as a way to attract shoppers and stand out from competitors.

Just how much money Sears can make by selling products that it doesn't manufacture itself is questionable. Critics contend that selling Sears' proprietary brands through other retailers could raise cash in the short run, but over time give shoppers fewer reasons to visit its stores and exacerbate the retailer's decline.

Morgan Stanley Research called the value of Sears' brands "highly theoretical" in a report in November.

"As (Sears Holdings) does not own any production assets and its brands are sold only in Sears and Kmart, one could argue that the value on names like Craftsman, Kenmore, DieHard or Lands' End is limited," wrote Morgan Stanley analyst Gregory Melich.

Sears has approached several retailers to gauge interest in their brands without much luck. The company talked to Abt Electronics about Kenmore appliances and also looked at selling Craftsman to Wal-Mart and Costco Wholesale Corp., according to people familiar with the process.

Officials at Wal-Mart, Abt and Do-It-Best declined to comment. Costco and Tractor Supply officials didn't return calls seeking comment.

As for Ace, carrying Craftsman gives it an advantage against the big home-improvement chains, such as Home Depot and Lowe's, which have been hurting its business. Ace has been making a concerted effort lately to bring in more outside labels.

Sears plans to showcase Kenmore, which is its biggest brand, at an estimated $4.9 billion in annual revenue, at a pop-up shop in Chicago in March. The temporary location called the Kenmore Live Experience Studio will have a social media component, Sears spokesman Tom Aiello said.

Sears declined a request to make an executive available to talk about the brand strategy.

Already, Sears has found it challenging to convince auto-parts stores to carry DieHard batteries, according to people familiar with the talks. Johnson Controls, a major supplier of DieHard batteries, also makes in-house brands for the major auto-parts stores. The prospect of DieHard batteries sharing shelf space with Johnson Control's other private-label products has been an obstacle, according to people familiar with the talks.

Allen Martin, Johnson Controls' vice president and general manager for the Americas, declined to comment beyond saying, "Sears is a longstanding customer (and) we're committed to supplying the highest quality batteries and services to support the success of all our customers."

Earlier this week, Sears said it will allow franchisees to open Sears Auto Centers, signaling another move to profit off its brands by opening them to outsiders. The first franchise is slated to open in March.

Daniel J. Danhauer

Note:
Both obituaries are correct -- two funeral homes, two services, two different days.

Daniel J. Danhauer, 84, of LaGrange, formerly a 30 year resident of Addison, Daniel is preceeded in death by his wife Lucille; he is survived by his wife Jeanne; loving father of Susie Clark, Kathleen (Stephen) Jacobs, Deborah (Dan) Supis, Daniel A. (Nancy) Danhauer and Sandy (John) Fuelts; Cherished grandfather of Jamie, Mike, Brian (Nicole), Ann, Kevin, William, Ashley and Tommy; treasured great-grandfather of Ella and Avery; also survived by many nieces nephews and friends.

Funeral Service Friday 9 a.m. from Humes Funeral Home, 320 W. Lake St. Addison (2 Mi E. of Rt. 53, 2 Mi W. of Rt. 83) to St. Philip the Apostle for Mass at 9:30 a.m. Interment Queen of Heaven. Visitation 3 to 9 p.m. Thursday.

Daniel worked for Sears-Roebuck and Co. as a National Merchandise Manager for 35 years and was a member of the Board of Directors at Hitatchi/Nissay-Sanyo for 15 years. For info., www.humesfh.com or 630-628-8808.

Daniel J. Danhauer

Daniel J. Danhauer, of LaGrange, beloved husband of Jeanne and the late Lucille; loving father of Susie Clark, Kathleen (Stephen) Jacobs, Debbie (Dan) Supis, Daniel A. (Nancy) Danhauer, Sandy (John) Fuelts, James (Ellen) Newton, Susan (late Paul) Kreke, Greg (Kathy) Newton, Marilyn (Mike) Rooney, and Lucy (Billy) March; devoted grandfather of Jamie and Mike Clark, Brian (Nicole), Kevin and Ann Jacobs, Bill Supis, Ashley and Tommy Fuelts, Jeff (Heather) , Patrick, Timothy, and Emily Newton, Matthew, (Melissa), Evan, Kim Kreke, Chrissy (Pat) Crowley, Jake Newton, David, Colleen, and Ryan Rooney, Erin and Will March, and Brandi Piper; dear great-grandfather of Ella and Avery Jacobs, Justin, Lily, and Quinn Newton, Jack and Sean Crowley; fond brother of Jerome (Pat) Danhauer and Nancy (Robert) King; dear uncle of many.

Visitation 3 to 9 p.m. Tuesday at at Hallowell & James Funeral Home, 1025 W. 55th St., Countryside. Prayers 9:15 a.m. Wednesday at the funeral home to St. Cletus Church, LaGrange, for Mass at 10 a.m. Interment will be held privately with the family. In lieu of flowers, memorials to Alzheimer's Association or Cystic Fibrosis Foundation appreciated. Funeral Home phone 708-352-6500.

Penney Offers Upbeat View, Sending Shares Higher
Big Pension Expense Depresses Fourth-Quarter Income,
but Margins Gain as Chain Avoids Deep Holiday Discounts
By Rachel Dodes and Karen Talley - The Wall Street Journal
February 20, 2010

J.C. Penney Co. on Friday forecast a return to growth following more than two years of monthly sales declines, even as its fiscal fourth-quarter earnings fell 5.2% on a pension charge.

Myron E. Ullman III, chief executive of the Plano, Texas, department-store chain, attributed the improving outlook to several new initiatives such as the fall 2010 introduction of new lines from Liz Claiborne Inc. and the Spanish fast-fashion chain Mango and the expansion of Sephora cosmetics boutiques in its stores. The company said it expects to take market share from competitors.

"We are assuming that the consumer is still somewhat traumatized for legitimate reasons, whether it be the jobs situation or constricted credit and other things," Mr. Ullman said.

The comments came a day after Wal-Mart Stores Inc. offered a soft sales outlook.

Penney posted a profit of $200 million, or 84 cents a share, for the quarter ended Jan. 30, down from $211 million, or 95 cents a share, a year earlier. Sales fell 3.6% to $5.55 billion.

The profit included $71 million, or 18 cents a share, in pension expenses, compared with a 10 cents a share gain a year ago.

Penney's profit from sales improved in the recent fiscal year. Gross margin, or sales price less cost of goods, hit 39.4%, a historical peak, as the 108-year-old company increased private-label offerings, weaned consumers off aggressive discounting and improved the flow of new merchandise.

The retailer's gross margin rate is expected to remain at the fourth quarter's 38.2% level as year-over-year sales turn higher, said Chief Financial Officer Robert Cavanaugh.

Investors liked the results and optimistic outlook, lifting Penney shares 6.6% to $27.66 in 4 p.m. trading Friday on the New York Stock Exchange.

Penney's focus for the coming year is to boost store productivity, rather than expand aggressively. "We're doing this the old-fashioned way," Mr. Ullman said. "We're not just going out and opening more stores. We don't think there are a lot of real-estate opportunities out there that make sense."

Some analysts are still skeptical. "We think management's top-line outlook for this year will likely prove to be aggressive—especially as Kohl's Corp. looks to get more aggressive on the pricing front and Target Corp. is showing signs of improvement in their apparel offerings," said Michelle Clark, a retail analyst at Morgan Stanley.

Like other retailers, the company has been battling a sharp decline in consumer spending. Penney has seen its shoppers focus on essential purchases as home vacancies grow and joblessness remains high.

Penney said Friday it will unveil a new five-year plan in April. The company had put its long-range plan on hold during the financial crisis in favor of a "Bridge Plan," but feels it is now positioned for growth again.

Mr. Ullman said some macro-economic indicators have started to "go in the right direction" and predicted that midterm elections will generate more enthusiasm, as politicians begin "talking about ways they are going to improve the job situation, the ways that the government is going to assist in getting consumers back on their feet."

Health Backlash in the States
The provinces revolt against loss of choice.
Review & Outlook - The Wall Street Journal
February 20, 2010

The backlash against ObamaCare is moving beyond the Tea Parties and has now arrived in state capitals. In more than 30 states, legislators are proceeding to pass statutes or ballot initiatives that would guarantee the right to choose medical services and insurance.

These laws are generally called Health-Care Freedom Acts. If enacted, they will set off a Constitutional 10th Amendment fight over whether there are limitations on the powers of the federal government to regulate health care and override the protections in these state laws.

Almost all these measures would make it illegal for the government at any level to require a citizen of the state to purchase health insurance. This would let Americans opt out of any federal "individual mandate," which makes people buy insurance or pay a tax, a la Massachusetts and both the House and Senate bills in Congress.

Second, the bills would guarantee the right of residents to pay directly for health services without incurring penalties or fines. This means citizens could go outside any government-run system to purchase private treatments from the doctor or hospital of their choice. Often, the federal Medicare program doesn't let doesn't let doctors charge extra for specialized care.

Virginia's legislature has already passed such a law and Republican Governor Bob McDonnell is about to sign it. The house in both Utah and Idaho passed a similar bill last week, and the Tennessee senate did so earlier this week by a vote of 26 to 1. Legislatures in Georgia, Kansas, Missouri, Nebraska, Oklahoma, South Dakota and Tennessee are expected to hold votes in coming weeks. Last June, Arizona's legislature authorized a November 2010 referendum vote on the Arizona Health Freedom Act. A similar ballot initiative failed by a slim margin (0.5%) in 2008 after health insurers spent millions to defeat it.

If Congress passes some version of health legislation, the federal law may pre-empt these state laws. But states do have the right to provide extra protections beyond what federal law guarantees. Many states, for example, have freedom of speech protections that go beyond federal law.

These bills aren't a "nullification" of a federal law. Clint Bolick of the Arizona-based Goldwater Institute notes: "If federal legislation is enacted, individuals would still have the option to participate in federal health insurance programs. This act simply protects a person's right not to participate."

The major constitutional issue is whether Uncle Sam has the right to supercede state laws, based on the Commerce Clause of the Constitution, and compel Americans to join a federal health system, as they must with Social Security and Medicare.

President Obama and Democrats continue to maintain their legislation is faltering because Americans don't understand the good it would do for the quality of their medical care. But the spectacle of "health-care freedom" legislation emerging in some 30 states suggests that voters and state lawmakers do understand that ObamaCare will alter the delivery of health care in ways that will limit choice and access.

Mr. Obama next week will hold his televised health-care summit, ostensibly to hear the ideas of Congressional Republicans. Maybe he should expand the format to include state legislators who are far out ahead of their Beltway colleagues.

Sears to close 8 stores
By Monée Fields-White - Chicago Business
February 19, 2010

(Crain’s) — Sears Roebuck & Co. is shutting eight of its namesake stores.

The closings — none of which are local — are part of the Hoffman Estates-based retailer's ongoing effort to dump underperforming locations.

The news comes a day after parent Sears Holdings Corp. said it would cut 13 Kmart Corp. stores, including locations in Woodstock and Crestwood.

Sears currently has 3,530 stores nationwide, including Kmart locations. With these cuts, Sears will have closed 98 stores since late 2008.

The company will shut down department stores in Georgia, Tennessee, North Carolina and Texas. It will also shutter four Sears Essentials locations in New Jersey, Wisconsin and New Hampshire.

The stores are expected to close by May 9, except for the New Hampshire location, which is slated to shut down on April 4. Sears Holdings is due to announce its fourth-quarter earnings results on Tuesday.

Sears Agrees to Sell Craftsman Tool Brand at Ace Hardware
By Mary Ellen Lloyd - Dow Jones Newswires
February 19, 2010

Sears Holdings Corp. (SHLD) has agreed to sell its popular Craftsman tool brand through Ace Hardware stores, as the company turns again to outsiders to help grow its sales.

Sears and Ace Hardware Corp., the largest retailer-owned cooperative in the hardware industry by sales, said Friday they willl start the partnership with 100 Ace stores selling about 10% of the total Craftsman line in May. The move confirms months of speculation that Sears might turn to an outside hardware or home-improvement chain to help sell the popular line of hand tools, portable power tools and tool storage as sales at Sears namesake department stores have continued to struggle.

Guenther Trieb, president of Sears Brands Management Corp., said in an interview that Sears will decide later whether to roll out the store-within-a-store Craftsman offering to all 4,500 Ace stores. But all stores in June will be allowed to sell a smaller grouping of Craftsman tools for a Father;s Day promotion.

"We believe it is a great strategic complement to our current format," Trieb said. "It is a strategic move to drive the overall value of the brand."

Ace currently sells tools made by Stanley Works (SWK) and by Black & Decker Corp. (BDK), two companies that are in the process of merging.

Sears roughly 900 department stores will remain the "headquarters" for sales of Craftsman, which has some 6,000 stock-keeping units, Trieb said. And the Ace stores will also complement Craftsman's presence in about 80 Orchard Supply Hardware stores and 110 Sears Hardware Stores in off-mall locations, he said.

Sears declined to discuss Craftsman's recent business trends but said the line remains the market leader "by far," Trieb said.

With its lifetime guarantee, Craftsman tools have long been popular in the U.S.

Popular Mechanics magazine readers last year named Craftsman as their favorite hand-tool brand, and market-research firm Harris Interactive's 2009 brand-equity ranking listed Craftsman as tops for tools.

Earlier this week, Sears said it will allow franchisees to open Sears Auto Centers. And on Feb. 11, the company's brand-management business announced a trademark licensing deal with a manufacturer to sell DieHard battery chargers, jump starters and other accessories to outside retailers.

Sears has said it won;t rule anything out with respect to expanding sales of other well known brands, including Kenmore appliances.

"We are doing these move because we see great strategic opportunity, and we currently don't have any specific plans for Kenmore," Trieb said Friday.

Shares of Sears Holding traded down 0.1% at $94.99 in late trading Friday. Shares of Stanley Works closed down 0.8% at $55.92, while Black & Decker ended regular trading down 1% at $70.62.

Analysts have said Sears, which reports fourth-quarter results Tuesday, must do something to revitalize sales. Sales trends in the department stores weakened through the first two months of the Jan. 30-ended fourth quarter, according to a Sears update Jan. 7. Comparable-store sales were running at a 6% decrease, on top of a 10.7% decline a year ago and compared with a 4.6% drop in the third quarter.

Sears said tools and automotive sales had been stronger, but large-ticket hardline categories offset the increases.
For its part, Ace seems like it could use a boost to its tools business. The cooperative earlier this week said domestic merchandise sales were most hurt by declines in the tools and electrical categories.

The cooperative reported net income of $95.7 million for the Jan. 2-ended fiscal year, an 11.5% increase. Full-year revenue fell 10.4% to $3.5 billion.

Ace Hardware signs on to sell Craftsman
By Sandra M. Jones - Chicago Tribune.com
February 19, 2010

Sears Holdings Corp. agreed to sell Craftsman tools at Ace Hardware stores starting in May.

About 100 Ace stores will sell Craftsman tools including hand tools and portable power tools. By June, Ace will promote Craftsman products to its 4,500 Ace stores.

Sears has been talking to mid-size hardware store chains across the country for the past year about carrying Craftsman products in their stores, holding discussions with Oak Brook-based Ace Hardware Corp., Do-It-Best Corp. of Fort Wayne, Ind. and Tractor Supply Co. of Brentwood, Tenn., to name a few, according to people familiar with the discussions.

The move follows an edict made two years ago when Edward Lampert, Sears' Chairman and majority shareholder, raised the possibilty publicly of selling Sears' exclusive in-house brands through rival retailers.

Lampert grouped Sears' marquee brands;Kenmore appliances, Craftsman tools and DieHard car batteries—into a separate brand business unit in 2008 and hired former Procter & Gamble Europe executive Guenther Trieb to run it.

"Our mission is to develop a brand building factory that grows the business, the brand equity and shareholder value of Craftsman, Kenmore and DieHard," said Trieb in an interview published and distributed to Sears employees. "We believe this will be the next big thing in corporate America."

The strategy runs counter to what most retailers are doing these days. Rivals from Walmart to J.C. Penney to Kohl's to Home Depot are expanding their in-house brands as a way to attract shoppers and stand out from their competitors.

Critics contend that selling Sears' proprietary brands through other retailers could raise cash in the short run, but over time give shoppers fewer reasons to visit its stores and exacerbate the retailer's decline.

J.C. Penney Offers Improved Outlook
By Rachel Dodes and Karen Talley
Dow Jones Newswires
February 19, 2010

J.C. Penney Co. on Friday forecast a return to growth following more than two years of monthly sales declines, even as its fiscal fourth-quarter earnings fell 5.2% on a pension charge.

