REPEAL THE TAX ON
SOCIAL SECURITY BENEFITS!
WRITE YOUR SENATORS AND REPRESENTATIVES NOW!!
(See December 30, 2008 article)

Walking On Air in Chicago
Glass Ledges Give Visitors a Thrill (or Pause)
By Peter Slevin - Washington Post Staff Writer
July 2, 2009

CHICAGO, July 1 -- Don't look down. Or do, since that's the idea. But brace for vertigo. In the city of big shoulders, this is like standing on an eyelash.

It's a glass ledge, 1 1/2 inches thick and poking out about four feet from the 103rd floor of the Sears Tower. There is no frame under the floor, only air -- 1,353 feet of it, straight down to the miniature taxis on Wacker Drive.

Picture Wile E. Coyote racing off the cliff. Think of the moment when he suddenly looks down. Only you don't actually fall.

The reason is an intriguing feat of engineering, a team of designers and builders said Wednesday, swearing on a stack of liability policies as they unveiled the project. The ledge -- actually four identical glass boxes suspended near the top of the nation's tallest building -- opens to the intrepid Thursday.

The natural instinct is to inch out onto the glass very, very slowly, said sheet metal worker Leo Thier, who took a break from another job to venture into the box. Still in his hard hat and construction boots, he delivered his verdict: "It's fantastic. It's insane."

"I've never seen a helicopter from that view: eye level," he said as a news chopper drifted in for a close-up. "See, now all the big wheels in this whole place are going to want [a ledge] in their office."

The ledges, created off the tower's enclosed Skydeck, are hardly likely to be duplicated elsewhere in the 36-year-old building. Knocking out chunks of steel and glass to install the four structures, with the wind whipping and the clock ticking, was cost and hassle enough.

If the wind is blowing at 20 mph on the ground, it is blowing two or three times harder 1,353 feet up, said construction chief Lou Cerny of MTH Industries. The building itself moves with the wind on a normal day, creating conundrums for installers seeking precision within a 16th of an inch.

"It's probably swaying seven to eight inches while we're standing here," Cerny said. "So the opening changes. You measure and you get a different dimension and you scratch your head."

The glass boxes look like square portholes on the west side of the tower -- or, from a great distance, dimpled chads on a ballot. From the Skydeck, which draws 1.3 million visitors a year, one steps onto the glass through openings 10 feet wide and 10 feet high.

Thick panels of glass are bolted to a steel frame at the top of each box. The 1,500-pound floor, which connects to the vertical pieces on three sides, is made of three sheets of glass layered with a special invisible resin called polyvinyl butyral, or PVB, the same stuff used in car windshields.

"Think of it like bulletproof glass. Even if the glass were to break, which it's unlikely to do, it stays inside the frame. It would never fall out," said Ross Wimer, the project's lead architect.

To make sure, workers used a center punch to shatter first the top layer of the glass, then all three layers, Cerny said. The floor held. As installed, each floor is designed to hold several times more weight than would ever be placed on it. "There's no problem with putting 5,000 or 10,000 pounds without anything happening," Cerny said. "It's been tested."

Then there is the mechanical part. Engineers had to figure how to clean the glass for paying customers and, just as important, allow a clear path for the building's window-washing platforms, which drop from cables anchored on the roof, seven floors above.

So, using equipment designed to move theater sets, they made the ledges retractable. The boxes can be hauled into the openings in the 103rd floor to allow the window washers to do their work, then are rolled back out.

Wimer, who typically designs airports and skyscrapers, was intrigued by the project. Working with colleagues at Skidmore, Owings and Merrill, the first instinct was a mesh floor and sides so visitors could "step out there and feel the wind."

That proved impractical -- and potentially painful in a city with merciless winters. Mesh would also impede the views. Wimer was seeking the sensation of "floating in space," as well as something that was not, as Prince Charles once said of a proposed London gallery extension, "a monstrous carbuncle on the face of a much-loved and elegant friend."

"How do we do this in a way that's consistent with the logic of the building?" Wimer said designers asked. "We didn't want this to be an amusement park ride, but simple, elegant and natural, so it felt it belonged in the Sears Tower."

One reason for designing glass ledges just four feet deep was to prevent more people from crowding onto them. Not for safety reasons, Wimer said, but to preserve an open feeling easier to establish if "they're not standing two-deep."

As the designers pulled back a curtain on a cloudy Wednesday morning and reporters moved gingerly toward the ledges, a television reporter said to his cameraman: "I'm not going to get out there. I'll get close."

"Close," it turned out, was a foot away. He extended his microphone to interview 11-year-old Isaac Moldofsky, who stood without fear on the glass and pronounced the experience "pretty cool."

Later, a visitor named Viesha Arbes was having none of it. In dressy clothes and heels, she lowered herself indelicately to hands and knees and crawled toward the opening. When she caught her first glimpse of the street 103 floors below, she gasped and lunged away.

"I don't think I have that much confidence," said Arbes, visiting from Raleigh, N.C. "It feels too real."

Reality worked for her 12-year-old daughter, Sarah.

"It's scary like no other. It's like you're floating," she said, long after Wimer had departed. After 20 minutes of coaxing, Sarah led her mother backward onto the ledge to pose for a photo. Her mother never looked down.

Staff writer Kari Lydersen contributed to this report.

Department stores lose ground on annual retailers' list
Wal-Mart keeps commanding lead;
Home Depot slips while Costco, Best Buy advance
By Sandra M. Jones - Chicago Tribune
July 2, 2009

For a glimpse at how the retail landscape has changed since this recession began in December 2007, look no further than the annual list of the nation's largest retailers.

Department stores are shrinking. Discount chains are growing. And Wal-Mart Stores Inc., the long-standing top seed, is so far ahead of its peers that the second through seventh largest retail chains combined would still generate less annual revenue than the $405.6 billion rung up at the world's largest retailer last year.

"The economy hasn't been a losing proposition for everyone," said Susan Reda, executive editor of Stores magazine, an arm of the National Retail Federation and publisher of the annual list. "And retailers who have made it through the recession will be well-positioned to grow in the future."

The Washington, D.C.-based trade group on Wednesday released its annual list of biggest U.S. retailers. The ranking, compiled by London-based market researcher Planet Retail, is based on 2008 revenue.

Among the biggest changes from the 2007 ranking: Home Depot dropped two notches from its No. 2 spot, where it remained for much of the housing boom, as many homeowners strapped by the economic downturn put off remodeling projects and others battled with banks over mortgages to stay in their homes.

Electronics giant Best Buy Co. appeared on the top 10 for the first time, after a steady climb from No. 16 in 2000, unseating Supervalu Inc., owner of Jewel-Osco and Albertsons grocery stores, which dropped to No. 11.

Sears Holdings Corp., parent of Sears and Kmart stores, clung to the top 10, falling to ninth. The retailer has been steadily losing ground for more than a decade, according to the list. In 1992, the two stores held the second and third spots on the list and together generated more annual revenue than No. 1 Wal-Mart, according to the trade group's data. As recently as 2000, Sears ranked fourth and Kmart fifth.

Meanwhile, Lowe's rose a notch to No. 8, a big step up from its No. 14 spot in 2000. The home improvement retailer took advantage of Home Depot's misstep of cutting back staff. Home Depot's move, under former CEO Robert Nardelli, hurt customer service. Nardelli came under fire at Home Depot for his oversized pay package and management style.

Lowe's positioned itself as a cleaner, friendlier alternative to Home Depot, and that strategy helped Lowe's hold its own during the economic downturn, said Paula Rosenblum, managing partner of RSR Research, a Miami-based retail consulting firm. Still, she predicts Home Depot, which is in the midst of a turnaround under Chief Executive Frank Blake, is angling for a comeback.

"Lowe's was hitting the right note during the boom," Rosenblum said. "The question is, in the coming couple of years with so many foreclosures, it implies there is a lot of remodeling to be done. It will be interesting to see how it will play out. It's going to be a two-horse race."

Another consistent climber is Costco. The warehouse club known for upscale merchandise has overtaken Target as a place to find cool stuff on the cheap. Costco rose two notches to the No. 3 spot, behind Kroger. Target, for its part, regained its No. 5 spot, after dropping to sixth in 2007. In comparison, Costco ranked No. 9 behind Target at No. 7 in 2000.

Retail consultant Burt Flickinger III points out a common factor among the retailers climbing the ranks: managers who grew up within the company and know it inside and out.

"They all have continuity of management," said Flickinger, managing director of New York-based Strategic Resource Group. "These are people who are born and raised in the company instead of executives who are more focused on taking care of themselves than taking care of their team or their consumers.

"It's like the Chicago Bulls keeping Michael Jordan and Scottie Pippen around for all [six] championships."

Wal-Mart Backs Drive to Make Companies Pay for Health Coverage
By Janet Adamy and Ann Zimmerman - Wall Street Journal
July 1, 2009

WASHINGTON -- In a major break with most other large companies, Wal-Mart Stores Inc. Tuesday told the White House that it supports requiring employers to provide health insurance to workers, a centerpiece of President Barack Obama's effort to provide near-universal coverage to Americans.

The support of Wal-Mart, the nation's largest private employer, could give momentum to one of the most-contentious aspects of legislation taking shape in Congress to fix the health system. To help pay for covering the 46 million uninsured, lawmakers have proposed mandating that all but small employers provide insurance for workers or help pay for it. Lobbies for large corporations have opposed the idea. The U.S. Chamber of Commerce has fought such a mandate, saying it would prompt companies to cut jobs, lower wages and possibly drive them out of business. Wal-Mart -- which provides insurance to employees and wants to level the playing field with companies that don't -- on Tuesday delivered a letter to President Obama taking a different stance.

"We are for an employer mandate which is fair and broad in its coverage," said the letter, signed by Wal-Mart Chief Executive Mike Duke. Andrew Stern, president of the Service Employees International Union, also signed the letter, along with John Podesta, who led President Obama's transition team and is chief executive of the Center for American Progress, a liberal-leaning think tank.

The National Retail Federation, the industry's main lobby, said it was "flabbergasted" by Wal-Mart's move. "We have been one of the foremost opponents to employer mandate," said Neil Trautwein, vice president with the Washington-based trade group. "We are surprised and disappointed by Wal-Mart's choice to embrace an employer mandate in exchange for a promise of cost savings."

Mr. Trautwein said an employer mandate is "the single most destructive thing you could do to the health-care system shy of a single-payer system," under which the government handles health-care administration. The mandate "would quite possibly cut off the economic recovery we all desperately need," he said. The group believes forcing companies to provide insurance will raise costs for its members.

Under the plans being discussed in Congress, small businesses would either be exempt from the mandate or face a less-onerous requirement.

The U.S. Chamber of Commerce said most of its members oppose an employer mandate, and it doesn't think Wal-Mart's stance will change that. "The kind that the groups in this letter support is the worst incarnation, the most dangerous policy," said James Gelfand, senior manager of health policy for the group, which represents three million businesses.

Wal-Mart's support of a broad-based employer mandate is a shift from its previous stance on health-care overhaul and follows years of tussles with organized labor, which has failed in drives to unionize Wal-Mart's store workers. Two years ago, Wal-Mart joined with the SEIU, the country's largest union, to call for affordable health care for all Americans by 2012. The group called for lowering health-care costs and insuring more Americans.

In recent years, Wal-Mart has improved its health-care benefits, cutting its waiting time for earning benefits in half for both full- and part-time employees and offering more plan choices. About 52% of Wal-Mart's 1.4 million U.S. employees are covered by company-provided insurance, up from 46.2% three years ago. The retail industry average is 45%, according to a Kaiser Family Foundation 2008 study.

Wal-Mart isn't changing its policies. The company says it supports the employer mandate because all businesses should share the burden of fixing the health-care system. Wal-Mart also said the mandate will only work if it is accompanied by a government commitment to rein in health-care costs that is guaranteed.

Wal-Mart's support for a broad mandate also appears to be aimed at beating back an alternative that may be less favorable to the company. The Senate Finance Committee is considering a measure expected to result in a more burdensome health-insurance requirement for companies that have lower-wage workers. The company's letter said: "any alternative to an employer mandate should not create barriers to hiring entry level employees."

As the White House and Congress began floating proposals, Wal-Mart felt it needed to shape the debate, said Leslie Dach, Wal-Mart's executive vice president of corporate affairs and government relations.

"As a company, we believe the present health-care system is unsustainable and making the country's businesses less competitive in the global economy," said Mr. Dach, who delivered the letter Tuesday to White House Chief of Staff Rahm Emanuel. Mr. Dach is a former adviser to Democratic politicians.

In a meeting with officials behind the letter, Mr. Emanuel said, "Cost control and employer mandate are heads and tails of the same coin."

Most Republicans have opposed an employer mandate. "Congress cannot take actions placing burdens on businesses of any size that exacerbate our nation's economic woes," Rep. Roy Blunt (R. Mo.) said in response to Wal-Mart's announcement.

Labor groups such as SEIU not long ago criticized Wal-Mart for what they said were skimpy health benefits the world's largest retailer provided employees. Nancy-Ann DeParle, head of the White House Office of Health Reform, said it is significant that Wal-Mart and the SEIU had joined on this.

"The rising cost of health care is hurting employers and employees alike, restricting businesses' ability to grow and keeping workers' wages flat," she said.

—Jonathan Weisman contributed to this article.

Life After Debt:
Inside Sears Changing Sales Strategy at Sears
By Anthony Mason - CBS News
June 30, 2009

(CBS) Inside the Sears flagship store in Chicago, customers look at merchandise, up in the second floor war room, Sears is looking at its customers and tracking their internet page clicks and purchases.

Jeff Hamm, IT Director at Sears says, "We're watching you and watching you buy stuff and learning from you."

As CBS News correspondent Anthony Mason reports, that research is more important than ever with the earthshaking shift in American shopping habits.

"All the metrics, consumer confidence, consumer spending have declined at a rate we haven't seen in 40 to 50 years," said retail consultant Michael Dart.

Richard Gerstein, head of marketing for Sears and Kmart says, "I think the customer is re-assessing their personal values and what value means in the world of shopping."

Inside the sprawling corporate headquarters, Sears executives are scrambling.

The company made a profit in the first 3 months of 2009 but overall sales were down nearly 12 percent from a year ago - to an average of just $64 a day according to a recent poll. That's down 38 percent from a year ago

Lisa Schultz, who leads the New York apparel team that designs for the 3,800 Sears and Kmart stores, says the economy will definitely affect the choices she makes.

To cut costs, Sears designers are actually developing their own fabrics. They're making blouses with machine washable polyester chiffon at $20. It looks and feels like silk that retails for $100.

"Price is very important," says Schultz.

Sears also is promoting a guarantee to replace any kids clothes that wear out.

Sears is the biggest appliance seller in the country, but sales have slipped. So soon it will allow buyers who lose their jobs to suspend payments.

And at store kiosks, Sears is even offering to find items it doesn't carry. They'll actually go on other websites to find the items you're looking for, and process it for you without charging you extra. He says, "we don't want you shopping anywhere else."

After closing 28 stores last year, Sears will shut another 24 this year.

In this recession, as shoppers are redrawing the retail map, Sears is trying to make sure it will still have a place on it.

Sears to Let Jobless Customers Stop Payments, Still Keep Fridge
By Lauren Coleman-Lochner - Bloomberg
June 29, 2009

Sears Holdings Corp., the largest U.S. department-store chain, will let customers who lose their jobs suspend payments and keep appliances bought with store credit cards in an effort to bolster sales in the recession.

Customers who spend at least $399 on appliances and related merchandise between July 6 and Aug. 1 will have one-twelfth of the purchase price credited to their account for every month they are out of work, said Larry Costello, a company spokesman. Those who are jobless for more than a year will have the full debt forgiven, he said. The offer period may be extended, he said.

“We thought this would be a way to get folks to jump in where they’d been a little reluctant,” Doug Moore, president of Sears’s home-appliance unit, said in a telephone interview.

The retailer, based in Hoffman Estates, Illinois, is running the trial program to spur spending on refrigerators and washing machines as consumers hold off on bigger purchases amid declining home values and mounting job losses.

Customers who lose their jobs between 60 days and one year after having made the purchase qualify for the offer, Costello said. The program also covers delivery, service and installation costs, he said.

Sears declined 64 cents to $64.90 in Nasdaq Stock Market trading on June 26. The stock gained 67 percent this year before today.

Last month, Sears said a drop in purchases of appliances and other home goods in the three months ended May 2 drove an 11.7 percent decline in sales at stores open at least a year. Sears didn’t specify appliance sales.

Sears, the largest appliance seller in the U.S., gained market share for the past four quarters after seven consecutive years of declines, Moore said.

Best Buy

Best Buy Co., the world’s largest electronics retailer, said June 16 that appliance sales at stores open at least 14 months fell 20.1 percent, compared with a 4.9 percent overall same-store sales drop in the three months through May 30. The chain is based in Richfield, Minnesota.

Same-store sales are considered a key measure of retail performance.

“It’s a differentiated program, and we believe that that’s going to get people to choose us over the other guys,” Kevin Brown, Sears’s chief marketing officer for home appliances, said by telephone.

The debt-forgiveness trial follows offers by carmakers allowing buyers who lost their jobs to stop payments. In January, Hyundai Motor Co. began offering the option of returning some cars and abdicating loan payments without penalty. General Motors Corp. and Ford Motor Co. subsequently introduced similar programs.

“It is much different than the Hyundai-GM-Ford models that we’ve all seen out there, in that you keep the appliance,” Brown said. “We’re the only ones with a program of this kind in this industry.”

Citigroup Inc.’s credit-card unit is managing the program. Sears will run a Web site, http://www.searsbuyerprotection.com, with details.

Big Hotel Planned Next to Sears Tower
By Maura Webber Sadovi - Wall Street Journal
June 25, 2009

Tallest U.S. building to get "green" retrofit
Reuters
June 24, 2009

CHICAGO (Reuters) - The tallest building in the Western Hemisphere will undergo a $350 million "green" retrofit that its owners said on Wednesday will make the 110-story office tower a beacon for environmentally sound space.

Plans call for the 1,450-foot Sears Tower to reduce its electricity consumption by 80 percent and water usage by 40 percent. It will be renamed the Willis tower later this summer in a deal with new tenant global insurance broker Willis Group Holdings.

To achieve the savings, owner American Landmark Properties and its partners plan to:

- Replace the 1973 tower's 16,000 tinted single-pane windows and create a "thermal break" between Chicago's frigid winters and hot summers and the interior.

- Install gas boilers equipped with fuel cells, which generate electricity, heat and cooling.

- Revamp the tower's 104 elevators and 15 escalators to cut their electricity usage by 40 percent.

- Conserve 24 million gallons of water with new restroom fixtures and "condensation capture."

- "Harvest daylight" by installing systems that automatically dim lighting based on available natural light.

- Install solar panels to heat water.

- Erect wind turbines on building setbacks, if possible.

- Plant green roofs that will be among the highest in the world to reduce storm runoff and the urban heat island effect.

- Replace granite plazas and walls surrounding the tower with terraced park space, trees, glass storefronts and an interactive digital display.

"We hope to set a benchmark for how high-rise buildings throughout the world can limit their impact on the environment," said architect Adrian Smith in a statement.

Beyond that, the consortium that owns the tower proposed constructing an adjacent hotel that would qualify for the federal LEED (Leadership in Energy and Environmental Design) designation.

Lofty 'green' renovation for Sears Tower
GOING GREEN | Skyscraper work to cost $350 mil., new hotel planned
By David Roeder - Chicago Sun-Times
June 25, 2009

Sears Tower is "going green" while keeping its attire of basic black. The tower's owners are planning a rooftop-to-plaza renovation to conserve energy and power up its financial performance.

The makeover detailed Wednesday calls for giving the tower a new neighbor, a 50-story hotel that the Sears owners said would feature "net zero" use of energy. They said changes to the tower itself will cut its appetite for electricity by 80 percent.

Highlights of the Sears Tower makeover

* 50-story, 500-room hotel planned at the northeast corner of Jackson and Wacker will use solar and wind technology to strive for "net zero" energy use.

* Granite plaza to be replaced with green space, new retail, permeable pavement and, along Adams Street, a solar-powered digital display for news and event information.

* Lobby "learning center" to demonstrate the latest in energy production and conservation.

* Replacement of 16,000 windows and metal panels to save heating energy by up to 60 percent. * New mechanical systems to incorporate fuel cell technology.

* Advanced lighting controls will adjust to movement and daylight.

* Elevators get new motors that go on or off almost instantly to adjust with demand.

* Escalators get motion detectors.

* Solar hot water panels on 90th floor roof will heat water for the restrooms.

* New plumbing fixtures will cut water use.

* Wind turbines and green roofs will be tested at various levels except the tower's antenna roof.

* Programs for tenants include bicycle sharing and recycling of paper and electronics.

Not part of the plan is changing the tower's color. A switch to silver had been contemplated, but the owners, working with noted architect Adrian Smith, decided it would be enough to change all 16,000 windows, introducing double-paned glass with an insulating layer of film in between.

The work on the 110 -story tower should cost about $350 million, said John Huston, principal with American Landmark Properties Ltd. The Skokie-based firm is part of the tower's ownership group. Huston estimated the hotel, for which outside investors will be sought, could cost $225 million. He said the dual projects could be completed within five years.

"Our plans are very ambitious. Our plans are groundbreaking in many respects" and will "set new standards for the greening of existing buildings," Huston said.

Smith, of the firm Adrian Smith + Gordon Gill Architecture, designed the hotel to include solar and wind power generation. He also is directing the changes to the tower.

He said the task is important because buildings worldwide account for more than 50 percent of carbon emissions. Smith said initiatives such as green roofs and advanced lighting controls will trim energy usage for a building that, with a population of 20,000 people, is a "good-sized village." The plan is to make the tower attractive to tenants who care about the environment. That could justify higher rents down the line, markets conditions permitting.

Robert Wislow, chairman of U.S. Equities Realty, which manages Sears Tower, said an efficient building is a selling point to tenants. "They are demanding to occupy sustainable space," he said. Conservation will help the tower's occupants by reducing what they pay toward the building's operating costs, said Katherine Scott, executive vice president at U.S. Equities.

Huston said the owners have requested a zoning change from the city to accommodate the hotel. A city subsidy also is under discussion, but Huston declined to get into details.

He noted that a Sears renewal would create 3,600 jobs, including short-term construction work. Based on formulas applied to other subsidy requests, the Sears owners could be asking for around $60 million under tax-increment financing, which provides developer subsidies from property taxes that otherwise would support local government.

Sears Tower is "the biggest taxpayer in the city" and has paid more than $750 million since it opened in 1973, Huston said.

A hotel building at Jackson and Wacker would fulfill original ideas for the property as developed by the architectural firm Skidmore Owings & Merrill in the 1960s. Lead architect Bruce Graham allowed for another building on the block, although current zoning doesn't permit it.

Owners of the tower include New York investors Joseph Chetrit and Joseph Moinian. In the near term, the owners plans two other changes: a name change and a heart-thumping addition to its 103rd floor observation deck.

This summer, the building will be rechristened Willis Tower after an insurance brokerage, Willis Group Holdings Ltd., that is leasing 140,000 square feet there.

The observation deck is supposed to reopen in a few weeks with glass extensions from the building that will give visitors the illusion of stepping out into space, with a clear view down to Wacker Drive.

Sears Tower to be revamped to produce most of its own power
By Susan Saulny - New York Times
June 25, 2009

CHICAGO — The Sears Tower, that bronze-black monument that forms the 110-story peak of the skyline here and stands as the tallest office building in the Western Hemisphere, will soon have another unique feature: wind turbines sprouting from its recessed rooftops high in the sky.

The building’s owners, leasing agents and architects said Wednesday that they are literally taking environmental sustainability to new heights with a $350 million retrofit of the 1970s-era modernist building — and the turbines are only the tip of the transformation. The plan, to begin immediately, aims to reduce electricity use in the tower by 80 percent over five years through upgrades in the glass exterior, internal lighting, heating, cooling and elevator systems — and its own green power generation.

In such a huge tower, with 4.5 million square feet of office and retail space, 16,000 windows and 104 elevators, the project is bound to be one of the most substantial green renovations ever tried on one site, planners said. The Sears Tower is significantly larger than the 102-story, 2.6-million-square-foot Empire State Building, for instance, which is also undergoing renovation to reduce energy consumption.

“If we can take care of one building that size, it has a huge impact on society,” said Adrian Smith, an architect whose firm designed the Sears Tower renovation. “It is a village in and of itself.”

Buildings are among the world’s largest contributors of greenhouse gas emissions. After the retrofit, energy savings at the Sears Tower, which is to be renamed the Willis Tower this summer, would be equal to 150,000 barrels of oil a year, officials said. The savings are expected to help redeem some of the project’s cost, which is to be financed through private equity investment, grants, debt financing and government funds.

The Sears Tower plans to open a first-floor center to educate the public about the redesign, and hopes to serve as a model for other aging skyscrapers around the world, officials said.

