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Sears general overview
Sears has been tossing around many new concepts
and strategies for their ailing stores including free standing
land’s End shops in some malls, removing Land’s
End from certain stores where the demographic does not relate
to the product and downsizing their slated ‘Grand’
stores. Their bottom line is still ailing but several product
placement, cost cutting and restructuring initiatives may
just prove to be the winning formula for this retailer.
Read on!
Sears in the news
Sears may Launch Lands' End Freestanding
Stores
Lands' End, a direct merchant that sells its products
through catalogues, the Internet and Inlet stores, may launch
some freestanding specialty stores, according to Sears,
Roebuck and Co. executives in the first quarter conference
call. "There are certain trade areas where we would
be very unlikely to ever put a Sears full line store, and
therefore, the potential to have a Lands' End Specialty
Store in certain either more upscale malls or in certain
freestanding locations in major shopping venues in major
cities in something that we are looking at," said Alan
Lacy, president and CEO. Lands' End, he said, currently
has one retail store, several outlet stores and an airport
store, and, Lacy said, the company's "ability to sell
full-priced goods in those locations is actually quite good...we
think that that is something we can perhaps move forward
on."
Lacy tells Sears Workers it's
Time to cut Costs
Workers at Sears Roebuck and Co.'s headquarters will have
to cut back on essentials like training, travel and off-site
meetings to help the retailer offset declining sales. Sears
CEO Alan Lacy sent an e-mail to employees at the sprawling,
blue-tinted-glass Hoffman Estates headquarters, stating
that spending cuts must be made this quarter and telling
workers to review their spending plans for the rest of the
year. Sears is under pressure to prove that it can survive
as a retailer after it sold its profitable, $32 billion
credit-card business to Citigroup on Nov. 3. Credit-card
income had accounted for more than 60 percent of Sears'
operating profit.
On April 21, Sears reported a net loss of $859 million,
or $3.90 per share, for the three months that ended April
3, compared with a profit of $192 million, or 60 cents per
share, for the same period a year ago. Most of the loss
was caused by a change in the way Sears accounts for its
U.S. pension and post-retirement medical benefits.
Sears said it expects second-quarter earnings of between
78 cents and 83 cents a share, with same-store sales flat
or up slightly. A Sears spokesman said the belt-tightening
request was a small portion of a wider-ranging memo, and
that it is part of the retailer's "ongoing program
to be more efficient and effective." Lacy wrote in
the internal memo that the cost-cutting "is not a layoff
initiative, but a spending adjustment in response to our
recent performance." Lacy has tried to turn around
the retailer's performance by revamping stores, buying the
Lands' End apparel brand and introducing self-serve and
shopping carts to better compete with discount rivals such
as Target and Wal-Mart. This year, Sears' January sales
were helped by record cold weather and steep discounts.
February and March sales disappointed Wall Street, and Lacy
conceded that Sears fumbled in getting Lands' End merchandise
into stores in time for spring sales.
Sears to Downplay Lands' End in Lower-Income Markets
Shoppers at the Sears store in Calumet City won't
see Lands' End clothing front-and-center when they enter
the store. But shoppers in Oak Brook won't be able to miss
the elaborate Lands' End display. Why? Because Lands' End
apparel has failed to attract shoppers in lower-income,
multicultural markets, Sears CEO Alan Lacy told reporters
after a stockholders' meeting last week. Few of these urban
shoppers -- Sears' largest customer base -- have ever heard
of Lands' End, and apparently fewer still care for its preppy
fashion. After all, Lands' End's target market has always
been a 35- to 55-year-old with a yearly income of more than
$75,000 and, in many cases, a graduate degree. Sears had
hoped the Lands' End apparel for men, women and children
would prompt shoppers looking for a Kenmore refrigerator
or a Craftsman power-saw to cross into the apparel aisles.
That strategy started to change in late January, when Lacy
said Sears would tailor its Lands' End clothing for its
stores' different ethnic, regional and income groups --
an oversight that he said had caused inventory problems.
But don't mistake Sears' change in strategy as conceding
it made a mistake when it paid an admittedly rich $1.8 billion
two years ago for a brand it hoped would turn around its
long-suffering apparel business. Lacy insisted that the
Lands' End brand still can be a growth vehicle. Sales of
Lands' End products grew 20 percent last year from the year
before, to $2 billion, but that included sales online and
through the Lands' End catalog, as well as in stores. Sears
intends to pump up the availability of Lands' End through
the Sears.com Web site this fall, when Sears starts offering
the entire Lands' End catalog selection on its Web site.
That might send shivers through Lands' End loyalists, who
have feared from the beginning that Sears would dilute Lands'
End quality and stylishness. Sears' Web site will include
Lands' End's "My Virtual Model" and a new feature,
"My Virtual Room," so Web surfers can see how
clothing and home-decor items look before buying them. Since
1998, LandsEnd.com has offered technologies that let customers
create models of themselves, from personal measurements
to hair and skin color, and virtually to "try on"
items. The recently enhanced Virtual Model enables men and
women to try on suits, shirts, bathrobes and other apparel
without setting foot in a dressing room.
Sears also will sell some of its Covington and Apostrophe
apparel brands on its Web site, starting this fall. Sears
faces persistent problems in straightening out Lands' End
inventory. Lacy provided new details into the problems last
week. Sears' buyers ordered too little merchandise for spring,
partly to overcompensate for a pile of inventory the previous
season.
However, Sears' rejiggering also caused problems. Last
summer, Sears reorganized all of its merchandising functions
and merged two groups into one. Though the idea was to "free
buyers to be buyers," it resulted in half of the newly
centralized planning group being new to the job, Lacy said.