Myron E. Ullman III, chief executive of the Plano, Texas, department-store chain, attributed the improving outlook to several new initiatives such as the fall 2010 introduction of new lines from Liz Claiborne Inc. and the Spanish fast-fashion chain Mango and the expansion of Sephora cosmetics boutiques in its stores. The company said it expects to take market share from competitors.

"We are assuming that the consumer is still somewhat traumatized for legitimate reasons, whether it be the jobs situation or constricted credit and other things," Mr. Ullman said.

The comments came a day after Wal-Mart Stores Inc. offered a soft sales outlook.

Penney posted a profit of $200 million, or 84 cents a share, for the quarter ended Jan. 30, down from $211 million, or 95 cents a share, a year earlier. Sales fell 3.6% to $5.55 billion.

The profit included $71 million, or 18 cents a share, in pension expenses, compared with a 10 cents a share gain a year ago. Penney's profit from sales improved in the last fiscal year. Gross margin, or sales price less cost of goods, hit 39.4%, a historical peak, as the 108-year-old company increased private-label offerings, weaned consumers off aggressive discounting and improved the flow of new merchandise.

The retailer's gross margin rate is expected to remain at the fourth quarter's 38.2% level as year-over-year sales turn higher, said Chief Financial Officer Robert Cavanaugh.

Investors liked the results and optimistic outlook, lifting Penney shares 6.6% to $27.66 in 4 p.m. trading Friday on the New York Stock Exchange.

Penney's focus for the coming year is to boost store productivity, rather than expand aggressively. "We're doing this the old-fashioned way," Mr. Ullman said. "We're not just going out and opening more stores. We don't think there are a lot of real-estate opportunities out there that make sense."

Some analysts are still skeptical. "We think management's top-line outlook for this year will likely prove to be aggressive—especially as Kohl's Corp. looks to get more aggressive on the pricing front and Target Corp. is showing signs of improvement in their apparel offerings," said Michelle Clark, a retail analyst at Morgan Stanley.

Like other retailers, the company has been battling a sharp decline in consumer spending. Penney has seen its shoppers focus on essential purchases as home vacancies grow and joblessness remains high. Last year, Penney embarked on a push into urban areas by launching its first store in Manhattan, hoping an edgier mix of merchandise would boost its credibility among urban consumers.

Penney said Friday it will unveil a new five-year plan in April. The company had put its long-range plan on hold during the financial crisis in favor of a "Bridge Plan," but feels it is now positioned for growth again.

Mr. Ullman said some macro-economic indicators have started to "go in the right direction" and predicted that midterm elections will generate more enthusiasm, as politicians begin "talking about ways they are going to improve the job situation, the ways that the government is going to assist in getting consumers back on their feet."

The Oscar for Best Retiree Goes to...
Our picks for the 10 best retirement films of all time
Lifestyles - Dow Jones Newswires
February 19, 2010

Retirement, at first blush, isn't the stuff that Hollywood blockbusters are made of. But with the Academy Awards scheduled for March 7, and given our focus at Encore, we began thinking about films in which retirees, or the idea of retirement, play a central role. As it happens, retirement isn't a bad way to pick up an Oscar. Or at least a nomination.

Starting with recommendations from experts (read: my brother Stephen), a thorough search of databases (imdb.com is a favorite) and some help from The Wall Street Journal's film critic, Joe Morgenstern, we've assembled a list of the 10 best retirement films of all time. Even found a blockbuster or two. Imagine that. —Glenn Ruffenach

About Schmidt (2002) Jack Nicholson is Warren Schmidt, a newly retired insurance actuary and, soon after the film begins, widower. With no spouse, no job and no purpose, he climbs into a 35-foot Winnebago (which he and his wife had planned to use in retirement) and begins a poignant search for a life. A remarkably understated performance by the usually redoubtable Mr. Nicholson. Both he and Kathy Bates, with whom he memorably shares a hot tub in the film, were nominated for Oscars.

At first blush, retirement films aren't the stuff that Hollywood blockbusters are made of. But as it happens, focusing on retirement isn't a bad way to pick up an Oscar. Or at least a nomination.

Cocoon (1985) Retirement meets science fiction. Director Ron Howard brings together a group of listless retirees—led by Don Ameche, Wilford Brimley and Hume Cronyn—and a group of hearty aliens (the Antareans) and creates a tender (and, at times, very funny) look at later life in America. Mr. Ameche has a wonderful scene as a newly energized dancer and, at age 77, won the Oscar for best supporting actor.

Going in Style (1979) Retirement is tough for George Burns, Art Carney and Lee Strasberg. The three men live together in an apartment in Queens, N.Y., subsisting primarily on Social Security checks. Days are spent on a bench in a nearby park, feeding the pigeons. To relieve the tedium and earn a few extra dollars, Mr. Burns's character suggests—what else?—robbing a bank. Which they proceed to do, with surprising results. Although billed primarily as a comedy, this is a remarkably frank and sometimes heartbreaking portrait of later life.

Harry and Tonto (1974) A retired teacher in New York, played by Art Carney, is forced to move when his apartment building is torn down to make way for a parking garage. After a brief and unsatisfying stay with his son, Mr. Carney's character and his best friend, a cat named Tonto, take to the road. Their journey is a series of small but splendid discoveries. Mr. Carney, at the time known primarily for his television and stage work, scored one of the biggest upsets in Oscar history, taking the best-actor award over fellow nominees Albert Finney, Dustin Hoffman, Jack Nicholson and Al Pacino.

High Noon (1952) Gary Cooper is trying to retire in this classic western. But the bad guys, and his conscience, won't let him. Mr. Cooper is Will Kane, a small-town marshal whose new wife is played by Grace Kelly. It's his last day on the job, but when he learns that a man he sent to prison years earlier is returning on the noon train to seek revenge, he stays and fights. Mr.

Cooper got the Oscar for best actor, but the film itself lost the best-picture contest (inexplicably) to Cecil B. DeMille's "The Greatest Show on Earth."

The Lion in Winter (1968) Can a king retire? It's Christmas in the year 1183, and Peter O'Toole, as an aging Henry II, hopes to choose a successor from among his three sons. But the boys and their calculating mother, played by Katharine Hepburn, have their own ideas about who should inherit the throne. Brilliant dialogue and inspired performances (including Anthony Hopkins's first screen role). Oscars for Ms. Hepburn as best actress (in a tie with Barbra Streisand for "Funny Girl") and best adapted screenplay.

Lost in America (1985) A very funny look at early retirement gone wrong. When he is denied his dream job, advertising executive David Howard (Albert Brooks) and his wife, Linda (Julie Hagerty), ditch their careers in California, cash out their savings accounts, and plan to spend the rest of their days crisscrossing the country in a motor home. Unhappily, Linda, after just 24 hours on the road, loses virtually all their money in a Las Vegas casino. (David: "Why didn't you tell me when we got married that you were this horrible gambling addict?" Linda: "I've only gambled twice in my life. This was the second time.") David's subsequent conversation with the casino manager—an effort to get the couple's money back—alone is worth the price of admission.

On Golden Pond (1981) Henry Fonda, in his last picture, is a retired college professor approaching his 80th birthday. He's grappling with his mortality—and with his estranged daughter, played by Jane Fonda. Much was made, at the time, of the on-screen pairing of the real-life father and daughter. But the film belongs to the older Fonda and Katharine Hepburn, who plays his devoted, indomitable wife. Received three Oscars: best actor, best actress (Ms. Hepburn's fourth) and best adapted screenplay.

The Straight Story (1999) Actor Richard Farnsworth earned a best-actor nomination for his role as Alvin Straight, a 73-year-old retiree in the small town of Laurens, Iowa. Straight lives with his daughter ( Sissy Spacek), and neither is able to drive. This becomes a problem when Straight learns that his brother, who lives 300 miles away in Wisconsin, has been felled by a stroke. Wanting to see the brother before he dies (and unable to afford a bus ticket), Straight boards a riding lawn mower and (at five miles per hour) sets out for Wisconsin. As with "Harry and Tonto," the odyssey makes the picture. Based on a real story.

Unforgiven (1992) Clint Eastwood is William Munny, a retired gunman turned hog farmer. "I'm just a fella now," he tells his former partner, played by Morgan Freeman. "I ain't no different than anyone else no more." But when a young cowboy offers Munny a chance to avenge a cruel attack on a prostitute (and to split a $1,000 reward), he mounts up, metes out frontier justice (giving special attention to a corrupt sheriff played by Gene Hackman) and becomes, if for just a few moments, the man he once was. Almost flawless. Oscars for best director (Mr. Eastwood), best supporting actor (Mr. Hackman) and best picture.

Wal-Mart Foresees Soft Sales Ahead
By Miguel Bustillo and Karen Talley - Wall Street Journal
February 19, 2010

Wal-Mart Stores Inc., which benefited from better sales during the start of the economic slump as consumers turned to discount merchandise, said its U.S. sales fell during the holidays even as other retailers saw signs of slow recovery.

The decline in U.S. sales during the fourth quarter at the world's largest retailer—which collects roughly $1 out of every $10 spent at stores in America—was accompanied by a company warning that soft sales would persist through April.

"The economy remains challenging for many of our customers around the world," Chief Executive Mike Duke said, adding, "We expect first-quarter sales in the U.S. will be difficult."

With unemployment high and many Americans still digging out from the housing collapse, many economists believe consumer spending is unlikely to soon return as the big driving force it was through much of the past decade.

Still, consumer spending grew at an inflation-adjusted rate of 2% in the fourth quarter, and economists expect it will increase at that pace or better in the current period. Consumer confidence, while still below pre-recession levels, is substantially stronger than a year ago, and an increase in savings has offered households more wiggle room.

"Consumers may be becoming a bit less cost-conscious again," said MF Global economist James O'Sullivan.

Historically, that trend has not benefited discounters such as Wal-Mart. The 1.6% decline in same-store sales at its U.S. Wal-Mart department stores and Sam's Club warehouses came at a time when many retail rivals are beginning to report that shoppers are gradually gravitating back to higher-priced merchandise after hunkering down during the recession.

"The benefit they saw last year from the 'trade-down' effect seems like it's dissipating," said Alan Lancz, president of Alan B. Lancz & Associates, an investment advisory firm.

Chief Financial Officer Tom Schoewe said in a conference call with reporters that Wal-Mart was continuing to retain the new customers it had gained during the recession. The retailer has said during the past year that more affluent consumers were increasingly among its shoppers.

But he acknowledged that increased competition from other retailers, which had adjusted inventories and introduced lower-cost goods by late 2009, weighed on Wal-Mart's results.

"We are a little bit of a victim of our success from last year," Mr. Schoewe said, noting that Wal-Mart faced difficult comparisons to its strong quarter a year earlier, when its U.S. sales at Wal-Mart department stores rose 6% even as they sharply declined nearly everywhere else. "It has certainly got more difficult in the fourth quarter," he added.

Wal-Mart still managed to notch a 22% profit increase for the three months ended Jan. 31, thanks to improved expense controls and international sales gains. For the full year, it posted a record $405 billion in annual revenues.

Following a stronger than anticipated holiday showing, top retail chains reported that sales in stores open at least a year rose 3.3% in January compared to the prior year according to a retail index compiled by Thomson Reuters. The index does not include Wal-Mart, which stopped reporting monthly sales last year.

Among the stronger performers were department stores Macy's Inc., which saw same-store sales grow 3.4%, and Nordstrom Inc., where sales jumped 14%. Wal-Mart rival Target Corp. also eked out a 0.5% increase, continuing a slow revival after months of weaker sales.

Restaurant companies including Darden Restaurants Inc., the parent of the Olive Garden and Red Lobster chains and a bellwether for casual dining, also have recently reported better sales after a lengthy period of declines.

Wal-Mart executives said the U.S. sales declines, were due primarily to falling prices in food and electronics, two critical categories for the discount retailer. The drop was below the company's forecast of flat comparable-store sales, plus or minus one percent.

Other retailers, such as Best Buy Co., however, have reported that they were overcoming deflation on items such as flat-panel televisions with higher sales volumes, and Wal-Mart had managed to do so as well until recently.

Yet despite Wal-Mart's recent weakening, the discount giant still apparently managed to wrest a larger share of U.S. spending overall. Craig R. Johnson, president of Customer Growth Partners, a retail consultancy, noted that Wal-Mart's U.S. revenues for 2009 represented 10.5% of U.S. retail spending based to overall figures released by the Commerce Department for retail sales minus autos, restaurants and fuel.

"Individual retailers are arguably gaining share on Wal-Mart, including Kohl's [Corp.] and maybe Best Buy," Mr. Johnson said, "But it's not like consumers are suddenly opting to pay full price again. Wal-Mart still has tremendous appeal in this economy, and that's not likely to change."

Wal-Mart posted a quarterly profit of $4.63 billion, or $1.21 a share, up from $3.79 billion, or 96 cents a share, a year earlier. Excluding a tax benefit in the latest quarter and other charges, including the costs of closing 10 Sam's Club locations, earnings per share were $1.17.

For the current quarter, the Bentonville, Ark., company projected earnings per share of 81 cents to 85 cents, and another round of flat U.S. comparable-store sales, plus or minus one percent. Wal-Mart said it expected stronger performance during the second half of the fiscal year and forecast annual earnings of $3.90 to $4 a share.

Wal-Mart's stock declined 1%, or 59 cents, at $53.47 in 4 p.m. trading on the New York Stock Exchange.

—Justin Lahart contributed to this article.

Sears Begins Franchising of Its Auto Centers
By Mary Ellen Lloyd - Dow Jones Newswires
February 18, 2010

For the second time in a week, Sears Holdings Corp. (SHLD) said it is turning to outsiders to help expand its business as the company said Thursday that it is allowing franchisees to open Sears Auto Centers.

Sears said it is offering auto dealers that recently lost their new-car franchises a new use for their space: Sears Auto Centers offering parts and services; over-the-counter merchandise; and previously owned vehicle sales.

The franchises will have the same products and services available at about 850 company-owned Sears Auto Centers, including DieHard batteries. They will offer similar services as other auto-repair chains, such as Pep Boys-Manny Moe & Jack (PBY), Meineke Car Care Centers and Monro Muffler Brake Inc. (MNRO).

In some cases, Sears Auto Center franchises will be allowed to carry other Sears products, such as Craftsman tools, said Bill Jackson, senior vice president of Sears Holdings Corp. and president of Sears Authorized Independent Auto Centers LLC.

Sears will help line up financing for car purchases, and it hopes eventually to offer Sears-backed warranties on the vehicles, Jackson said in an interview.

Last week, Sears brand-management business announced a trademark licensing deal with a manufacturer of battery accessories to sell DieHard brand battery chargers, jump starters and other accessories to outside retailers. That agreement with Schumacher Electric Corp. didn't include DieHard batteries themselves.

While the two deals are unrelated and structured very differently, they show the company is seeking efficient ways to grow, Jackson said.

"Sears has a lot of spectacular assets, the auto business being one of them and the brands being another," Jackson said. "What we are looking for is smart ways to expand them."

Department-store sales at Sears namesake stores have continued to struggle, despite strong brand names in Craftsman, Kenmore and other products. Sears will report its fiscal fourth-quarter results on Tuesday.

The first auto center franchise, in East Windsor, N.J., is targeting an April 1 opening, and Jackson said Sears has several other new centers in the works. "We are looking right now, initially, for 20," he said. "Once we define the model and get it to work perfectly, we think it could be hundreds.

"Sears has got a great auto business today," he said, declining to offer specific financial details. "This was a great opportunity to expand our model."

Franchises must pay an initial fee of $30,000 for the franchise and $3,000 a month in brand license fees for the first year and $2,000 monthly thereafter. A service license fee of 2% of prior year revenue is charged after the first year, and franchisees contribute 3% of net revenue to a marketing fund to support national advertising and activities.

Several thousand auto dealerships in the U.S. have lost their franchises as auto makers have consolidated amid efforts to become profitable.

"There is a lot of very good talent in rejected Jeep, Chrysler, Dodge, Saturn, Pontiac and Saab dealers that already have the facilities in place, the manpower and years of experience to help Sears sell their products," said Bruce Coleman, president of the Coleman Auto Group dealership in East Windsor, N.J., and a partner in what will be the first Sears Auto Center franchise.

Coleman Auto Group will turn its former Chrysler and Jeep store into the Sears Auto Center, converting the former new-car showroom into a shop selling Sears auto accessories, rooftop carriers, battery chargers and other items.

Shares recently traded down 1.2% at $94.20. The stock has more than doubled in value in the past year.