Lampert's $70.9 Million AutoZone Sale
By Teresa Rivas - Barron's
June 24, 2009

Eddie Lampert's ESL Investments still has a 39% stake in the retailer.

THE TREND OF CONSUMERS HOLDING on to their cars has been driving shares of AutoZone (ticker: AZO) higher throughout the recession. However, Eddie Lampert, the company's largest shareholder, is easing up on his ownership of the stock.

On Wednesday Lampert's ESL Investments disclosed that it sold 450,000 shares for $70.9 million, or $156.22 a share. The firm continues to own 21 million shares, or a 39% stake in Memphis, Tenn.-based AutoZone. The sales were made from June 19 to 23.

Barrons.com last wrote about Lampert buying the shares in April 2008. (See Inside Scoop, "Eddie Lampert Likes AutoZone," April 18, 2008.)

AutoZone did not return phone calls seeking comment. A spokesman for ESL declined to comment.

AutoZone and a number of its peers have benefited as the recession crimped new vehicle sales and consumers were keen to repair their current cars. The company itself cited an estimate that the average age of cars on the road in the U.S. is now 10 years, a spike from previous years.

Over the past year, AutoZone has defied the market trend, gaining 37.4%, while the Dow Jones U.S. Specialty Retailers Index lost 14.7% and the overall market tumbled 32.4%.

However, in the past three months the tide has turned. While the broader market rallied 10.6% and the specialty retailers index gained 4%, AutoZone has slumped 5%.

The news of Lampert's sale weighed on the stock in trading Wednesday, and the shares fell $5.41 to $148.80. The shares have recently retreated after reaching a 52-week intraday high of $169.99 on April 30.

Lon Juricic, president of StreetInsider.com, noted that it's not surprising that the stock market would react, as Lampert's large stake means there are always fears about him selling, but that it's hard to judge his true intentions.

"Today's news can just be random portfolio adjustment or it could be a sign that he wants to limit his exposure to the retailer and distributor of automotive parts," he wrote in a note. "Lampert has a person on the board and has been the company's strongest and best investors for years. AutoZone is one of Lampert's best-performing positions."

However, FBR Capital Markets analyst Stephen Chick wrote in a research note that Lampert's sales were confirmation of his Underperform rating, as Lampert has been loath to sell, last doing so in 2006.

EEOC Sues Kmart for Alleged Disability Discrimination
Dow Jones Newswire
June 24, 2009

The U.S. Equal Employment Opportunity Commission has sued Kmart Corp. for discrimination, alleging the retailer violated the Americans with Disabilities Act by terminating an employee who has spinal stenosis.

The EEOC alleges that Kmart fired Alonzo McGlone - who suffers from the condition in which one or more areas of the spine narrows, often putting pressure on the spinal cord or nerves - because of his disability. The group also said the Kmart discount store, located in Norfolk, Va., refused to allow McGlone to use an "assistive device" to aid him in standing and walking.

The EEOC said McGlone was qualified for and could perform the duties of his position as a greeter.

Kmart is owned by Sears Holdings Corp. (SHLD).

The lawsuit, filed Tuesday in Virginia, seeks unspecified damages including reinstatement to the job or pay in lieu of employment. It also seeks punitive damages for pain and suffering.

This isn't the first time Kmart has been sued by the EEOC. The company paid $60,000 in 2004 to settle a job-discrimination lawsuit filed on behalf of a mentally disabled Kansas man.

Wal-Mart aims to keep a new flock of customers
By Anne D'Innocenzio - AP
June 24, 2009

The recession steered a new type of customer to Wal-Mart — deeper in the pockets and suddenly looking for bargains. Now the world's largest retailer has to figure out how to keep that customer when the economy recovers.

So Wal-Mart is bringing in more brand names, ditching scores of other products and even redesigning hundreds of stores to give them wider aisles, better lighting and better sight lines.

It's more than just a cosmetic upgrade. That new breed of customer also spends about 40 percent more than the traditional Wal-Mart shopper, and the retailer senses an opportunity to accelerate its growth.

Take Aditya Krishnan, a 42-year-old lawyer from San Jose, Calif. He used to buy only light bulbs at Wal-Mart but now finds himself spending $150 a month there, including buying workout clothes he used to get at Macy's.

"If I am able to get good stuff at Wal-Mart, and I am able to save money, why would I change?" Krishnan asked. "I am seeing better brands, and the shopping experience is better" than before.

Wal-Mart says that's no accident. It's placing a big bet on the redesign of most of its 3,600 stores, started last fall. This fiscal year, it plans to redo up to 600 at a cost from $1.6 billion to $1.7 billion.

The prototype for the remodeling includes lower shelves to make it easier to see across the store, better lighting and wider aisles. Expanded electronics areas will include interactive displays to test video games and portable gadgets.

The store now carries brands like Danskin and Better Homes and Gardens, and its electronics section now stocks pricier products like Palm Inc.'s well-received new Pre smartphone.

Whether it all works, Wall Street analysts say, depends in part on how quickly the behemoth retailer can remodel and keep shoppers satisfied. Concerns about how Wal-Mart will keep its momentum have sent its stock down 13 percent this year.

The early signs are positive, putting pressure on the rest of the industry. Target Corp., whose sales have been hampered by its emphasis on nonessentials like trendy jeans, is expanding its fresh food offerings. Best Buy Co. is beefing up customer service.

"I believe a lot of what (Wal-Mart) is doing is working," said Joseph Feldman, a retail analyst at Telsey Advisory Group. "They are a threat to everyone."

Other discounters, including TJX Cos. Inc., which sells name-brand fashions and home furnishings, Costco Wholesale Corp. and BJ's Wholesale Club Inc., are focusing on how to hold on to new customers lured by low prices during the recession.

But Wal-Mart, which only three years ago struggled with cluttered stores, long lines, stiff towels and unattractive clothing, has a bigger hurdle to climb. And it has to move fast to win over people who still have negative feelings about shopping there.

"The service still needs to be improved, and the stores are a little sloppy," said Daniel Chou, 35, of Warren, N.J., who was at a local Wal-Mart to pick up a bungee cord but who says he rarely shops there.

Stock in Wal-Mart and a few other discounters such as Costco Wholesale Corp. have fallen this year as investors turn to beaten-down shares of more upscale companies like Macy's Inc. and Williams Sonoma Inc., which investors believe don't have much further to fall.

Wal-Mart, which topped $400 billion in sales last year, attracts more than 140 million customers per week. But to get them to buy more than just groceries, which account for about half of annual sales, it's paring its product lineup and making room for better brands.

Consultant Burt P. Flickinger III estimates the remodeled stores are carrying 10 to 15 percent less inventory, particularly getting rid of no-name labels.

The shift risks turning off longtime customers who are looking for only the cheapest products. It's happened before: The company had to dump Metro 7, its in-house clothing line launched in 2005, because it turned out to be too trendy for its general clientele.

Wal-Mart executives say 17 percent of the chain's traffic growth in February came from new customers, and they're spending 40 percent more per trip. More than half of those shoppers living in households that take in more than $50,000 a year.

While that may not be considered affluent, it's a big departure from Wal-Mart's core customers, of whom one in five does not have a bank account or has limited access to financial services.

To keep prices low while offering better products, Wal-Mart is slashing its own costs in little ways. The Angus ribeye steak being sold at Sam's Club at 25 percent below competitors' prices is paid for in part by a switch to shorter straws at its cafe, saving $52,000 a year, says spokeswoman Susan Koehler.

A recently converted customer is Judy Safern, a 42-year-old public relations executive from Dallas who used to buy her children's clothing at Galleria mall and groceries at Tom Thumb supermarket.

She now says she hasn't been to the mall in a year and figures she saves several hundred dollars a month by buying most clothing and food at Wal-Mart. "I basically buy everything there," she said.

Calif AG Reaches $8.7 Million Settlement With Kmart,
Sues Target
Dow Jones Newswires
June 15, 2009

The California attorney general's office reached an $8.65 million settlement with Sears Holdings Corp.'s (SHLD) Kmart stores and filed a similar lawsuit against discount retailer Target Corp. (TGT), seeking to block it from allegedly dumping hazardous waste in local landfills.

The Kmart settlement includes civil penalties, costs and funding for projects to improve environmental protection in California.

Meanwhile, the attorney general's office said Target carries and handles hundreds of items with hazardous properties, including bleach, paints, pesticides, aerosol products, oven cleaners and automotive products. It noted Target is responsible for properly handling and disposing of products that are damaged during shipping or stocking, returned to the store by customers or removed because they are past their expiration date.

"Target has shown a willful disregard for California's hazardous waste laws by dumping flammable liquids and toxic chemicals in local landfills over a period of eight years," California Attorney General Edmund G. Brown Jr. said. "If successful, this lawsuit would force Target to comply with state laws governing the lawful handling and disposal of toxic and corrosive waste."

In a statement, a Kmart spokeswoman said, "Kmart is proud of its environmental leadership and has cooperated with the state in developing a comprehensive environmental compliance program that meets the specific requirements of California. The settlement we've entered into with the state underscores our commitment to meeting all of the detailed regulatory requirements the state is imposing."

A Target spokesman wasn't immediately available for comment.

In after-hours trading, Target shares dipped 0.5% to $39.92, while Sears was inactive.

The Brits are coming: Chicago's Sears Tower renamed
Plans for the UK insurance firm Willis to lend its name to North America's tallest building have blown up a storm in the Windy City
By Andrew Clark in New York - Guardian UK
June 14, 2009

Don't mention the B-word. The London-based insurance company Willis Group is anxiously trying to play down its British roots as it battles American hostility over a plan to lend its name to a towering midwestern landmark.

In a ceremony next month, Chicago's 110-storey Sears Tower which, at 442 metres (1,450ft), is the tallest building in North America, will be rechristened as the Willis Tower in a multimillion-dollar naming rights deal. The locals are not impressed.

An online petition condemning the change has attracted 33,000 signatures. A Facebook group attacking the new name has 95,000 members and the letters pages of Chicago's papers have been peppered with scornful digs at the building becoming "Big Willie".

The actor David Schwimmer, who went to university in Chicago, has described the change as "a bummer". Chicago's historians say the new name will never stick.

One tenant with offices in the tower described it as "beyond the pale of stupidity". In an attempt to dampen the controversy, Willis's New Jersey-born chief executive, Joe Plumeri, declared last week that opponents were labouring under the mistaken apprehension that the company is a foreign interloper. "More information about the company's lack of Britishness might have been good," he told the Chicago Tribune.

Plumeri omitted to mention that the company was founded as a marine insurer in London's Docklands in 1828. Or that it famously provided cover for the Belfast-built Titanic. Or that it went public on the London Stock Exchange in 1976. Or that the Duke of York opened its new global headquarters in Lime Street, smack in the middle of the Square Mile, last year.

Willis views naming rights to the Sears Tower as a quick way to become a household name in the US. The building, completed in 1973, was the highest in the world for 25 years until it was overtaken by Kuala Lumpur's Petronas Towers and, more recently, by the Taiwanese skyscraper Taipei 101.

The structure is viewed with pride by the people of Chicago and critics point out that Willis is getting the naming rights despite leasing just three floors to occupy roughly 3.7% of the building's office space.

Gerald Skoning, a Chicago lawyer whose father oversaw construction of the tower as vice-president of real estate for Sears, said: "It's really not the Chicago version of the Boston tea party. It's nothing personal against the UK, the Brits or Willis Group. It's just that Chicagoans don't take kindly to people renaming their icons."

Local people say the tip of the tower, poking over the horizon, is typically their first glimpse of Chicago when they return from an out-of-town journey. Skoning recalls driving into the city on an autumn evening after a trip into the countrywide to play golf: "There was an amazing sunset. This rosy, beautiful, orangish-red glow was mirrored on the entire frame of the Sears Tower. It was just a phenomenal picture."

Willis argues that it is bringing 500 jobs to the Chicago area and that its $17m (£10m) investment ought to be welcomed in a recession. The insurer bought a US broker, Hilb Rogal & Hobbs, last year and is keen to expand in the American market.

Valerie Di Maria, Willis's vice-president of marketing, said: "While we obviously have very strong roots in London, we are a global company and the Chicago press made this sound like a British invasion. We have offices in New York and we've had operations in the US for over a hundred years."

The mayor of Chicago, Richard Daly, has remained unmoved by the controversy. When asked about the name change by reporters recently, he shrugged and pointed out that the tower's existing name was redundant: "Sears moved out a long time ago."

But members of the public are proving harder to win over. "The name is part of the history and that shouldn't be messed with," said one resident of Chicago's suburbs, Jessica Schatte, in a letter to the Chicago Daily Herald. "Once you do change the name, it never seems to be the same in many people's hearts and minds."

Willis's efforts to blur its nationality cut little ice with Alex Lucas, a systems analyst who works a block away from Sears Tower and who has set up a protest website, ItstheSearsTower.com.

"If it were a more well-known company with a long history in our city, I believe the response would have been much more favourable," he said. "I've seen people outraged at the audacity of a company relatively unknown to most Chicagoans coming from seemingly out of nowhere and putting their name on our iconic structure."

Neiman Plans Lower-Priced Strategy
By Tess Stynes - Wall Street Journal
June 11, 2009

FTC Charges Kmart, Other Cos With False 'Green' Advertising
By Brent Kendall - Dow Jones Newswires
June 9, 2009

Allstate Shares Deserve a Better Premium
By Jonathan R. Lang - Barron's
June 8, 2009

Allstate has suffered heavy losses as a result of the credit crisis. But it appears to be on the mend as it shifts focus back to the bread-and-butter business of writing auto and homeowners policies. INSURANCE-GIANT ALLSTATE has endured scores of profit-shredding natural calamities over its more than seven decades of existence -- from Hurricanes like Katrina to California's Northridge earthquake. Yet none of these events has proven as devastating to Allstate's financials as the tsunami that hit the global financial markets over the past year.

To wit, heavy asset write-downs in Allstate's now $94 billion investment portfolio were largely responsible for the company's posting a loss of $1.7 billion for 2008 and of $274 million in this year's first quarter. This compares to lush profits of $4.6 billion, or $7.83 a share, and $5 billion, or $7.89 a share, in '07 and '06, respectively.

Even worse was the damage wrought by the credit crisis on Allstate's shareholder net worth, or book value. Largely as a result of realized and unrealized security losses, its equity per share has plummeted between year-end 2007 and first-quarter '09 by more than 40% -- from $21.9 billion, or $38.58 a share, to $12.24 billion, or $22.65 a share. As a result, Allstate stock (ticker: ALL) has been pummeled, falling from nearly 60 in the fourth quarter of 2007 to a low of under 14 in March, before recently rebounding to around 25. Red ink hasn't been the stock's only problem. The company has also slashed the quarterly dividend rate in half and suspend a $2 billion stock-buyback program in midstream in order to marshal precious capital.

Yet barring some huge natural disaster, Allstate appears unimpeachably to be on the mend. Perhaps most important, the company has belatedly cut back on the risk in the $59 billion portion of its investment portfolio that backs its life insurance and other financial-products operations. This has been achieved by shortening the duration of its bond portfolio to render it less sensitive to changes in interest rates and by shifting some investments from more risky sectors like commercial real estate to tamer asset classes like money markets.

Moreover, Allstate is beginning to cut back on its life and financial products to emphasize what it calls its "protection" business -- auto and homeowners' policies, which are carried by some 70 million Americans. This makes eminent sense, since Allstate's property-and-casualty business traditionally has earned a return on equity approaching 15%, and, in the financial unit's best years, still accounts for 80% or more of the company's earnings.

"Life insurance in most years has been a nice add-on business, and we plan on staying in the financial-products area on a reduced basis," Allstate Vice President and Chief Financial Officer Don Civgin asserted to Barron's. "But it makes sense for us to build on what we're really good at and delivers most of the earnings -- our protection business."

The great fear this spring was that Allstate would be forced to drastically dilute its stock to boost its capital. It wasn't an errant concern after the company had seen more than 40% of its book value go up in smoke. But these concerns have dissipated since as some of its bond holdings have improved in price, and Allstate says it has sufficient wherewithal to conduct its insurance operations. Last month, Allstate even turned down a capital infusion proffered by the Troubled Asset Relief Program.

STILL, ALLSTATE ISN'T ABOVE a bit of old-fashioned embellishment in depicting its capital position. In recent weeks, it has ballyhooed the fact that its casualty-insurance unit (auto and homeowners) has $13 billion in so-called statutory, or regulatory, capital, and its life-insurance unit has $3.4 billion in stat capital.

That sounds like a nice cushion over the $12.24 billion in capital reported on Allstate's GAAP (generally accepted accounting principles-based) balance sheet. Yet the actual stat number should be reported as $13 billion for the two companies combined, since the $3.4 billion number is, in effect, being counted twice. That's because the casualty company owns the life-insurance unit, and as a result of the stacking, commingles the unit's capital with its own. Yet Allstate stock, even at current levels in the mid-20s, seems cheap.

It will surely take awhile for Allstate to recover its earnings power of just two years ago. Yet analysts' consensus earnings forecasts (earnings before any special items such as capital gains and losses) sit at $3.91 a share for this year, and $4.24 a share for 2010. Hence at 25, the shares trade for less than six times next year's number. That's rock-bottom in just about anybody's book. A climb in Allstate book value back to its old high of $21.9 billion, or $38.58 a share, seems some years away. Still, Credit Suisse analyst Vinay Misquith foresees book value rising to nearly 28 a share by the end of next year, from its March 31 level of 22.65 a share.

ALLSTATE CERTAINLY DESERVES to sell at a price-to-book ratio of well above one-times, given its status as the largest publicly-owned personal-lines insurer in the U.S. The Bottom Line: Allstate shares are cheap, despite their recent rise. One analyst thinks that they can reach 40 over the next 12 months, from a recent level of about 25.

"Allstate is an interesting opportunity, because I believe it was unfairly tarred with the woes of the life-insurance industry, with investors ignoring its highly profitable primary business in auto and homeowners," explains Misquith. "The company has a huge market share in personal-auto insurance, and that business is fairly sticky, despite the long-term secular inroads direct writers like Progressive and Geico are making, because the latter don't have to compensate agents as Allstate does." Misquith has a 12-month price target of 32 on the stock. Analyst William Yankus of Fox-Pitt Kelton has an even higher target of 40 a share.

ALLSTATE'S FORTUNES ARE improving on a number of fronts. For one thing, credit spreads (the yield difference between various classes of bonds and government securities of similar maturity) are finally starting to compress. As a result, Allstate is seeing the $9.4 billion in unrealized losses it was lugging at first quarter's end (thus depressing its book value if not its earnings) drop by $1.5 billion, according to Allstate CFO Civgin. With this portfolio generally performing well in terms of credit ratings and cash flow, he expects most of these losses to be temporary and reversible.

To be sure, not all the $9.4 billion in unrealized losses would roll into book value, should they all reverse. Due to esoteric quirks in insurance accounting, these losses have only penalized Allstate's book value by $3.8 billion, or $7 a share, to date -- so that's all that the company could pick up in book value if everything were to go right in the portfolio. Still, even a $3.50 bump-up in book value added to Misquith's year-end 2010 estimated book value of 28 a share would be a nice fillip to shareholders.

Allstate has made a number of moves to tamp down the risk in its life-insurance portfolios in a process called -- you guessed it -- "de-risking." No longer will Allstate be looking for love in all the wrong places, such as in high-risk instruments like collateralized-debt obligations squared. It has also reduced its exposure to commercial real estate by more than a billion dollars through targeted sales and principal pay-downs. The duration of its bond portfolio (73% of the whole) has been shortened by half a year, in order to decrease exposure to any rise in interest rates.

These changes don't come for free, however. Allstate's move to greater investment safety caused a 23% drop in investment income in the first quarter, to $1.18 billion, from the year-ago period.

The recent immolation in Allstate's life-insurance-investment portfolio has only renewed clamor in some circles for the company to dump its financial business. After all, the unit has never been a major part of the company, nor does it come close to matching the 14% to 15% return on equity of the property and casualty business. While Allstate ranks second to State Farm in the U.S. personal-auto and homeowners' lines, it's just 16th in life insurance and related products.

Likewise, there's precious little cross-selling of life products in Allstate's store-fronts, with just 10% or so of its property and casualty customer base opting for Allstate's life insurance and annuities.

But while it's an also-ran in financial products, Allstate is likely to soldier on in the business. The company's Chief Executive Officer Tom Wilson, 51, once headed up the financial unit, and has long harbored the grandiose ambition of transforming Allstate into the retirement advisor of choice for Middle America. But clearly the trauma of the last year has tempered those hopes.

Late last year, Allstate quietly scrapped plans to offer a family of target-date funds nationwide. At the same time, the then-chief of the financial unit unceremoniously left to "explore other options." The parent company this spring also disclosed plans to let go 1,000 of the employees.

It could've been worse for the financial unit. Fortunately, Allstate in 2006 sold its variable-annuity business to Prudential Financial, and thus avoided having to pay heavy guarantees that were triggered by the recent stock-market swoon. Allstate CFO Civgin tells Barron's that the financial unit will now concentrate on fairly basic life and annuity products and maintain a lower-octane investment portfolio.

Finally, Allstate's stock may have suffered some from long-term worries that its model for selling personal-lines policies through agents is making it vulnerable to continued depredations by cheaper direct sellers like Geico and Progressive. Younger people are not only abandoning newspapers for the Internet. They also seem more comfortable shopping online for insurance than dealing with smooth-talking agents sitting in a store front trying to upsell them to more expensive products.

That's not a small matter. But the attrition in Allstate's business as measured, for example, by policies in force, is occurring at glacial pace. Likewise, Allstate saw a 14.8% rise in the first quarter in new applications for auto insurance -- which may be an indication of stronger business to come.

All told, Allstate figures to make a lot of money for years to come, even in the face of any erosion in its market share. And that will no doubt redound to the benefit of the company's shareholders -- especially at the current price level of the stock.

Willis Group Holdings' chief Joe Plumeri has people talking
Outspoken CEO Joe Plumeri concedes Sears Tower name change could have been handled better
By Becky Yerak - reporter - Chicago Tribune
June 7, 2009

Joe Plumeri has cut a high profile as the head of Willis Group Holdings Ltd., being an outspoken critic against industry compensation practices and making one of the sector's biggest acquisitions in a decade.

But few of his moves as chairman and chief executive of the multinational insurance brokerage have ever mobilized John Q. Public to start a Facebook group, create a Web site and circulate a petition -- until recently.

In March, Willis, founded 181 years ago in London, announced plans to acquire the naming rights to Chicago's Sears Tower, the tallest building in the Western Hemisphere.

Backlash ensued, spawning ItsTheSearsTower.com and a Facebook group called Chicagoans against Willis Tower. An unscientific poll by the Chicago Tribune elicited 15,175 responses, of which 95 percent said they'll keep calling it Sears Tower.

"More information about the company's lack of Britishness might have been good," Plumeri conceded in an interview last week in Sears Tower's Metropolitan Club when asked what, if anything, he wishes he had done differently in rolling out the name change.

While Willis is usually described as "London-based," the New Jersey-born and -raised Plumeri still lives in the Garden State. He spends just as much time running the company, which serves 190 countries, from its New York offices than from London.

"People were upset that, A, the Sears name was going away, and B, it was being replaced by a British company, so that's two bad things," said Plumeri, a former longtime Citigroup veteran who in 2000 was hired by Henry Kravis of Kohlberg Kravis Roberts & Co. to run Willis, at the time one of the buyout firm's holdings.

"And you can't get more American than Chicago, so that's three bad things," said Plumeri, whose red-blooded American bona fides also include owning two minor-league baseball teams.

The Willis Tower dedication is slated for July, and Willis' 500 Chicago-area workers will move into newly renovated offices occupying most of the tower's 18th, 19th, and 20th floors by summer's end. They're currently scattered in five area offices.

Now publicly traded, Willis asked for and received $3.8 million in tax-increment financing from the city to redevelop the Sears Tower space.

"It's going to cost us about $17 million," said Plumeri. "We're bringing jobs into the city, and hopefully in the next couple of years it'll be 600, 700 jobs because we expect our business to grow rather strongly in the next three years."

Willis will consider spending money on marketing to help the Willis Tower name stick, but Plumeri knows it will take time.

"They can call it whatever they want, even 'The Big Willie,' " said Plumeri, who turns 66 next month. "All I know is that the day we announced that this building would be named Willis Tower, everybody in America knew who Willis was."

Willis doubled its North American revenues in 2008 with its $2.1 billion acquisition of Hilb Rogal & Hobbs. It was the brokerage sector's biggest deal in a decade, Willis said.

One of Willis' chief rivals is Chicago-based Aon Corp., which has about 2,500 Chicago-area workers and occupies one of the city's other big towers. Plumeri plans to invited Aon founder and Chicago civic leader Pat Ryan to the Willis Tower dedication, calling him "an icon not only in the insurance industry but in the city."

