Friday, November 29, 2002
CHICAGO (AP) -- Donna Lucy strolled past a colorful display of Lands' End sweaters just inside Sears' main entrance and surveyed the other changes at a retail chain where she has shopped for years.
"It's brighter, it's more wide open and they've got better-quality clothing," the suburban Chicago resident said approvingly. "And they've finally got shopping carts to help you out."
Sears, Roebuck and Co., the one-time star of American shopping malls turned dowdy, is taking the first wraps off a makeover of its U.S. department stores -- in time for the holiday shopping season.
Initial reviews from retail analysts and customers, such as Lucy in the newly remodeled store in West Dundee, Ill., are positive.
But whether the restructuring can help troubled Sears regain lost retail glory and market share is a question that won't produce a neatly packaged answer by Christmas.
"Big retail organizations can't be turned around in a year," said George Whalin, president of Retail Managements Consultants in San Marcos, Calif.
"They seem to be on the right track. But they're probably in for a very tough holiday season, and I think they are going to struggle for a while."
Problems
Struggles are nothing new for Sears. Since being dethroned by Wal-Mart as the nation's leading retailer in 1991, the 116-year-old company has been buffeted by a series of competitive and financial threats and hasn't been able to shake its image as stodgy and old-fashioned.
Discounters Kohl's and Target have siphoned off shoppers from its 870 department stores, specialty retailers have eroded more sales and shopping mall traffic has tailed off.
A '90s campaign focusing on Sears' "softer side" fizzled, taking away business from its strengths in hardline goods such as tools and home appliances -- a market it still dominates. Apparel sales have fallen for 22 straight months in comparison with the previous year's total.
Most recently, after working for two years to iron out the weaknesses in apparel, CEO Alan Lacy this fall disclosed unexpected problems in the credit business.
That unit, generating a $1.53 billion profit last year, has been so successful in recent years that Sears has been dubbed a credit-card company with stores.
Sears acknowledged failing to anticipate the extent of skyrocketing delinquencies and bankruptcy filings in a customer base it boldly expanded in mid-2000 by introducing its own gold MasterCard.
The world's No. 2 MasterCard issuer, with nearly 25 million such accounts, was forced to set aside an extra $222 million in the third quarter for uncollectible bills.
Coupled with the fragile economy, the credit woes further clouded Sears' recovery efforts and slashed two-thirds of its stock's value between early June and Nov. 13, when it dived to a 20-year low.
Credit issues aside, the overhaul of stores appears to give the Hoffman Estates, Ill.-based chain its best chance in years for a comeback.
Sears is cashing out its traditional department-store model to become more like a discount store, addressing customers' quest for easier, faster shopping, while simultaneously upgrading its goods.
What's being done
Only 50 of the more than 600 full-line stores to be remodeled have been made over so far. The revamp, which is costing Sears $800 million this year, won't be completed until the end of 2004. But changes already are on display in all Sears' stores.
For starters, Sears has cleared the racks of eight weak-selling apparel brands and removed cosmetics as the first department shoppers encounter as they enter.
Showcased instead, in 184 stores by year's end, is upscale casual apparel from Lands' End, which Sears bought in June for $1.9 billion.
Nearby are clothes from Covington, its new private-label line of classic apparel, available in all stores.
Self-service is a key part of the revamp -- nearly 6,000 store sales jobs have been eliminated in shoes and several other departments.
Also involved for many or most stores: expanded home decor, Tool Territory departments with workbenches for testing out the wider variety of brands, Big and Tall men's departments, new "plasma" departments to showcase flat-screen TVs, and closet shops featuring wooden hangers and clothes racks.
As striking as any new brand or product, however, are the wider aisles, open design, simplified signs and centralized checkout stations, a strategy employed successfully at other chains.