Sears Begins Franchising of Its Auto Centers
Dow Jones Newswires
February 18, 2010

Sears Holdings Corp. (SHLD) said it will allow franchising of its Sears Automotive businesses, offering many auto dealers that have recently lost their franchises to sell new vehicles a new use for their space.

Sears said franchisees will be able to open Sears Auto Centers that focus on parts and services, over-the-counter merchandise and previously owned vehicle sales. The franchises will have the same products and services that are now available at about 850 company-owned Sears Auto Centers.

Several thousand auto dealerships in the U.S. have lost their franchises as auto makers have consolidated amid efforts to become profitable. Coleman Auto Group of East Windsor, N.J., is the first dealership to franchise under the Sears name and will open a Sears Auto Center in March.

The move by Sears comes as department-store sales at its namesake stores have continued to struggle. But growth has been reported of late at its Kmart chain. Sears will report its fiscal fourth-quarter results on Tuesday.

Shares closed at $95.32 on Wednesday and were inactive premarket. The stock has more than doubled in value in the past year.

Sears will franchise auto centers
By Sandra Guy - Staff Reporter - Chicago Sun-Times
February 18, 2010

For the second time in a week, Sears Holdings Corp. is making good on Chairman Edward S. Lampert’s goal of letting outside businesses buy rights to the name of Sears’ once-proprietary brands.

Sears announced this morning that it will franchise its Sears Auto Center business to auto dealers who have lost their dealerships in the Chrysler and General Motors downsizings.

The new franchised centers will offer the same products and services for cars, light trucks and motorcycles as do Sears’ company-owned auto centers, according to the Hoffman Estates-based retailer. Sears Auto Centers offer repair service and sell products such as DieHard batteries and Michelin, Goodyear, BF Goodrich and Bridgestone tires.

Some of the franchised auto centers will be located next to body-shop operations, making them convenient for customers, Sears said.

The first franchisee is Coleman Auto Group in East Windsor, N.J., which will operate a Sears Auto Center on the site of a former Chrysler dealership.

One week ago, Sears announced it had signed a licensing agreement to sell DieHard battery chargers, jump starters and power inverters to Schumacher Electric Corp.

Lampert, the hedge-fund billionaire who engineered Kmart’s $12.3 billion takeover of Sears five years ago, introduced the idea of selling Sears’ proprietary brands to outside companies three years ago.

Sears has also advertised for entrepreneurs to run its Sears Hometown dealer stores, which sell tools, electronics, lawn mowers and vacuum cleaners.

Wal-Mart's Profit Rises 22%;
Current-Quarter Outlook Is Weak
By Karen Talley - Dow Jones Newswires
February 18, 2010

Wal-Mart Stores Inc. reported a 22% gain in fourth-quarter profit but said sales declined at U.S. stores opened more than a year. The retailing giant also offered tepid first-quarter earnings guidance. The worse-than-expected sales results were due primarily to falling prices in grocery and electronics, the company said. The soft fourth-quarter sales also may reflect that consumers aren't relying on discounters are much.

"The benefit they saw last year from the 'trade-down' effect seems like it's dissipating," said Alan Lancz, president of Alan B. Lancz & Associates, an investment advisory firm. While higher-priced competitor Target Corp. has been seeing improving same-store sales, Wal-Mart's are deteriorating sequentially, Mr. Lancz noted.

For the period ended Jan. 31, Wal-Mart posted a profit of $4.63 billion, or $1.21 a share, up from $3.79 billion, or 96 cents a share, a year earlier. Excluding a tax benefit in the latest quarter and other charges, earnings from continuing operations rose to $1.17 from $1.03. In November, the company projected $1.08 to $1.12, largely below analysts' estimates at the time, which hadn't changed since.

Net sales increased 4.5% to $113.65 billion, falling short of analysts' predictions of $114.36 billion. Sales at U.S. stores opened more than a year fell 1.6%, excluding fuel, and were down 2% at namesake outlets and up 0.7% at the Sam's Club warehouse change. The company had projected a companywide drop of as much as 1%.

For the current quarter, Wal-Mart, based in Bentonville, Ark., projects per-share earnings between 81 cents and 85 cents, while analysts on average have been forecasting 85 cents a share, according to Thomson Reuters. For the year, it said it is targeting $3.90 to $4 a share. On average, analysts have been projecting $3.97 a share.

For the current quarter, the company expects U.S. same-store sales to be flat, plus or minus a percentage point.

Wal-Mart had been faring better than most non-discount retailers because its low prices appeal to recession-weary consumers. But increasing signs of stabilization may be boosting buyers' spending, steering them away from Wal-Mart to more fuller-priced items.

Other consumer-driven sectors of the economy also are seeing signs that consumers are loosening their purse strings. Restaurant chains—such as Darden Restaurants Inc., a bellwether for casual dining—have been in recent weeks reporting better sales as the sector shakes off years of declines.

 

Did Wal-Mart's Price Cuts Help Bag Sales?
By Miguel Bustillo - Wall Street Journal
February 18, 2010

Wal-Mart Stores grabbed plenty of headlines over the holidays with aggressive prices on best-selling books, movies and videogames.

Now, investors are about to find out if the hype helped the world's largest retailer snap up extra sales.

The Bentonville, Ark., company, which reports fiscal fourth-quarter results Thursday, made its reputation by passing price cuts down to consumers, making up for the smaller margins with higher sales. That, in turn, let Wal-Mart squeeze buying clout from vendors that helped the discount retailer push prices even lower.

Lately, though, Wal-Mart has met or exceeded earnings forecasts with unusually high gross margins that suggest the company has been holding onto some of the cost reductions traditionally passed along to customers.

Chief Executive Mike Duke promised last year that the "productivity loop" would make a return, assuaging critics who wondered if the company was veering from founder Sam Walton's blueprint. Wal-Mart rolled out a flurry of targeted promotions every week going into the Christmas holidays, in a bid to underscore its image of having the lowest prices on everything.

Whether the price cuts sparked sales growth during an economic slump is the big question. Wal-Mart already reaped the early benefit of consumers trading down to discount merchandise.

Wal-Mart set expectations low in November, forecasting that sales at stores open at least a year would be somewhere between up 1% and down 1% in the latest quarter. That suggests the company is challenged just to keep the customers it gained during the recession.

Still, Wal-Mart predicted earnings per share of $1.08 to $1.12, above last year's $1.03. The consensus among analysts is $1.12, according to Thomson Reuters.

Though it faces tougher overall sales comparisons from a year ago, Wal-Mart is benefiting from rising food prices and a more favorable exchange-rate environment, which is expected to be a tailwind for its international business this year.

If Wal-Mart can show it piled up sales during the holidays, and issues a rosier projection for its next fiscal year, that would help sway skeptics that the retailer has more market share to gain with its everyday low prices.

With Big Takeover Bid, Simon Aims to Control 30% of U.S. Malls
By Michael J. de la Merced - New York Times
February 17, 2010

After months of speculation, the Simon Property Group on Tuesday finally made an unsolicited $10 billion offer for General Growth Properties, its bankrupt rival. But General Growth quickly rebuffed the approach, calling the bid too low.

The New Park Mall in Newark, Calif., owned by General Growth Properties. The Simon Property Group offered $10 billion for the company on Tuesday.

The Roosevelt Field Mall in Garden City, N.Y., owned by the Simon Property Group, which is well regarded in the industry.

If successful, Simon, already the biggest mall operator in the country, would control about 30 percent of malls in the United States, according to analysts from Bank of America Merrill Lynch.

Merging the two companies, whose portfolios are roughly the same size, would also unite two of the most well-known names in the business.

In a letter sent to Simon late Tuesday, General Growth’s chief executive, Adam Metz, said that he would welcome discussions within the confines of the bankruptcy process.

“We and our board of directors have given considerable thought to your indication of interest and have concluded based on discussions with other interested parties that it is not sufficient to pre-empt the process we are undertaking to explore all avenues to emerge from Chapter 11 and maximize value for all the Company’s stakeholders,” Mr. Metz said.

A merger would allow General Growth to finally remove itself from a 10-month, complicated Chapter 11 case.

Begun 56 years ago as a shopping center in Iowa, General Growth grew to be one of the nation’s biggest mall companies, operating prized malls like the Ala Moana Center in Honolulu, only to run aground because of debt troubles after acquiring the Rouse Company for $12.6 billion in 2004.

Simon, whose chief executive, David Simon, is the scion of the company’s founding family, is regarded by analysts as one of the best-managed mall operators in the business.

Over the last year, Simon has been building up its war chest to prepare for acquisitions to take advantage of depressed commercial real estate prices, with General Growth squarely in its sights. It said on Tuesday that its offer would be largely financed by its cash on hand and existing credit agreements.

“They’re the most logical strategic bidder in the whole world for General Growth,” said James Sullivan, a managing director at Green Street Advisors, a real estate research firm. Mr. Sullivan added that other mall operators might be interested in buying pieces of General Growth’s portfolio.

Simon’s move is meant to pre-empt General Growth’s own plan to emerge from bankruptcy, which may include financial help from another mall operator, Brookfield Asset Management, that owns some of its unsecured debt. A hearing on General Growth’s motion to extend the exclusivity period for its plan of reorganization is scheduled for Monday in federal bankruptcy court in Manhattan.

Simon is portraying its offer as speeding General Growth’s exit from Chapter 11 by paying off $7 billion in unsecured debt in full and in cash and by assuming about $21 billion in secured debt. Under the terms of its proposal, Simon would pay about $6 a share in cash. It would also distribute ownership in General Growth’s planned community development, valued at about $3 a share.

“Simon is in the unique position of being able to offer General Growth creditors and shareholders full, fair and immediate value,” Mr. Simon said in a statement. “Our offer provides much-needed certainty to conclude General Growth’s protracted reorganization process.”

General Growth’s official unsecured creditors committee said in Simon’s statement that it was encouraging talks between the two companies. In the world of mall operators, gaining size and scale gives companies greater bargaining power over their tenants, especially the national retailers whose stores serve as anchors. For Simon, which owns many outlet malls as well as some marquee names like Copley Place in Boston, the merger would also present a more formidable rival to other owners of shopping real estate, including Wal-Mart and operators of strip malls and lifestyle centers, Mr. Sullivan said.

“In the mall business, being bigger is better,” he said.

Advisers for the two companies have met several times in the last few months, according to a person briefed on the matter. Last week, Simon executives formally presented their offer to General Growth’s chief executive, lead independent director and advisers to discuss its takeover proposal. While advisers for the two companies have talked since then, Simon made the matter public after it received no formal response to its offer.

One question is how one of General Growth’s biggest stakeholders, the hedge fund Pershing Square Capital Management, will respond to Simon’s offer. In a December presentation, Pershing Square’s head, William Ackman, said that based on a comparison with publicly traded rivals, he believed General Growth was worth at least $24 a share.

Simon is being advised by the investment banks Lazard, JPMorgan Chase and Morgan Stanley and the law firm Wachtell, Lipton, Rosen & Katz. General Growth’s advisers include the investment banks UBS and Miller Buckfire and the law firm Weil, Gotshal & Manges.

Lampert Raises Exposure To Financials In 4Q
By Brendan Conway - Dow Jones Newswires
February 16, 2010

(Dow Jones)--Hedge fund billionaire Edward Lampert built up exposure to the financial sector last quarter, a regulatory filing Tuesday shows.

Lampert-affiliated RBS Partners reported a substantially larger Citigroup Inc. (C) stake as of Dec. 31, as well as 1.5 million new shares in Wells Fargo & Co. (WFC) and about 454,000 in Bank of America Corp. (BAC). Lampert's Citigroup holdings rose 12.5 million shares to 31.3 million.

The chairman of Sears Holding Corp. (SHLD) also reported 4.5 million shares in lender CIT Group Inc. (CIT), after reporting no CIT stake in the previous period.

The moves reverse some of the adjustments Lampert made over the summer, when he reduced exposure to several financial stocks and eliminated what was once a stake of 15.4 million CIT shares.

Lampert also kept cutting holdings in Sallie Mae (SLM), which he reduced last summer as well. Lampert reported 2.9 million shares in the student lender as of Dec. 31, down from 4.3 million in the previous quarter.

Other adjustments made by the Sears chairman include a trimming of nearly 200,000 shares in Capital One Financial Corp. (COF) and about 400,000 in marketing-services company Acxiom Corp. (ACXM).

Many investors who manage more than $100 million are required to disclose holdings of most types of securities within 45 days of the end of a quarter. The filings give the public its freshest possible look inside the portfolios of well-known investors.

The fourth-quarter deadline was Tuesday.

Simon Bids for General Growth
By Joan E. Solsman - Dow Jones Newswires
February 16, 2010

Simon Property Group Inc. offered to buy General Growth Properties Inc. for about $10 billion as the world's largest shopping-mall operator seeks to absorb the No. 2 mall owner in the U.S. as it grapples with bankruptcy.

Although shopping-mall real-estate investment trusts have been struggling with declines in consumer spending, Simon is viewed as one of the healthiest. It reported better-than-expected quarterly results last month, and although Simon's business was still hurt by write-downs and lower occupancy rates, it predicted brighter days for 2010.

Meanwhile, Simon raised several billion dollars in the latter part of 2009 looking for opportunities to take advantage of woes in the commercial real-estate sector. Simon had said earlier this month it wasn't in active negotiations with General Growth.

The Chicago-based owner of 200 U.S. malls, filed for Chapter 11 bankruptcy protection in April, taking 166 of its malls into the case with it. Since then, it has restructured and extended the due dates of $11.6 billion in mortgages on its malls. But it still needs to reach similar deals with holders of another $3 billion of mortgages and to pay its $7 billion of unsecured debt with either cash or equity.

Simon said Tuesday its proposed deal would accelerate General Growth's emergence from bankruptcy court. The offer gives creditors about $7 billion in considerations by providing a 100% cash recovery of par value plus accrued interest and divided to holders of various debt and securities.

General Growth shareholders would receive more than $9 as share, including $6 in cash plus assets valued at more than $3 a share. It is also prepared to offer Simon common shares instead of cash to General Growth holders interested in owning Simon stock.

Secured debt on General Growth's portfolio would remain in place.

A General Growth spokesman wasn't immediately available to comment. Simon Property's stock closed Friday at $72 and wasn't active premarket.

Simon makes $10B offer for General Growth
Dow Jones Newswires - Chicago Tribune
February 16, 2010

Simon Property Group Inc. offered to buy Chicago-based General Growth Properties Inc. for about $10 billion, as the world's largest shopping-mall operator seeks to absorb the No. 2 mall owner in the U.S. while General Growth grapples with its exit from bankruptcy.

General Growth, a real estate investment trust that owns Water Tower Place and more than 200 regional shopping malls in 45 states, filed for bankruptcy last year.

Although shopping-mall real estate investment trusts have been struggling with declines in consumer spending, Simon is viewed as one of the healthiest. Reporting better-than-expected profit for the fourth quarter last month, Simon was still hurt by write-downs and lower occupancy rates, but it predicted brighter days for 2010.

Meanwhile, Simon raised several billion dollars in the latter part of 2009, looking for opportunities to take advantage of woes in the commercial real-estate sector. Simon had said earlier this month it wasn't in active negotiations with General Growth.

The Chicago-based owner of 200 U.S. malls filed for Chapter 11 bankruptcy protection in April, taking 166 of its malls with it. Since then, it has restructured and extended the due dates of $11.6 billion in mortgages on its malls. But it needs still needs to reach similar deals with holders of an additional $3 billion of mortgages and to pay its $7 billion of unsecured debt with either cash or equity.

Simon said Tuesday its proposed deal would accelerate General Growth's emergence from bankruptcy court. The offer gives creditors about $7 billion in considerations by providing a 100% cash recovery of par value plus accrued interest divided among holders of various debts and securities.

General Growth shareholders would receive more than $9 a share, including $6 in cash plus assets valued at more than $3 a share. It is also prepared to offer Simon common shares instead of cash to General Growth holders interested in owning Simon stock.

Secured debt on General Growth's portfolio would remain in place.

A General Growth spokesman wasn't immediately available to comment. Simon Property's stock closed Friday at $72 and wasn't active premarket.

Sears Holdings Names President of Kmart Apparel Business Unit
Sears Holdings News Release
February 15, 2010

HOFFMAN ESTATES, Ill., Feb. 15 /PRNewswire-FirstCall/ -- Sears Holdings (Nasdaq: SHLD) announced today that apparel veteran Tara Poseley will join the company as SVP and president – Kmart Apparel. She will be responsible for the oversight, leadership and strategic growth of Kmart's apparel business, both in-store and online.