Through Friday, Willis stock is up 12.6 percent year to date, while Aon, Arthur J. Gallagher and Marsh & McLennan are down 20.5 percent, 17.3 percent and 18.5 percent, respectively.

Aon points out that its long-term track record, particularly over the three- and five-year periods, beats Willis. Aon CEO Greg Case, tapped by Ryan for the top job in 2005, "has done a nice job with Aon," Plumeri said.

Earlier this year Willis rolled out an unpaid furlough program, though the program is voluntary, he said.

"We had a Willis Choice program, an inventive way to give people an opportunity to choose to take days off," Plumeri said. "It obviously saved the company money and gave people an opportunity to be more flexible with the way they worked."

At a company function earlier this year, Plumeri said he has no plans to retire and expects Willis to remain independent.

Plumeri was an early critic of "contingent commissions," in which insurance providers pay a sum to brokers as compensation for placing business with the insurer, but Hilb continues to take them.

"That doesn't mean I agree with them," Plumeri said.

Such commissions were common in the insurance brokerage industry, but Eliot Spitzer, then attorney general of New York, attacked the practice. Brokerages such as Marsh and Aon paid large sums to settle litigation brought by Spitzer and other states' attorneys general. Critics say the practice represents a conflict of interest because brokers are supposed to represent the interests of insurance buyers, not insurers, and the commissions can skew that relationship.

"We still have them because to acquire a company that takes them, I can't pay for them and then not take them," Plumeri said. "I took them for three years so the economics of the deal work."

Say a broker's underlying revenues are $7 and its contingent commissions are $3, and a buyer is essentially paying for the $10. "If I'm going to pay a multiple that includes the contingents, I've got to be able to keep taking them," Plumeri said.

The practice will end after three years, he vowed. "I'm dead set against them."

Bill Lomonaco, retired Sears executive, dies at 73
Chicago Tribune
June 6, 2009

William S (Bill) Lomonaco, age 73, of Oconomowoc, passed away Thursday , June 4, 2009.

Bill was a graduate of the University of Illinois in 1957 in Business and Marketing and had a career with Sears from which he retired from in 1992 after 32 years with the company. He retired as the National Merchandise Manager of hardware (Craftsman), plumbing and paint. He was also a Captain in the Army Reserves for 8 years.

Bill is survived by his loving wife Jean of 49 years. Daughters Patricia (Dan) Rogers and Teresa (Jon) Schmeling all of Oconomowoc and a son Michael (Kathryn) LoMonaco of Caledonia, MI. His grandchildren Chris, Sarah and Rachel Rogers, Jessica and Emma Schmeling, Nick, Madelyn and Anna LoMonaco. His sister Vilma Seveska of Waukegan, IL and a brother Vince (Elizabeth) LoMonaco of Carol Gables, FL. Also survived by a sister-in-law Delores LoMonaco of Gurnee, IL and several nieces, nephews and cousins. Bill was preceded in death by his parents Josephine and Peter, his brother Frank, an infant son Peter William and an infant grandson Nathan William Rogers.

Funeral Mass for Bill will be held on Monday June 8, 2009 at St. Jerome Catholic Church (995 S. Silver Lake St. Oconomowoc, WI 53066) at 2:00 P.M. with a visitation starting at 12:00 Noon. Burial will follow at St. Jerome Catholic Cemetery.

Sears set to gofer it
SCI-TECH SCENE | New online shopping venture centered on centralized shopper pickups
By Sandra Guy - Chicago Sun-Times
June 6, 2009

Janet Potts, a school-bus driver and mother of two, needed 2 gallons of milk, and her husband realized he had to get a refill line for the weed-whacker to finish the yard work.

Rather than drag two children ages 3 and 7 to the store for an arduous search, Potts went online. She found both items, plus vacuum-cleaner bags, at Mygofer.com, a new retail concept started by Sears Holdings Corp., that lets online shoppers drive to a warehouse-like store in Joliet to pick up their online orders.

Shoppers can drive immediately to the Mygofer store if the item is in stock to pick up their orders at either a drive-through or by walking into the store.

"Comparing prices online was a lot easier than running around, and the ease of not having to drag two children through the store was a great help," said Potts, who lives within a 15-minute drive of the Mygofer store. "I can stick to a budget and it's like one-stop shopping."

Mygofer shoppers pay no shipping fees, but they do pay sales tax. Shoppers may check whether the items they have ordered are available, print out their "ready for pickup" email, and drive to the store to get the order. Shoppers with no computer access may call in orders at 877-551-7467, or go to the store and order at computer terminals in the lobby. The store is at the Louis Joliet Pointe Shopping Center at 2700 Plainfield Road.

The Mygofer Web site also links to Kmart stores at 1360 N. Ashland Ave. in Chicago, in southwest suburban New Lenox and in Rockford. At those stores, Mygofer shoppers may pick up their orders within two hours or have them shipped. The Rockford store also provides a personal shopping service that picks up items at other stores and brings them to Kmart.

Sears Holdings Corp. Chairman and billionaire hedge-fund guru Edward S. Lampert has made a point of lauding Apple, Amazon.com and other technology companies who've changed the retail paradigm, and he wants Sears and Kmart to join the revolution.

"It's as much a service as a store," Lampert said as he touted Mygofer at the retailer's yearly shareholders' meeting in May at Hoffman Estates headquarters. "There are displays, but they are small. It's functioning more as a fulfillment warehouse."

Other retailers have expanded their online assortments so much, their Web sites have become destinations, including Macy's, Wal-Mart and Target, said Andrew Lipsman, director of industry analysis at Chicago-based online research firm ComScore.

Why?

Online shoppers are increasingly looking for in-store pickup, Lipsman said, noting that certain retailers are seeing 30 percent or more of their transactions as order on-line, pick up in-store. Shoppers also are proving they want coupons, discounts, easy-return policies and outstanding customer service, Lipsman said.

An April poll by ComScore revealed that on-line shoppers chose product details, buying incentives, site navigation and product reviews as their top priorities.

Lampert and Sears Holdings Corp.'s interim CEO Bruce Johnson are now overseeing changes that are pushing Sears and Kmart into social networking, albeit at a measured pace.

The idea is to get customers talking online. So far, more than 200,000 users have registered at MySears, a social networking site rolled out in late March. MyKmart launched in early May.

"We are re-inventing ourselves as a technology company, but not 'technology for technology's sake.' Our focus is on customer issues," said Jim Barr, president of the online business unit for Sears Holdings Corp., parent company of Sears and Kmart. Sears hired Chicago-based startup Viewpoints.com to set up and service the sites.

"More customers are 'speaking' to each other at MySears blogs. They are rating products and answering polls to help us figure out how to price certain items," Barr said.

Recent posts included a reviewer who said a Craftsman 168-piece mechanics' tool set "helped me put together simple tasks such as my daughter's bicycle (and) fixing the garage and odds and ends around the house." Another blogger asked for help with a washer whose timer didn't advance from the agitating mode to the rinse mode.

Sears has expanded to 3 million from 600,000 the items it sells on its Sears.com Web site. The site sells online whole categories not found in Sears stores such as books, shoes, toys, movies, DVDs, auto parts, an expanded tool selection, and electronics such as iPods and PlayStations. Barr said "web to store" purchases constitute "a very large percentage" of Sears' online business but not yet the majority.

"Customers tell us they appreciate the convenience of the store, and they don't have to pay shipping when they pick up in store," Barr said. Online shoppers choose how far they are willing to drive to a store to pick up their order, especially if they can pick up the order on the same day.

The importance of letting shoppers buy online and pick up in-store is so important that Kmart stores will soon add this capability, Lampert said.

Among the Web features Sears has launched recently are:

*** A Sears2Go mobile service that lets shoppers browse, buy and schedule pickup or services on their iPhones and mobile phones.

** PayPal payment options at Sears.com and Kmart.com.

** An ultimate tractor experience under the "Lawn and Garden" category at Sears.com that lets lawnmower and lawn-tractor buyers compare tractors, buy accessories, keep track of their mower or tractor's maintenance and provide support after the sale.

** A short-cut shoe finder at Sears.com that lets shoppers type in their criteria -- style, color, size and other details -- and one-click to those that fit. Another feature lets browsers look at a page of shoe photos to visually browse the assortment.

** An online coupon center at Kmart.com.

** A site called SearsHomeServices.com (NO HYPHEN) that lets shoppers schedule appliance repair and other services. It also connects Sears appliance buyers with their product's service manual, which they can print out.

** ManageMyHome.com, which lets frazzled homeowners compile lists of their valuables, plan do-it-yourself projects, follow DIYers on Twitter in the Neighborhood directory, and get expert help for problems ranging from noisy refrigerators to cracks in walls.

** ServiceLive.com, a service that lets consumers name their price for any number of contractors ranging from handymen to helpers who can install flat-screen TVs.

This reporter used ServiceLive.com to read contractor reviews and find a plumber who was prompt, reasonable and who did a wonderful job. But I had to be walked through the ServiceLive payment system to pay the plumber's bill. The help-desk assistant was calm and capable, but the process to complete payment wasn't obvious, at least to me.

Other Web-site updates are subtle but geared toward making online shopping easier: a technology change that lets shoppers look at 40 items on a single page without requiring lengthy download times; express checkout for shoppers who've already filed shipping and credit-card information at the sites; a link to share a product photo and description with others on social networks such as Twitter, Facebook and MySpace, and navigation tools on the left-hand side of the home page that let shoppers immediately see categories such as "baby gear" and "nursery" under the main heading of "baby."

Sears agrees to settle spyware charges
By Jeff Gelles - Staff Writer - Philadelphia Inquirer
June 5, 2009

It fit the classic definition of spyware. Once downloaded, it collected a wealth of data most people would consider private, including details from their online shopping, bank statements, drug-prescription records, video rentals, library-borrowing histories, even the names and addresses of their e-mail correspondents.

But this spyware didn't come from some fly-by-night company or Eastern European hacker ring. It came from one of the most trusted names in U.S. commerce: Sears.

Sears Holdings Management Corp., which operates the Sears Web site for its retailing affiliate, agreed yesterday to settle charges by the Federal Trade Commission that it had misled consumers when it lured them to join "My SHC Community" via online invitations in 2007 and 2008.

The FTC said Sears led consumers to believe that the software would simply track their "online browsing." In return, they would get a $10 incentive payment, plus access to a "dynamic and highly interactive online community" where they could provide feedback to Sears and its sister retailer, Kmart.

But the FTC said Sears failed to adequately disclose the depth and breadth of the information it was collecting. In a complaint filed with the settlement, the FTC said the software monitored "nearly all of the Internet behavior that occurs on consumers' computers," and also collected data about the users' computers, printers, and other devices. The data collection was not detailed until deep into a long licensing agreement, the FTC said.

Sears admitted no wrongdoing in the settlement, in which it agreed to destroy the data it had collected and to quit snooping without "clearly and prominently" disclosing its intentions. Neither Sears nor the FTC would say how many computer users had installed the "My SHC Community" software.

In an e-mail, Sears vice president Chris Brathwaite wrote that the information had been destroyed more than a year ago and downplayed the episode's significance.

"The company conducted a research project nearly two years ago with a small panel of consumers who were recruited online to better understand the surfing behavior of U.S. retail customers," he said. He said the panelists "were informed up front of the nature of the work."

"At all times, Sears Holdings ensured the privacy and security of the personal information of all participants who enrolled in the program," Brathwaite said. He said Sears enrolled "less than 5,000" people.

Rick Quaresima, a lawyer in the FTC's Bureau of Consumer Protection, said the agency's primary concern was that consumers were likely unaware of how much information Sears was collecting.

"They said it was going to be monitoring your online browsing, but in fact it was collecting a whole lot more," Quaresima said. "There is no allegation that they misused the data in any way."

But privacy and spyware experts, including a Harvard University researcher who helped draw the FTC's attention to "My SHC Community," said collecting such detailed personal data opens the door to what many would consider abuse.

"It's quite off-putting to think of a company tracking these kinds of things about you," said Benjamin Edelman, a longtime spyware researcher and an assistant professor at the Harvard Business School.

Edelman said a variety of companies might benefit from the kinds of data Sears collected, such as drugmakers or insurers that might want to know more about people who fill prescriptions for particular medicines.

"I hope this sends a message to all other companies thinking of installing this kind of intrusive software," Edelman said.

Ari Schwartz, vice president of the nonprofit Center for Democracy and Technology, said Sears had touted the value of the software for enabling consumers to track information about their purchases, such as warranty expiration dates. But he said that when his organization examined the "My SHC Community" Web site, it found it had inadequate controls and made the information available to "basically anyone."

"We pulled up information about the then-chairman of the FTC's refrigerator," Schwartz said.

Privacy advocates said stopping consumers' unintended disclosures was crucial, because the commercial value of the data creates a strong incentive for companies to collect it.

"For a lot of companies, the information they have about their customers is worth more than their ongoing businesses," said Paul Stephens, of the nonprofit Privacy Rights Clearinghouse.

Sears Tower designer singled out
Chicago Sun-Times
June 5, 2009

Wal-Mart annual meet features cheers, Ben Stiller
By Nicole Maestri - Reuters.com
June 5, 2009

FAYETTEVILLE, Arkansas (Reuters) - Wal-Mart Stores Inc's annual meeting got under way on Friday amid raucous cheers as the world's largest retailer celebrates the gains it has made expanding its business despite a global economic downturn.

It marks the first annual meeting under newly installed Chief Executive Officer Mike Duke, who took the helm on Feb 1.

Cheerleaders and a marching band kicked off the meeting, and led a 16,000-seat stadium in the company's corporate cheer, while comedian and actor Ben Stiller welcomed the early-morning crowd.

"I hear they're still sleeping over at Target," Stiller joked.

The meeting is taking place as Wal-Mart grabs market share amid the economic downturn that has changed the way consumers shop. Instead of splurging on fancy restaurant meals, name-brand clothes, or flashy jewelry, consumers are showing a new austerity and are buying necessities, like food, toiletries and electronics that can be used to entertain at home or keep in touch with friends and family.

That shift in spending patterns has favored Wal-Mart.

Not only are consumers increasingly seeking its low prices, but because of an effort the retailer started in 2006 to improve sales by slowing U.S. expansion, new customers who are coming into its stores are finding wider aisles, less clutter and an improved merchandise selection.

Those are all factors that Wal-Mart believes will help it retain its increased market share once good economic times return.

To manage the recession, Wal-Mart has been planning conservatively. Last year it cut its capital spending plans and said it would pull back on opening U.S. supercenters -- its massive stores that combine a full grocery store with a discount store. Remodels are taking center stage and it is looking at opening smaller stores across the globe.

In October at its analyst meeting, Wal-Mart forecast sales growth of 5 to 7 percent for this current fiscal year -- or what it calls its fiscal year 2010 -- and capital expenditures of $13 billion to $14.5 billion. It also said it expected to open between 125 and 140 U.S. supercenters in this fiscal year. In fiscal year 2008, it opened 191 supercenters and had capital expenditures of $14.9 billion.

During a presentation to the media on Thursday, Wal-Mart also said its strong financial position leaves it well positioned to take advantage of acquisition opportunities across the globe.

"We're clearly very actively looking at possibilities," Wan Ling Martello, the chief financial officer of Wal-Mart International, told reporters.

Wal-Mart Taps Color, Brands To Retain Shoppers
By Andria Cheng - Wall Street Journal.com
June 5, 2009

At Wal-Mart Stores Inc.'s (WMT) first store not far from the company's Bentonville, Ark., headquarters, laptops from Dell to Acer were laid out - instead of locked inside display cases - for consumers to try.

Other products, from mascara and bath towels to video games and T-shirts, were displayed either by color or were color-coded to spur interest or make it easier for shoppers to find what they were looking for.

It's all part of an effort to retain new shoppers the low-cost retailer has picked up during the recession, Wal-Mart representatives said on a media store tour ahead of its annual shareholder meeting Friday.

As Wal-Mart, touting its "Save Money. Live Better" tagline, has won new budget-conscious shoppers, the company is making aisles wider, lowering shelf heights and removing products that used to occupy the center of the aisles to make it easier for shoppers to navigate the store and find products.

The goal is to keep those shoppers, old and new, and especially those with household incomes of over $50,000, even after the economy rebounds.

The concern that Wal-Mart will lose those shoppers when good times return has led its stock performance to lag other retailers selling more apparel and other non-essential items this year, investors said. Wal-Mart was the top performer in the Dow last year.

At the super-center store, which Wal-Mart finished remodeling last October as part of its plan to renovate as many as 600 U.S. stores in each of the next five years, brands - such as Samsung and Sony in the electronics department; Ocean Pacific and l.e.i. in the apparel section; and Better Homes and Gardens and Canopy in the home goods department - became a key focus, as they were individually highlighted.

Pharmacy and beauty sections were moved close to the grocery and fresh food section to help accommodate shopper requests to get in and out of the stores quickly,

Color palette also was another focus. Whereas a single color scheme would have defined a store in the past, different bright colors, such as orange and yellow in the deli and bakery section, were applied to make it easier to locate different departments. Remodeling Pays Dividends

The remodeling "has paid dividends for them," said Walter Todd of investment firm Greenwood Capital Associates, a Wal-Mart shareholder, adding that for the first time this past holiday season, he bought a Kodak digital camera for his mother at Wal-Mart, a purchase he wouldn't have considered making there before.

"You can tell a dramatic difference. That helped retain and attract shoppers," Todd said.

On an earlier tour of Sam's Club, color and brands were also an increasing focus. The wholesale club chain, which has suffered from declining sales as consumers cut back on non-essential purchases, is increasingly featuring branded products such as an $18.88 Nike moisture-wicking crew shirt that has a regular retail price of $35, on a one-time basis.

It's also carrying more colors such as orange, red and green lounge chaises, instead of just featuring one color, as in the past, Charles Redfield, senior vice president of merchandising for Sam's Club, said in an interview. Taste Panels And Grease-Fuel

"We have had a concentrated effort around recognizable name brands" such as Seven for All Mankind jeans, Redfield said. Color and brands "drive excitement." The club also is seeking to engage consumers through more interactive events and activities. For instance, it created a consumer taste panel to help it pick food to sell in its stores - such as mozzarella and roasted garlic chicken sausage, something that the company said its own buyers wouldn't have selected.

The club also will host a live catering Web cast for its small-business customers in the catering business to help create menus using products from Sam's Club.

On the international front, Wal-Mart, which operates in 15 markets outside of the U.S., said it's "confident and hopeful" about entering Russia. The company set up an office in that country a year ago to study the market and explore opportunities. Wan Ling Martello, finance chief of the retail giant's international division, told reporters that Wal-Mart also is actively looking to buy businesses to expand its global reach after Wal-Mart earlier this year bought a controlling interest of Chile's largest grocer.

Wal-Mart's international unit - which includes markets such as Brazil, Mexico, China and Japan - generates about $100 billion, or about a quarter of the company's sales. It has been the fastest growing division of the company, generating compounded annual sales growth rate of 17% the past five years.

The unit also is increasingly tapping into online sales by creating Web sites for Brazil late last year, for instance. It's also leveraging its global scale by negotiating with its suppliers, such as Procter & Gamble Co. (PG), as a whole instead of through each individual country's market.

On the cost side, Wal-Mart is testing four alternative fuels, including using waste grease from the fryers in its snack bar, on some truck fleets as fuel prices have picked up.

Wal-Mart adopts long view in halting monthly sales reports
Biggest retailer joins crowd of chains not reporting monthly sales
By Sandra M. Jones - Reporter - Chicago Tribune
June 4, 2009

Few retailers these days have an appetite for telling the world how their stores are faring each month, and now Wal-Mart Stores Inc. is joining the crowd.

When retail chains report May sales Thursday, the world's largest retailer for the first time won't be among them. Wal-Mart said it wants to encourage Wall Street to take a longer-term view of the company, and so from now on it will be reporting sales quarterly.

The move comes as analysts are predicting another down month for the retail industry, and getting a handle on consumer behavior becomes increasingly difficult.

Wal-Mart's decision is vexing because it accounts for 15 percent of retail industry sales, according to an estimate from Credit Suisse, the New York-based investment bank.

"Wal-Mart has a big impact," said Matthew Katz, a New York-based managing director at AlixPartners, a consulting and financial advisory firm.

A growing chorus of retailers have stopped reporting monthly sales: Sears, Chico's, CVS, Family Dollar, Ann Taylor and Home Depot, just to name a few. Macy's stopped reporting monthly sales last year but restarted under pressure from Wall Street.

Investors like the monthly number because it provides a window into a company's performance and highlights the retailers that are attracting the most consumers.

Retailers often are frustrated with the monthly ritual because the figure alone can be misleading. A shift in spending on a big holiday, such as Easter falling in March one year and in April the next, can make it look like a single month is particularly bad or unusually good and change Wall Street's perception of the company.

Five years ago there were 87 companies that reported monthly sales. Today, there are 34, said Frank Badillo, senior economist at Retail Forward.

Monthly sales at chain stores have "always been a piece of the puzzle" when looking at the economy, Badillo said. Without Wal-Mart, he said, it's just a smaller piece.

The most telling part of the monthly report is same-store sales, or sales at stores open at least a year. A Wall Street analyst created the same-store sales measure in the early 1970s to try to figure out what was really going on at a failing department store chain.

Jerry Gallagher had just taken over coverage of W.T. Grant Co. for Donaldson, Lufkin & Jenrette. The retailer's sales were growing as it opened outlets, but Gallagher suspected it was in trouble. When he asked the retailer how its older stores were doing, the company wouldn't say. So Gallagher came up with a calculation, calling it same-store sales.

The theory: All things being equal, if same-store sales declined, the retailer's profit is probably falling. It became the barometer by which Wall Street takes a quick measure of a retailer's health, and remains so today.

But overreliance on the metric has hurt the retail industry, said Katz. Young stores that show big percentage gains in annual revenue can boost same-store sales figures. Wall Street rewarded retailers for building new stores, and that led to too many stores, Katz said.

"It creates an illusion of growth," Katz said. "As an industry, we're oversaturated, and we're paying for it now with tremendous store closures."

Wal-Mart has managed to post monthly sales gains during one of the most brutal retail climates in a decade, while the industry at large has been in decline. The discount chain said same-store sales increased 2.9 percent for the March-April period combined.

But now Wal-Mart is facing tough comparisons from a year ago, when consumers were spending federal government rebate checks at its stores.

Wal-Mart declined to comment on the timing of its decision.

"We manage the company for the long term," said a Wal-Mart spokesman, "so we made this decision. It gives a better view of the long-term performance of our U.S. stores."

 

(AP) — General Electric's finance arm, GE Capital, said Tuesday it helped lend $4 billion to retailer Sears Holdings Corp. to provide working capital.

Led by financier Edward Lampert, Sears Holdings owns Sears and Kmart stores and sells home appliances, tools, home electronics and other merchandise. It is based in Hoffman Estates, Ill.

GE Capital Markets served as joint lead arranger for the loan.

"We're pleased to be able to provide $400 million to Sears in this transaction, making the largest contribution of new capital to the company and demonstrating how retailers benefit from working with a retail-focused lending team," said Jim Hogan, managing director of GE Capital, Corporate Retail Finance.

Jury in Michigan sides with SEC in Kmart case
Associated Press
June 1, 2009

(AP) — ANN ARBOR, Mich. - The former head of Kmart Corp., who told jurors he was hired to save the venerable retailer, was found liable Monday for misleading investors about company finances before a bankruptcy protection filing in 2002.

The verdict in the civil fraud trial followed 10 days of testimony here in federal court. The case was a fresh look at Charles Conaway's brief tenure and the desperate scramble to keep Kmart afloat before one of the largest bankruptcies in retail history.

The Securities and Exchange Commission accused him of failing to disclose that the retailer was delaying payments to suppliers to save cash. The trial centered on a conference call with analysts and Kmart's quarterly report to regulators, both in November 2001.

The SEC blamed Conaway for not sharing details in the report's management-analysis section. He testified that he didn't write it, didn't read it and relied on his chief financial officer and others.

On a call with Wall Street analysts, Conaway said sales were poor-and the stock took a 15 percent hit-but he didn't talk about the vendor strategy or an ill-timed purchase of $800 million in merchandise.

U.S. Magistrate Judge Steven Pepe will handle the penalty phase of the SEC's case. Conaway, 48, could be banned from serving as an executive at a public company.

He had a successful career in the drug store industry when he agreed in 2000 to try to turn around Kmart, which was no match for discount rivals Wal-Mart Stores Inc. and Target Corp. Conaway was gone less than two years later.

Kmart emerged from the Chapter 11 bankruptcy as a smaller company and now is part of Sears Holdings Corp., based in Hoffman Estates, Ill.

The Mobile Man
Breaking new ground, Sears names Thomas Emmons m-commerce leader
By Bill Siwicki - Internet Retailer
June 2009

One day in early 2007, Thomas Emmons, a new member of the innovation group at Sears Holdings Corp., was tapped on the shoulder by the vice president of e-commerce and asked to draft a strategy on what mobile technology in e-commerce could look like for the retailing giant. Emmons got to work. Before long, the e-commerce chief summoned Emmons to the office of the chief information officer. The e-commerce chief introduced Emmons to the CIO as Sears’ new mobile team leader.

