Sears to eliminate 4,900 jobs
By Dave Carpenter
Associated Press
CHICAGO — Sears, Roebuck and Co. is slimming down and becoming more of a discounter, taking cues from competitors that have enjoyed shopping sprees at its expense in recent years.
The nation's fourth-largest retailer announced a makeover yesterday that includes elimination of 4,900 salaried jobs, other cost-cutting and a new merchandising strategy that plays to its strengths — home appliances and home furnishings.
While falling short of some of the radical changes suggested by some analysts, such as ditching its sluggish apparel business, Sears' overhaul marks a bold departure from its traditional department-store model.
It also signals a new direction under chief executive Alan Lacy, the Sears credit whiz who took over a year ago and is experimenting to try to regain retail ground lost to such discounters as Kohl's and Target.
His solution: More discounting, more self-service, increased emphasis on home appliances, less "clutter" of weak-selling products on the sales floor and a leaner administrative staff.
"This strategy ... will substantially improve Sears' financial performance by creating an easier shopping experience for our customers while operating with greater focus, speed and efficiency," Lacy said.
He stressed that the company is not abandoning department stores for an all-out discount strategy, complete with "cavalcade checkout." Rather, Lacy said in an interview, Sears will adopt more of an off-mall look.
"We'll have better service and better quality goods than a discounter," he declared.
As part of the changes, Sears is making its biggest job cuts in eight years, trimming about 22 percent of its salaried corporate and regional staff.
Some 1,300 positions will be eliminated from Sears' headquarters staff of 7,000 in the Chicago suburb of Hoffman Estates by the end of 2002. Another 3,600 positions will be cut from district and regional offices in the 15,000-strong field organization that supervises its 860 department stores.
Lacy spent several hours outlining the plan in Chicago to retail analysts, who have been clamoring for change since Lacy took over a year ago from longtime Sears head Arthur Martinez.
"Our new approach to merchandising reflects a distinctive competitive positioning, a clear emphasis on home and family, and a lower-cost operating model," he said.
After acknowledging earlier this year he had considered dropping apparel, Lacy said the company will put an even stronger focus on it. Merchandise will be upgraded, the depth of assortments will be improved and the company will establish a Sears casual brand for its men's, women's and children's clothing.
Sears also is eliminating "less productive" promotional activity, allowing it to invest more heavily in marketing the Sears brand.
Customer service changes include more service for big-ticket items but more self-service overall. Centralized checkouts will be installed in about 140 stores by year's end and in all stores by mid-2002. Store signs, fixtures and layouts will be revised.
The CEO said the plan will increase its operating income by 50 percent to more than $3 billion, double profits from its retail and related services operations by 2004 and achieve annual savings of $600 million by the same year.
He said the improved merchandise offerings are designed to put greater emphasis on its strengths, such as home appliances, where it is the top-selling U.S. retailer. The company also is a powerhouse in hardware and tools.
Retail analyst Kurt Barnard said the plan was the best news he's heard from Sears in 10 years.
"For many years Sears has been stuck in the mud while its rivals were moving forward," said Barnard, a consultant and president of Barnard's Retail Trend Report.
The changes, he said, will remake Sears into "a new kind of discount store — like Kohl's, but with a little overlay of the traditional department store."
Under Lacy, Sears this year already has closed 89 unprofitable stores, stopped selling cosmetics, sold its pest control business and ended some underperforming product lines such as bicycles and basketball gear.
Quarterly earnings narrowly exceeded expectations despite the decline in shopping after the Sept. 11 terrorist attacks.
Net earnings were $262 million, or 80 cents a share, down from $278 million, or 81 cents a share, a year earlier. That was a penny better than the consensus per-share estimate of analysts surveyed by Thomson Financial/First Call.
Revenues gained 1.7 percent to $9.75 billion from $9.59 billion. But retail revenues slipped 1.8 percent to $7.33 billion.