Poseley brings to the company over 20 years of diverse retail experience - leading brand and new business launches, developing Web sites and employing social networking tactics for several well-known retailers. She most recently held the role of President for BEBE SPORT, and in six months created and launched PH8 (fate) to replace the BEBE SPORT brand.

Previous to BEBE SPORT, Tara was President for Disney Stores North America, a division of The Children's Place as well as CEO and President for Design Within Reach, a preeminent provider of distinctive modern design furnishings and accessories. She started her career with Gap Inc., as a merchant trainee.

During her 15 years with the company, she held numerous senior leadership roles including SVP, GapKids and babyGap and played a key role in the launch of gapbody. Poseley earned a bachelor's degree from the University of Wisconsin at Madison.

"We're excited that Tara is joining our apparel team," said John Goodman, EVP – Home and Apparel. "She is an accomplished leader and merchant whom I have worked with previously. She brings to the company excellent product development and brand management experience and a demonstrated success in creating and inspiring high performance teams that are focused on satisfying the customer."

"As we to work to transform our business and enhance our relationships with our customers, I'm pleased to add a leader with Tara's wealth of apparel experience to our team," added Bruce Johnson, Interim CEO and President. "Under John's leadership, we are confident that we will continue to attract high caliber talent to the company."

Poseley will be based in the company's San Francisco apparel offices.

Discover to Pay $775 Million
Settlement With Former Parent Morgan Stanley Brings Legal Feud to an End
By Aparajita Saha-Bubna - Wall Street Journal
February 13, 2010

Discover Financial Services said Friday it would pay $775 million to Morgan Stanley under the terms of a settlement, closing the chapter on a legal battle with its former parent.

The settlement, reported Friday in a filing with the Securities and Exchange Commission, won't affect Discover's bottom line.

That is because the company already had squirreled away reserves, totaling $809 million as of Nov. 30, in anticipation of a payment to Morgan Stanley.

Morgan Stanley last month won a legal ruling under which Discover was obligated to pay as a special dividend over almost $800 million Morgan Stanley said it was owed.

Discover had said it would appeal the ruling.

"On a positive note, the settlement limited the amount Discover had to pay Morgan Stanley," said Sanjay Sakhrani, an analyst at Keefe, Bruyette & Woods, in a research note published Friday.

Mr. Sakhrani has the equivalent of a "buy" rating on Discover shares.

At issue is money stemming from a $2.75 billion antitrust settlement payment Discover received from Visa Inc. and MasterCard Inc. as part of a 2004 lawsuit.

Morgan Stanley, which had acquired Discover in the 1990s as part of its merger with brokerage firm Dean Witter, spun off the card company into an independent entity in 2007.

As part of the spinoff, the companies agreed that Morgan Stanley was entitled to receive a portion of Discover's settlement.

But Riverwoods, Ill.-based Discover contended that Morgan Stanley had breached the spinoff agreement by meddling in the Visa-MasterCard settlement. It declined to pay the dividend.

That prompted Morgan Stanley to file suit against Discover in a New York state court last fall.

Morgan Stanley claimed that it was owed $1.2 billion of the $2.75 billion settlement.

After taxes, that comes to about $785 million, plus interest.

As part of the settlement announced Friday, Discover also dropped its pending case against Morgan Stanley, under which it sought claims for damages from Morgan Stanley "for their breach of contract and tortious interference in settlement negotiations between Discover, Visa and MasterCard."

A spokesman for Morgan Stanley said, "We are delighted with this outcome."

A spokesman for Discover declined to comment beyond the regulatory filing.

Sears Canada turns to Web for ‘endless aisle'
Catalogue giant is betting heavily on the Internet to shore up flagging sales at its bricks-and-mortar department stores.
By Marina Strauss - Globe and Mail - Toronto
February 12, 2010

Toronto — Tucked away on the seventh floor of Sears Canada Inc.'s (SCC-T25.950.712.81%) flagship store in downtown Toronto is a room filled with computers and youthful e-commerce specialists whose work may hold a key to better times for the retailer.

Internally it's known as the war room, a hub of activity where members of the 80-strong Sears e-commerce team converge to plot the company's online strategy. For eight months last year, they worked behind closed doors – sometimes round-the-clock – to test and redesign prototypes for the re-launch of Sears.ca in October. Now they're focused on updating the website with new products and interactive features.

“It's an endless aisle,” Simon Rodrigue, associate vice-president of e-commerce at Sears, said as he settled into a seat in the war room. “The goal is to carry not only everything that exists in the retail channel, but also everything that exists in the catalogue channel – and even more.”

Sears is betting heavily on its endless aisle to shore up flagging sales at its bricks-and-mortar department stores. With an aim of more than doubling cyber sales in five years, it is also rushing to fill a gap left about a year ago when Hudson's Bay Co. (owner of the Bay and Zellers) and Canadian Tire Corp. ditched their e-commerce sites. Despite its rivals' moves, Sears still faces growing pressure to improve its online game as other merchants embrace Web selling.

“It would be a mistake if Sears let its leadership position in e-commerce slip by not upgrading that customer experience,” said Jim Okamura, senior partner at retail consultancy J.C. Williams Group.

Sears Canada already has an edge in online selling. The retailer, controlled by U.S. parent Sears Holding Corp., is one of the few in this country to run a catalogue business, which provides a framework for e-commerce distribution.

Today, cyber sales make up less than 10 per cent of Sears Canada's overall $5.7-billion of annual revenue, but that is up from only 1 to 2 per cent of total sales in 2005, a company spokesman said.

While Sears' overall revenue has been slipping, its online sales rose “in the single digits” in 2009 after having jumped 18 per cent the previous year, Mr. Rodrigue said.

What's more, the outlook for e-commerce in Canada is upbeat. In 2010, online sales are expected to rise by 9 per cent, to $11.3-billion (U.S.), according to data compiled by New York-based researcher eMarketer Inc. “Certainly the Web business is growing faster than the stores,” eMarketer's senior analyst Jeffrey Grau said.

Sears wants to cash in on the trend by chasing younger consumers who have largely abandoned department stores but are prime Internet shoppers. The company is rapidly introducing new products online, ranging from sports collectibles (coming soon: a $1,300 autographed Wayne Gretzky jersey) to eco-clothing and other items that are not carried in Sears' physical stores or its catalogue. It's running online chats and demo videos and touting its wares on Facebook and Twitter; it's adding automatic search techniques that can boost sales by suggesting related products and services when a shopper looks for an item; and it's evaluating its parent company's cyber moves, including a “marketplace” for other businesses to sell their wares at Sears.com.

Ground zero for Sears' e-commerce planning is the war room, a test lab where a white board on one wall is covered with scribbles of sales projections. When an online shopper recently wanted to know how a treadmill could be stored, a jeans-clad team member and colleague headed down to the store's basement treadmill section and videotaped him folding the treadmill and leaning it on a wall. The video was posted on YouTube as well as on Sears.ca.

The e-commerce team has become so important to Sears that it has more than doubled to 80 employees from a year ago, with plans to reach 100 by year's end, even as Sears has shrunk staffing elsewhere in the company. Cyber team members come from major e-rivals such as Indigo Books & Music and Home Depot Canada, where Mr. Rodrigue led the Internet strategy until moving to Sears in mid-2008.

At Sears Canada, he's borrowing a leaf from the playbook of U.S. parent Sears Holdings, which has put a big push on e-commerce to help in its turnaround efforts. The parent has launched a series of websites and mobile phone applications, and is piloting a scheme dubbed MyGofer for drive-through purchase pickups. It runs an online Marketplace in which other sellers peddle their products on Sears.com, paying the retailer a commission of up to 20 per cent.

Mr. Rodrigue is keeping a close eye on the parent's projects for possible ideas to adopt here. His big task last year was to bring the online operation in-house because, up until Oct. 22, it was run by e-tailing giant Amazon.

But the Amazon model failed to give him the flexibility that Sears.com had to quickly tweak the site. “We felt we needed to have more control of our destiny.”

The economics of cyber-selling also can be attractive. Profit margins can be 1- to 2-per-cent higher online than in traditional stores, which are costlier to run, Mr. Okamura said. Sears.ca benefits because it doesn't have to carry the risk of stocking the inventory. Instead, suppliers hold on to the merchandise until it's purchased, at which point it's shipped directly to the customer.

But perhaps the biggest benefit for Sears is the endless aisle. With 350,000 products online now – more than twice the number in its physical stores – Mr. Rodrigue is set to bump that up by more than 25 per cent this year. “Instead of having just five fireplaces online, we can have 100 fireplaces online.”

DieHard accessories to be sold outside Sears stores
Move aims to broaden customer base
By Julie Wernau, reporter - Chicago Tribune
February 12, 2010

The DieHard brand of portable power equipment is moving beyond the walls of Sears Auto Centers, marking the first time a Sears brand will be sold outside the retail chain.

Hoffman Estates-based Sears Holdings Corp. announced Thursday that it has inked a trademark license agreement with Mount Prospect-based Schumacher Electric Corp.

 that will allow DieHard brand power accessories, such as battery chargers, jump starters and power inverters, to be sold in stores in the United States, Puerto Rico and Mexico.

Automotive batteries, the top-selling DieHard product, will continue to be sold exclusively in Sears and Kmart stores.

Sears Chairman Edward Lampert first raised the possibility of selling its exclusive brands to other retailers in an annual letter to shareholders in early 2008, mentioning Kenmore appliances, Craftsman tools and DieHard battery brands.

Kimberly Picciola, a Morningstar analyst, said Sears is likely testing the waters to see whether other exclusive products would fare well in a larger market.

"I think Lampert is looking at ways in which he can really monetize assets that the company has," Picciola said. "They're doing the analysis to see how selling their brands in other channels might cannibalize their existing sales."

Larry Costello, a spokesman for Sears, said customers can expect to see DieHard products on the shelves of other retailers within six months. He would not say which retailers were being considered.

Erik Rosenstrauch, general manager for the DieHard brand, said Sears hopes to expand the brand beyond its typical customers — male do-it-yourselfers with an interest in vehicle maintenance.

Sears has begun to do that through viral YouTube videos that show a DieHard battery powering everything from a home stereo and tanning bed to a hot tub and musical set by Reggie Watts.

"We see this as a huge opportunity to broaden the customer base of the DieHard brand," said Guenther Trieb, senior vice president and president of brands at Sears.
Sears' stock ended Thursday at $90.52, up $1.09.

Sears to let other retailers sell DieHard brand
Monée Fields-White - Chicago Business
February 11, 2010

(Crain's) — Sears Holdings Corp. said Thursday that it reached a trademark licensing deal to sell DieHard branded goods in other retailers' stores.

The agreement with Schumacher Electric Corp. includes DieHard battery chargers, jump starters, and power inverters.

"We're excited that this agreement will allow our customers the opportunity to purchase DieHard power accessories at additional retail outlets," Guenther Trieb, senior vice-president and president of brands, said in a release.

Sears Holdings Chairman Edward Lampert has hinted in the past couple years that the company would look at selling its key brands, such as DieHard, outside of its department stores.

Sears Reaches Agreement With Schumacher Electric to Sell DieHard(R) Brand Products
DieHard Power Accessories to be Available at Additional Retail Outlets
PRNewswire
February 11, 2010

HOFFMAN ESTATES, Ill., Feb. 11 /PRNewswire-FirstCall/ -- Sears Brands Management Corporation announced a trademark license agreement with Schumacher Electric Corporation today which will enable DieHard-branded power accessories to be sold to retailers in the U.S., Puerto Rico and Mexico.

"DieHard is the top selling brand of power accessories in the U.S.," said Guenther Trieb, senior vice president and president of brands. "We're excited that this agreement will allow our customers the opportunity to purchase DieHard power accessories at additional retail outlets."

The DieHard products to be sold as part of the agreement include battery chargers, jump starters, and power inverters. In a 2009 Battery Brand Tracker Survey, DieHard products were selected by an overwhelming margin as "most trusted," "dependable" and "performs in extreme conditions."

"The DieHard name is the most trusted in the automotive battery industry, and the brand is instantly recognized by millions of consumers," said Don Schumacher, CEO of Schumacher Electric. "Through this license agreement, we look forward to expanding the reach of the DieHard brand and the availability of DieHard products through retail channels."

In related news, DieHard is serving as the primary sponsor of the Don Schumacher Racing Dodge Funny Car driven by Matt Hagan in the 2010 NHRA Full Throttle Drag Racing Series. The 23-event season begins in Pomona, Calif., Feb. 11-14. Hagan is in his second season with Don Schumacher Racing.

DieHard has a new home on the Web at the relaunched DieHard.com and a mobile companion at mobile.diehard.com. The sites include a help center, battery selector, maintenance guide and a series of videos documenting DieHard's performance inside the DieHard Torture Labs.

About Sears Holdings Corporation

Sears Holdings Corporation is the nation's fourth largest broadline retailer with approximately 3,900 full-line and specialty retail stores in the United States and Canada. Sears Holdings is the leading home appliance retailer as well as a leader in tools, lawn and garden, home electronics and automotive repair and maintenance. Key proprietary brands include Kenmore, Craftsman and DieHard, and a broad apparel offering, including such well known labels as Lands' End, Jaclyn Smith and Joe Boxer, as well as the Apostrophe and Covington brands. It also has the Country Living collection, which is offered exclusively by Sears and Kmart. We are the nation's largest provider of home services, with more than 12 million service calls made annually. Sears Holdings Corporation operates through its subsidiaries, including Sears, Roebuck and Co. and Kmart Corporation. For more information, visit Sears Holdings' website at www.searsholdings.com.

About the DieHard brand

Introduced in 1967, Sears designed the DieHard to produce 35 percent more usable starting power than other similar batteries. Featuring a revolutionary tough, thin-walled case of translucent polypropylene plastic, which was 50 percent thinner than conventional black rubber-type battery enclosures, the design's extra room meant bigger plates, more acid and extra starting power. Consumers consistently rate DieHard as "most trusted," "dependable," "performs in extreme conditions" by overwhelming margins, according to a 2009 Battery Brand Tracker Survey.

About Schumacher Electric

Established in 1947, Schumacher Electric Corporation has been leading change and driving performance to exceed their customers' expectation. Engineered patent pending technologies and award winning marketing have paved the way for Schumacher to be the battery accessories (battery chargers, portable power sources, 12 volt accessories, etc.) manufacturer of choice. Schumacher internationally distributes to retailers, distributors, OE manufacturers and industrial markets. Schumacher's world headquarters is located in Mount Prospect, Illinois with manufacturing plants in China and Mexico. For more on Schumacher Electric, visit www.batterychargers.com.

Allstate swings to quarterly net profit of $518 million
Operating results exceed analysts' expectations;
investment income falls
By Alistair Barr, MarketWatch
February 10, 2010

SAN FRANCISCO (MarketWatch) -- Allstate Corp. swung to a quarterly net profit of $518 million late Wednesday and operating results released by the insurer exceeded Wall Street estimates.

Allstate (NYSE:ALL) said fourth-quarter net income came in at $518 million, or 96 cents a share. That compares with a net loss of $1.13 billion or $2.10 a share in the same period a year earlier.

Operating earnings, which exclude net realized investment gains and losses, were $592 million, or $1.09 a share, in the latest period. Allstate was expected to make $1.01 a share, according to the average estimate of 17 analysts in a Thomson Reuters survey.

The combined ratio, excluding catastrophes and prior-year reserve re-estimates, was 88.1 in the fourth quarter. In 2010, this ratio will likely be 88 to 90, Allstate said.

The combined ratio measures claims and expenses as a percentage of premiums. It's a closely watched measure of insurers' underwriting performance. Brian Meredith, an insurance analyst at UBS, was expecting a 2010 combined ratio of 88.5 for Allstate.

Allstate was hit hard by investment losses during the 2008 financial crisis. The strong rebound in equities and corporate bonds last year relieved a lot of that pressure. However, the company still faces challenges from a sluggish economy, competition in the auto-insurance market and lower investment income.

Allstate-brand standard auto premiums written climbed less than 1% in the fourth quarter of 2009. Average premiums rose 2.6%, but the number of policies in force declined 1%, according to Allstate.

Net investment income for the fourth quarter of 2009 was $1.1 billion. That was $253 million less than in the same period a year earlier, it noted.

Judge Divides Up the Money in Sears' Record-Setting ADA Settlement
By Lynne Marek - LAW.com
February 9, 2010

A federal judge in Chicago late last week gave final approval to the allocation of $6.2 million among 235 former Sears, Roebuck & Co. employees in the largest settlement ever reached by the Equal Employment Opportunity Commission in an Americans with Disabilities Act class action.