That was news to Emmons.

He hadn’t even completed his strategy and the company had decided mobile commerce was so important it needed its own leader. Excited, Emmons dug back in and finished his presentation that showed how text messaging could be used in marketing and order online/pickup in-store, how a mobile commerce web site could help customers on the go or even in a store looking for more information and reviews, and how downloadable mobile applications were on the horizon.

The big pitch

The vice president of e-commerce, Rob Mills, then took Emmons and his mobile strategic plan before the CIO and other top Sears executives. Emmons made his pitch. The reaction? Sears gave Emmons and Mills the green light.

Two short years later, Sears boasts a popular m-commerce site (Sears2go.com), a strong text messaging program, and a new iPhone application that leverages GPS and personalization technologies to create a unique mobile shopping experience for every customer.

“Tom’s varied background in technology and innovation, his willingness to wear multiple hats, and his ability in leveraging new technologies to simplify rather than complicate solutions made him ideal for this spot,” Mills says.

In the past few years, an increasing number of retailers have begun text message marketing campaigns and launched m-commerce sites, making significant bets on the future of mobile commerce. Other retailers are hesitant, taking a wait-and-see approach.

But as more consumers switch from conventional phones to smartphones—and their numbers are growing fast, thanks in large part to the iPhone—and gain access to faster 3G wireless data networks, they are expecting site publishers and retailers to provide rich mobile web experiences optimized for their devices of choice.

Mobile innovation

Because Sears has been in business since 1893, it knows how to tell the difference between a trend and a fad. It concluded mobile would be an important and permanent part of its multichannel strategy moving forward. And, more than most retailers getting started in m-commerce, it’s put its money where its mouth is in the form of Tom Emmons. And it changed the name of its innovation group. Today it’s the mobile/innovation group.

“Mobile is the most graspable of the kinds of new technology,” Emmons says. “The world is really changing. If I go to my wife’s parents’ house on the weekend, for example, I can bring my iPhone and leave my laptop at home. If as a retailer you don’t have an answer for that, you are really going to be left out. A lot has happened in the last eight to 10 months, especially with the release of the iPhone 3G where the vast majority of our mobile traffic comes from.”

Sears created the post of mobile team leader to have someone who could stay on top of, and, as much as possible, ahead of, the fast-paced, ever-changing world of mobile technology and the mobile web. It needed an executive who could guide the retailer through new and uncharted waters.

Today, most retailers in m-commerce assign mobile leadership and responsibilities to the director of e-commerce or similar title. Some split responsibility between e-commerce and I.T. or e-commerce and marketing.

But it’s going to be an imperative sooner rather than later that larger multichannel and web-only retailers that want to lead have an executive devoted to m-commerce, says Jim Okamura, senior partner at retail consulting firm J.C. Williams Group Ltd.

“It’s a title we will start to see become more commonplace, with a strong connection up to the hierarchy, for the foreseeable future through the director of e-commerce,” Okamura says. “As a part of the overall direct and cross-channel alignment, it makes sense for mobile to have representation among executives, to direct an organization through this technology new to retail, to have a champion that can fight for internal resources.”

Emmons and company

Emmons leads a team of four and reports to the director of technology, Ravi Acharya. He also is charged with working with two mobile technology vendors: Usablenet Inc. and an offshore development firm.

“We have a collective responsibility as a group to keep the ball rolling to stay one step ahead of what customers want, offering value in this new channel and working with all the different organizations within Sears where mobile makes sense,” Emmons says. “A third of my time is spent doing strategy work, another third project execution, and the final third
operations.”

Another reason Sears created the post of mobile team leader was because mobile efforts require time and energy—and the director of technology already had many other projects that required his attention.

“It boils down to focus: Mobile takes time and persistence,” Emmons says. “It took two years to get where we’re at today. A lot of that was chasing people down, talking with anyone who might work with us. Now the situation is flipped: We have lots of people interested in working with us. Focus is why we’re able to continue.”

In addition to focus, Sears understands that mobile is a highly specialized arena, and as a result, an m-commerce chief needs freedom.

“We’re given a lot of free rein on what the direction is for these projects, because you really need to be close to the technology to understand how things work and what the user experience should be like,” Emmons remarks.

“If you don’t understand that at a low level, it will be difficult to make business decisions. So we’re much more of a bottom-up innovation area than a top-down.”

First stop: texting

Emmons’ strategy called for text messaging to be the first stop for mobile—specifically, texts tied to Sears’ popular order online/pickup in-store program. It’s very simple: A customer receives a text message alert the second an order is ready for pickup. Emmons says the opt-in program has become very popular among customers.

Though simple, these text messages exemplify how mobile can be multichannel, something at the core of Emmons’ strategy, and one of the reasons texting came first. “Mobile helps us differentiate as a multichannel retailer,” he explains. “Mobile is great at cross-channel.”

Early last year, Sears expanded its text message program to include marketing. One example: a text-to-win contest designed around the release of a new film, The Incredible Hulk. The contest was promoted on signs in stores and on the e-commerce site.

Shoppers texted ‘Hulk’ to KMART (56278, the telecommunications short code for Sears’ sister retailer) to enter. They were immediately notified if they won or lost.

“We had great response from our customers,” Emmons says. “The thing I loved was people did text back their addresses to enter. And the vast majority of those addresses were usable. We had to call a few people. It really worked. It was real time, people were told they won right away and mailed their prizes. Those who didn’t win were prompted to enter again the next day. These customers were significantly more engaged with the brand.”

To really engage customers in the mobile realm, though, a retailer needs what is central to mobile commerce today: an m-commerce site. Which is why after text messaging, Emmons steered Sears’ mobile ship to Sears2go.com, a mobile web site developed with vendor Usablenet and launched in November.

“Before we developed Sears2go, we did the research and found there was a decent amount of traffic coming to Sears.com from mobile devices. But the site was not providing an optimized experience for mobile devices,” Emmons explains. “With Sears2go.com, we have a great place to send these people for a quick, clean, fast experience.”

The perfect storm

To make Sears2go.com happen, Emmons and his team did some PowerPoint pushing throughout the organization. Then came a fortuitous confluence of events.

First, the number of customers visiting Sears.com using smartphones and other mobile devices significantly increased. Second, the retailer found in Usablenet, Emmons says, an easy and cost-efficient way to develop and launch an m-commerce site. And third, with some education from the mobile team, departments throughout Sears bought into m-commerce.

“We were able to justify a business case behind it based on the increase in traffic we saw to Sears.com on mobile devices,” he says. “Then we got a ton of support from our internal business teams, finance teams, all sorts of people who saw our PowerPoint decks and realized the potential of this technology. It was the perfect storm.”

There was so much support and enthusiasm for the m-commerce site that development was fast and furious, in part because Sears wanted Sears2go.com live for the 2008 holiday season. The amount of time between the decision to create the mobile site and when it went live? Three months. “For a big company, this happened as fast as it possibly could,” Emmons says. “It was as quick as we could have gotten anything done.”

Sears declines to give exact m-commerce sales figures. But since it launched,
Sears2go.com has been a learning experience for Emmons as an m-commerce leader.

“We’re happy. It met our expectations of traffic and sales—but in different manners than we had anticipated,” he explains. “An example: the places people are buying from. I thought use would come from a lot of urban areas. But there has been a decent amount—more than a blip on the radar—from rural areas. We’re not yet sure why.”

Emmons also learned about category and product selection in the mobile world.
“We started out with products we thought were good for the holidays. And they served us well,” he says. “But as we added things we thought were not initially important, we were surprised. Almost every day one of our top searches, for example, is ‘wheels’ or ‘rims.’ And we didn’t think people would be buying appliances on their phones, but they’re not afraid at all. We’ve been wrong in places—this is a test-and-learn team.”

The big cheese

While the team has been given a lot of freedom and has accomplished much in two years, it does depend on higher-ups for help. As the mobile leader, Emmons must work with other executives to achieve goals and continue to innovate. Creating a tight relationship between m-commerce and e-commerce has been key.

“I get a lot of ideas and access to people through our vice president of e-commerce, Rob Mills. This is a huge place, with thousands of people at the home office,” Emmons says. “Rob also will give a push now and then, which is good. But he really helps by giving us the space to develop these technologies and test and learn and get them out. He was instrumental in our mobile coupon efforts, for instance. When we were first starting that, he was the one who got all the people who needed to be in the room.”

Today, Emmons and his team have been focusing on the recent launch of the Sears mobile app, an important new component of m-commerce because it uses the computing power of a device, bypassing the need for mobile web pages, to offer a richer, more optimized customer experience. The new Sears iPhone mobile app, for example, uses the GPS technology native to iPhones to create an experience unique to each customer.

Mobile apps are the next step in m-commerce, after text messaging and m-commerce sites. Their popularity is soaring along with use of the mobile web—yet another indicator, Emmons says, of the shape of things to come.

“It’s happening as we speak,” says Emmons of m-commerce coming into its own. “I was at a conference recently and talked with a number of retailers and almost everyone was interested in getting involved. If more retailers looked at how many people are trying to access their sites on mobile phones, they would be a lot more worried about properly serving these customers.”

Ex-Kmart chief denies lying to SEC, investors
He's accused of hiding cash shortage
By Margaret Cronin Fisk and Steven Raphael - Detroit Free Press
May 28, 2009

Kmart Corp.'s former CEO, Charles Conaway, said he didn't mislead investors or the U.S. Securities and Exchange Commission in the months before the retailer filed for bankruptcy in 2002.

"I was absolutely honest," Conaway testified Wednesday during a trial in Ann Arbor. "If there was anything that I knew was wrong, I would have said it."

The SEC sued Conaway in 2005, alleging that he misled investors in a third-quarter 2001 filing and a Nov. 27, 2001, conference call by failing to disclose before the bankruptcy that the company faced a cash shortage and was delaying payments to vendors.

Conaway said he wasn't consulted about the quarterly report, which was prepared by Kmart's disclosure committee. "Nobody talked to me about anything," he testified.

"It was the committee's responsibility to determine content, form and timing of public disclosures consistent with our legal responsibility," he said. Asked whether he intended to defraud anyone, Conaway responded, "Absolutely not."

The government is seeking to bar Conaway permanently from working for publicly traded companies.

Kmart filed for bankruptcy on Jan. 22, 2002, subsequently shedding 599 stores and firing about 57,000 workers. Conaway was fired two months later.

The company exited bankruptcy in May 2003. Troy-based Kmart Holding Corp. later bought Sears, Roebuck & Co., creating Sears Holdings Corp., based in Hoffman Estates, Ill.

The SEC played excerpts from Conaway's Feb. 13, 2008, deposition in court May 19. Conaway testified live Wednesday in the defense portion of the trial and will be cross-examined today.

The trial on the SEC allegations began May 13 before a five-man, five-woman jury. The jury will determine liability only. U.S. Magistrate Judge Steven Pepe is to decide any penalties.
Conaway said he was focused on trying to save Kmart in the months before the struggling company filed for bankruptcy in 2002.

Previous management had left the company bleeding market share to Wal-Mart Stores Inc., Conaway testified. When a Wal-Mart store opened near a Kmart, Kmart's sales would drop 40% in the first year, Conaway said.

Kmart was buying inventory it couldn't sell and advertising products that were often unavailable, at uncompetitive prices, he testified.

"I was brought in to save Kmart, no ifs, ands or buts about that," Conaway testified. Kmart was "the greatest challenge in retail," he said.

The SEC said Conaway was responsible for the company's failure to disclose in the management's discussion and analysis section of the quarterly report that delaying vendor payments was a primary source of working capital.

Sears tests MyGofer prototype store in Joliet
TheStreet.com pans concept as 'a bad cross between Amazon.com and Dairy Barn'
By Sandra M. Jones - reporter - Chicago Tribune
May 29, 2009

What are Sears stores going to look like in the future? You might get a clue by visiting the retailer's latest incarnation: a drive-through general store.

MyGofer debuted in Joliet on May 9 with little fanfare. The Sears name is nowhere in sight. Neither is Kmart's. MyGofer wants no help or hindrances from Sears Holdings Corp.'s better-known brands. Shoppers can order online and pick up their purchases at a drive-through. They can also order at kiosks inside the showroom.

Sears calls it a marriage of online shopping and bricks and mortar. TheStreet.com called it "a bad cross between Amazon.com and Dairy Barn" and named MyGofer to its weekly "Five Dumbest Things on Wall Street" list earlier this month.

After years of high-profile format flops, Sears is testing its latest prototype far from Wall Street in a suburb about 50 miles west of Chicago, known for its casinos, NASCAR racing and ranking (before the housing crash) as one of the fastest-growing Midwestern cities.

"We are still ironing out a lot of the processes and making sure things run smoothly, so we haven't shouted to the world yet to come on in," said Neal Siegler, a former Circuit City district manager who joined Sears in February to run the Joliet store. "We're relying on word of mouth."

MyGofer occupies an empty Kmart store in a strip mall off Interstate Highway 55. Instead of a traditional store, the building is a warehouse with a showroom in front. There are no shelves or racks of products to touch. Instead product samples are grouped in displays -- some under glass, some on the walls. They showcase the range of items MyGofer sells: Windex, a PlayStation video game player, jewelry, a laptop, a Craftsman cordless drill, a Barbie Beach Party Cruiser, Purina Beggin' Strips.

The space is airy, clean and modern with silver tables and chairs. There are kiosks for placing orders on flat-screen computers and sales assistants in green T-shirts ready to explain how the process works. On the back wall is a giant screen tuned to CNN. An electronic board over the exit displays shoppers' names and the status of their orders. Outside a covered bay has parking spaces for about a half-dozen cars.

Eric Plautz, 28, waits inside a sedan full of friends on a recent weekday as a MyGofer employee delivers a Hartz dog toy through the car window. Plautz said he placed the order online at home after reading about MyGofer on the Web.

Retail consultant Mara Devitt is skeptical that the idea will stick because shoppers can already order essentially the same products at Sears.com and pick them up at the store. She asks: Why spend the money on creating a whole new retail concept?

"The idea is valid, and that's why they're testing it," said Devitt, a partner at Chicago-based McMillan Doolittle. "But getting people to change their behavior is very tough."

Tears for Sears?
By Tiernan Ray - Barron's
May 22, 2009

Sears is surging today but investors would be wise to avoid the stock.

EDDY LAMPERT, HEAD of hedge fund ESL Investments, has probably got enough money to bail out a small bank, having announced yesterday after the bell that he put together $6.5 billion in promised financing for struggling retailer Sears Holding (SHLD), which includes both Sears Roebuck and K-Mart.

The problem is it won't help Lampert, who is chairman of Sears, very much. Fewer and fewer people are coming through the doors at Sears and K-Mart, a decidedly bad sign in an age when a discounter like this should be cleaning up on cash-strapped bargain hunters.

The bottom line is that there's still no compelling reason to own this stock. But don't tell that to Wall Street. The stock was sharply higher, up about 16% in early afternoon trading at a recent $58.23 after the company announced a surprise profit of 38 cents per share (excluding one-time items) compared to expectations of a loss of 88 cents.

With 11.5% of the stock sold short, and an unusually high volume of trades in put options to sell the stock at $50 in recent months, many are no doubt scrambling today for shares to cover their bearish stance given that 70% of the stock is in the hands of insiders.

Raising $6.5 billion in credit in the current environment means somebody thinks Lampert can fix what ails the two stores, but if there's a master plan, it's not clear what it is.

Comparable-store sales in the three months ending May 2 declined 7.4%, and the plunge was much worse at Sears Roebuck Stores, down 11.7%.

Compare that to Wal-Mart (WMT), which announced May 14 that comparable-store sales were up 3.7% in the same period.

Target (TGT), which struggled in the quarter, faired much better, announcing on Wednesday that comp-store sales were down 3.7%.

Sadly, for Sears and for K-Mart, bad comp-store sales are not a product of the recent economy. The phenomenon has been happening for years, even before Lampert bought into the company.

"I see no sign whatsoever that Sears is on track," says Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting and investment advisory firm.

"When you've had comp-stores sales negative for eight years [at K-Mart], the business has not changed," says Davidowitz.

The difference is that both Wal-Mart and Target are expanding while Sears is shrinking. Wal-Mart opened 20 new stores in the first quarter and Target reaffirmed a plan to open 60 new stores, net of closings, this year.

Lampert's surprise profit was helped by closing stores, and there'll be more of that this year, he's told shareholders.

But instead of expanding the business, Lampert has so far put the money to work buying back shares, to the tune of $40 million last quarter and $687 million last year.

At some point, he has to get revenue rising again, something that's been elusive, with sales falling $1 billion, or 9%, in the quarter.

There may indeed be a master plan for all that funding, but with Sears losing share to more successful discounters, we see no reason to own the stock.

Sears Holdings Corp. reported an unexpected first-quarter profit Thursday and disclosed that it has secured a new $2.4 billion line of credit to help finance purchases through 2012, easing concerns about its financial condition.

The operator of Sears and Kmart department stores created by billionaire hedge-fund executive Edward S. Lampert reported that improved profit margins from better cost controls offset a sizable $1 billion drop in revenue, to $10.1 billion from $11.1 billion in the quarter ending May 2.

The retailer has been losing market share for years to discounters such as Wal-Mart Stores Inc. and TargetCorp.

Earnings for the Hoffman Estates, Ill., retailer rose to $26 million, or 21 cents per share, compared to a loss of $56 million, or 43 cents per share, a year ago.

Stock Jumps
Its shares soared 20%, or $19.91 apiece, in late trading. Results, which were released after 4 p.m., surprised Wall Street analysts who had forecast Sears would report a loss. The stock had closed down 6%, or $3.26, at $50.19 in 4 p.m. trading on the Nasdaq Stock Market.

Sears, controlled by Mr. Lampert, said it reduced its inventories to $9.5 billion from $10.3 billion a year ago, and cut its total debt to $3 billion from $3.5 billion in May 2008.

Sales at stores open at least a year -- a measure of retail health that Mr. Lampert has played down -- continued to fall, dropping 7.4% overall, including declines of 11.7% at Sears and 2.1% at Kmart.

Higher margins combined with a $168 million reduction in domestic sales and administrative costs allowed Sears to improve its performance despite reduced revenue, interim Chief Executive W. Bruce Johnson said in a statement. "We are pleased with the progress we have made in improving our gross margin rate, controlling inventories and further reducing our cost structure," he said.

Sears had previously said it would release earnings May 28, but decided to report its results late Thursday afternoon after it had secured a new credit agreement earlier in the day.

Its current $4 billion revolving credit line was set to expire in March of 2010. The absence of long-term financing to help Sears make purchases during heavy periods such as the holidays has been a source of concern among analysts and investors.

Replaced an Agreement
Under a new deal forged with a team of lenders led by Banc of America Securities LLC, Sears replaced the existing agreement with a $1.7 billion credit line that extends through March 2010, and a $2.4 billion line that extends through March 2012.

As a result it now has $4.1 billion available through next spring and $2.4 billion available afterward, with an option to add another $1 billion.

As for the reduction in its borrowing capacity beyond 2010, Sears said the new amount is more in line with its needs.

In addition to boosting profits, Sears reported that it had reduced its inventories to $9.5 billion at the end of the quarter from $10.3 billion the year before, and had cut its total debt to $3 billion from $3.5 billion in May 2008.

Sears Posts Profit, Shares Jump
By Kathy Shwiff - Wall Street Journal.com
May 21, 2009

Sears Holdings Inc. posted a surprise profit for its fiscal first quarter on higher margins and lower expenses, sending its stock sharply higher.

The retailer also announced it has amended and extended its credit facility to provide $4.1 billion in financing through March 24 and another $2.4 billion for 27 months after that.

"In this challenging economic environment, we are pleased with the progress we have made in improving our gross margin rate, controlling inventories and further reducing our cost structure," said interim Chief Executive W. Bruce Johnson.

Beyond slumping sales, both the Sears and Kmart chains have been beset with poor reputations of late for problems ranging from shoddy customer service and high out-of-stock levels.

For the quarter ended May 2, the retailer reported profit of $26 million, or 21 cents a share, compared with a year-earlier loss of $56 million, or 43 cents a share, a year earlier. Revenue declined 9.2% to $10.06 billion, while sales at U.S. stores open at least a year fell 7.4%.

Analysts' estimates were for a loss of 88 cents a share on revenue of $10.06 billion, according to a poll by Thomson Reuters.

Gross margin rose to 28.6% from 27.3%, while inventory fell 8.2%. U.S. overhead costs fell 6.7%.

In after-hours trading Thursday, Sears share jumped 16% to $58.40 on the Nasdaq Stock Market.

AIG's Liddy to step down as chairman, CEO
By Eileen AJ Connelly, AP
May 21, 2009

American International Group Inc. on Thursday said its chairman and chief executive plans to step down when a search for replacements is complete.

The company also said its board agreed with a recommendation from Edward M. Liddy, who took over the insurer in September, to separate the chairman and CEO roles.

AIG will start a search for permanent leadership after the company's annual shareholder meeting June 30. At that meeting, investors will vote on a slate of six new independent directors.

Shareholders will also vote on a company proposal for a reverse stock split of the company's outstanding common stock at a ratio of 1 for 20, according to a regulatory filing.

The plan to split the chairman and CEO comes as AIG's corporate governance practices continue to receive intense scrutiny, after it paid out millions in bonuses despite a huge bailout from taxpayers.

AIG has received $182.5 billion in financial support from the government since September. As part of the loan package, the government has also taken a roughly 80 percent stake in the huge insurance company.

The company said the search for new leadership will include participation by both the reconstituted board and the trustees of the AIG Credit Facility Trust, which was established to represent government interests in the company.

Liddy, former CEO of Allstate Corp., was named chairman and chief executive on Sept. 18, in connection with the federal bailout. He succeeded Robert B. Willumstad, who was chairman since November 2006 and held the CEO spot since June.

Sears Holdings Reports First Quarter Results and Extension of Its Credit Facility Sears
News Release
May 21, 2009

HOFFMAN ESTATES, Ill., May 21 /PRNewswire-FirstCall/ -- Sears Holdings Corporation ("Holdings," "we," "us," "our" or the "Company") (Nasdaq: SHLD) today reported its first quarter 2009 results. Highlights include:

• Net income attributable to Holdings' shareholders for the quarter of $26 million ($0.21 per diluted share) as compared to a net loss attributable to Holdings' shareholders of $56 million ($0.43 loss per diluted share) in the first quarter of 2008;
• Adjusted EBITDA increased 73% to $359 million in the first quarter as compared to $208 million in the first quarter of 2008;
• Gross margin rate increased by 130 basis points to 28.6% for the first quarter of 2009;
• Reduced domestic selling and administrative expenses by $168 million (or 6.7%) during the first quarter of fiscal 2009 as compared to the same quarter in 2008;
• Maintained a strong balance sheet with $1.2 billion in consolidated cash while reducing consolidated debt to$3.0 billion at May 2, 2009 from $3.5 billion at May 3, 2008; and
• Today, we successfully amended and extended our credit facility to provide $4.1 billion in financing through March 24, 2010 and $2.4 billion from March 25, 2010 through June 2012, with the option to use existing collateral to obtain up to $1.0 billion of additional capacity subsequent to March 2010 through an accordion feature.

"In this challenging economic environment we are pleased with the progress we have made in improving our gross margin rate, controlling inventories and further reducing our cost structure," said W. Bruce Johnson, Sears Holdings' interim chief executive officer and president. "Our efforts had a clear impact on our overall results as both net income attributable to Holdings' shareholders and Adjusted EBITDA increased significantly during the first quarter as compared to last year."

First Quarter Revenues and Comparable Store Sales

For the quarter, total revenues decreased $1.0 billion to $10.1 billion for the 13 weeks ended May 2, 2009, as compared to total revenues of $11.1 billion for the 13 weeks ended May 3, 2008. The decrease includes a $208 million decline due to unfavorable foreign currency exchange rates and was primarily due to lower comparable store sales.

Domestic comparable store sales declined 7.4% in the aggregate, with Sears Domestic comparable store sales declining 11.7% and Kmart comparable store sales declining 2.1% for the quarter. The decline at Sears Domestic continues to be driven by categories directly impacted by housing market conditions (including the home appliances, lawn & garden and tools categories) and lower apparel sales. The decline in comparable store sales at Kmart was driven by a decline in apparel and was partially offset by an increase in sales of home electronics and the impact of assuming the operations of its footwear business from a third party effective January 2009.

Operating Income (Loss)

Operating income was $128 million for the 13 weeks ended May 2, 2009, as compared to an operating loss of $8 million for the 13 weeks ended May 3, 2008. Operating income for the first quarter of 2009 includes expenses of $59 million related to domestic pension plans and previously announced store closings and severance, as well as a gain on sale of assets at Sears Canada of $44 million. Excluding these items, operating income increased $151 million and was primarily the result of a decline in selling and administrative expenses, partially offset by lower gross margin dollars. Total selling and administrative expenses declined by $242 million due primarily to a $107 million reduction in advertising expense and an $84 million reduction in payroll and benefits expense. The decline in selling and administrative expenses was partially offset by a decline in gross margin dollars of $150 million, which includes a $63 million decline related to the negative impact of foreign currency exchange rates on gross margin at Sears Canada.