The former workers, who said the company fired them after they went on disability leave, will receive between $2,500 and $122,500 each, depending on their individual circumstances, according to the allocation approved by U.S. District Judge Wayne Andersen of the Northern District of Illinois on Feb. 4. The workers will receive the money in the next two months. Overall settlement of the case with a consent decree was reached and announced last September.

The EEOC sued Hoffman Estates, Ill.-based Sears in 2004 following a complaint from John Bava, an injured appliance service technician who said Sears fired him after he took a leave for knee, wrist and back injuries suffered on the job. Bava is the only plaintiff to get the top $122,500 payout, based on his initiation and the facts of his particular case, said John Hendrickson, who leads the Chicago regional EEOC office that pursued the matter.

The agency found in pretrial discovery that many other employees at the retailer had encountered treatment similar to that experienced by Bava. Gregory Gochanour was the supervisory EEOC trial attorney in Chicago on the case, and he had assistance from Deborah Hamilton and Aaron DeCamp.

Sonnenschein, Nath & Rosenthal lawyer Amy Bess, an employment and litigation partner in Washington, D.C., who was part of the team representing Sears, referred a request for comment to the Sears legal department, which had no comment on the allocation.

Frank O'Reilly
Chicago Tribune
February 10, 2010

Frank O'Reilly, of Bartlett, Veteran of World War II, member of US Marine Corp., fought in Iwo Jima and received a Bronze Star. Beloved husband of Diane, nee Marken; devoted father of Mark (Donna Lafemina), Sharon (Kevin) Kaufman and Maureen (Burley) Howard; dear brother of Mary Miller; dear grandfather of Chris and Kelly Howard, Kyle, Daniel and Rojina Kaufman. Frank lived all his life by his faith.

Friends and family are asked to meet Friday at Clare Oaks Independent Living Center, 825 Carillon, Bartlett, IL, www.clareoaks.com, for a Memorial Mass at 9:30 a.m. Interment private.

Arrangements by Salerno's Rosedale Chapels, for info: 630-889-1700 orwww.salernofuneralhomes.com. Please omit flowers.

Will Walmart, not Whole Foods, save the small farm and make America healthy?
By Corby Kummer The Great Grocery Smackdown - The Atlantic
(March 2010)

BUY MY FOOD at Walmart? No thanks. Until recently, I had been to exactly one Walmart in my life, at the insistence of a friend I was visiting in Natchez, Mississippi, about 10 years ago. It was one of the sights, she said. Up and down the aisles we went, properly impressed by the endless rows and endless abundance. Not the produce section. I saw rows of prepackaged, plastic-trapped fruits and vegetables. I would never think of shopping there.

Not even if I could get environmentally correct food. Walmart’s move into organics was then getting under way, but it just seemed cynical—a way to grab market share while driving small stores and farmers out of business. Then, last year, the market for organic milk started to go down along with the economy, and dairy farmers in Vermont and other states, who had made big investments in organic certification, began losing contracts and selling their farms. A guaranteed large buyer of organic milk began to look more attractive. And friends started telling me I needed to look seriously at Walmart’s efforts to sell sustainably raised food.

Really? Wasn’t this greenwashing? I called Charles Fishman, the author of The Wal-Mart Effect, which entertainingly documents the market-changing (and company-large repercussions—and told me that what it had decided to do since my Natchez foray was to compete with high-end supermarkets. “You won’t recognize the grocery section of a supercenter,” he said. He ordered me to get in my car and find one.

He was right. In the grocery section of the Raynham supercenter, 45 minutes south of Boston, I had trouble believing I was in a Walmart. The very reasonable-looking produce, most of it loose and nicely organized, was in black plastic bins (as in British supermarkets, where the look is common; the idea is to make the colors pop). The first thing I saw, McIntosh apples, came from the same local orchard whose apples I’d just seen in the same bags at Whole Foods. The bunched beets were from Muranaka Farm, whose beets I often buy at other markets—but these looked much fresher. The service people I could find (it wasn’t hard) were unfailingly enthusiastic, though I did wonder whether they got let out at night.

During a few days of tasting, the results were mixed. Those beets handily beat (sorry) ones I’d just bought at Whole Foods, and compared nicely with beets I’d recently bought at the farmers’ market. But packaged carrots and celery, both organic, were flavorless. Organic bananas and “tree ripened” California peaches, already out of season, were better than the ones in most supermarkets, and most of the Walmart food was cheaper—though when I went to my usual Whole Foods to compare prices for local produce, they were surprisingly similar (dry goods and dairy products were considerably less expensive at Walmart).

Walmart holding its own against Whole Foods? This called for a blind tasting.

I conspired with my contrarian friend James McWilliams, an agricultural historian at Texas State University at San Marcos and the author of the new Just Food: Where Locavores Get It Wrong and How We Can Truly Eat Responsibly. He enlisted his friends at Fino, a restaurant in Austin that pays special attention to where the food it serves comes from, as co-conspirators. I would buy two complete sets of ingredients, one at Walmart and the other at Whole Foods. The chef would prepare them as simply as possible, and serve two versions of each course, side by side on the same plate, to a group of local food experts invited to judge.

I STARTED LOOKING into how and why Walmart could be plausibly competing with Whole Foods, and found that its produce-buying had evolved beyond organics, to a virtually unknown program—one that could do more to encourage small and medium-size American farms than any number of well-meaning nonprofits, or the U.S. Department of Agriculture, with its new Know Your Farmer, Know Your Food campaign. Not even Fishman, who has been closely tracking Walmart’s sustainability efforts, had heard of it. “They do a lot of good things they don’t talk about,” he offered.

The program, which Walmart calls Heritage Agriculture, will encourage farms within a day’s drive of one of its warehouses to grow crops that now take days to arrive in trucks from states like Florida and California. In many cases the crops once flourished in the places where Walmart is encouraging their revival, but vanished because of Big Agriculture competition.

Ron McCormick, the senior director of local and sustainable sourcing for Walmart, told me that about three years ago he came upon pictures from the 1920s of thriving apple orchards in Rogers, Arkansas, eight miles from the company’s headquarters. Apples were once shipped from northwest Arkansas by railroad to St. Louis and Chicago. After Washington state and California took over the apple market, hardly any orchards remained. Cabbage, greens, and melons were also once staples of the local farming economy. But for decades, Arkansas’s cash crops have been tomatoes and grapes. A new initiative could diversify crops and give consumers fresher produce.

As with most Walmart programs, the clear impetus is to claim a share of consumer spending: first for organics, now for locally grown food. But buying local food is often harder than buying organic. The obstacles for both small farm and big store are many: how much a relatively small farmer can grow and how reliably, given short growing seasons; how to charge a competitive price when the farmer’s expenses are so much higher than those of industrial farms; and how to get produce from farm to warehouse.

Walmart knows all this, and knows that various nonprofit agricultural and university networks are trying to solve the same problems. In considering how to build on existing programs (and investments),

Walmart talked with the local branch of the Environmental Defense Fund, which opened near the company’s Arkansas headquarters when Walmart started to look serious about green efforts, and with the Applied Sustainability Center at the University of Arkansas. The center (of which the Walmart Foundation is a chief funder) is part of a national partnership called Agile Agriculture, which includes universities such as Drake and the University of New Hampshire and nonprofits like the American Farmland Trust and the Sustainable Agriculture Coalition. To get more locally grown produce into grocery stores and restaurants, the partnership is centralizing and streamlining distribution for farms with limited growing seasons, limited production, and limited transportation resources.

Walmart says it wants to revive local economies and communities that lost out when agriculture became centralized in large states. (The heirloom varieties beloved by foodies lost out at the same time, but so far they’re not a focus of Walmart’s program.) This would be something like bringing the once-flourishing silk and wool trades back to my hometown of Rockville, Connecticut. It’s not something you expect from Walmart, which is better known for destroying local economies than for rebuilding them.

As everyone who sells to or buys from (or, notoriously, works for) Walmart knows, price is where every consideration begins and ends. Even if the price Walmart pays for local produce is slightly higher than what it would pay large growers, savings in transport and the ability to order smaller quantities at a time can make up the difference.

Contracting directly with farmers, which Walmart intends to do in the future as much as possible, can help eliminate middlemen, who sometimes misrepresent prices. Heritage produce currently accounts for only 4 to 6 percent of Walmart’s produce sales, McCormick told me (already more than a chain might spend on produce in a year, as Fishman would point out), adding that he hopes the figure will get closer to 20 percent, so the program will “go from experimental to being really viable.”

Michelle Harvey, who is in charge of working with Walmart on agriculture programs at the local Environmental Defense Fund office, summarized a long conversation with me on the sustainability efforts she thinks the company is serious about: “It’s getting harder and harder to hate Walmart.”

“WE SUPPORT LOCAL FARMERS,” read a sign at an Austin Walmart. I didn’t see any farm names listed in the produce section, but I did find plastic tubs of organic baby spinach and “spring mix” greens with modern labeling that looked like it could be at Whole Foods. My list was simple to the point of stark, for a fair fight. Some ingredients seemed identical to what I’d find at Whole Foods. Organic, free-range brown eggs. Promised Land all-natural, hormone-free milk. A bottle of Watkins Madagascar vanilla for panna cotta. I couldn’t find much in the way of the seasonal fruit the restaurant had told me the chef would serve with dessert. But I did find, to my surprise, a huge bin of pomegranates, so I bought those, and some Bosc pears. The sticking points were fresh goat cheese, which flummoxed the nice sales people (we found some Alouette brand, hidden), and chicken breasts. I could find organic meat, but no breasts without “up to 12 percent natural chicken broth” added—an attempt to inject flavor and add weight. I wasn’t happy with the suppliers, either: Tyson predominated. I bought Pilgrims Pride, but was suspicious. The bill was $126.02.

At the flagship Whole Foods, in downtown Austin, the produce was much more varied, though the spinach and spring mix looked less vibrant. The chicken was properly dry, a fresh ivory color—and more than twice as expensive as Walmart’s. My total bill was $175.04; $20 of the extra $50 was for the meat.

Brian Stubbs, the tall, genial young manager of Fino, and Jason Donoho, the chef, were intrigued as they helped me carry bag after bag into the restaurant’s kitchen. They carefully segregated the bags on two shelves of a walk-in refrigerator. The younger cooks looked surprised by the Whole Foods kraft-paper bags, and slightly horrified by the flimsy white plastic ones from Walmart.

The next night 16 critics, bloggers, and general food lovers gathered around a long, high table at the restaurant. Stubbs passed out scoring sheets with bullets for grades of one (worst) to five (best) for each of the four courses, and lines for comments.

The first course, bowls of almonds and pieces of fried goat cheese with red-onion jam and honey, was a clear win for Walmart. The Walmart almonds were described as “aromatic,” “mellow,” “pure,” and “yummy,” the Whole Foods almonds as “raw,” though also more “natural”; they were in fact fresher, though duller in flavor. (Like the best of the food I saw at the Austin Walmart, the packaging for the almonds had a homegrown Mexican look.) The second course, mixed spring greens in a sherry vinaigrette, was another Walmart win: only a few tasters preferred the Whole Foods greens, calling them fresher and heartier-flavored. And only one noticed the little brown age spots on a few Walmart leaves, but she was a ringer—Carol Ann Sayle, a local farmer famous for her greens.

So far Walmart was ahead. But then came the chicken, served with a poached egg on a bed of spinach and golden raisins. A woman whose taste I already thought uncanny—she works as an aromatherapist—compared the broth-infused meat to something out of a hospital cafeteria: “It’s like they injected it with something to make it taste like fast food.” I thought it was salty, damp, and dismal. The spinach, though, was another story: even the most ardent brothy-breast haters thought the Walmart spinach was fresher.

Dessert was the most puzzling. I had thought that Walmart’s locally sourced milk and exotic-looking vanilla would be the gold standard, but the Whole Foods house brands slaughtered them (“Kicks A’s ass,” one taster wrote). People couldn’t find enough words to diss the Walmart panna cotta (“artificial, thin”) and praise the Whole Foods one (“like a good Christmas”). I wished I’d bought the identical Promised Land milk at Whole Foods, to see if there is in fact a difference in the branded food products that suppliers give Walmart, as there is in the case of other branded products. The pomegranate seeds, sadly, were wan, with barely any flavor, particularly compared with the garnet gems from Whole Foods. But Walmart got points from the chef, and from me, for carrying pomegranates at all.

As I had been in my own kitchen, the tasters were surprised when the results were unblinded at the end of the meal and they learned that in a number of instances they had adamantly preferred Walmart produce. And they weren’t entirely happy.

IN AN IDEAL WORLD, people would buy their food directly from the people who grew or caught it, or grow and catch it themselves. But most people can’t do that. If there were a Walmart closer to where I live, I would probably shop there.

Most important, the vast majority of Walmarts carry a large range of affordable fresh fruits and vegetables. And Walmarts serve many “food deserts,” in large cities and rural areas—ironically including farm areas. I’m not sure I’m convinced that the world’s largest retailer is set on rebuilding local economies it had a hand in destroying, if not literally, then in effect. But I’m convinced that if it wants to, a ruthlessly well-run mechanism can bring fruits and vegetables back to land where they once flourished, and deliver them to the people who need them most.

Ten GOP Health Ideas for Obama
We don't need to study lawsuit reform for one minute longer.
By Newt Gingrich and John C. Goodman - The Wall Street Journal
February 10, 2010

'If you have a better idea, show it to me." That was President Barack Obama's challenge two weeks ago to House Republicans regarding health-care reform. He has since called for a bipartisan forum, not to start over on health reform but to "move forward" on the "best ideas that are out there."

The best ideas out there are not those that were passed by the House and Senate last year, which consist of more spending, more regulations and more bureaucracy. If the president is serious about building a system that delivers more quality choices at lower cost for every American, here's where he should start:

• Make insurance affordable. The current taxation of health insurance is arbitrary and unfair, giving lavish subsidies to some, like those who get Cadillac coverage from their employers, and almost no relief to people who have to buy their own. More equitable tax treatment would lower costs for individuals and families. Many health economists conclude that tax relief for health insurance should be a fixed-dollar amount, independent of the amount of insurance purchased. A step in the right direction would be to give Americans the choice of a generous tax credit or the ability to deduct the value of their health insurance up to a certain amount.

• Make health insurance portable. The first step toward genuine portability—and the best way of solving the problems of pre-existing conditions—is to change federal policy. Employers should be encouraged to provide employees with insurance that travels with them from job to job and in and out of the labor market. Also, individuals should have the ability to purchase health insurance across state lines. When insurers compete for consumers, prices will fall and quality will improve.

• Meet the needs of the chronically ill. Most individuals with chronic diseases want to be in charge of their own care. The mother of an asthmatic child, for example, should have a device at home that measures the child's peak airflow and should be taught when to change his medication, rather than going to the doctor each time.

Having the ability to obtain and manage more health dollars in Health Savings Accounts is a start. A good model for self-management is the Cash and Counseling program for the homebound disabled under Medicaid. Individuals in this program are able to manage their own budgets and hire and fire the people who provide them with custodial services and medical care. Satisfaction rates approach 100%, according to the Robert Wood Johnson Foundation.

We should also encourage health plans to specialize in managing chronic diseases instead of demanding that every plan must be all things to all people. For example, special-needs plans in Medicare Advantage actively compete to enroll and cover the sickest Medicare beneficiaries, and stay in business by meeting their needs. This is the alternative to forcing insurers to take high-cost patients for cut-rate premiums, which guarantees that these patients will be unwanted.

• Allow doctors and patients to control costs. Doctors and patients are currently trapped by government-imposed payment rates. Under Medicare, doctors are not paid if they communicate with their patients by phone or e-mail. Medicare pays by task—there is a list of about 7,500—but doctors do not get paid to advise patients on how to lower their drug costs or how to comparison shop on the Web. In short, they get paid when people are sick, not to keep them healthy.

So long as total cost to the government does not rise and quality of care does not suffer, doctors should have the freedom to repackage and reprice their services. And payment should take into account the quality of the care that is delivered. Once physicians are liberated under Medicare, private insurers will follow.

• Don't cut Medicare. The reform bills passed by the House and Senate cut Medicare by approximately $500 billion. This is wrong. There is no question that Medicare is on an unsustainable course; the government has promised far more than it can deliver. But this problem will not be solved by cutting Medicare in order to create new unfunded liabilities for young people.

• Protect early retirees. More than 80% of the 78 million baby boomers will likely retire before they become eligible for Medicare. This is often the most difficult time for individuals and families to find affordable insurance. A viable bridge to Medicare can be built by allowing employers to obtain individually owned insurance for their retirees at group rates; allowing them to deposit some or all of the premium amount for post-retirement insurance into a retiree's Health Savings Account; and giving employers and younger employees the ability to save tax-free for post-retirement health.

• Inform consumers. Patients need to have clear, reliable data about cost and quality before they make decisions about their care. But finding such information is virtually impossible. Sources like Medicare claims data (stripped of patient information) can help consumers answer important questions about their care. Government data—paid for by the taxpayers—can answer these questions and should be made public.

• Eliminate junk lawsuits. Last year the president pledged to consider civil justice reform. We do not need to study or test medical malpractice any longer: The current system is broken. States across the country—Texas in particular—have already implemented key reforms including liability protection for using health information technology or following clinical standards of care; caps on non-economic damages; loser pays laws; and new alternative dispute resolution where patients get compensated for unexpected, adverse medical outcomes without lawyers, courtrooms, judges and juries.

• Stop health-care fraud. Every year up to $120 billion is stolen by criminals who defraud public programs like Medicare and Medicaid, according to the National Health Care Anti-Fraud Association. We can help prevent this by using responsible approaches such as enhanced coordination of benefits, third-party liability verification, and electronic payment.

• Make medical breakthroughs accessible to patients. Breakthrough drugs, innovative devices and new therapies to treat rare, complex diseases as well as chronic conditions should be sped to the market. We can do this by cutting red tape before and during review by the Food and Drug Administration and by deploying information technology to monitor the quality of drugs and devices once they reach the marketplace.

The solutions presented here can be the foundation for a patient-centered system. Let's hope the president has the courage to embrace them.

Mr. Gingrich is former speaker of the U.S. House of Representatives and founder of the Center for Health Transformation. Mr. Goodman is president and CEO of the National Center for Policy Analysis.

Court Approves $6.2 Million Distribution in EEOC vs Sears Disability Settlement
Kansas City infoZine
February 9, 2010

235 Former Employees Terminated at End of Workers’ Compensation Leaves of Absence to Share Settlement Proceeds After Participating in Claims Process

Chicago, IL - infoZine - The U.S. Equal Employment Opportunity Commission (EEOC) today announced court approval of the distribution of a $6,200,000 compensation fund in the landmark Americans With Disabilities Act (ADA) litigation between the EEOC and Sears, Roebuck & Co.

The distribution is being carried out pursuant to the terms of a consent decree approved by Federal District Judge Wayne Anderson on September 29, 2009. In its lawsuit against Sears, the EEOC had alleged that Sears maintained an inflexible workers’ compensation leave exhaustion policy and terminated employees instead of providing them with reasonable accommodations for their disabilities, in violation of the ADA. The case resulted in the largest ADA settlement in a single lawsuit in EEOC history. Under the terms of the decree, the EEOC provided claim forms to certain Sears employees who had been terminated under Sears’ workers’ compensation leave policy. The claimants were asked to report to the EEOC, among other things, the extent of their impairments, their ability to return to work at Sears, and whether Sears had made any attempt to return them to work. Based on these criteria, the EEOC found that 235 individuals were eligible to share in the settlement. The average award was approximately $26,300. More than twenty claimants were found to be ineligible by the EEOC. As with all EEOC litigation, none of the settlement fund will retained by the EEOC; all of it will be distributed.

“It is a satisfying day indeed when victims finally receive compensation for the wrongful discrimination they have endured,” said EEOC Acting Chairman Stuart J. Ishimaru. “The EEOC is pleased and proud that we fought long and hard on this case to protect the rights of workers with disabilities, and that many Sears employees will now benefit from our law enforcement efforts.”

Chicago Regional Attorney John Hendrickson said, “The Sears case has been a long haul, but now it’s over—this is it. The court has enjoined future discrimination by Sears and approved the amount of money each class member will receive for the particular discrimination he or she suffered. Their day for compensation is here, and as far as the EEOC is concerned, that makes it a good day for everyone involved.”

EEOC Trial Attorney Aaron DeCamp noted that, in addition to the disbursement of settlement funds, the EEOC is seeing positive effects from the consent decree. “As a result of the decree, we believe Sears has an improved workers’ compensation leave process, and it has posted notices regarding the decree. We know that employees have been seeing the notices because we’ve been receiving inquiries as a result. So we think it’s pretty clear that our lawsuit genuinely benefited the employees of Sears and strengthened the company’s human resources processes.”

The lawsuit, filed in November 2004, was assigned to Federal District Court Judge Wayne Anderson of the Northern District of Illinois and Magistrate Judge Susan Cox, and is captioned EEOC v. Sears Roebuck & Co., N.D. Ill. No. 04 C 7282. Judge Anderson entered the order approving the monetary distributions on February 4.

The EEOC litigation team included, in addition to Hendrickson and DeCamp, Supervisory Trial Attorney Gregory Gochanour and Trial Attorneys Ethan Cohen, Deborah Hamilton and Laurie Elkin.

The EEOC Chicago District Office is responsible for processing charges of discrimination, administrative enforcement, and the conduct of agency litigation in Illinois, Wisconsin, Minnesota, Iowa, and North and South Dakota, with Area Offices in Milwaukee and Minneapolis.

Allstate Denies Plans to Terminate 3,000+ Agents
By Pat Speer - Insurance Networking News
February 8, 2010

Ahead of its earnings call scheduled for this Wednesday, Allstate denied growing reports in online blogs, trade journals and in the general press of its plans to reduce its distribution network by 3,000-plus independent agents.

Maryellen Thielen, senior manager of Financial Communications, Allstate Corporate Relations, told Insurance Networking News that Allstate has not set targets for agency numbers or size, but qualified its goal of seeking to work with agents who can provide “superior levels of customer service.

“It’s clear that growing agencies is good for our customers, the agencies and Allstate,” she said. “We’ve seen that agency locations in the range of $3 million to $4 million in premiums (between 3,000 to 4,000 policies in force) have the scale to support the staff and other resources needed to provide superior levels of customer service.”

Without specifying the metrics that would be used to measure Allstate’s desired level of customer service, Thielen did say that Allstate will provide smaller agencies with the incentives and resources necessary to meet and exceed those customer expectations.

“Some agencies may choose not to take this journey with us, but for agency owners committed to providing consistently superior levels of service, the opportunities have never been better to grow their agencies,” she said.

Allstate offered the following as examples of specific resources being promoted to their agents “to help Allstate agencies enhance the customer experience—and their success:”

• Agency technology: An Allstate Web site offers a self-assessment tool and other aids to help Allstate agents find opportunities to improve service (e.g., location and staffing) and grow. • 24/7 support from the Allstate call centers

• Education: Allstate is providing tools to help customers understand their insurance better—for example, through its new “Auto Insurance Made Simple” brochure

• Detailed customer research down to the agency level

• Added support for Allstate premier service agencies, the designation for its highest performing agencies (based on business results and customer experience)

Analysts, meanwhile, are hedging their bets on Allstate’s earnings call, stating that, on average, the company is expected to report earnings per share (EPS) of $1.01. Last quarter (sequential), Allstate reported EPS of $0.99, missing consensus estimates of $1.01. For the full year, the company is expected to post EPS of $3.39, predict analysts.

Retailers Continued Comeback Into January
Sales Rose 3.3% as Long-Suffering Department and Clothing Stores Showed Signs That Consumers Are Returning
By Elizabeth Holmes - The Wall Street Journal
February 5, 2010

Apparel retailers followed up a strong holiday showing with a good January by turning what is usually a month for clearance sales into an opportunity to move spring merchandise at full prices.

Clothing stores kept inventories lean and held the line on discounts over the holidays, leaving shoppers hungry for marked-down products in the new year, said Ken Perkins, president of Retail Metrics Inc. Buyers snapped up whatever clearance merchandise was left in the first two weeks of the month then moved on to spring outfits, which sold at or near tagged prices.

The result was the biggest increase in sales in nearly two years. That doesn't mean consumers are back in force: Retailers' terrible showing in January 2009 was an easy one to beat, and shoppers still need to be lured in by bargains. But it does show retailers and consumers have a better handle on their circumstances, which bodes somewhat better for profits and sales.

"You can say you are in a challenging position and have a tough set of circumstances surrounding you," Macy's Inc. Chief Executive Terry Lundgren said, describing the position consumers find themselves in. "But at least you can forecast where the future is going to be."

Sales at stores open at least a year, the retail industry's main performance benchmark, rose 3.3% in January over the prior year, according to Thomson Reuters and Retail Metrics Inc. The index doesn't include retail behemoth Wal-Mart Stores Inc.

January has historically been a clearance period for retailers and therefore less important to the fourth quarter than the critical holiday months of November and December. Still, the result was "a little bit of icing on a cake that had already been baked," says Todd Slater, an analyst with Lazard Capital Markets.

The strong showing led retailers including Macy's, Gap Inc. and TJX Cos. to raise their outlooks for profits in their fiscal fourth quarters, which ended last weekend.

Several retailers did better than expected. Teen retailers and department stores, both of which were expected to post slight declines, reported increases of 6.5% and 2.5%, respectively. Sales at apparel retailers rose 7.3%.

Macy's saw a 3.4% increase in same-store sales for January, which Mr. Lundgren attributed in part to low levels of clearance merchandise, which drove more full-priced selling.

American Eagle Outfitters Inc., which has said it is working on improving its fashion, reported same-store sales up 10% for January. Children's Place Retail Stores Inc. saw sales climb 12%.

Higher-end retailers that added lower opening prices to their assortments also did well. Nordstrom Inc., which has expanded the range of prices on its shelves, had the best results of the monthly reporters, with an increase of 14%. "We still have a lot of work ahead of us in order to improve service and continue earning our customers’ business,” says Blake Nordstrom, the company's president.

Abercrombie & Fitch Co. reported the biggest sales surprise of the month, with same-store sales up 8% in January. Analysts had forecast a decline of 8%. The company said it benefited from the redemption of $22 million in gift cards, which were distributed as a promotion to holiday buyers at its namesake brand and lower-priced Hollister division. The free gift cards expired Jan. 30.

Discounters faced challenges last month, in part because the Super Bowl, held in January last year, has been moved to February. Costco Wholesale Corp. posted flat U.S. sales, excluding gasoline, that fell short of analysts' estimates. Thediscounter reported soft TV sales last month, but said that trend was reversing this month.

January's results underscore the importance of bargains for shoppers. Some of the best figures came from low-priced retailers. TJX Cos, which operates Marshalls and T.J. Maxx, reported a 12% increase in same-store sales. Discount department store Kohl's Corp. saw a 6.5% increase, while Old Navy, Gap Inc.'s bargain brand, posted a 10% increase.

Higher-end retailers that added lower opening prices to their assortments also did well. Nordstrom Inc., which has expanded the range of prices on its shelves, had the best results of the monthly reporters, with an increase of 14%.

January sales typically benefit from the redemption of gift cards, which usually go towards the purchase of full-priced merchandise. Sales of merchant-branded gift cards, meaning cards for a specific store, rose 2.1% in the 2009 holiday season, according to the Holiday Gift Card Performance Report from card-processing firms First Data. For specialty retailer, the dollar value of gift cards sold rose 7.3%. The average gift card value was $43.14.

— Rachel Dodes contributed to this article.

Wal-Mart laying off 300 workers at Arkansas HQ
Wal-Mart to trim 300 jobs at Arkansas headquarters in effort to cut duplication
By Chuck Bartels, AP Business Writer - Yahoo Finance.com
February 3, 2010

LITTLE ROCK, Ark. (AP) -- Wal-Mart Stores Inc. is cutting 300 administrative jobs at its headquarters as it completes a yearlong series of changes to improve performance. The company has cut almost 14,000 jobs in the past 13 months.

Wal-Mart President and CEO Mike Duke told employees about the latest layoffs in a memo on Wednesday.

"With this last major strategic piece in place, we are beginning our new fiscal year with every part of our business focused on being even more responsive to our customers," Duke wrote. He said the world's largest retailer trimmed its labor force to advance its strategy of improving its "growth, leverage and returns."

The 300 being laid off this month at the company's Bentonville, Ark., headquarters include workers in corporate affairs, finance, human resources, information systems and legal departments, Wal-Mart spokesman Dave Tovar said.

Wal-Mart, which generated $400 billion in sales last year, has welcomed wealthier consumers trading down from higher-price stores during the recession. But it also has noticed financial strain among its core customers, including bigger swings in spending between paychecks.

Duke said an essential part of Wal-Mart's culture is always striving for greater efficiency. He said the company's new fiscal year, which began Monday, is off to a productive start.

"Last fall, we laid out three strategic priorities to deliver even more value for both customers and shareholders: growth, leverage and returns," Duke wrote. "Each move has been designed to help us become more global, take advantage of our scale, and move our business even closer to the customer."

The goal, company officials told investors in October, is to cut costs so it can lower prices for shoppers and in turn boost sales.

Wal-Mart, which has 2 million employees worldwide, has changed its global sourcing network and, last month, cut 11,200 jobs in its 600-store Sam's Club warehouse division when it turned over in-store demonstrations to an outside company. The cut amounted to 10 percent of Sam's Club's work force of 110,000. That cut included 10,000 workers, mostly part-timers, who offered product samples to customers and 1,200 workers who recruited new club members.

Sam's also closed 10 underperforming stores, which cost another 1,500 jobs.

A year ago, Wal-Mart cut between 700 and 800 headquarters workers in its real estate, apparel and health and wellness departments. That layoff followed a reduction in the number and size of new stores Wal-Mart said it would build. The company also plans to renovate many existing stores.

Wal-Mart said last week that it was realigning its U.S. operations in an effort to give more autonomy to executives in regional markets and reinvigorate U.S. growth. Vice Chairman Eduardo Castro-Wright said the changes would help the company better use its resources and "facilitate our growth as we seek to enter new markets and develop new segments across the U.S."

Wal-Mart isn't alone in trying to reduce overhead as consumers continue to spend carefully. Home Depot Inc., the largest U.S. home-improvement retailer, said last month would lay off 1,000 employees as it cuts three pilot programs and some support positions. The cut amounts to less than 1 percent of Home Depot's more than 300,000 workers.

Bookseller Borders Group Inc. announced last month it would lay off 164 employees -- less than 1 percent of its work force of 22,5000 -- to cut costs amid slumping sales.

Wal-Mart, which reports on its earnings Feb. 18, has experienced some softness in its U.S. business. In the most recent quarter, its Walmart chain saw sales at U.S. stores open at least a year fall 0.5 percent, though total sales rose 1.6 percent in stores abroad. Adjusted for currency fluctuations, international sales rose 12.1 percent.

AP Retail Writer Anne D'Innocenzio contributed reporting from New York.

Social Security could be next to need a bailout
By Allan Sloan - Washington Post
February 2, 2010

Don't look now. But even as the bank bailout is winding down, another huge bailout is starting, this time for the Social Security system.

A report from the Congressional Budget Office shows that for the first time in 25 years, Social Security is taking in less in taxes than it is spending on benefits.

Instead of helping to finance the rest of the government, as it has done for decades, our nation's biggest social program needs help from the Treasury to keep benefit checks from bouncing -- in other words, a taxpayer bailout.

No one has officially announced that Social Security will be cash-negative this year. But you can figure it out for yourself, as I did, by comparing two numbers in the recent federal budget update that the nonpartisan CBO issued last week.

The first number is $120 billion, the interest that Social Security will earn on its trust fund in fiscal 2010 (see page 74 of the CBO report). The second is $92 billion, the overall Social Security surplus for fiscal 2010 (see page 116).

This means that without the interest income, Social Security will be $28 billion in the hole this fiscal year, which ends Sept. 30.

Why disregard the interest? Because as people like me have said repeatedly over the years, the interest, which consists of Treasury IOUs that the Social Security trust fund gets on its holdings of government securities, doesn't provide Social Security with any cash that it can use to pay its bills. The interest is merely an accounting entry with no economic significance.

Social Security hasn't been cash-negative since the early 1980s, when it came so close to running out of money that it was making plans to stop sending out benefit checks. That led to the famous Greenspan Commission report, which recommended trimming benefits and raising taxes, which Congress did. Those actions produced hefty cash surpluses, which until this year have helped finance the rest of the government.

But even then, it was clear the surpluses would be temporary. Now, years earlier than projected, Social Security is adding to the government's borrowing needs, even though the program still shows a surplus on paper.

If you go to the aforementioned pages in the CBO update and consult the tables on them, you see that the budget office projects smaller cash deficits (about $19 billion annually) for fiscal 2011 and 2012. Then the program approaches break-even for a while before the deficits resume.