For the quarter, we generated $2.9 billion in gross margin as compared to $3.0 billion in the first quarter last year. While gross margin dollars declined, our gross margin rate increased 130 basis points to 28.6%. The increase in gross margin rate consisted of increases of 240 basis points at Sears Domestic and 70 basis points at Kmart and was mainly the result of improved inventory management. The increase in domestic gross margin rate was partially offset by a decline in gross margin rate at Sears Canada.

Significant Items

A number of significant items affected our first quarter results. Excluding these items, net income attributable to Holdings' shareholders for the first quarter of fiscal 2009 was $47 million, or $0.38 per diluted share. Significant items affecting our results include:

• a previously deferred gain on the August 2007 sale of Sears Canada's former headquarters building of $44 million ($19 million after tax and noncontrolling interest or $0.16 per diluted share) was recognized as Sears Canada ceased use of the building under the lease-back agreement signed at the time of the sale;
• domestic pension plan expense of $42 million ($25 million after tax or $0.20 per diluted share);
• mark-to-market losses on Sears Canada hedge transactions of $14 million ($6 million after tax and noncontrolling interest or $0.05 per diluted share); and
• a charge of $17 million ($9 million after tax and noncontrolling interest or $0.08 per diluted share) related to costs associated with store closings and severance.

As we noted in our fourth quarter 2008 earnings release, the Company has a legacy pension obligation for past service performed by Kmart and Sears, Roebuck and Co. associates. The annual pension expense included in our financial statements related to these legacy domestic pension plans was relatively minimal in recent years. However, due to the severe decline in the capital markets that occurred in the latter part of 2008 our domestic pension expense has increased by an estimated $160 to $175 million in 2009. As a result, we present pension expense as a significant item affecting earnings and as a separate line item in our Adjusted EBITDA reconciliation to promote operating performance comparability.
In the second quarter of 2008 we realized a gain of $62 million ($37 million after tax or $0.29 per diluted share) from the overturning of an adverse jury verdict relating to the redemption of certain Sears, Roebuck and Co. bonds in 2004. We do not expect a similar event this year; whereas we do expect domestic pension expense to increase in the second quarter of 2009 by an amount comparable to the increase experienced in the first quarter.

Financial Position

We had cash balances of $1.2 billion at May 2, 2009 (of which $515 million was domestic and $734 million was at Sears Canada) as compared to $1.4 billion at May 3, 2008 and $1.3 billion at January 31, 2009. For the quarter, the significant uses of our cash included $40 million for share repurchases, $76 million in capital expenditures, and $52 million of contributions to our pension and post-retirement plans.

Merchandise inventories were approximately $9.5 billion at May 2, 2009 as compared to $10.3 billion at May 3, 2008. Domestic inventory levels declined from $9.4 billion at May 3, 2008 to $8.7 billion at May 2, 2009 due to efforts taken to improve inventory management noted previously. Inventory levels at Sears Canada decreased $136 million largely due to the impact of foreign currency exchange rates.

Total debt at May 2, 2009 was $3.0 billion, as compared to $3.5 billion at May 3, 2008. The decrease in outstanding debt was mainly the result of a reduction in domestic long-term debt obligations of $386 million. Total short-term borrowings at May 2, 2009 of $839 million were consistent with our level of borrowings at May 3, 2008, with amounts borrowed mainly used to build inventory for the spring season and to pay matured term debt. Excluding amounts owed under the revolving credit agreement and borrowed non-recourse to Sears Holdings by Orchard Supply, Holdings has less than $1 billion in domestic borrowings, with no significant required repayments until 2011.

Extension and Amendment of Credit Agreement

On May 21, 2009 we successfully extended the maturity date of our revolving credit facility by entering into an amended credit agreement (the "Amended Agreement") which has an expiration date of June 22, 2012. Our original credit agreement (the "Original Agreement"), which was set to expire on March 24, 2010, provided $4.0 billion of borrowing capacity, however only approximately $3.8 billion had been available since September 2008 when an affiliate of Lehman Brothers notified us it would no longer fund its proportionate share of the Original Agreement. As part of the Amended Agreement, our borrowing capacity under the Original Agreement will be increased over the original amount to $4.1 billion until March 24, 2010.

The amended terms and conditions of the asset based credit facility provide for a bifurcation of the existing $4 billionfacility into a $2.4 billion tranche maturing on June 22, 2012 and bearing an interest rate of London Interbank Offered Rate ("LIBOR") plus 4.00% (the "Extended Tranche"), with a LIBOR floor of 1.75%, and a $1.7 billion tranche maturing March 24, 2010, bearing an initial interest rate of LIBOR plus 0.875% (the "Existing Tranche"). The bifurcation into the Extended Tranche provides Holdings and its subsidiaries more than adequate liquidity for standby letters of credit and working capital needs. The facility also provides an accordion feature that allows us to use existing collateral in the facility to obtain up to $1.0 billion of additional capacity subsequent to March 24, 2010 should we so choose. The amendment and extension revises certain terms of the credit agreement to reflect current market conditions. Similar to the Original Agreement, the Amended Agreement has a $1.5 billion letter of credit sub-limit, is secured by a first lien on most of our domestic inventory and receivables, and determines availability pursuant to a borrowing base formula.

The transaction was led by Banc of America Securities LLC, Wells Fargo Retail Finance, and GE Capital Markets, as Joint Lead Arranger and Joint Book Runners, which collectively committed $1.2 billion, and was supported by many other financial institutions. "We are pleased to announce the extension and amendment of our credit agreement," said Michael D. Collins, senior vice president and chief financial officer. "We will have a borrowing capacity of $4.1 billion, as well as a favorable interest rate on a portion of that capacity through March 2010, at which time we will adjust our capacity to a level more consistent with our historical borrowing needs. Our transaction leads recognize the strength of our franchise and have provided significant capital to us in a time of unprecedented credit contraction."

Share Repurchase

During the first quarter of 2009, we repurchased approximately 1.0 million common shares under our share repurchase program at a total cost of $40 million, or an average price of $41.04 per share. As of May 2, 2009, we had remaining authorization to repurchase $465 million of common shares under the share repurchase program. The share repurchases may be implemented using a variety of methods, which may include open market purchases, privately negotiated transactions, block trades, accelerated share repurchase transactions, the purchase of call options, the sale of put options or otherwise, or by any combination of such methods. Timing will be dependent on prevailing market conditions, alternative uses of capital and other factors.

Domestic Pension Plan Funding

In our Annual Report on Form 10-K for the fiscal year ended January 31, 2009 we disclosed that we expected to make contributions to our domestic pension plans of approximately $170 million in 2009 and $500 million in 2010. The large increase in contributions expected between fiscal 2009 and 2010 at that time was due primarily to the severe decline in capital markets that occurred in the latter part of 2008 and U.S. government legislation regarding pension-funding requirements. Based on new guidance issued by the Treasury Department, we now estimate that the 2010 contribution will be approximately $325 million, though the ultimate amount of pension contributions could be affected by further changes in the applicable regulation and financial market and investment performance. We expect each remaining quarter of 2009 to contain domestic pension plan expense consistent with first quarter levels.

Sears Canada Q1 Profit Falls
RTT NEWS.COM
May 20, 2009

Department store chain Sears Canada Inc. (SCC.TO) Wednesday said its profit for the first quarter dropped sharply from a year ago, hurt by a 10.4% decline in same-store sales reflecting weak consumer confidence. Revenues were down 10.9%.

Quarterly net earnings for the Toronto-based multi-channel retailer plunged 85.6% to C$10.3 million or C$0.10 per share from C$70.8 million or C$0.66 per share in the same quarter a year ago.

Operating net earnings for the quarter, excluding charges related to a staff severance, were C$16.8 million or C$0.16 per share, compared to C$42.5 million or C$0.40 per share in the prior-year quarter, excluding the gain on the sale of the company's property in Calgary, Alberta. The company to reflect changes in accounting policy has restated first quarter 2008 earnings.

Comprehensive loss for the quarter, excluding mark-to-market adjustments, loss on derivatives and other items, was C$8.8 million, compared to comprehensive income of C$73.0 million in the year-earlier quarter.

Revenues for quarter dropped 10.9% to C$1.12 billion from C$1.25 billion in the same quarter a year ago. Same store sales were down 10.4%.

Segment wise, revenue Merchandising declined 11.07% to C$1.10 billion and revenue from Real Estate Joint Ventures decreased 3.31% to C$11.7 million from the comparable quarter a year ago.

Commenting on the quarter, Dene Rogers, president and chief executive officer said, "The economic recession deepened during the first quarter, unemployment increased to 8% and the Consumer Confidence Index averaged 22 percentage points below last year."

In the sequentially preceding fourth quarter, profit of Sears Canada declined 19.7% to C$95.5 million or C$0.89 per share, driven by a 5.8% drop in revenues at C$1.62 billion.

Operating EBITDA for the quarter under review was C$62.3 million, compared to C$94.4 million in the year-earlier quarter.

SCC.TO is currently trading at C$19.50, up $0.15 or 0.78%, on the Toronto Stock Exchange. In the last 52-week period, the stock traded in the range of C$15.00 to C$25.39, on a three-month average volume of 64,880.3 shares.

Sears Canada numbers are dismal all around
CANADA.COM
May 21, 2009

An 85% drop in first-quarter profit at Sears Canada Inc. has industry analysts wondering who will be the first to blink among the rival hedge-fund leaders who have locked up most of the company's shares.

The Canadian unit of Sears Holdings Corp., which has been under heightened pressure as consumers curb purchases in the recession, saw its sales at stores open for more than a year plunge 10.4% in the first quarter, a low watermark among Canadian retailers.

Such dismal numbers had many wondering whether Sears chairman Edward Lampert -- whose Greenwich, Conn.-based ESL Investments Inc. is the controlling shareholder in Sears Canada with a roughly 75% stake -- might finally agree to deal with William Ackman, chief executive of rival hedge fund Pershing Square Capital of New York, who controls almost 20% of Sears shares through the fund.

Sears Canada Q1 revenue drops 10.1 per cent,
profit falls to $10.3M
THE CANADIAN PRESS.COM
May 21, 2009

TORONTO — Sears Canada Inc. (TSX: SCC) first-quarter profit was 85 per cent lower than last year as the department store operator spent more on severance and saw revenue fall by 10.9 per cent.

Net income for the 13 weeks ended May 2, 2009, was $10.3 million or 10 cents per share. Excluding the charge related to a staff severance announced in February, operating net income was $16.8 million or 16 cents per share.

A year earlier, net income was $70.8 million or 66 cents per share for the 13 weeks ended May 3, 2008. Excluding the gain on the sale of a property in Calgary, operating net income was $42.5 million or 40 cents per share in last year's first quarter.

Revenue fell to $1.117 billion from $1.254 billion a year earlier.

Dene Rogers, Sears Canada's president and chief executive officer, attributed weaker financial results to the recession's impact on unemployment and consumer confidence.

"Considering the economic conditions, Sears delivered solid results and I commend our 33,000 associates for their contribution to these results," Rogers said.

Wal-Mart Election Probe by FEC Comes to a Close
By Miguel Bustillo and Kris Maher - Wall Street Journal
May 20, 2009

The Federal Election Commission said Tuesday it closed an inquiry into whether Wal-Mart Stores Inc. illegally pressured workers to vote against Democrats in last year's elections, citing insufficient evidence.

A coalition of organized-labor groups asked the commission to investigate Wal-Mart after a Wall Street Journal article in August detailed how the discounter had suggested to employees in mandatory meetings that they shouldn't vote for Democrats, including then-Sen. Barack Obama in his bid for the presidency.

Workers who attended the meetings said the company was concerned about Democrats wresting total control of Washington because of fears they would push legislation that would make it easier for employees to unionize.

FEC commissioners disclosed that they ultimately saw no cause to further investigate the issue after a preliminary review by the commission's general counsel found no evidence of elections-law violations and recommended no further action. Officials cited insufficient evidence that Wal-Mart pressed workers to vote GOP.

Josh Goldstein, a spokesman for American Rights at Work, said it was unclear whether the group would pursue further action. "Frankly we're disappointed with the FEC's decision because Wal-Mart continues to get away with intimidating their workers," he said.

Wal-Mart provided materials disseminated at the meetings to the commission and argued in its response that the purpose of the meetings was merely educational. A Wal-Mart spokeswoman said the Bentonville, Ark., retailer was pleased the matter was resolved.

Can Sears Be the Next Amazon?
By Buck Hartzell - The Motley Fool.com
May 20, 2009

Driving up Sears Parkway in the Chicago suburbs is a nostalgic journey. Heading to this year's annual shareholder meeting, I couldn't help recalling the glory days when this was the headquarters of the most dominant retailer in the world's largest economy.

Unfortunately, success gave way to arrogance and complacency. Sears Holdings (Nasdaq: SHLD) fell victim to the trappings of its own excess. This large, bureaucratic organization got too big, too fat, and too far removed from its customers. Its moat thinned, leaving the company vulnerable to sneak attacks from enemies such as Wal-Mart (NYSE: WMT), Target (NYSE: TGT), and a host of specialty retailers.

All the king's horses ...
But there's a new king in town, and his name is Eddie Lampert. He runs a tight ship, and he has little patience for the status quo. At this year's annual meeting, he sounded like a tech czar from Silicon Valley.

He praised the mass communication benefits (not business models) of Twitter and Facebook. He noted how the Internet and social networks require transparent pricing from retailers. He also described how Sears Holdings is trying to create an open dialogue and feedback loop with its customers.

In the new world, "engagement" replaces "marketing." In Lampert's words, marketers talk to someone. Engagement requires you to talk with them. He stressed how the conversation must be authentic and applauded both Amazon.com (Nasdaq: AMZN) and Zappos for their customer responsiveness.

Sears 2.0?
So what's the plan for Sears Holdings? Could it become the next Amazon? Short answer: Probably not.

Turning around behemoth retailers Kmart and Sears would be tough work in normal times. The difficulty factor has been ratcheted up tenfold now, with the dire economic conditions that struck the world's economies in 2008. Completely remaking both companies' bureaucratic cultures, problem-solving approaches, and business methods is a monumental undertaking.
The Sears brand does own some good names, including Lands' End, Kenmore, Craftsman, and DieHard. It also has a broad reach, with more than 200 million square feet of retail space.

But Sears stores aren't nearly as efficient as many of their competitors are, and they're saddled with a serious perception problem. During the press Q&A period, Lampert said, "Some might think [Sears is] caught between Target and Macy's (NYSE: M)." Unfortunately, I think many consumers rank the retailer below both Target and Macy's. And when it comes to shoppers' decisions, perception is often reality.

All the king's men ....
So how does one bring about such drastic change? Lampert began the meeting by introducing his management team; half of them are new to the company in the past year. That's a good start. You can't solve a problem with the same level of thinking that caused it. Fresh blood is essential to changing the way Sears Holdings does business.

Bruce Johnson still carries the uncomfortable title of "interim CEO." Lampert spoke about the company's Senior Leadership Program and how he wants to recruit smart people who want to innovate and take on responsibility. Sears Holdings wants people who are willing to question authority and challenge the status quo. Lampert admitted that he can't force a culture on such a big ecosystem, but he does believe he can create circumstances that will unlock the company's human potential.

Sears Holdings ultimately wants people who can both be managers and entrepreneurs.

Specifically, it seeks:
1. Lifelong learners.

2. People who aren't afraid to fail. (The occasional $5 million lesson is a necessary ingredient of success.)

3. People who can innovate, and who aren't afraid to be benchmarked against the competition.

4. Individuals who can examine problems in multiple ways.

It seems that interim CEO Johnson is on a short leash. He just doesn't seem like the type to embrace the quick moving, technology-focused strategy Lampert is trying to deploy. Lampert would love a visionary leader likeSteve Jobs. The real question is whether a Jobs-esque leader is looking to work for Sears Holdings.

Questions remain
"It's only when the tide goes out that you find out who has been swimming naked," Warren Buffett once famously said. Lampert switched this around, saying, "When the tide comes back in, I want to be sure that we've got some good swimmers who are ready to go."

Before assessing how well it'll be able to swim, let's take a look at some of the challenges that lie ahead:

1. The company wants to infuse more innovation into its existing brands. First, it wants Lands' End to produce specialty-retailer-type margins. Lands' End will be coming to 75 more Sears stores this year. Second, it wants Craftsman and Kenmore to be known as creators of innovative products, and it's challenging its manufacturers to step up and meet that goal.

2. The company needs to put its 200 million square feet of retail space to better use. Typically, 50% of its Sears stores are dedicated to apparel. The company needs to figure out how to earn a good return on that space; it appears that Lands' End will be a part of that solution.

3. To date, Sears hasn't freed up its brands to appear at competing retailers, and for good reason. If you can find DieHard batteries in your local Wal-Mart, why would you go to a Sears auto service center?

4. Credit is a big issue for larger purchases such as appliances and tractors. Have these big purchases been merely deferred, or are we experiencing a complete shift in consumer purchasing behavior? Lampert believes that as homes turn over, even at lower prices, Sears Holdings will benefit. Both sellers and buyers will spend money on home improvements. Still, the banks behind their credit cards are pulling back on their own risks -- and tightening the credit lines they extend to Sears' cardholders.

5. Can the company pull off a multichannel strategy that combines online shopping and research with offline fulfillment? The company's investing heavily in technology, and trying to build in customer feedback loops at all points of the shopping experience. To me, this seems like the biggest reach for the company, but also the biggest opportunity. It would be way too costly for the company to invest heavily in its existing base of 2,300 Sears stores. To his credit, Lampert has refused to make those huge capital expenditures. Instead he's focused on building out the company's online presence and buying back its stock. He's bought back more than $5 billion worth in the past few years.

6. Lastly, Sears Holdings has the sort of legacy pension responsibilities that competitors such as Lowe's(NYSE: LOW) lack. The company has contributed $1 billion to shore up pensions over the past three years. Lampert said the company has probably lost 30% of those funds, despite directing its pension fund managers to have approximately 50% of the funds' holdings in short-duration, fixed-income assets. Lampert expects the company will need to contribute approximately $170 million to pensions in 2009, and $500 million in 2010.

The future
Over the past several years, specialty retailers have eaten the lunch of the lumbering one-stop-shops. Compare the electronics department of Sears or Kohl's to that of Best Buy (NYSE: BBY). Compare the lingerie section of any department store to that of Victoria's Secret. Old-school retailers also face stiff competition from online retailers like Amazon and Zappos.

Ultimately, an investment in Sears Holdings requires strong faith in Eddie Lampert's leadership. To succeed, he must transform the culture of a gigantic organization into a responsive, customer-focused, learning machine. When the tide comes in and the real estate market starts to rebound, we'll see just how many good swimmers this company has developed. If all goes well, Lampert and Sears Holdings' balance sheet will be swimming in cash.

As he stated several times during the annual meeting, Lampert is a large shareholder, and he believes the board of directors is well-aligned with shareholder interests. In today's me-first culture, where executives and board members continually put their own interests ahead of shareholders, that allegiance is a breath of fresh air.

Despite the numerous challenges that lie ahead, I think Lampert just might have the gumption to pull it off. Mr. Lampert, I wish you and your team luck as you try to restore the luster of your Sears stores in this most difficult retail environment. Your shareholders, your 300,000 employees, and this Fool are cheering you on.

Bloomberg LP announced today that it has named former Sears executive Maureen A. McGuire as chief marketing officer, a new post, as the news wire strives to build its brand.

McGuire will report to Bloomberg Chairman Peter T. Grauer.

Billionaire investor Edward Lampert hired McGuire in 2005 as chief marketing officer for Sears Holdings Corp., the Hoffman Estates based-retailer where Lampert is chairman and majority stakeholder. McGuire, who oversaw the Sears and Kmart brands, left Sears in August 2008.

Before that, McGuire spent more than 30 years at IBM Corp. in various marketing roles.

City: Willis to grow at Sears Tower, may bring Nashville jobs
By Eddie Baeb - Chicago Business
May 18, 2009

(Crain’s) — In addition to the 479 jobs Willis Group Holdings Ltd. will soon move into Sears Tower, the London-based insurance brokerage has committed to add another 100 jobs there within five years.

The city also says Willis could move as many as 300 jobs to Chicago from Nashville, Tenn., according to a report issued last week by the staff of the Department of Community Development supporting the city’s proposed $3.8-million subsidy for Willis.

A New York-based Willis spokesman denies any plans to move workers here from Tennessee.

“We have absolutely no intention of relocating jobs from our Nashville office to Chicago,” the spokesman says. “We do intend to grow in Chicago, but the notion that we’re moving jobs from Nashville to Chicago is incorrect. I can’t be stronger on that point.”

Willis is obtaining options for a sizable expansion of its space at Sears Tower, which is soon to be renamed Willis Tower, and Chicago could be in line for jobs that would move from Willis’ Nashville office, according to the city’s report.

“As the consolidation in Chicago progresses, it is possible that 200 to 300 jobs from Nashville could be relocated to Chicago,” the report says. “While this move is not currently programmed, the success of the Chicago project could produce incentives to further consolidate operations here.”

The Willis spokesman says he didn’t know whether company officials had ever told city staffers that moving jobs from Nashville was a possibility. The company has about 600 employees in Nashville, where back-office support and processing work is done. The Chicago office is a “retail location,” the spokesman says, where brokers and other client-service employees are based.

A Department of Community Development spokeswoman declines to comment on the matter.

The report lays out the rationale for the city’s Community Development Commission vote last Tuesday to recommend that the City Council approve $3.8 million in tax-increment financing for Willis to help pay for building its new offices at Sears Tower, 233 S. Wacker Drive. The staff report says the TIF funds amount to 24% of estimated total project costs of $15.9 million.

Willis is leasing 141,010 square feet — three floors — in Sears Tower for 15 years, and is obtaining options for another 100,000 square feet for future expansion, according to the city’s staff report.

The Sears Tower office will consolidate Willis’ three downtown offices, at 10 S. LaSalle St., 222 N. Riverside Plaza and 1 E. Wacker Drive, along with three offices in the suburbs: 1100 Jorie Blvd. in Oak Brook, 425 N. Martingale Road in Schaumburg, and the Highland Pointe complex at 333-337 E. Butterfield Road in Lombard.

Willis is incurring about $4 million in write-off costs to exit those leases, according to the city report.

The report says the consolidation of Willis’ offices here was largely driven by recent acquisition of three Chicago-area firms: Innotech in 2003, InsuranceNoodle in 2007 and Hilb Rogal & Hobbs (HRH) in 2008.

Willis says Innotech, an outsourced health-care benefits management firm, could alone add 100 jobs and see its revenue grow to $50 million in coming years from $5 million, according to the report.

Before opting for Sears Tower, where Willis will pay rent of $14.50 a square foot, the company considered keeping its suburban offices and only consolidating downtown. That option would have been $20 million less expensive, according to the report, so Willis sought TIF money from the city to defray some of its capital costs.

The $15.9 million in project costs will be paid for with $8.14 million from Willis’ “corporate capital funds” and $7.76 million from a so-called landlord work-letter agreement, where the landlord borrows the money and advances it to the tenant. The amount plus interest is incorporated into the lease.

Willis, as part of its agreement with the city, must submit a letter of credit for the full amount of the city funds. The company also agrees over 10 years to occupy a minimum of 141,010 square feet in the tower and maintain about 530 jobs, including the 100 new positions. If those conditions aren't met, the city can recoup its money and terminate the agreement, according to the report.

Wal-Mart Steps Up Its Game in Electronics Aisle
By Miguel Bustillo - Wall Street Journal
May 18, 2009

Wal-Mart Stores Inc. is revamping the electronics departments in its more than 3,500 U.S. stores this week, ramping up an aggressive battle with Best Buy Co. and Amazon.com to seize customers up for grabs due to the demise of Circuit City Stores Inc.

Wal-Mart's roomier and more interactive electronics displays begin arriving in stores Monday, showcasing the latest mobile phones and portable computers, and including standalone sections for popular brands such as Nintendo Co. and Apple Inc.

"Circuit City's business is up for grabs right now and we expect to get our share," Gary Severson, Wal-Mart's senior vice president of home entertainment, said in an interview at the company's Bentonville, Ark. headquarters. Its push comes as the economic downturn has turned more affluent customers into Wal-Mart shoppers.

The world's largest retailer by revenue was expanding its electronics selection before Circuit City collapsed. Over the last five years, it moved away from entry-level televisions and DVD players from lesser-known manufacturers toward more sophisticated products such as Research in Motion Ltd.'s Blackberry smart phones.

Wal-Mart executives said their stores will soon carry Palm Inc.'s Pre smart phone, a highly anticipated gadget, contrary to bloggers who claimed it would be a Best Buy retail exclusive.

Wal-Mart is adding to its assortment of higher-end televisions by manufacturers Sony Corp. and Samsung Electronics Co., and broadening its array of Blu-ray disc players and movies as it expands a strategy of selling top brands at lower prices than rivals offer.

Its moves are fueling fierce price competition. An Acer netbook, or small portable computer, that sells for $328 on Walmart.com is $329.99 on Amazon.com. Bestbuy.com sells a MSI Wind 10-inch netbook for $309.99. The same machine was reduced to $298 from $308 on Walmart.com.

To be sure, Best Buy retains a lead in U.S. consumer electronics retailing with 22% of the total market, based on market-research estimates from Stevenson Co.

But Wal-Mart has been quickly gaining. Circuit City filed for bankruptcy last November and closed its stores in March. Its closing left about $11.1 billion in annual revenue up for grabs, estimated Deutsche Bank.

Wal-Mart is adding to its assortment of higher-end televisions by Sony and Samsung and broadening its array of Blu-ray disc players and movies. But Best Buy has seen fewer shoppers walking through its doors during the recession, while Wal-Mart is gaining shoppers. Wal-Mart also is leveraging a more subtle advantage it boasts over standalone electronics chains: a mom-heavy clientele. Retailers say women often have final say over household purchases of new video games and televisions.

Best Buy was assumed to be the biggest beneficiary of Circuit City's liquidation. But Morgan Stanley analyst Gregory Melich recently noted first-quarter market-share estimates show Wal-Mart and Amazon splitting much of Circuit City's television business.

A Best Buy spokeswoman declined to comment. Best Buy has said it miscalculated demand and ran short of televisions in January and February, which contributed to lower sales.

Paul Ryder, an Amazon vice president overseeing its electronics business, said the Seattle, Wash., retailer is increasing the range of products it sells, so that it can offer often a wider selection of electronics than any physical store can carry.

Wal-Mart fought for years to be taken seriously by electronics makers that wanted to cultivate a top-of-the-line image. Apple, for instance, didn't sell its music players at Wal-Mart until it released the inexpensive iPod Shuffle, and released the iPhone at Wal-Mart only after it had been selling through Best Buy.

"A few years ago, the suppliers wouldn't even consider us for these kinds of technologies -- they'd take it to Best Buy," Kevin O'Connor, Wal-Mart's vice president of consumer electronics, said as he stood beside a new display that showed off Blu-ray players and movies as part of a wall of flat-panel televisions. "But Wal-Mart is where the consumer is going."

Wal-Mart in June will start selling Dell Inc.'s new Studio One 19 touch-screen computers.

"In this environment, you want to associate yourself with big [retail] brands," said Michael Tatelman, vice president of sales and marketing for Dell's consumer business. "Wal-Mart has been incredibly collaborative."

As Wal-Mart senses an opening, it is expanding its mobile-phone assortment and adding an island where shoppers can pick up and try out laptops and netbooks. Wal-Mart previously kept the portable computers under lock and key for fear of shoplifting, a sore point with some manufacturers.

—Geoffrey Fowler contributed to this article.

Penney Profit Falls 79%, Hurt by Pension Costs
By Rachel Dodes - Wall Street Journal
May 16, 2009

J.C. Penney Co.'s fiscal first-quarter earnings fell 79% on pension-related expenses and lower sales as consumers continued to pull back.

Chief Executive Myron E. Ullman III said in a conference call that the company is "seeing more stability ... in business trends," but cautioned high unemployment rates and falling employee pay suggest "there is good reason for consumer sentiment to continue to be low."

For the quarter ended May 2, Penney posted net income of $25 million, or 11 cents a share, down from $120 million, a year ago. The results include $81 million in pension-plan expenses. Sales fell 5.9% to $3.9 billion.

The Plano, Texas, retailer warned weaker sales and higher pension expenses would produce a loss of between 15 cents and 25 cents a share in its current quarter, compared with year-ago net 52 cents a share.

Ken Hicks, Penney's president and chief merchandising officer, said the company reduced inventories by 15.8% at stores open at least a year.

"With inventory better aligned and sales ahead of plan, we are selling more at regular promotional prices and less at clearance prices," he said.

Separately, department store chain Dillard's Inc. reported first quarter profit rose to $7.7 million, or 10 cents a share, from $2.7 million, or four cents a share a year ago. Net was aided by a gain from the repurchase of debt. Sales fell 12% to $1.47 billion.

Dillard's credited "aggressive efforts with regard to inventory management, expense reduction and cash conservation."

Kerry E. Grace contributed to this article.

J.C. Penney Profit Falls as Non-Essential Spending Declines
By Lauren Coleman-Lochner - Bloomberg.com
May 15, 2009

May 15 (Bloomberg) -- J.C. Penney Co., the third-largest U.S. department-store chain, said first-quarter profit declined for the seventh straight quarter on lower sales.

Net income dropped to $25 million, or 11 cents a share, from $120 million, or 54 cents, a year earlier, the Plano, Texas-based company said today in a Business Wire statement. Revenue for the quarter ended May 2 fell 5.9 percent to $3.88 billion.

Many chains have reported weaker sales of clothing and home goods as people curtail non-essential spending during the recession. Comparable-store sales fell 7.5 percent in the quarter at J.C. Penney, which operates about 1,100 U.S. stores.

Analysts anticipated a profit of 11 cents a share, the average of 11 estimates compiled by Bloomberg. The company forecast profit for the current quarter of 15 cents to 25 cents a share, compared with the analysts’ projected loss of 9 cents, excluding some items.

Kohl’s Corp., the fourth-largest U.S. department-store company, yesterday posted a first-quarter profit that declined less than analysts estimated after April sales exceeded the chain’s forecast.

Net income at Kohl’s fell to $137 million, or 45 cents a share, in the three months ended May 2, from $153 million, or 49 cents, a year earlier, the Menomonee Falls, Wisconsin-based company said.

The loss at Macy’s Inc., the second biggest U.S. department-store chain, widened to $88 million last quarter, the company said May 13. Sears Holdings Corp., which runs the biggest U.S. chain, reports results May 28.

J.C. Penney rose 13 cents to $26.65 yesterday in New York Stock Exchange composite trading. The shares have gained 35 percent this year.

As Rivals Fall, Wal-Mart, Kohl's Gain Market Share
By Miguel Bustillo and Rachel Dodes - Wall Street Journal
May 15, 2009

The chief executives of retailers Wal-Mart Stores Inc. and Kohl's Corp. said Thursday that the difficult economy is helping them gain market share from competitors, but cautioned they aren't yet convinced the recession is abating.

Discount retailer Wal-Mart reported flat first-quarter profit due to a decline in international results, while department-store chain Kohl's posted a 10% earnings drop on flat sales.

New customers made up 17% of Wal-Mart's increased shopper visits, and their purchases were 40% higher on average than its traditional shoppers, said U.S. operations chief Eduardo Castro-Wright. Customer visits have "accelerated to levels we have not seen in several years," Mr. Castro-Wright said. One reason, he said, was that Wal-Mart is taking advantage of the slumping advertising market to increase its advertising.

Wal-Mart Chief Executive Mike Duke predicted that Wal-Mart would hang on to shoppers it has gained after the recession ends. The company noted that it is aggressively spending on improving technology systems and sprucing up aging U.S. stores.

While Wal-Mart only matched its year-ago profit, the $3 billion, or 77 cents a share, that it posted for the quarter ended April 30 outperformed retail competitors that have reported thus far.

Wal-Mart's earnings were buoyed by the continued strong performance of its U.S. stores, which reported sales at stores open at least a year rose 3.7%. But its international operations continued to be a drag on the company's bottom line, largely due to the rise in the value of the U.S. dollar. Wal-Mart's net sales edged down to $93.5 billion, from $94 billion last year.

The world's largest retailer by revenue forecast profit of between 83 cents and 88 cents a share for its fiscal second quarter. But executives of the Bentonville, Ark., chain struck a cautionary note, saying it would have a tough time exceeding the 86 cents a share it earned last year when stimulus checks were distributed to U.S. consumers.

Kohl's reported earnings of $137 million, or 45 cents a share, for the period that ended May 2, down from $153 million, a year earlier. The Menomonee Falls, Wis., retailer's revenue inched up 0.4% to $3.64 billion, but sales at stores open at least a year dropped 4.2%.

The company raised its full-year profit outlook, saying it expects to earn between $2.19 and $2.42 a share. Analysts said they believe the discount department store is being too conservative in its predictions. Kohl's recently took over 36 locations from liquidating retailer Mervyn's LLC in California, where it has been a strong performer.

Chief Executive Kevin Mansell said he expected consumers to remain skittish about spending. "We are trying to recognize there is high unemployment, low consumer sentiment, [and] most consumers are stretching their dollars," he said.

The U.S. Commerce Department reported Wednesday that overall retail sales fell 0.4% in April, surprising economists, who had expected them to be flat. On Thursday, the Labor Department reported that the number of people collecting unemployment rose for the 15th straight week, to 6.56 million from 6.36 million.

"These retailers have much better real-time data than any government," said Barclays Capital retail analyst Robert Drbul. Despite their cautiousness, he said, "Kohl's continues to execute very well in an extremely difficult environment for apparel retailers. Wal-Mart's traffic is very encouraging."

Wal-Mart did not forecast monthly sales, part of a new policy that analysts expect more retailers will adopt. Kohl's Mr. Mansell said it would like to follow Wal-Mart's lead when the economy improves. For now, Kohl's will continue reporting monthly sales, he said.

Separately, Nordstrom Inc. and Urban Outfitters Inc. both reported sharp drops in first-quarter profits as sales tumbled. Nordstrom, of Seattle, said earnings at the upscale department store chain fell 32% to $81 million on a 9.2% drop in sales.

Urban Outfitters, based in Philadelphia, posted a 28% drop in first-quarter profit, to $30.8 million.

"Our data tells us the customer is buying less and that she's more discriminating," Chief Executive Glen Senk said on a conference call Thursday.

Kmart’s Conaway Misled Investors, SEC Says at Trial
Margaret Cronin Fisk and Steven Raphael - Bloomberg.com
May 13, 2009

May 13 (Bloomberg) -- Former Kmart Corp. Chief Executive Officer Charles Conaway misled investors about the company’s ability to pay its bills before its bankruptcy filing in 2002, a government lawyer told a jury.

The case is about “deception, misrepresentation, half truths and omissions made to the public” in a 2001 quarterly filing, Alan Lieberman, a U.S. Securities and Exchange Commission attorney, said today at the start of a trial in Ann Arbor, Michigan. Conaway was responsible for the misstatements, Lieberman said. “He was the top guy, hands-on,” the lawyer told a jury of five men and five women.

The SEC sued Conaway and former Chief Financial Officer John McDonald in 2005 alleging violations of securities regulations. McDonald settled the suit last month, agreeing to pay $120,000 in fines and accept a five-year ban on working for public companies.

The SEC contends Conaway and McDonald, the top officers at Kmart before the bankruptcy, were responsible for misleading statements in the company’s third quarter 2001 filing and a Nov. 27, 2001, conference call. The men failed to inform investors that the company faced a cash shortage and was delaying payments to vendors, the SEC said.

The jury will determine liability only. U.S. Magistrate Judge Steven Pepe will decide any penalties. The government is seeking to bar Conaway permanently from working for publicly traded companies.

Conaway’s Defense

Conaway didn’t mislead investors, his attorney Scott Lassar, said today in the trial. Conaway wasn’t involved in preparing the quarterly statement because he was too busy trying to keep the struggling company afloat, the lawyer said.

“He had other things to do,” Lassar said. “He was trying to save Kmart. He had no more knowledge of what was in the 10Q than you or I.”

Conaway was involved in developing a strategy to slow the payments, Lassar said. The CEO didn’t mislead vendors, and even in a slowdown Kmart was paying suppliers faster than some companies in the retail industry, he said.

Kmart filed for bankruptcy Jan. 22, 2002, subsequently shedding 599 stores and firing about 57,000 workers. Conaway was fired in March 2002.

The company exited from bankruptcy in May 2003. Kmart Holding Corp. later bought Sears, Roebuck & Co., creating Sears Holdings Corp., based in Hoffman Estates, Illinois.

CEO Responsibility

The SEC said Conaway was responsible for the company’s failing to disclose in the management’s discussion and analysis section of the quarterly report that delaying vendor payments was a primary source of working capital.

Conaway hid the company’s financial situation from the Kmart board and “was never honest with the vendors,” Lieberman told the jury.

Kmart began delaying payments because of a cash crunch set off by an “extraordinary” $850 million purchase of inventory in the summer of 2001 by the company’s chief operating officer, “made without the approval or knowledge of other senior managers of the company,” the SEC said in its complaint. Kmart didn’t disclose the “inventory overbuy,” the government said.

In the third-quarter conference call, Conaway blamed slow payments on a new system that had caused invoices to be dropped, the SEC said in its complaint. “These statements were false and misleading,” the government said.

‘Lot of Noise’

Conaway referred to complaints from vendors about slow payments as “a lot of noise from a small group of suppliers,” Lieberman said, quoting the conference-call transcript. “He was not up front” about the payments, Lieberman said.

Conaway disclosed significant problems at Kmart and his own strategic mistakes on the conference call, Lassar, the defense lawyer, said. Conaway didn’t deceive investors, he said. The company’s shares dropped 11 percent the next day, Lassar said.

Conaway asked the judge before trial to find he wasn’t liable for any misstatements in the third-quarter 2001 report because he didn’t sign the document. Pepe refused, saying in a 41-page opinion that even without having seen, reviewed or discussed the document, the former CEO could be found responsible for its contents.

“At a minimum, the evidence is such that a reasonable juror could conclude that: Mr. Conaway was a principal architect of the two schemes to stretch vendor payments to ease the liquidity problems,” Pepe wrote.

The case is Securities and Exchange Commission v. Conaway, 05-cv-40263, U.S. District Court, Eastern District of Michigan (Ann Arbor).

Miami jury finds five guilty in Sears Tower plot
Reuters
May 12, 2009

MIAMI (Reuters) - A U.S. jury found five men guilty on Tuesday of plotting with al Qaeda to blow up Chicago's Sears Tower and government buildings after two previous attempts to convict the group ended in mistrials.

The jury acquitted a sixth man in a case that was touted nearly three years ago as a major blow against terrorism and a victory in the government's efforts to dismantle domestic "sleeper cells."

The guilty verdicts in a trial that lasted nearly three months came after prosecutors tried and failed twice in the last two years to persuade juries that the men conspired with the Islamic militant group to wage holy war against the United States.

Federal agents arrested the men, who became known as the Liberty City Six after the poor Miami neighborhood where they met, in June 2006.

At the time, authorities said the plot was "aspirational rather than operational," and that the men posed no real threat because they had neither al Qaeda contacts nor the means of carrying out attacks.

But during the trial, prosecutors accused them of pledging allegiance to Osama bin Laden's militants.

Basing the case on thousands of hours of wiretaps, the prosecutors said ringleader Narseal Batiste had recruited soldiers who wore uniforms, marched together and engaged in military training to wage war on the United States.

They said the men took photos of possible targets, scouting Miami's FBI headquarters and a courthouse, surveying entry ramps, surveillance cameras and guardhouses.

According to the prosecution, Batiste suggested an attack on the Sears Tower, America's tallest skyscraper.

Defense lawyers said the alleged plot was concocted by the government with the help of informants who posed as Middle Eastern contacts. They said the accused went along in a bid to extract money from the informants.

Batiste was convicted on all four charges; conspiring to provide material support to al Qaeda, conspiring to provide material support to an act of terrorism, conspiring to destroy a building and conspiring to wage war against the United States. He faces up to 70 years in prison.

The jury also found Patrick Abraham guilty on three of the counts. He could face up to 50 years in prison.

The panel returned guilty verdicts on two counts against Stanley Grant Phanor, Burson Augustin and Rotschild Augustine, who each face 30 years in prison.

Sentencing was set for July 27.

The sixth man, Naudimar Herrera, was acquitted of all charges.

Willis seeking TIF subsidy for move to Sears Tower
By Eddie Baeb - Chicago Business
May 11, 2009

(Crain’s) — Willis Group Holdings Ltd. is seeking a $3.8-million city subsidy to pay for build-out of its new headquarters at Sears Tower, which will soon be renamed Willis Tower after the London-based insurance brokerage.

A tax-increment financing (TIF) redevelopment agreement for the project is on the agenda Tuesday for the city’s Community Development Commission meeting. A New York-based Willis spokesman said he knew the company had requested a subsidy, but didn’t have details.

Willis and the owners of Sears Tower, 233 S. Wacker Drive, announced in March that the 110-story skyscraper would be renamed Willis Tower after the insurance broker, which is consolidating its local offices there and leasing about 140,000 square feet starting this summer.

Allstate Reports Third Straight Loss on Investments
By Erik Holm
May 8, 2009

(Bloomberg) -- Allstate Corp., the largest publicly traded U.S. home and auto insurer, posted its third straight loss on investment writedowns and declines in private equity and hedge fund holdings.

The first-quarter net loss of $274 million, or 51 cents a share, compares with a profit of $348 million, or 62 cents, in the same period a year earlier, the Northbrook, Illinois-based company said in a statement today. Profit before investment losses was 84 cents a share, compared with the $1.25 estimate of 14 analysts surveyed by Bloomberg.

Chief Executive Officer Tom Wilson halved the firm’s dividend, halted share buybacks and is cutting 1,000 jobs at Allstate’s money-losing life insurance business to preserve capital. The insurer in December announced it was replacing the heads of its life and investing units.

Insurers typically add to profits by investing payments from customers until the funds are needed to pay claims. The model backfired last year, leaving 23 of the 24 companies in the KBW Insurance Index with a profit decline or a net loss. The trend has continued as companies report first quarter results, with Hartford Financial Services Group Inc., MetLife Inc. and Lincoln National Corp. among those with losses.

Allstate’s investment losses were $359 million before taxes. The insurer wrote down $620 million in securities it said had permanently declined in value, and lost $105 million in its so-called limited partnership investments in private equity and hedge funds. The investment total also included gains from $418 million in sales of securities, primarily U.S. government fixed- income holdings, the company said.

Profit Margin

Allstate has fallen 16 percent in New York Stock Exchange composite trading this year, compared with the 2.1 percent decline in the KBW Index. The shares rose $1.80, or 7 percent, to $27.60 at 4:15 p.m. today.

The company earned 3.2 cents for every dollar it collected in premiums for its property-casualty units. Excluding the effects of catastrophes and changes to reserves for claims from prior quarters, the company earned 11.1 cents per premium dollar, compared with 14.2 cents a year earlier.

Allstate repeated the guidance it gave in January, when it said it expects to retain from 11 to 13 cents of every dollar in 2008 excluding catastrophes and reserve changes.

Allstate, which gets about 60 percent of revenue from its auto unit, has been raising the price of car coverage in some states. Rivals including Bloomington, Illinois-based State Farm Mutual Automobile Insurance Co., the largest U.S. auto insurer, and No. 4Progressive Corp. are following suit as drivers pare back coverage and insurers face more fraudulent claims because of the slumping economy.

Auto Fraud

The number of auto-theft claims where drivers are suspected of abandoning their cars increased 24 percent in the first quarter from the same period a year earlier, the National Insurance Crime Bureau said last week.

“We’re taking very proactive actions to make sure that we’re not at the receiving end of the some of this fraud,” said George Ruebenson, the president of Allstate’s home and auto business, in a presentation to investors in March

Allstate is the second largest home and auto insurer in the U.S. by premium behind State Farm, according to 2008 data compiled by the National Association of Insurance Commissioners.

Wind turbines coming to Prairie Stone
By Ashok Selvam, Daily Herald Columnist - Daily Herald, Suburban Chicago
May 8, 2009

Off-track betting parlors aren't the only thing Hoffman Estates' Prairie Stone Business Park is good for.

The village board on Monday approved the installation of four wind turbines on top of a parking deck at the Sears Holdings offices at 3333 Beverly Road. The turbines will be about 20 feet tall and 6 feet wide and safe for birds and even bats.

Sears officials could not estimate on how much money from reduced electricity usage will be saved. The turbines will be used primarily to power the garage's light fixtures, with excess power returning to the main power grid.

Greg Strzalkowski from Sears said the turbines would generate 5 decibels of sound, which he added is "quite low." The HelixWind turbines have a 30-year life span. If other companies want to add turbines, just like any other site plan alterations, they would have to come before the village board for approval.

Wal-Mart to end monthly sales data
By Jonathan Birchall in New York - Financial Times
May 7, 2009

Wal-Mart, the largest US retailer, said on Thursday it was pulling out of one of the great rituals of the US industry - the monthly delivery of same store sales by many of the largest retail chains.

Tom Schoewe, chief financial officer, said in a statement the retailer believed the move would ”reduce the intra-period volatility related to events such as calendar shifts” and reflected the company’s focus on long-term strategy. Wal-Mart announced the change as it said sales at its US stores open at least a year had risen by 5 per cent in April. The sales figures were boosted by strong demand, new customers and by the fact that this year’s Easter holiday fell in April, rather than in March, as it did last year. The retailer’s March comparable sales were this year conversely comparatively subdued because of the Easter shift, increasing by just 0.6 per cent at its US supercenters and discount stores. Wall Mart’s shares subsequently dropped around 6 per cent, despite the retailer having reported sales growth in key categories.

Eduardo Castro-Wright, head of the company’s US stores, expressed exasperation with Wall Street analysts and investors for over-reacting to the low March figure, and failing to understand the significance of the Easter shift.

“The market sometimes forgets that the calendar has an enormous impact on retail and particularly retailers like Wal-Mart that depend heavily on when a Friday falls,” he said.

Wal-Mart will now join Sears Holdings, Home Depot, Lowe’s, the supermarkets and many other large retailers who opt to report comparable sales on a quarterly rather than a monthly basis.

In February last year, Macy’s, the largest US department store also stopped issuing monthly same store numbers, citing volatility concerns as it began an overhaul of its stores. But it started again in October, saying it wanted “to provide investors as much information and transparency as possible” as uncertainty over the economy deepened.

Wal-Mart’s strong sales during the recession have had a strong impact on industry-wide indices used to track the monthly same-store sales.

Retail Metrics, a company that tracks the monthly figures, said that without Wal-Mart, its index for April sales would have fallen 2.7 per cent, rather than the 1.5 per cent rise reported including Wal-Mart.

Brian Sozzi, retail analyst at Wall Street Strategies, said he believed Wal-Mart’s move reflected its management’s desire to get investors to focus on its long term outlook, reflecting its shift from being a growth to a value investment. He also said he expected other retailers to follow Wal-Mart’s lead in abandoning the monthly figures. “It’s going to take someone like a Wal-Mart to take the lead to do this,” he said.

Sears's Lampert Targets Web Shopper
By Miguel Bustillo - Wall Street Journal
May 5, 2009

Sears Holdings Corp.'s chairman, Edward S. Lampert, told investors at the annual shareholder meeting Monday that Sears may become a smaller retailer but that it will be well positioned to profit as consumers increasingly shift to shopping online.

Mr. Lampert, a billionaire investor whose ESL Investments Inc. hedge fund owns more than half of Sears Holdings, said he didn't have any immediate plans to replace acting Chief Executive W. Bruce Johnson.

But he said he was continuing to remake the company's top management after reorganizing Sears into five business units a year ago, moving away from the former structure, which he described as "socialistic" because it covered up weak performers.

While Mr. Lampert expects that most Sears sales will continue to occur in brick and mortar stores, he said he would increase investment in Internet experiments. His goal, he said, is to capture the attention of shoppers at the crucial moment when they begin to discuss purchases with friends on social-media Web sites and to research buying choices online.

"We want to make sure we don't become completely irrelevant as people's way of making decisions changes," he said, adding, "The goal is not just survival, it's progress."

The retailer recently began new rewards programs aimed at frequent Sears and Kmart customers, and it disclosed plans to let shoppers pick up merchandise at Kmart that they have bought online. Kmart is owned by Sears Holdings.

Mr. Lampert also said the company may expand MyGofer, a new store concept being tested in Joliet, Ill., that turns some stores into pickup locations for online sales to try to bridge the gap between online sites and traditional stores.

Sears Holdings struggled more than most retailers in the economic downturn of 2008. Its annual profit plunged 90% to $53 million, or 42 cents a share, down from $826 million, or $5.70 a share, in 2007. Same-store sales, a metric Mr. Lampert has played down, fell 8%.

But there were hopeful signs, including a spike in the company's already leading share of the appliance market last year to 34.6% from about 30%. That share continued to increase in the first quarter of this year, company officials said.

Mr. Lampert said he expected Sears's exclusive Kenmore appliance and Craftsman tool brands to leverage their size better by developing innovative products.

"Historically, we have been way too passive," he said. He added that he didn't see Sears's lack of production ability as a hindrance. "Nike doesn't own manufacturing," he said.