Social Security currently provides more than half the income for a majority of retirees. Given the declines in stock prices and home values that have whacked millions of people, the program seems likely to become more important in the future as a source of retirement income, rather than less important.

It would have been a lot simpler to fix the system years ago, when we could have used Social Security's cash surpluses to buy non-Treasury securities, such as such as government-backed mortgage bonds or high-grade corporates that would have helped cover future cash shortfalls. Now it's too late.

Even though an economic recovery might produce some small, fleeting cash surpluses, Social Security's days of being flush are over.

To be sure -- three of the most dangerous words in journalism -- the current Social Security cash deficits aren't all that big, given that Social Security is a $700 billion program this year, and that the government expects to borrow about $1.5 trillion in fiscal 2010 to cover its other obligations, about the same as it borrowed in fiscal 2009.

But this year's Social Security cash shortfall is a watershed event. Until this year, Social Security was a problem for the future. Now it's a problem for the present.

Allan Sloan is Fortune magazine's senior editor at large.

5 Questions for Thomas Wilson
By Sandra Block, USA TODAY
February 1, 2010

Thomas Wilson, 52, is the chairman, president and chief executive officer of Allstate and Allstate Insurance. He joined Allstate in 1995 from Sears Roebuck, where he was vice president of strategy and analysis. Prior to Sears, he was managing director of mergers and acquisitions at Dean Witter Reynolds from 1986 to 1993. Wilson is vice chairman of the Federal Reserve Bank of Chicago. A native of St. Clair Shores, Mich., he holds a master's of management degree from Northwestern University's Kellogg School of Management and a bachelor's degree in business administration from the University of Michigan.

Q: A new poll by Allstate and the National Journal found that 55% of Americans believe the country is on the wrong track. Why do you think Americans have such a negative outlook?

A: We're seeing a continuing trend of people feeling like the economy is not working for them. What you see then, is this growing trust deficit. The trust deficit is growing faster than the fiscal deficit.

Americans are saying we don't trust business or government, and they point the finger at both. If you say, "Do you think we've learned our lessons from this economic downturn?" 70% of people say, "No."

Q: As the chief executive of a major publicly held company, what is your responsibility to address the lack of trust in business?
A: Part of it is making sure people's voices are heard. We need to do more things in our business to both inform and educate our customers about the risks they face.
If you ask people who do you trust, three-quarters of them trust themselves the most. That's not a surprise — Americans are pretty individualistic. Then you say, do you know enough about mortgage, credit cards and insurance, and more than half of the people say, "I don't know enough."

Q: Has the recession caused consumers to cut back on auto insurance?
A: People are cutting back. I'm not concerned about it because I think it's in the range of acceptability in terms of what the risks are.
People are raising their deductibles and they're buying less insurance. I think if that's what it takes so you stay insured but you make your budget, that's a good choice. One of the other things we've been doing is try to simplify our products. You can buy standard, gold, platinum, value. We're seeing a lot of people who used to have gold or platinum buying value now.

Q: Some supporters of health care reform argue that mandatory health care insurance is analogous to mandatory auto insurance coverage, which is required by most states. Do you agree?
A: We don't really have a strong view on what should happen or shouldn't happen.

I think there are some differences between health insurance and auto insurance. (The reason for mandatory) auto insurance is that I can directly hurt you because of what I do. The linkage on health insurance is a little less direct. I'm hurting you because I'm not taking care of myself, therefore, overall health care costs will go up. I don't think it's as clean a shot as auto insurance. If you ask consumers, they want to be able to choose. Consumers do not like to be told what to do.

Q: The earthquake that devastated Haiti last month was the worst in 200 years. Is there any way to prepare for something like that?
A: We're quick to forget people knew that could happen, and people didn't build houses they should have built.
I think it should be a learning experience. Let's look at building codes for houses in the earthquake zones on the coast. They're not set up to actually protect people and their houses. In Florida, over a third of the homeowners are insured by a company called Citizens, which is a state company. If a big hurricane comes, Citizens isn't going to have enough money. Everybody knows it; everybody's hoping it doesn't happen; and when it does happen … you're going to have all this economic turmoil. You see this time and time again, and we never really learn our lessons.

Allstate Agent Association:
Company to Terminate 3,000 Existing Agents
Insurance News Net.com
February 1, 2010

Thousands of existing Allstate agents are to be eliminated within the next two to three years as the company sheds those it thinks are not meeting specified production quotas, according to the National Association of Professional Allstate Agents.

Association Executive Director Jim Fish said more than 3,000 agents are being sent termination notices. Many agents are "older agents -- 50 to 60 years old -- who might be servicing their book of business and maintaining high retention and loss ratios, but that isn't enough for Allstate."

"They (Allstate) are looking to add high-value, production-oriented new agents" to hit marks on new business and premiums the NAPAA says are established by Allstate. Fish said the "so-called" Allstate independent agents are anything but, constantly controlled by the company in "every aspect of the business" from hours of operation and holiday schedules, to personnel requirements, Fish said.

Allstate spokesperson Maryellen Thielen said the company "has not set targets for agency numbers or size."

"We intend to grow and succeed with Allstate agencies," Thielen said.

"We’re providing incentives and tools for Allstate agencies to provide a consistently superior customer experience. We’re also incenting agents to grow and enhance the customer service their agencies provide. We’re actively recruiting new agents to further enhance and strengthen our local presence."

NAPAA President Bob Isacsen, who said Allstate "doesn't acknowledge we exist," said the insurer has used agents as a scapegoat for "ineffective leadership."

"You have non-insurance people running the company and running it into the ground, if you ask me," said Isacsen, who owned an agency for 21 years before selling about three years ago to retire. Isacsen, who is now the managing director of risk and insurance services at United Nations Federal Credit Union, said many agency owners will not be able to sell now due to a "dearth of available buyers."

Just before Christmas, a federal judge approved a $4.5 million settlement between the Equal Employment Opportunity Commission and Allstate Corp. to officially end allegations of age discrimination. A class of 90 older former employees of Allstate will share the award. Its lawsuit, filed five years ago, alleged Allstate Insurance Co. violated the Age Discrimination in Employment Act (BestWire, Dec. 22, 2009).

The EEOC alleged Allstate in 2000 began a reorganization plan in which it fired all of its sales agents and offered to make them independent contractors. Part of the plan said that former Allstate sales agents could not be rehired in other, nonagent positions for one year. In the lawsuit, the EEOC said that more than 90% of those agents were older than 40, making the hiring policy in violation of the federal ADEA (BestWire, Oct. 27, 2009).

Allstate said it chose to agree to the settlement to avoid further litigation costs but continued to believe its position was correct and that it would have prevailed in court.

In afternoon trading on Feb.1, shares of Allstate Corp. (NYSE: ALL) stock were selling at $29.83, down 0.33% from the previous close.

Allstate may shed 20% of its agents
Insurer also raising expectations for agents, like target of generating annual premiums of at least $4 million per location
By Becky Yerak, reporter - Chicago Tribune
January 31, 2010

Allstate Corp. insurance agents are bracing for a shakeup that they say could winnow their ranks by about a fifth.

Howard Simpson counts himself among those on the chopping block.

An Allstate agent in central Ohio from 1967 until last month, Simpson said he was asked to either sell his agency by Jan. 1 or accept a $130,000 termination payment. Allstate was unhappy, Simpson said, because the number of policies in his portfolio fell 1.5 percent, or about 30 accounts.

"I had negative growth, but the company's was down more than that," said Simpson, 68.

In 2008, Allstate saw a drop in policies on its books — down 1.8 percent for autos and 4.2 percent for homeowners — as well as a loyalty score shy of company goals.

When an Allstate manager issued what Simpson saw as an ultimatum, his gallows humor kicked in: "I'm assuming Tom Wilson will be leaving the same day I'm leaving?" he said of the chief executive of Northbrook-based Allstate.

The National Association of Professional Allstate Agents expects Simpson's lament to become increasingly common in coming years as more agents are let go.

"We believe Allstate is planning to eliminate between 3,200 and 3,300 agents by 2013," said Jim Fish, the association's executive director.

Allstate, which has 14,700 exclusive agencies and financial representatives, in 2008 wrote premiums of $26.6 billion, or $1.8 million an agency. That was down 2 percent from 2007, a trend Allstate blamed on declining new car sales, a weak housing market and tough competition.

Allstate's new agency targets include generating annual premiums of at least $4 million per location, having one licensed employee for every 1,000 policies, and reaching certain loyalty goals, Fish said.

"The company wants to get rid of agents who aren't actively producing new business," he said. "The ones taking care of customers and servicing the book — they're not interested in keeping those agents because they think they can service those policies at a call center."

Allstate said the opportunities have never been better for agencies "committed to providing outstanding service."

"We're providing incentives and tools for Allstate agencies to consistently provide a superior customer experience," said Maryellen Thielen, a company spokeswoman.

At least one Allstate agent said the new goals are doable.

Jim Towns, an Allstate agent in Addison for about 20 years, expects to meet the $4 million premium mark at each of his three offices and will staff to future company standards.

"The company feels that if you have these economies of scale, you'll be able to take care of the customers" better, Towns said. "They want you to answer the phone, they want you to be in your office, or have someone who is licensed taking care of the customer."

In a 24/7 world, the customer expects more, said Towns, who has seven full-time workers and two part-timers. "My offices are open six days a week, and four of us have iPhones and are accessible when the customer needs us," he said.

Allstate said it is providing agents with incentives to grow and is actively recruiting new agents.

"Our goal is to grow and succeed with Allstate agencies," Thielen said. The company said customer loyalty rose through the first nine months of 2009, but auto and home policies in force declined 1.3 percent and 4.1 percent, respectively, in the third quarter.

Many affected agents will have difficulty selling their shops because of the dearth of available buyers, partly because of tighter financing. So there could be a glut of agencies on the market, Fish said.

Two dozen Illinois agents are advertising on Allstate's Web site trying to sell their businesses. In August 2008, there were only two.

Meanwhile, the prices that the company's agencies fetched fell through 2009, according to the Allstate Agency Value Index. The index is measured by PPC Loan, a Woodlands, Texas-based loan originator for Allstate agents, and is based on Allstate agency sales.

"From the first quarter of 2007 to the end of 2009, the average value for which an Allstate agency has been sold has dropped from the peak of 2.95 times renewal commissions to 2.46 times," said the fourth-quarter report, released Tuesday. That's partly due to a more realistic perception of Allstate agencies by potential buyers, it said.

As of year end 2009, components of the Agency Value Index are at their lowest levels since at least 2005.

The good news: Agency prices have begun to stabilize, and the weeding out of less-effective agencies could boost values in the future, the report said.

"My cell phone has been ringing off the hook by agents told that they'll receive, or have already received, a 90-day termination notice," Bob Isacsen, president of the National Association of Professional Allstate Agents, noted in a letter to members.

Allstate wants to set minimum staffing standards to reduce the time the office is closed for lunch or vacation and cut down on instances of phones not being answered, Fish said.

It's hard to argue against the benefits of proper staffing, but it's only one reason customers defect, Fish said, noting that they sometimes leave because of prices. Many agents being terminated have customer retention rates exceeding 90 percent and earn the company at least $500,000 a year in profit, he said.

"Plus, they've been loyal to the company for decades," Fish said. "Their only fault is that they have not been able to meet their quotas in a difficult market."

Simpson, the Ohio agent, had found one buyer willing to pay his asking price of $450,000. But he said Allstate wouldn't approve him. Simpson, who is now self-employed after starting a mobile notary signing service, eventually found an approved buyer and sold his agency for $370,000.

Five myths about America's credit card debt
By Robert D. Manning - Washington Post
January 31, 2010

They're yuppie food stamps. They give new meaning to the question "paper or plastic?" And they're in everyone's wallet. Americans have nearly 700 million all-purpose bank credit cards, plus nearly 500 million retail store cards -- and they have transformed how we live and consume. Today, Americans are more dependent on credit than savings, a radical departure from the last major economic crisis, in the 1930s. Congress's effort to change that, with the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, signed by President Obama last spring, is set to go into effect in a few weeks. But it won't fix everything. Or maybe not much of anything. Here are the myths that muddle our understanding of how we've racked up so much credit card debt.

Middle-class American families have long depended on bank credit cards to manage their budgets. 1. Not true. Consumer credit originated with local merchants that offered "open book" credit to cement customer loyalty and increase sales. As major retail chains and malls replaced small shopkeepers in the 1950s and '60s, stores such as Sears and Montgomery Ward issued credit cards for the same reasons. But if you didn't like what Sears had to offer, you couldn't use its credit card anywhere else.

Universal or bank cards such as Visa or MasterCard were reserved for high- and upper-middle-income households. They were offered to reward the banks' best customers (after all, how many toasters could you use?) and served as "loss leaders," as most cardholders paid off their monthly balances. Until the early 1980s, bank credit cards were a symbol of high social status, used mainly for convenience rather than need. This was the inspiration for the color-coded cards that emerged in the 1980s and 1990s: Fiscally responsible "convenience" users wanted to be distinguished from less credit-worthy consumers with a "platinum" card.

More people have credit cards because companies got better at managing risk and began marketing to lower-income customers. 2. Mostly no. Credit card use expanded dramatically during the golden age of the industry -- beginning in the early 1980s -- because deregulation suddenly allowed high interest rates and penalty fees, and credit cards became a major engine of bank profits. In 1978, a Supreme Court decision effectively ended consumer interest-rate limits and the federal usury law. After the 1981-82 recession, industrial restructuring shifted demand for bank loans from manufacturing companies to individual households, and national banks aggressively pushed for deregulatory policies, in line with the '78 decision. A 1996 Supreme Court ruling that ended state-regulated limits on credit card fees furthered that cause. Today, only nonprofit credit unions, as mandated by Congress, must abide by an interest rate ceiling of 15 percent.

As more and more people were preapproved for credit cards in the '80s and '90s, the "free" credit used by the most affluent households was subsidized by the high interest rates and penalty fees paid by the most financially distressed. A carefully guarded secret of the industry is that about a quarter of cardholders have accounted for almost two-thirds of interest and penalty-fee revenues.

Responsible cardholders will have to pay more to make up for the defaults of irresponsible consumers. 3. False. Although credit card companies are experiencing record default rates, irresponsible consumer borrowing is not the main culprit behind soaring interest rates and fees. Banks have suffered far more from mortgage foreclosures and home-equity loan defaults. Major banks encouraged their credit card divisions to relax their standards at the end of the financial bubble; more customers went deeper into credit card debt. Those customers were encouraged to refinance their mortgages, generating high fees for the banks. Banks then sold credit-card-debt-backed securities to institutional investors around the world. When the bubble burst in September 2008, banks could not sell these low-quality securities. They were stuck with poorly performing credit card portfolios. For cardholders, the central problem is that the credit card industry's business model is fundamentally flawed; bankers want consumers to foot the bill for its reengineering through higher interest rates and fees.

As deregulation gave rise to conglomerate financial institutions, credit cards continued to serve as marketing "loss leaders" through the bundling of other financial products such as loans, brokerage fees and insurance to higher-income cardholders who typically paid off their monthly charges. With the recession, these other bank revenues have declined sharply, which has increased pressure on credit card companies to boost profits.

The credit card industry is so competitive that regulation is unnecessary. 4. Rather than a self-regulating and intensely competitive market of more than 5,000 issuers, the credit card industry is one of the most concentrated in the nation (and it's increasingly being hit with allegations of monopoly practices). The top three issuers -- Bank of America, Citibank and Chase -- control more than 60 percent of outstanding credit card debt. Consumer choice has declined over the past 20 years as economies of scale for marketing, administration and customer service have led thousands of card issuers to cash out to the largest banks.

The CARD Act finally protects consumers against the credit card industry's most abusive practices. 5. Yes and no. Although touted by the Obama administration as a major consumer achievement, the long-awaited CARD Act, which goes into effect Feb. 22, offers a mix of overdue protections and surprising omissions.

Some of the worst industry practices are prohibited, including billing systems that generate finance charges on paid-off balances, retroactive interest-rate increases on past balances less than 60 days late and unrestricted marketing to consumers under the age of 21 who don't have an independent source of income.

On the negative side, Congress stipulated a nine-month phase-in period for these regulations. For millions of Americans, especially those suffering from employment and income interruptions, this is too late. If you're in debt today, this bill doesn't help you. Companies already have jacked up interest rates, sharply reduced lines of credit, increased service fees and diluted the value of loyalty reward programs. These trends have brought consumer credit scores down, triggering higher borrowing costs and greater difficulty finding work.

But there is a silver lining to falling credit scores and fewer preapprovals for cards: More people are learning that when it comes to plastic, you can leave home without it.