Sears focused on its real estate Chairman Edward Lampert attempting to make retail space 'more productive'
By Sandra M. Jones - Reporter - Chicago Tribune
May 5, 2009

Sears Holdings Corp. Chairman Edward Lampert regularly takes heat from investors for failing to articulate a strategy. And once again at the company's annual meeting -- the only time he speaks publicly to investors -- he provided little insight into Sears' direction.

But he had plenty of ideas on how to keep Sears going through the toughest retail downturn in decades.

The billionaire investor and majority Sears stakeholder is concentrating these days on how to make about 200 million square feet of retail real estate space "more productive," he told shareholders Monday. He has been adding jobs in Sears' real estate department, while cutting hundreds of jobs elsewhere, in hopes of finding tenants to lease space inside the retailer's stores. He also has reorganized the company so each store is held accountable for the categories it sells and the profits it makes. And he is testing an initiative in which massive stores are transformed into drive-up warehouses.

While the steps don't add up to a strategy, it may not matter in these economic times, said retail consultant Neil Stern.

"The one real advantage Sears has right now is in the downturn, when it is all about cost-cutting, expense control and inventory management, these are things Lampert is really good at," said Stern, a partner at McMillan Doolittle in Chicago. "The rest of the retailers are learning these skills, and that's what Sears does very well."

Sears just opened its first pilot store, called MyGofer, in Joliet in an experiment that turns an old Kmart into a showroom. Shoppers can order online and pick up their purchases at a drive-through.

One store isn't going to shore up Hoffman Estates-based Sears' declining sales and profits. But if it works, it could give Lampert a way to convert a lot of high-cost stores into low-cost warehouses that still generate a good deal of revenue.

"I want to get this right," Lampert said when an investor asked about plans for the concept. He added that he won't bow to pressure to move too quickly.

That wasn't the case four years ago when Lampert engineered the combination of Sears and Kmart.

At the time, Lampert saw the chance to move Sears into the big-box arena that Wal-Mart and Target dominated by converting Kmarts into Sears Grand stores, a free-standing format that previous Sears management pegged as the wave of the future. That effort fell flat.

The format was a mishmash of Sears washers and dryers and tools inside a worn-out Kmart store. Inventory replenishment wasn't well-coordinated. Even the name change to Sears Essentials was a "compromise," he said.

"The biggest disappointment was the inability right out of the box to take Kmart stores and create a hybrid," Lampert said. "We thought we had the potential to roll out to many more stores. We could have, but it would have been a great waste of money."

As for renting out space inside the stores, aside from Lands' End, the preppy outfitter that Sears already owns, Sears has yet to turn its big stores into mini-malls.

Indeed, shopping center operators are losing tenants and lowering rents as retailers retrench in the recession. And rival department stores are looking to lease space as well -- Macy's rents to toy store FAO Schwarz and J.C. Penney leases space to cosmetic retailer Sephora.

At a news conference after the meeting, Lampert said Sears is working with banks to renegotiate its $4 billion credit line, which expires in March.

MyGofer store could become template for future Sears, Kmart stores
RETAIL | Joliet test store has online ordering, pickup drive-through
By Sandra Guy - Chicago Sun-Times
May 5, 2009

Sears Chairman Edward S. Lampert told shareholders Monday that a Mygofer store in Joliet, which lets shoppers order goods online and pick them up at the store, go through a drive-through or have the order brought to their cars, could become one template for Sears and Kmart stores in the future.

"It's as much a service as a store," Lampert said of the Mygofer store that opened Friday in a former Kmart. ''There will be and there are displays, but they are small. It's functioning more as a fulfillment warehouse.''

Shoppers can buy everything from milk to TV sets to appliances at Mygofer. The importance of letting shoppers buy online and pick up in-store is so important that Kmart stores will soon add this capability, Lampert said.

In other news, Sears interim CEO Bruce Johnson said Sears will heighten and expand its selling of brand-name clothes to try to boost its long-struggling apparel business. Labels named include Levi's, OshKosh, Wrangler, Adidas and Carters.

Lampert said Lands' End clothing, set up as in-store shops in more than 200 Sears stores and slated to be in 75 more Sears stores by year-end, is hoped to be a centerpiece of Sears' clothing redo.

"We can bring more fashion and style to [Lands' End]," Lampert said. "You'll not see anything dramatically different but more of an evolved style."

Another bright spot in a year in which Sears Holdings Corp., the parent of Sears and Kmart, saw its adjusted profits (EBITDA) drop 37 percent to $1.6 billion, was the retailer's layaway program. Heightened advertising of the layaway program, primarily at Kmart but brought back late in the year at Sears, attracted 1.4 million new customers, a 106 percent increase in layaway sales and an incremental sales increase of $152 million during the 2008 holiday season from the year-earlier period.

The Hoffman Estates-based retailer also will expand its online product offerings and extend its service teams, called the "Blue Crew," beyond appliances to lawn-and-garden products such as lawn tractors.

You have to wonder what's the matter with W. Bruce Johnson.

Since Sears Holdings Corp. booted his predecessor, Aylwin Lewis, Johnson has served as acting chief executive for more than 15 months now.

That's a lot of acting.

Johnson is a former management consultant whose pedigree includes executive stints at the company's Kmart unit, the French discounter Carrefour and Colgate-Palmolive Co. He has helped usher Sears through one of the most difficult periods in retail history.

As acting CEO, he has restocked its turnover-prone executive suite and pushed through a plan to decentralize corporate decision-making. On Monday, he's expected to help preside over the annual meeting of shareholders, his second in the "interim" role.

Yet if Johnson remains a temp, who's directing the action? Clearly, the big boss is majority owner and Chairman Eddie Lampert, who confirmed not long ago that the search is still on for Johnson's replacement.

The Connecticut hedge-fund financier's status as the de-facto CEO, and a "micromanager" at that, makes it almost impossible to attract big-league management talent, according to Bill Dreher, an analyst at Deutsche Bank.

Considering that among those said to be weighing in on merchandising decisions is Lampert's mother, who once worked at Saks Fifth Avenue, "It doesn't sound like an easy job to fill," Dreher said.

As Diane Shand of Standard & Poor's explained, "Eddie is really the acting CEO."

In addition, the company has been split into five autonomous business units, each independently accountable. That holding-company structure would tend to lessen the need, and opportunity, for a star merchant.

Lampert took a crack at explaining this state of affairs in a letter to shareholders at the end of February. The board has enough confidence in Johnson that it feels comfortable in taking its time and being "highly selective" in its CEO search, he asserted.

Sears reportedly approached such retail giants as former J.C. Penney Co. CEO Allen Questrom and ex-Gap Inc. honcho Mickey Drexler, now at J. Crew, but as of three months ago it hadn't offered the job to anybody, Lampert wrote.

In fact, Johnson has more authority than is generally understood. After Johnson took over as interim CEO, Lampert severed direct-reporting relationships with other senior managers. Those positions report to Johnson.

You might think that given the rough business environment, Sears could use a steady hand. That's what Lampert said he likes about Johnson: "I am continually impressed with Bruce's steadiness through these difficult economic times," he wrote.

At any rate, replacing the CEO is far from the company's immediate problem, analysts agree.

"Their sales are very negative," said Shand, who monitors Sears' junk-rated debt. "They continue not to invest a lot in their stores. They continue to struggle with Kmart. They've had a lot of turnover."

Still, results in the most recent quarter were not as completely awful as Wall Street expected. One surprise: In the crucial month of December, the long-suffering Kmart gave only a little ground.

Dreher, who rates Sears Holdings a "sell," expects sales at its stores open more than a year to plunge in the months ahead. The less-severe-than-expected decline in its most recent quarter could be a function of layaway sales, cash management and other "razzle-dazzle" practices that can't be sustained for long, he said.

After Monday's annual meeting, Sears reports its fiscal first-quarter earnings on May 28. So by month's end, Wall Street will find out if the steady-handed temp at the helm can surprise again, with or without the razzle dazzle.

Sears, Kmart look to Web to boost sales
By Monèe Fields-White - Chicago Business
May 4, 2009

(Crain’s) — Hoffman Estates-based Sears Holdings Corp. wants to hone the online and in-store shopping experience at both of its struggling department store chains. Financier and Sears Holdings Chairman Edward Lampert told shareholders at the company's annual meeting Monday that the company will spend the year building its shopping platforms and offering consumers options at Sears and Kmart stores.

The company has launched MyGofer.com, a new shopping format that allows consumers to purchase items such as groceries, electronics and appliances over the Internet with the option of an in-store pick up.

“We think that’s going to be a better way for consumers to shop,” Mr. Lampert told shareholders. “We want to make sure we don’t become irrelevant. (It’s) an idea that we’re trying and that should resonate.”

The economic downturn has hampered retailers over the past year. Sears Holdings saw an 8% drop in same-store sales during the fiscal year ended Jan. 31. Net income fell to $53 million last year from $826 million in 2007. Total revenue was down to $46.8 billion from $50.7 billion in 2007.

The company saw a few bright spots, including the lay-away program, which was re-launched during the holidays. Another positive for the company was a boost in marketshare for several products, including appliances and tools.

“We have some things going for us,” said W. Bruce Johnson, interim president and chief executive officer. “Still, we have a lot of things we have to work on and improve.”

Mr. Lampert split the company into five business units last year. This year, the retailer introduced a home-improvement and repair site, ServiceLive.com, and an online shopping site, ShopYourWay.com. The company now offers about 3 million items on its Web site, up from 500,000 a year ago.

"There will be more hybrid forms of shopping going forward, (and) you won’t have to go to six stores," Mr. Lampert said.

Mr. Lampert also said that his retail chain will have "more than enough" access to credit markets and can take steps to generate the cash it needs should the economy worsen. He was acknowledging press reports that the company was in discussions with banks about its $4-billion revolving credit agreement that expires in March.

Extension of the credit line has been a key concern among industry watchers and analysts as the company's margins have been squeezed amid the economic recession.

"We're pretty confident we'll have more than enough access to operate businesses and give us flexibility should conditions worsen," Mr. Lampert said. "There are things we can do should conditions worsen."

Sears has taken steps to reduce costs including reducing inventory levels, laying off hundreds of workers and closing stores.

"We're taking a position to give us a cushion six months out," he said.

The recession has also hampered the company’s search for a permanent chief executive officer since Aylwin Lewis was forced out in January 2008.

"If the economy was different and the business environment was different, we could allow someone to take whatever amount of time it took to learn the system and implement their ideas," Mr. Lampert said.

Sears shares gained $2.58, or 4.2%, to close at $62.85 on Monday.

Sears looks to Web for future growth
By Ashley M. Heher - Associated Press
May 4, 2009

HOFFMAN ESTATES, Ill. (AP) — The chairman of Sears Holdings Corp. said Monday that the retailer is working to change how customers interact with it in stores and online.

Speaking at an annual shareholder's meeting at Sears' suburban Chicago headquarters, financier Edward Lampert said the company was upgrading its Web sites, selection and interactivity to help the company emerge stronger than ever from the recession, particularly as competitors slash prices in an effort to sell merchandise.

"Make no mistake, I'd rather have our sales going up, and rather have same-store sales going up," he said. "But not at the expense of generating profit. When you give product away, you're renting market share. We want to own market share. And you do that by providing better experiences."

Coming off a year when sales sank 8 percent and profit tumbled 90 percent, Sears — which owns both Sears and Kmart stores — is using its massive footprint of 3,900 stores to experiment.

Lampert highlighted the company's newest effort, known as mygofer, which opened its first store last week in the southwest Chicago suburb of Joliet, where shoppers can go online, select items and receive curbside delivery at the location right away. The store, which operates more like a warehouse than a traditional retail location, features few displays, in the hope that shoppers won't miss strolling through aisles of toilet paper and detergent.

"We think that's going to be a better way for people to shop," he said. "This is not just about there being a new store experience, it's about there being a different way for people to shop."

Executives hope the customer-focused efforts, along with the online ventures, help Sears succeed where competitors have failed. The latest among them, Filene's Basement, filed for federal bankruptcy protection Monday morning.

Lampert acknowledged the efforts may not succeed, much like the ill-fated Sears Essentials stores, which sold merchandise from both Sears and Kmart, but never resonated with shoppers.

Other initiatives under way this year include boosting proprietary brands such as Craftsman and Kenmore, highlighting the chains' home-and-garden products — everything from Kmart's bedding to Sears' riding lawnmowers — along with their struggling apparel lines, said W. Bruce Johnson, Sears' interim president and chief executive.

The company plans to promote some nonproprietary brands too, such as Wrangler, Adidas, Levi's and Vanity Fair in Sears and Gerber, Fisher-Price and branded Nickelodeon clothing at Kmart.

"We're pretty excited about the merchandise we have in the stores, the new merchandise we're bringing in," Johnson said. "We feel we're moving in the right direction from the standpoint of what we have to offer."

But much of the year's focus relates the company's online presence. Sears Web sites will offer more than 3 million products in 2009, up from 500,000 in 2008. The company also launched an online venture that allows homeowners to solicit online bids for service and maintenance projects as well as a growing and vibrant online community at MySears.com, where customers can write reviews, take surveys and lodge complaints while interacting with Sears employees.

Meanwhile, an online ordering program that allows customers to pick up goods at nearby stores will expand to Kmart locations shortly.

Sears said Monday that its layaway sales soared, adding $200 million to the fourth quarter of 2008, thanks to a holiday push that promoted paying in installments.

Lampert, who spent more than two hours answering shareholder questions, said the company's prolonged chief executive search continues, but that he remained comfortable with Johnson at the helm.

Sears shares rose $2.58, or 4.3 percent, to close at $62.85 Monday.

Lampert confident Sears will keep credit lines
By Tom Hals - Reuters
May 4, 2009

HOFFMAN ESTATES, Ill., May 4 (Reuters) - Sears (SHLD.O: Quote, Profile, Research, Stock Buzz) will have "more than enough" access to credit markets and can take steps to generate cash if needed should the economy worsen, controlling shareholder and Chairman Edward Lampert said on Monday.

Addressing shareholders at the company's annual meeting, Lampert acknowledged press reports that the company was in discussions with banks about its $4 billion revolving credit agreement that expires in March. The borrowing facility has become a concern to analysts as the company's margins have been squeezed during the recession.

"We're pretty confident we'll have more than enough access to operate businesses and give us flexibility should conditions worsen," said Lampert, a hedge fund manager. "There are things we can do should conditions worsen."

Sears has closed some of its thousands of Sears and Kmart stores over the past year and has taken other steps to reduce costs, such as tightening inventory control. "We're taking a position to give us a cushion six months out," Lampert.

Sears has been hard hit by the housing downturn, which has cut into sales of its Kenmore appliances and Craftsman tools as well as lawn and garden supplies. Lampert wouldn't predict when the economy might bottom and begin to recover, but he said the key for Sears would be a pick up in activity in the housing market.

Lampert said the search for a permanent CEO had been slowed by the company's new management structure and recession.

"If the economy was different and the business environment was different we could allow someone to take whatever amount of time it took to learn the system and implement their ideas," said Lampert.

The company's acting chief executive, Bruce Johnson, joked at the meeting outset that his wife and kids address him as "interim."

Lampert faced a friendly group of shareholders and analysts, and peppered his answers with references to Mikhail Gorbachev, Margaret Thatcher and recommended books by the Austrian economist Friedrich Hayek. A representative from a retirees group, which clashed with management in the past, read a complimentary letter.

Management emphasized to the roughly 250 attendees the various programs it is developing to give it greater access to customers, such as Kmart's layaway program. Johnson said more than 1 million new customers used the layaway program in 2008, giving the company customer email addresses and a way to communicate with them as traditional ways of reaching shoppers, such as newspaper circulars, decline.

The company also highlighted its efforts in developing online formats and expanding its Internet offerings. The company recently opened a My Gofer store near Chicago, which allows shoppers to place Internet orders for essentials such as toilet paper and groceries and then pick them up, and began in-store pickup at Kmart for online orders.

"There will be more hybrid forms of shopping going forward," said Lampert. "You won't have to go to six stores, you can go to My Gofer. That's an idea were trying and that should resonate."

Lampert and Johnson also focused on ServiceLive, an online forum recently launched by Sears which brings together providers of services such as home repairs with customers.

Last year Sears divided the company's operations into five areas in an attempt to improve efficiency. Lampert said the system led to some "stepping on toes" but uncovered areas of the company that were very unproductive and allowed more talented managers the freedom to run ahead of the pack.

An individual shareholder asked if the division of the company into five reporting segments would eventually allow its Craftsmen and Kenmore brands to be sold. Lampert said the company is looking for more ways to leverage brands, but emphasized that no brands were up for sale.

Sears shares ended up 4.3 percent at $62.85. The shares have risen about 75 percent since it reported in late February better than expected results for 2008.

Filene's Files for Chapter 11
By Jacqueline Palank - Dow Jones Newswire
May 4, 2009

Filene's Basement Inc., seller of bargain designer clothes and accessories, filed for Chapter 11 bankruptcy protection Monday with a deal in hand to sell 17 of its 25 stores for $22 million.

Filene's is seeking to sell the stores -- including its flagship Boston location -- to Crown Acquisitions, a commercial real estate firm based in New York. The deal still must be tested by a bankruptcy law-mandated auction.

Filene's said Crown still intends to operate the stores under the Filene's name while continuing to sell designer goods at bargain prices.

Crown said in a separate statement that it will seek to acquire the Filene's stores with partner Chetrit Group, a real-estate owner whose holdings include the Sears Tower and the Manhattan property that is home to Filene's Sixth Avenue store.

Filene's said it will seek to hold the auction, at which it will seek bids for its remaining assets, within five weeks.

Filene's has been struggling amid an "increasingly competitive discount retail market," the company said in court papers, pointing out such rivals as Loehman's, TJ Maxx and Century 21, as well as traditional department store chains like Macy's.

The retailer said recently opened stores, including locations in the suburbs rather than the traditional city locations, haven't performed well. And amid a recession that caused consumers to slash their spending, Filene's said its liquidity has become constrained.
Just a few weeks ago, the retailer's former owner sold the chain to liquidator Buxbaum Group, citing Filene's "uncertain future" and warning of a potential bankruptcy filing.

The move came three months after the former owner, Retail Ventures Inc., said it would close 11 of Filene's 36 locations in order to shore up its balance sheet after taking several quarters' worth of operating losses from the chain.

Filene's Basement was founded in Boston in 1909 by Edward A. Filene to sell leftover merchandise from his father's full-price department store, Filene's Department Store, located above the basement bargain-hunters' paradise. The retailer has since become famous for its bridal gown sales event, first held in 1947.

In Filene's Chapter 11 petition, filed Monday with the U.S. Bankruptcy Court in Wilmington, Del., the retailer reported $83.8 million in assets and $182 million in liabilities.

Those debts include $16.9 million in secured debt owed to a group of lenders including National City Business Credit Inc., Wells Fargo Retail Finance LLC and Wachovia Capital Finance Corp. The Burlington, Mass., company also owes $52.6 million in two unsecured promissory notes, $30 million in trade debt and $4.8 million in pension obligations.

Wal-Mart Expands Drug Program
Retailer Steps Up the Competition Over Managing Benefits for Employers
By Ann Zimmerman and Amy Merrick - Wall Street Journal
May 4, 2009

Wal-Mart Stores Inc. is expanding a pilot prescription-drug program for companies, heating up the race among pharmacy retailers to transform the way drugs are priced and sold.

The discount retailer is offering businesses low-priced drugs if they sign up to buy directly from Wal-Mart's network of in-store pharmacies, rather than contracting to buy drugs through third parties known as pharmacy-benefit managers.

Wal-Mart's program follows other recent initiatives by big pharmacy retailers to grab market share by offering companies a less-expensive and simpler way to manage their drug plans.

The competition among Wal-Mart, Walgreen Co. and others to create more-efficient business plans for pricing and selling prescription drugs has the potential to spur change across the pharmacy industry. And it poses a direct challenge to the dominant role pharmacy-benefit managers have played in the drug chain.

Wal-Mart's drugstores, above, present a challenge to the deals pharmacy-benefit managers have with employers.

When Wal-Mart introduced its $4 generic-drug program a few years ago, it shook up the drugstore business and prompted rivals to introduce their own discount plans, broadly lowering costs for consumers.

But at least one PBM sees more benefit to Wal-Mart than to consumers in the retailer's newest drug program. "While our business model focuses on improving health outcomes while reducing wasteful spending, Wal-Mart's program appears to be designed to build store traffic," said Maria C. Palumbo, spokeswoman for Express Scripts Inc., one of the country's largest PBMs.

Wal-Mart began a trial of its program in September with heavy-equipment maker Caterpillar Co., which provides prescription coverage for 70,000 employees and their dependents.

Wal-Mart negotiated a fixed markup over its cost for the drugs it sells to Caterpillar's employees under the heavy-equipment maker's in-house insurance.

Though Wal-Mart doesn't reveal the costs to Caterpillar, they are verified by a third party. The markup guarantees a profit for Wal-Mart, while reducing the cost to Caterpillar.

Todd Bisping, who manages Caterpillar's drug-benefits program, said the company was able to reduce its drug costs enough that it waived copayments on generic prescriptions bought from Wal-Mart.

Wal-Mart deemed the trial successful enough to expand the program to other companies last month, though it declined to say whether it has signed up new clients.

Walgreen's strategy, meanwhile, has been to create an extensive health-care program, including checkups at a network of Walgreen's-operated health-care centers, for big employers such as Walt Disney Co. and Toyota Motor Corp.

Walgreen's chief rival, CVS Caremark Corp., is betting on the PBM industry, purchasing the big PBM Caremark for $27 billion in 2007. CVS Caremark executives said owning more parts of the drug-supply chain would make the combined company more profitable and efficient, driving down costs for employers.

Typically, employers and federal and state governments contract with PBMs to administer their drug coverage, which includes choosing which drugs will be covered and how much they will cost the employers and patients.

The PBMs promise customers they're getting lower prices because drug makers and retail pharmacies give them discounts for buying in large quantities or sending patients their way. But it's often unclear how much of that discount is passed on to customers.

The new competition from drug retailers aims to provide more certainty -- and better prices -- to companies. Wal-Mart says it, too, can negotiate lower prices because it buys large quantities. It says it passes more of that savings on to its clients than PBMs do. PBM representatives declined to discuss their pricing policies.

Wal-Mart records a profit for each drug sale and benefits by drawing customers to its stores, who may make other purchases, from groceries to hardware.

"This is a game changer," said Adam Fein, president of Pembroke Consulting Inc. and author of a blog called Drug Channels. "Right now there is no incentive for an employee to choose the lowest-price pharmacy, because the copays are all equivalent."

Walgreen hopes to appeal to employers by offering a clearer pricing structure than PBMs, which base their prices on costs that aren't easily verified by clients. Walgreen executives say its clients will know in advance how much they are paying for each drug or service.

Walgreen has a growing relationship with Toyota, operating about a half dozen pharmacies at the auto maker's U.S. work sites. The car maker is discussing with Walgreen the possibility of setting up a program similar to Wal-Mart's project with Caterpillar, in which Walgreen would expand its drug program for Toyota employees.

—Kelly Nolan and David Armstrong contributed to this article.

Sears Tower to open glass-bottom Skydeck in June
4-foot Ledge walkway will let visitors look 103 stories straight down
By David Roeder - Chicago Sun-Times
May 1, 2009

Sears Tower -- and it's still called that for the time being -- will invite its Skydeck visitors to enjoy a view usually reserved for window-washers and superheroes.

It'll be a walk on the high side as visitors on the observation deck step into glass enclosures that extend 4.3 feet beyond the building. Beneath their feet in dizzyness-inducing splendor will be the city itself, 103 stories below, with an inch and a half of glass between person and pavement. The attraction, called the Ledge, should open by early June and is part of a multimillion dollar renovation of the tourist spaces at the nation's tallest building, said Randy Stancik, Skydeck general manager.

He said the Ledge was inspired by glass-floored thrills at the Grand Canyon and Toronto's CN Tower. The plan is to attract more Skydeck visitors, especially jaded locals who haven't visited the tower in years.

"This definitely will be something new to take from the experience, a new Skydeck memory," Stancik said. About 1.3 million people visit the Skydeck every year. Stancik realizes the illusion of a mid-air suspension isn't for everyone. But the daredevils will be enclosed by glass.

Seeing foreheads pressed to the Skydeck windows, Stancik knew people want to look down as well as out.

The four enclosures are on the west side of the tower so you can look straight down to the ground. On other sides, downward views are interrupted by setbacks from the wider floors below.

The enclosures are retractable: they move inside so window-washing equipment isn't obstructed. Stancik said the Ledges will be available in all kinds of weather.

The Ledges are included in Skydeck admission, which jumps a buck today to $14.95 for ages 12 and up. It's $10.50 for kids 3 to 11. The price increase is in preparation for a Skydeck upgrade that also includes new exhibits highlighting Chicago's history, culture and tourism attractions, including a display that lets viewers rise the equivalent of 103 stories above Wrigley Field.

The Skydeck changes are part of a plan to make the iconic building more profitable.

Later this summer, the name will change to the Willis Tower, for a global insurance firm that leased space in the building.

The owners also are considering painting or recladding the building in silver to give it a contemporary look. Also under discussion is building a hotel next to the tower.

That’s the way Chicago crumbles
By Paige Wiser - Television Critic - Chicago Sun-Times
April 28, 2009

TELEVISION | After the people are gone, the river will overflow and ivy will choke Wrigley, "Life After People' series predict

“Welcome to Earth: population zero,” announces “Life After People,” a History Channel series with one mission: to freak you out. Tonight’s episode focuses on what would happen to London, Atlanta and Chicago if humankind were to suddenly disappear.

Chicago’s L system may be falling apart already, but the History Channel has a bleaker view 100 years from now on “Life After People” at 9 tonight.
(Hint: cannibal pigs.)

The Chicago portion of the 9 p.m. show is eerily realistic, maybe because producers had such a conveniently close case study. They looked to a once-thriving, now-abandoned section of Gary as what could happen to another lakeside city in a short amount of time. The narrator sternly calls Gary “the Pompeii of the Midwest.”

The question “Well, what happened to the people?” is never addressed, and it’s probably best that way. It’s humbling enough to realize that the world will go on without us. We don’t really need to be contemplating which horrific plague/war/comet will do us in.

“Life After People” has a primal appeal, says Matthew Kubik, one of the experts featured. “People love to watch things fall apart,” says the onetime architect for Skidmore, Owings & Merrill in Chicago who is now a professor at the combined Indiana University/Purdue University campus in Fort Wayne.

“If you have a look around us, we recognize that things are rotting,” Kubik says. “We have potholes in the street.” There’s a fancy name for that: the second law of thermodynamics. The idea is that the order we try to impose on nature will inevitably revert to disorder. “It’s the natural and inevitable flow of the universe,” Kubik says. “Why do we go to the racetrack and watch these cars smash into the wall? That’s order to disorder — rapidly.”

This could be the future of Chicago:

The Chicago River

Within a matter of days, the river would have its revenge. Back in 1900, engineers reversed the flow of the river to reduce pollution in our drinking water. But without humans manipulating the water levels, the river would fill up like a bathtub. First downtown Chicago would flood, and then entire Midwestern towns would be wiped out. Buh-bye, Joliet.

Wrigley Field

Expect the confines to become much less friendly. Its ultimate opponent is already embedded in the outfield wall: the ivy, which is regularly maintained by the grounds crew. Soon the ivy would blanket the entire stadium, with the infield dense with the scourge of the suburbs: buckthorn.

Sears Tower

Sure, it’d be OK for a couple of centuries. But eventually Chicago’s extreme weather would rust away the steel cables supporting its complicated elevator system. When the highest elevator finally loosens, it would come shooting down its shaft like a bullet out of a gun. With its foundation devastated, the Sears Tower would fall apart.

John Hancock Center

Its sturdy crisscross design should keep it standing longer than the Sears Tower, but not forever. “My supposition is that eventually it would crumple as if you were pushing down on a box of Wheaties,” Kubik says.

“We’re very arrogant as humans,” he says. “We built these buildings and we think they are emblems of our human power over nature and they’re going to last forever. But the truth of the matter is that buildings have about a 40-year life-span.”

Kubik will be closing out the NeoCon show at the Merchandise Mart on June 17, giving a presentation on energy detailing for interior design. The lesson he takes from the “Life After People” series is that it’s a vision we can avoid — if we change the way we do pretty much everything.

“We feel like we have this sort of divine right that’s been biblically handed onto us to subdue the world,” Kubik says. “But where we are right now is a point in history where we are so exploitative of the natural resources on this planet. We have to develop a different attitude.”

The History Channel, at least, has things in perspective. “We’re not really masters of the universe,” Kubik says.

Target Shoppers Heading to Wal-Mart in Droves
By Todd Sullivan - Seeking Alpha
April 27, 2009

For those folks who think "Target (TGT) is fine just the way it is", here's some interesting data from Marketing Charts:

US consumers are growing increasingly stingy with their money and are becoming more and more likely to base their retail purchase decisions on price, according to a study from The Gordman Group, which reports that Wal-Mart stands to benefit most from this phenomenon.

According to Retailer Daily, The Gordman Group’s Spring “Retail Trend Tracker Survey,” reveals that 90% of respondents say the economy has affected how much they spend, and 80% say the economy has affected where they shop. In the last three months, 45% of respondents have spent less, and 31% expect to spend less in the next three months. More than half, 59%, believe the economy is getting worse, and almost half, 49%, say the economy has affected them directly.

So what do you say? It sounds like everyone will suffer. Read on....

Here is the blow to the folks who think "we don't need any of Bill Ackman's changes"
More than half of respondents (54%) in the study plan to spend a larger share of their budget at Wal-Mart (WMT) in 2009 than they did in 2008. The next-most-popular response to this question, internet stores, was only selected by 27% of respondents as a destination where they will spend more money this year. Only 25% of respondents say they will spend more money in 2009 at chief Wal-Mart rival Target, the Gordman Group found.

So, it is clear that there has been a fundamental shift in consumer behavior. In my recent conversation with AutoNation (AN) CEO Mike Jackson he said to me that he thought "the consumer is scarred and their behavior has been fundamentally altered, perhaps permanently". Jackson gets that and is changing his business to meet the new reality. Execs at Wal-Mart get it and are pounding their value message home to consumers. Even media whipping boy Sears Holdings (SHLD) gets it, as the company has been very aggressive proving to consumers its appliance prices are the best (and it is working).

Now, Target management has responded to Ackman saying:
For more than a decade, Target’s Board and management have been guided by our brand promise to our guests — to “Expect More. Pay Less.” — and this approach has produced outstanding results and a best-in-class retailer.

• Over the past 10 years, Target has grown its revenues at a compound annual rate of 11%, expanded its EBITDA margins by 200 basis points and grown EPS at a 14% average annual rate.
• Target has built a track record of disciplined management across all areas of its business including expense management, inventory control and use of capital.
• Target also has a history of returning cash to its shareholders through dividends (which have been paid every quarter since 1967, when we first went public) and a share repurchase program, all while maintaining a prudent capital structure as evidenced by its strong investment-grade credit rating, which we firmly believe is important to maintain.

Target’s Board and management are working to address the challenges of a deeply recessionary economy and remain firmly committed to the values and strategies that have driven Target’s success for nearly 50 years. By working as a team, delivering outstanding value, offering continuous innovation and an exceptional guest experience, Target believes it will enhance its position as a leading, world-class retailer and emerge from the current economic environment an even stronger company. Target’s future success depends on its ability to continue adapting to changes in the environment while fulfilling its “Expect More. Pay Less.” brand promise with passion and discipline, and delivering outstanding value for its guests, team members, shareholders and communities.

OK....but all evidence for the past year now ought to tell everyone that the "Expect more, Pay Less" motto just ain't getting through to folks. When I see the question "what are you doing NOW to address problems" and I hear "For the past 10 years..." I hear nothing after that because I think there is no new plan. Whenever I read anything from Target I see a laundry list of reasons they think everything Ackman proposes and everyone Ackman nominates just isn't right for the company. What don't I ever read?

Anyone?

How about "this is what we are going to do to stop the sales free fall". Why is that missing? As a consumer I am not seeing anything out of Target I have not seen for the past 5 years or more. It is old and stale and the competition is adapting.

Ackman's food argument is 100% true. People are heading to Wal-Mart for cheap staples. Target is know for chic fashion, which people clearly do not want right now as they hunker down. While they are in Wal-Mart for staples they are picking up other things and saving another trip. Target needs to become a place to go for staples. Anything other than trying to sell affordable work clothes to women now out of a job or worried about losing one.

If I were a Target shareholder, I would have a hard time not voting for the guy who at least has a plan versus "the last decades plan is the plan for the next one"

The landscape has changed...

Disclosure: Long WMT, AN, SHLD

Best Buy Expands Private-Label Brands
By Miguel Bustillo and Christopher Lawton - Wall Street Journal
April 27, 2009

Best Buy Co. is rapidly expanding its private-label electronics business in a gamble to gain a key competitive advantage over rivals such as Wal-Mart Stores Inc. and Amazon.com Inc.

Best Buy believes it can prosper in private-label electronics -- an area that has historically flummoxed U.S. retailers -- by using the mountains of customer feedback it collects from its stores to make simple innovations to established electronic gadgetry. The move comes as Best Buy's position in the consumer electronics market has strengthened in the past year following the liquidation of former rival Circuit City Stores Inc.

Sales of Best Buy private-label electronics soared 40% during the past fiscal year, which ended Feb. 28, even as the company's overall sales and profits sank. Popular products included a global-positioning system with Google Inc. search capabilities, a high-definition radio receiver that displayed the names of songs, and stripped-down digital picture frames without pricey extras such as music-players.

Best Buy's house brands include Insignia and Dynex televisions. Above, customers with an Insignia flat-panel TV at a Best Buy in Greensboro, N.C., in January. Retail experts believe the largest U.S. electronics chain by sales could further distance itself from competitors if its exclusive electronics lines develop the type of brand loyalty Sears Holdings Corp. enjoys with its Kenmore appliances and Craftsman tools.

Best Buy now sells hundreds of electronic products under an umbrella of five house brands that includes Insignia and Dynex televisions, Rocketfish video cables, Geek Squad flash drives and Init electronics cases and accessories.

But Best Buy's private-label gambit has its perils. Promotion of its own brands threatens to strain relationships with some product makers, who are now also competing against the retailer. And the reputation of the private brands is a two-edged sword, with potential to lift Best Buy's appeal to customers, or tarnish its overall reputation for quality.

That risk flared up for the Richfield, Minn.-based retailer April 2, when it recalled 13,000 26-inch Insignia televisions amid reports that two had caught fire in consumers' homes. The recall also included a $100 portable power device that had spontaneously combusted.

"All manufacturers face these challenges, and we are ready for them," Best Buy spokeswoman Kelly Groehler said of the recalls.

As it reaches for market share, Best Buy is shutting out some low-priced brands that compete directly with its offerings. One notable example: Vizio Inc.'s flat-panel televisions, which are sold at Wal-Mart and Costco Wholesale Corp. and are among the top sellers in the U.S., along with Sony Corp. and Samsung Electronics Co. Ltd.

The Irvine, Calif., television maker has talked with Best Buy about selling in its stores, but worries that Best Buy would give its products short-shrift. "We couldn't go in and be constrained by comments like, 'Don't hurt my house brand,'" said Vizio co-founder Laynie Newsome.

Best Buy acknowledges that it is choosing not to carry some low-priced electronics brands that would compete with its private-label offerings.

Best Buy's share of the fast-growing flat-screen television market more than doubled in the past year, according to market-research firm iSuppli Corp. Insignia and Dynex televisions made up 4.9% of flat-screen televisions sold last December. Best Buy brands only had 2.3% of the pie a year earlier, according to iSuppli.

"I don't see why they would want to have another value brand in the mix anymore," said iSuppli television analyst Riddhi Patel. "They have hit on a good model."

Even before the recession forced a new emphasis on budget options, retailers have been building private-label product lines because they typically generate higher profits for the store than selling other brands. So far the trend has been most successful in the grocery business, where house lines such as Wal-Mart's Great Value have tapped into consumers' willingness to forgo famous names on staples such as sugar and milk in exchange for lower prices.

Electronics have fared worse, because consumers see products such as mobile phones as brand-driven status symbols. Technological advances make it difficult for retailers to develop relevant products without investing huge sums in research.

Earlier this decade, Wal-Mart experimented with an inexpensive electronics line called iLO before dropping it to refocus on name brands.

Best Buy, meanwhile, struggled trying to sell computers under its own house brand, VPR Matrix, which was launched in 2001 and phased out in 2003.

Best Buy began another private label push in 2004. Earlier Best Buy Blu-ray players and digital converter boxes were identical to electronics sold at Wal-Mart and Radioshack Corp. stores, because they were made by the same Chinese factories. But now the company is moving away from buying "off the shelf," and employs a team of engineers to innovate products using customer feedback, said Best Buy Executive Vice President Mike Vitelli.

After noticing that many portable DVD players were purchased for young children, the retailer in 2007 developed a spill-resistant Insignia model with rubberized edges. It became a top seller and received a Red Dot Award, a coveted German design prize.

J.C. Penney Co. raised its forecast of financial results for the fiscal first quarter for the second time in two weeks, joining a chorus of companies reporting that the free fall in sales that began last fall appears to be over.

At an analysts conference in New York Wednesday, Penney Chief Executive Myron "Mike" Ullman III said he is seeing a "more predictable trend" across the retailer's businesses after watching the chain's customers spend less and profits slide in recent months.

His comments come amid a growing debate over whether the global recession is over. Several major companies predicted this week that the economy is approaching a bottom, but others say it is still too soon to tell.

Coach Inc., known for its "affordable luxury" accessories, said Tuesday that sales at its North American stores have returned to pre-Christmas levels. French luxury conglomerate Moët Hennessy Louis Vuitton SA said Wednesday that its revenues were up 0.4% for the first quarter, with sales at its fashion and leather-goods business rising 11% globally.

Penney said it now expects flat to slightly higher earnings per share in the first quarter ending April 30, an improvement from a previously expected loss of 5 cents to 10 cents a share. Last year, the Plano, Texas-based company earned 54 cents a share in the first quarter.

"I never thought flat to slightly positive would look so good," Robert Cavanaugh, the retailer's chief financial officer, told the meeting. "We are comforted that it is more predictable."

Penney has revised its first-quarter guidance once before. In February, the company forecast a first-quarter loss of between 20 cents and 30 cents a share. It is scheduled to announce first-quarter earnings May 15.

Ken Hicks, president and chief merchandising officer, said Penney's long-suffering home-products business, which accounts for about 20% of its revenue, "has stabilized," but he warmed that he "wouldn't declare victory" yet.

Indeed, Mr. Ullman said the more predictable trend the company is seeing is "not one we like," because sales levels are lower than they were before the recession. But he called it "good news for people who sell things that people want" because it offers an opportunity to grab market share.

Mr. Ullman told analysts the retailer is still showing restraint in opening new stores and is planning fewer than five of them this year. The company is also working to "clarify" its pricing in stores, to make extra discounting clearer and appeal to value-conscious consumers.

Peter McGrath, executive vice president and director of sourcing, said the retailer expects further price declines in negotiations with suppliers for fall 2010. He noted that pricing fell 2% to 3% in spring 2009 and another 5% to 6% for fall 2009.

Wal-Mart To Boost Rooftop Solar At Its California Stores
Dow Jones Newswire
April 22, 2009

SAN FRANCISCO (Dow Jones)--Wal-Mart Stores Inc. (WMT), the largest U.S. retailer, said Wednesday it plans to double the amount of solar power generated from rooftop panels on its California stores.

Solar panels already installed on 18 Wal-Mart stores produce about 16,000 megawatt-hours of electricity a year, enough to serve about 1,300 homes. The new project will double that amount, with panels installed at 10 to 20 additional sites, the Bentonville, Ark., company said.

BP PLC (BP) unit BP Solar, will install and own the rooftop panels and sell the power to Wal-Mart under a 10-year power purchase agreement, said Wal-Mart spokesman Kory Lundberg. BP installed some of the panels in the first project, along with SunPower Corp. (SPWRA) and privately held SunEdison.

The rooftop panels are expected to provide 20%-30% of the power needs of the stores where they're installed, at a price either at or below the price of "traditional energy," Lundberg said.

"It just makes tremendous business sense, even in the current economy," he said. The project is part of a company goal to use renewable sources for 100% of its energy needs, as part of a larger environmental initiative started by former Chief Executive Lee Scott.

Other retailers, including Target, Macy's and Whole Foods have announced similar solar projects over the last two years.

Most op-ed pieces written by captains of industry are usually pretty pedestrian.

But one written by Allstate Corp. Chief Executive Tom Wilson and published in Thursday's New York Times prompted gasps in Empire State insurance circles.

Repeating his oft-stated call for a federal insurance regulator to replace the current "hodgepodge" of state overseers, Wilson noted almost in passing that "insurance companies that wrote credit default swaps were happy not to be regulated" and that Allstate "played only a small role in unregulated insurance markets."

Those comments prompted New York state's insurance department to fire off a letter to Wilson demanding that his Northbrook-based company detail any credit default swap transactions that its New York operations made in the "unregulated insurance markets."

"While the credit default swap market is not regulated, insurance company use of credit default swaps is," Eric Dinallo, New York insurance superintendent, said in a statement Friday. "In New York, no insurance company can use credit default swaps except under very specific and limited ways and only with approval."

Furthermore, Allstate must share any knowledge it has of other insurers conducting credit default swaps, the regulator said.

"If Allstate broke the law or is aware of any other insurance company that broke the law, Allstate should immediately report that conduct to the appropriate state insurance regulator," Dinallo said. "The last thing an insurance executive should be doing now is undercutting consumer confidence."

Allstate had no immediate comment.

Credit default swaps are a form of insurance against certain securities defaulting. They helped bring American International Group to the brink of bankruptcy last September and led to a massive government bailout of the company.

On a day when the Dow Jones industrial average was up slightly, stock of the nation's biggest publicly traded home and auto insurer was down 2.4 percent Friday to $23.42 a share. Its 52-week trading range is $13.77 to $52.16.

In January, Allstate reported a fourth-quarter loss of $1.13 billion, as losses in its investment portfolio spiked.

In his op-ed, Wilson said states "lack the expertise to properly oversee rapid innovation or systemic risks" in financial markets.

All companies that create risk for financial markets need "federal regulation, including companies like Allstate," he said.

"A good start would be for Congress to eliminate the hodgepodge of state regulatory systems by establishing a federal regulator for national insurance companies," Wilson wrote. "Such a sophisticated federal insurance regulator would oversee the financial stability of large companies."

Such CEO op-eds are almost never controversial," Peter Debreceny, who spent nine years as Allstate vice president of corporate relations before leaving the company in March 2007.

"Obviously, the CEO in any organization, because it's his or her name on the piece, is going to be involved, and it's their words ultimately," he said. "But the information drawn reflects a team effort."  He said Allstate is diligent about following state regulations and predicts the op-ed matter will be "a storm in a teacup."

Union Intensifies Efforts to Organize Workers at Wal-Mart
By Kris Maher and Ann Zimmerman - Wall Street Journal
April 17, 2009

The United Food and Commercial Workers union is ramping up organizing at Wal-Mart Stores Inc. after a five-year lull, dovetailing with its efforts to win support in Congress for a bill to make union organizing easier.

The Bentonville, Ark., retailer, a leading opponent of the legislation, said managers have seen increased union activity at a number of stores, prompting mandatory meetings to discuss unionization. "We have noticed that the UFCW has been working harder lately in its attempts to get Wal-Mart associates to sign union cards, but we don't think our associates have any reason to be more interested than before," said Wal-Mart spokesman David Tovar.

Unions are expected to escalate card-signing efforts at other companies as well. But the campaign at Wal-Mart, because it is the nation's largest private-sector employer with 1.4 million employees at more than 3,600 stores, could have the greatest impact on the legislative debate and other organizing efforts.

Since February, about 60 UFCW organizers have been dispatched to more than 100 Wal-Mart stores in 15 states to get workers to sign union-authorization cards.

The cards are attached to flyers that feature a photograph of President Barack Obama and a quote from a 2007 speech he gave to UFCW activists in Chicago. "I don't mind standing up for workers and letting Wal-Mart know they need to pay a decent wage and let folks organize," Mr. Obama said in 2007. A White House spokesman said Thursday that the president stands by the statement.

Meanwhile, the UFCW plans to fly about 100 pro-union Wal-Mart workers to Washington this month to lobby members of Congress on the pending legislation, known as Employee Free Choice Act. The bill, organized labor's top legislative priority, would allow unions to bypass secret-ballot elections and form union locals if more than 50% of workers at a company location signed cards requesting representation. At this point, the union said it hasn't obtained majority support at any Wal-Mart stores, but has majorities in a handful of individual departments, which can be unionized separately.

Business groups are spending tens of millions of dollars to defeat the bill and say it would allow union organizers to pressure workers to sign cards.

Wal-Mart and other companies targeted by unions are trying to counteract organizing efforts with meetings, fliers and videos. "I was a member of a union in a previous job, and it was not a good experience for me," a Wal-Mart representative said, according to an audio recording reviewed by The Wall Street Journal.

Wal-Mart remains one of labor's staunchest opponents, arguing that a union would lead to higher operating costs and less flexibility in managing workers. It also represents labor's biggest prize, because its jobs can't be shipped overseas and it sets standards in the retail and grocery industries. Union officials believe they would have an easier time organizing Wal-Mart competitors if the retailer were represented by unions.

At a Duncanville, Texas, Wal-Mart, the union has signed up 58 employees, representing a little more than 10% of the store's 500 employees. Several workers said the company's strong performance during the recession encouraged them to sign union cards in an effort to get better wages and benefits.

Linda Haluska, an overnight stocker at a Wal-Mart in Glendale, Ill., said Wal-Mart is "a good place to work, but it would be better with a union." Since February, Ms. Haluska said her store has held five or six meetings attended by managers from the Wal-Mart corporate office to discuss unionization. Ms. Haluska and other workers said the meetings are aimed at dissuading workers from supporting the union. "They are not giving us the full picture, just enough to discourage you."

For its part, in a letter dated March 6, Wal-Mart asked the union to stop violating company policy by entering its facilities and soliciting signatures from workers "in working areas and on working time." The company added: "These tactics provide a great illustration of why there is such widespread concern about allowing unions to be certified based solely on the basis of authorization cards."

S&P Lowers Ratings On Five Department Store Cos,
Affirms 1
Dow Jones Newswires
April 16, 2009

Standard & Poor's Ratings Services lowered its ratings on five department stores operators, placing two of the companies into junk territory, as the credit agency cited concerns about the impact of the recession on the increasingly troubled sector.

Retailers have been suffering from the worst falloff in U.S. consumer spending in a generation, and traffic in shopping malls has slumped, which has led chains to cut prices, trim corporate staffs and modify their name-brand merchandise.

S&P credit analyst Diane Shand said the sector felt "the full brunt of the declining U.S. economy and weakening consumer confidence in 2008."

In its latest ratings action, moderate-priced department store operators Dillard's Inc. (DDS), Macy's Inc. (M) and J.C. Penney Co. Inc. (JCP) were each lowered two notches, with Dillard's pushed further into junk to B- and Macy's and J.C. Penney pushed into junk territory to BB.

S&P said the three chains were expected to suffer high-single-digit declines in same-store sales in 2009.

Meanwhile, upscale competitors privately held Neiman Marcus Group Inc. and Nordstrom Inc. (JWN) are expected to incur low-double-digit declines in same-store sales. Their ratings were lowered one notch each, with Neiman placed at B, or five notches into junk, and Nordstrom lowered to BBB+, or three notches above junk.

Sears Holdings Corp. (SHLD) was the only company in the sector that escaped a downgrade - its rating was affirmed at BB-, or three notches into junk.

S&P removed all six companies from watch for downgrade on Thursday. Sears and Neiman Marcus have negative outlooks, meaning future downgrades aren't out of the question, while the rest of the companies have stable outlooks.

Throughout the industry, S&P expects companies to generally plan conservative inventories expenses and store growth throughout the year in an effort to protect margins and cash flow.

Despite these efforts, most companies' margins are likely to erode as a result of the weak consumer demand, lack of sales leverage and promotional activity. Shand said the recession was likely to last through at least the third quarter of 2009, given weak employment, the poor housing market and continuing turmoil in financial markets.

"We believe lower consumer spending and declining mall traffic will affect the sales and profits of the department store operators this year," said Shand.

In after-hours trading, Macy's shares were down 3% to $12.14, while J.C. Penney was off 0.7% to $26 and Nordstrom fell 0.7% to $21.09. Sears and Dillard's shares were unmoved in after-hours trading, at $58.29 and $7.23, respectively.

Rumors about retailers can be very bad news for their health
By Jayne O'Donnell and Matt Krantz, USA TODAY
April 13, 2009

Bruce Berkowitz Bought More Shares of Sears Holdings Corp.
GuruFocus.com
April 11, 2009

Investment Guru, Fund Manager of Fairholme Funds Bruce Berkowitz bought additional 1.5 million shares of Sears Holdings Corp. (SHLD) on March 31, 2009. His trading price was about $45.71 and the stock price has climbed over 15% since then.

According to GuruFocus Premium Member data, Bruce Berkowitz started to accumulate Sears Holdings Corp. since when Sears was at much high prices. He owned at a peak time more than 16 million as of July 31, 2008. Since then, he sold some shares and at yearend of 2008, his position was reduced to a little less13 million shares. Apparently, the stock’s low prices attracted him to buy more shares, as of March 31, his ownership in the stock is back to 14.5 million shares. We re-produce the holding history of Bruce Berkowitz in Sears below.