Robert D. Manning is the author of "Credit Card Nation" and "Living With Debt." He was the editorial adviser to the 2007 documentary "In Debt We Trust" and is the founder of the Responsible Debt Relief Institute.

Good Things in Store for Wal-Mart
By Alexander Eule - Barron's.com
January 29, 2010

A major reorganization and an upgrade by Goldman Sachs are welcome news for the underperforming stock.

WAL-MART SHARES WERE left behind during the market mania of 2009. It could finally be catch-up time.

Last night, Wal-Mart Stores (ticker: WMT) announced a significant reorganization that it promises will "ensure that every part of our business is becoming more global, leveraging our scale, and moving closer to the customer."

Today Wall Street is applauding that news, along with an upgrade from Goldman Sachs.

Goldman upgraded Wal-Mart stock to Buy from Hold. "With expectations seemingly muted, we believe the bar is low for Wal-Mart," Goldman analyst Adrianne Shapira wrote in a note to clients. "Given the shift in macro factors in its favor (improving food inflation outlook, better foreign exchange) and company-specific initiatives (cost cuts, improved global sourcing), we see a beat-and-raise EPS scenario unfolding for Wal-Mart in 2010."

Shares are up 2.1% today, but the stock still looks cheap, with shares fetching just 13.9 times expected-earnings per share for the next 12 months. Wal-Mart, over the last five years, has traded at a median multiple of 15.4 times forward earnings.

The stock is up just 12% over the last 12 months, compared with a 29% increase for the S&P 500 index. Wal-Mart disappointed investors in November when it reported a negative same-store sales figure.

The structural changes are surely an attempt to cut costs and boost margins by taking greater advantage of Wal-Mart's massive scale.

Among the changes are a new global merchandising center and a partnership with a new buying agent.

"We believe the new organization and partner are game-changers that should finally enable Wal-Mart to more readily seize the opportunity to leverage its scale, lower its cost of goods, accelerate its speed to market and improve its quality," Shapira wrote. "Its peers have capitalized on this margin opportunity, and now Wal-Mart has the structure and plan in place to seize its share."

Wal-Mart also said it was consolidating U.S. operations across three divisions called Wal-Mart West, Wal-Mart South and Wal-Mart North.

We're generally skeptical about such realignments, but it in this case it could portend a larger shift in strategy. David Strasser at Janney Montgomery Scott wrote today that "the segmenting of the operations by region could be a precursor to a more aggressive rollout of smaller/urban stores."

John Lawrence, an analyst at Morgan Keegan, tells Barrons.com that today's announcement is one more effort to cut SG&A, or selling, general & administrative expense, a focus since Mike Duke became chief executive last February.

Lawrence points to recent changes at Sam's Club, as another example of the effort. "It's all about getting the returns up in every division, and they just continue to look for opportunity to squeeze out more productivity," Lawrence says.

As for opportunities, investors should take advantage of the one being presented in Wal-Mart's stock.

Walmart, others cut TV prices in Super Bowl run-up
By Nicole Maestri, Reuters
January 29, 2010

Wal-Mart Stores Inc is cutting prices on high-definition TVs ahead of the U.S. Super Bowl championship game, looking to entice shoppers to spend now that the holiday season has ended.

In its U.S. Walmart stores, the discounter is also getting more vocal about promoting its in-home TV installation service, an offering that it said is helping shoppers become more comfortable buying larger, and often more expensive, TVs.

"We do know that there are customers who are not all do-it-yourself type customers, they do want professional help for installation," said Alex Cook, senior category director for consumer electronics at Walmart U.S.

Starting on Sunday, Walmart is cutting prices on select high definition TVs by $30 to $300. It will offer a Vizio 55-inch 1080p LCD TV for $1,298, or $200 off; a Sony Bravia 46-inch 1080p LCD TV for $778, or $300 off; and a Vizio 32-inch 720p LCD TV for $368, marked down by $30.

Electronics retailers typically roll out discounts ahead of the Super Bowl to entice shoppers to buy a new TV to watch the game. This year, the National Football League's Super Bowl is being played on February 7.

Sears has launched an ad campaign featuring Minnesota Vikings quarterback Brett Favre, and on its Website it is offering 5 percent off LCD TVs $499 and over.

Best Buy Co Inc is cutting prices on TVs, offering a Samsung 46-inch 1080p LCD high-definition TV for $1,599.99, a price cut of $900. It is also promoting its Geek Squad TV installation service.

In a playful twist, Target Corp is promoting Super Valenbowl -- a celebration of the Super Bowl and Valentine's Day. For the event, it is highlighting low TV prices and touting its home delivery and installation services.

U.S. retailers just completed a better-than-expected holiday sales season. Holiday retail sales rose 1.1 percent in 2009, according to the National Retail Federation, beating its own forecast for a 1 percent drop in sales for the November-December period.

The question now is whether that momentum will continue into 2010. Many electronics retailers offered rock bottom prices on TVs during the holiday season -- prices lower than many of those now advertised for the Super Bowl.

Cook said Walmart knows customers are watching their discretionary spending, which is one reason it is highlighting the new price cuts for the Super Bowl.

Wal-Mart Combining Some US Units in Streamlining Move
By Miguel Bustillo and Karen Talley - Dow Jones Newswire
January 28, 2010

Wal-Mart Stores Inc. (WMT) is consolidating its U.S. realty, store operations and logistics divisions, which will operate under three geographic business units, as the world's biggest retailer aims to improve efficiency and lower operational costs.

Wal-Mart said Thursday it plans to break up its U.S. business into North, South and Western regions, each of which would have its own real estate teams to scout and build new stores, and merchandising teams to fine-tune the mix of products sold to suit local tastes. The new model more closely resembles the company's international operations, which are headed by country presidents with similar teams working underneath them.

"This is consistent with what they have been doing on the merchandising side as they have sharpened their focus on the specific needs of the local consumer," said Sarah Henry, retail analyst with MFC Global Investment Management.

Taking broad strokes makes sense, since "when you have a mature retailer, your focus is on bringing out productivity per square foot," Henry said. "This a good use of their analytic power."

Wal-Mart "is always looking for ways to be more efficient and this seems like a logical step," said Peter Wood, a senior vice president who follows retail companies at Chase Investment Counsel, a money management firm.

Wal-Mart's U.S. stores chief, Eduardo Castro Wright, who will oversee all three new regions, wrote in another memo the new structure would "facilitate our growth as we seek to enter new markets."

He suggested that the regionalized approach would lead to different new store formats around the country. The company is aligning its store planning team with a customer experience team, a move that "will also support our efforts to accelerate our speed to market with new formats," Castro Wright said.

Rosalind Brewer has been named an executive vice president and president of the Southern region. Previously, she was president of the Southeast division for Walmart US.

Hank Mullany has been promoted executive vice president and president of Walmart North. He was previously president of the Northeast division of Walmart US.

Eric Zorn, president of Walmart Realty, and Johnnie Dobbs, executive vice president of logistics, will remain in their positions, with their roles expanded as the operating groups are aligned, the company said.

As of Feb. 1, Wal-Mart is transferring the responsibility for store merchandising from its market team to zone merchandise supervisors, a move that will cause the elimination of market team jobs. Wal-Mart did not disclose the number of jobs being lost.

Wal-Mart is also aligning its Puerto Rico business with that in the U.S. as a way of leveraging its U.S. buying power.

The moves follow Wal-Mart's announcement on Sunday that its Sam's Club division would lay off 11,200 workers as it restructures its in-store demonstrations unit.

Wal-Mart shares closed down 1.5% to $52.61, and were unchanged in late trading.

 

Is This Guy the Next Buffett?
By Chuck Saletta - The Motley Fool.com
January 27, 2010

When Warren Buffett first took control of Berkshire Hathaway (NYSE: BRK-A), it was a struggling textile manufacturer. Rather than invest an incredible amount of additional capital in a vain attempt to keep that business competitive with cheaper offshore rivals, Buffett let it die off.

Instead of throwing good money after bad, Buffett used the cash the textile business generated in its dwindling days to invest elsewhere and diversify the company. That decision helped turn Berkshire into the insurance and investment giant it is today, and paved the way for Buffett to become a multibillionaire. It's a great story of his investing prowess and the benefits of intelligent capital allocation -- but it also helped accelerate the original Berkshire's demise.

Is history repeating itself?
Perhaps as a way of foreshadowing things to come, Eddie Lampert is often described as "the next Warren Buffett." A hedge fund manager, Lampert took control of the once-bankrupt K-Mart and used his financial prowess to leverage that investment in fellow retailer Sears. The resulting Sears Holdings (Nasdaq: SHLD) is a marriage of two struggling former titans, both of which are worth more to Lampert as asset plays than as retailers.

Both Sears and K-Mart own plenty of valuable real estate, bought decades ago and held on the books at depreciated historical cost. Even in today's real estate slump, Lampert can sell off those buildings and land to book profits and raise cash to invest elsewhere. In addition, while the combined company continues to struggle with accounting profitability, its operations still generate solid free cash flow.

And in Buffett-like fashion, Lampert is very concerned about overinvesting that cash in an existing business that's unlikely to provide a decent return. As a result, there's a very real chance that Lampert may do what Buffett did for Berkshire: doom Sears and K-Mart, the retailers, to save Sears Holdings, the overall company.

That shouldn't be a surprise. After all, both Lampert and Buffett are value-focused investors who care about a company's ability to generate cold, hard cash. The more, the merrier. And both those top-tier investors are even happier when that cash flow can be bought cheaply. After all, the less they need to invest to get that cash flow, the more productive their capital can be.

Invest like those market masters do
Cash flow is of such paramount importance to these greatest of capital allocators that they'd rather see a company's business line die than to invest in something that won't generate cash. If you want to follow in their investing footsteps, you too should make cash productivity a key metric you seek in the companies you're partially buying in the stock market.

Fortunately, it's fairly straightforward to find companies that generate significant amounts of cash. Just look for businesses with strong free cash flow (which is frequently measured by turning to the cash flow statement and subtracting capital expenditures from operating cash flow). It's an easy -- and critically important -- metric to measure, but because it's not typically reported by automated screening tools, it's one that's often overlooked.

And because free cash flow is so easily overlooked, you can often find companies trading at single-digit multiples to their realized cash-generating ability. Like these, for instance:
 
Company                 Market Capitalization     Free Cash Flow        Market
                                            (in Millions)               (in Millions)        Capitalization-to-
                                                                                                    Free Cash Flow Ratio
Pfizer (NYSE: PFE)                 $151,546                   $16,563                  9.1
AT&T (NYSE: T)                       $149,472                  $19,252                  7.8
Comcast (Nasdaq: CMCSA)    $  44,819                  $  5,362                  8.4
Honeywell (NYSE: HON)          $  30,499                  $  3,190                  9.6
Lockheed Martin (NYSE: LMT) $  29,023                  $  3,871                  7.5

Data from Capital IQ.

As long as there are investors more concerned with accounting earnings than a business' true cash-generating capability, you will find chances to buy cash flow on the cheap. In so doing, you're following in the footsteps of some of the greatest investing minds of our time.

If it works for them ...
At Motley Fool Inside Value, we've seen just how successful investors like Buffett and Lampert have been, thanks to their laser-like focus on buying cash generation on the cheap. We're proud to have adopted their strategy as our own, and we've been sharing in some of their success as a result -- outperforming the S&P 500 by an average of eight percentage points per recommendation since the service's inception. If you're ready to join us in following the path those greats have blazed, click here to start your no obligation, 30-day free trial.

At the time of publication, Fool contributor Chuck Saletta did not own shares of any company mentioned in this article. Sears, Pfizer, and Berkshire Hathaway are Inside Value selections. Berkshire Hathaway is also a Motley Fool Stock Advisor pick. The Motley Fool owns shares of Berkshire Hathaway and has a disclosure policy.

Retailers try new survival strategies for 2010
By Jayne O'Donnell, USA TODAY
January 26, 2010

Follow-Up - Sears Holdings: Leave It on the Shelf
By Jonathan Laing - Barron's
January 25, 2010

WE PAINTED A GRIM PICTURE OF THE future of Sears Holdings in our Aug. 24, 2009, cover story, "Washed Out."

As we saw it, the company (ticker: SHLD), controlled and operated by onetime hedge-fund superstar Edward Lampert, was suffering from years of underinvestment in the stores and lackluster merchandising.

As a result, the falling sales figures and shrinking margins Sears had suffered under Lampert during his five years of running both Kmart and Sears were bound to continue, until Sears one day just faded away. Yet the stock, trading at about 66 at the time of our story, has pushed up to more than 100 in the past month.

Sears' stock has leaped to more than 100 since our cover story. Some of the impetus came from the company's announcement earlier this month that all-important fourth-quarter sales, though down from a year ago, wouldn't be as bad as expected. Thus, the company expected profit of between $190 million and $270 million, or $1.61 and $2.29 a share.

That set off a spasm of covering in the heavily shorted stock. Few of the retailer's 116 million shares are available for either shorting or covering shorts, and the annual "borrow," or cost to shorts to maintain their position, stands around a punishing level of 20%. Lampert's hedge fund alone owns approximately 57% of the shares outstanding.

Another major holder is Bruce Berkowitz's Fairholme Fund (FAIRX), which has pushed its ownership interest in the past year to around 13%.

Berkowitz was recently named Morningstar domestic stock-fund manager of the year and decade as a result of his reputation for having a keen sense of value stocks. Except in major holdings like Sears and Florida real-estate concern St. Joe Co. (JOE), he seems to gravitate toward thinly traded, low-quality companies with big short interests.

Finally, other long-term holders in Sears, such as the Tisch family, allow Lampert and acquaintances to tie up nearly 80% of Sears stock.

So short squeezes are both frequent and vicious in Sears. The high borrowing costs of the shares pressure the shorts whenever a corporate announcement of even mildly promising proportion hits the tape. Also, time costs the shorts dearly.

Lampert may be a nonpareil stock operator, but he has proven a lousy retailer. Sooner or later, that reality will obtrude and lay both the company and its shares low.

-- Jonathan R. Laing

The Worst Stocks for 2010: Sears Holdings
by Alyce Lomax - The Money Times.Com
January 22, 2010

Many consumers seem to have forgotten that Sears and Kmart even exist. Once 2010 is done, Sears Holdings (Nasdaq: SHLD) shareholders may want to forget, too. A few promising signs do suggest that the retailer could still escape a Circuit-City-like fate -- but even so, its shares remain way too expensive. I predict 2010 will be a sad year for this stock.

Better isn't good enough
Sears investors recently got very excited when the company announced that December same-store sales squeaked up by 0.4%. In addition, impressive comps strength at Kmart actually offset weakness at its namesake Sears stores. The company was also able to increase its fourth-quarter earnings guidance to a much greater profit projection than analysts had been expecting.

These are admittedly heartening signs that Sears might not be quite as bad off as struggling retailers like Borders Group (NYSE: BGP) or Blockbuster (NYSE: BBI). But these glimmers of hope from Sears shouldn't lull investors into a false sense of security. If anything, they might give Sears shareholders a great opportunity to cut and run.

Considering the ruthless competitive landscape in retail, it's a miracle that Kmart was able to perform as well as it did during the holidays. Tough rivals in the discount segment abound, including Wal-Mart Stores (NYSE: WMT), Target (NYSE: TGT), and Costco (Nasdaq: COST). I'd argue that all three of those names have much stronger brands and customer loyalty than either Sears or Kmart.

Regardless of whether famed hedge fund manager and Sears chairman Eddie Lampert is involved -- his mere presence often seems to make some investors bullish about Sears' future -- Sears and Kmart are both old-school names that lost their brand luster a long, long time ago. Lampert's long-expected magic hasn't really improved operating performance at Sears.

This stock's too pricey!

Meanwhile, recent investor euphoria over Sears has turned it into an overpriced retail stock doomed to stumble. Like Abercrombie & Fitch (NYSE: ANF), there's a massive disconnect between its operational performance and the surge in its share price.

Sears' shares are up 136% in the last 12 months. Even if you include Sears' earnings projections of $3.36 to $4.06 per share for the upcoming quarter, the company's still trading at 44 times earnings at best, and 64 times earnings at worst. Given its still-plunging sales, this stock's been boosted on little more than hope.

Consider a few of Sears' key metrics compared to major rivals:

*All data from Yahoo! Finance as of Jan. 19, 2010.

Sorry, folks. Sears clearly looks like the massive, overpriced loser when compared to its major rivals in the discount retail space. Check out its crazy forward price-to-earnings ratio and the astronomical PEG ratio. (Not to mention its "not applicable" trailing P/E, since Sears hasn't even been profitable in the last 12 months!)