"There was a loss of continuity, a loss of institutional
memory," he said. To make matters worse, a key manufacturer
went bankrupt, and a number of apparel vendors shipped their
products late, so instead of taking late orders, Sears canceled
them, Lacy said. In April, as the inventory problems became
clear, Sears realigned its leadership structure, reducing
to 11 from 16 the number of executives who report directly
to Lacy. One of the changes involved William "Gus"
Pagonis, a celebrated former three-star Army general who
led Sears' supply chain management, who will retire within
the next few months. Pagonis, 62, will be replaced by Jeff
Jones, former leader of The Great Indoors, Sears' home-decor
stores.
Lacy said he expects Sears to be "more on market trends"
for the fall season -- the back-to-school season that retail
analysts say is a make-or-break time for Sears apparel sales.
Meanwhile, Sears continues to change its store-remodeling
plans. Sears will replace 70 percent of the bed-and-bath
departments that the retailer showed off two years ago at
its store in West Dundee. When Sears decided to let customers
help themselves rather than putting more sales people on
the floor, some of its earlier plans didn't fit, Lacy said.
The company's wall rugs and closet shops didn't prove to
be productive, he said. Now Sears is putting more color
and upscale products in its bed-and-bath department. For
example, towels will come in 96 colors rather than the old
27 selections.
Sears will Downsize its Expanded
Stores
Future Sears Grand stores will be a little less grand.
In recent months, Sears, Roebuck and Co. has opened two
of the freestanding stores - each exceeding 200,000 square
feet - to better compete against the growing dominance of
discounters like Wal-Mart Stores Inc. The stores, one in
Gurnee, Ill., and the other in suburban Salt Lake City,
mirror a traditional mall-based Sears for about 80 percent
of its merchandise while the remaining space is devoted
to such new lines as magazines, convenience-food items,
cosmetics and toys. Sears Chief Executive Officer Alan Lacy
said at the company's annual shareholder meeting that the
retailer is considering two new, smaller approaches. Larger
versions of the store will top out at about 185,000 square
feet and smaller formats will be in the low 100,000-square-foot
range. He didn't comment on changes to the merchandising
mix, but did say wine would be sold in future stores. The
annual meeting was held at the company headquarters in Hoffman
Estates, Ill. Despite the trimmer size, Sears Grand remains
the "principal store growth vehicle for the foreseeable
future," Lacy told shareholders concerned about Sears'
stagnating store base. Bill White, general manager for full-line
stores, said results for Sears Grand has exceeded expectations
and that the company sees the potential for as many as 500
stores. Lacy didn't elaborate Thursday on how many additional
stores Sears is considering. Lacy also said that Sears'
Great Indoors home improvement chain might also be in growth
mode again by year's end after closing some stores last
year. Sears once had visions for 150 stores, ended up opening
21 and now has 18. Sales for Great Indoors rose in April
for the first time in months. "I'm hopeful that at
the tail end of this year we'll see store growth again,"
Lacy said.
During the meeting, Lacy also had some explaining to do
to unhappy shareholders. With proceeds from last year's
sale of its credit business, Sears has repurchased stock,
paid down debt and contributed to its pension obligations.
But one Morton Grove, Ill., shareholder complained that
remaining Sears investors were overdue for a special dividend
or an increase in their regular dividend. Lacy defended
Sears' use of the proceeds, explaining that Sears' stock
appreciation over the past year is largely the result of
the stock buyback strategy. Sears bought back nearly a third
of its stock in 2003. In the fourth quarter alone, Sears
repurchased 36.2 million of its shares at an average price
of $48.72 for a total of $1.8 billion. Sears' stock has
since fallen to about $38. Lacy told the shareholder that
Sears stock is up 45 percent since he took the helm in late
2000, outperforming rivals including Wal-Mart, Kohl's and
Home Depot. Lacy also noted that first-quarter sales were
up and that Sears has delivered on its earnings forecasts
so far this year. Lacy also was asked about Sears' largest
investor, ESL Partners, a Greenwich, Conn., investment house
that has boosted its stake in Sears from 9 percent to almost
14 percent over the past year. ESL chief Edward Lampert,
who invested in Sears' stock early in Lacy's stewardship,
is "a very happy shareholder," said Lacy, who
talks to the Greenwich, Conn., investor "periodically."
Shareholders on Thursday voted to elect directors on an
annual basis instead of the current three-year terms. The
measure was approved by 67.8 percent of the votes cast.
That was up from the 60.6 percent that the shareholder resolution
got last year. Still, Sears' board of directors is unlikely
to adopt the measure. Lacy also shed more light on the apparel
problems that hurt Sears' April sales. In particular, the
Lands' End clothing line had execution problems, Lacy said.
A key supplier went bankrupt and other suppliers shipped
late. Rather than accept the late shipments, Sears' canceled
the orders rather than having to put the goods on clearance
immediately.
Sears Enjoys a Dose of Reality
Television
At a Sears store in Texas, a bank of televisions
shows ABC's "Extreme Makeover: Home Edition."
Sears is a traditional sponsor of the show, with paid commercials,
but Sears stores also appear in every program. Viewers have
taken to reality TV shows with a vengeance, and the stores
where they shop are right on the trend. Sears, Roebuck and
Co. is on ABC's "Extreme Makeover: Home Edition."
J.C. Penney Co. is on A&E's "House of Dreams."
The Container Store will be on NBC's "The Apprentice."
Pier 1 Imports and Golfsmith are on Bravo's "Queer
Eye for the Straight Guy." The list is growing as more
stores compete to be seen between commercials. "This
is appointment television. It's destination programming.
The customer is setting time aside during their busy week
to watch. We're making a brand connection with the consumer
during the program," said Michael Cape, vice president
of brand marketing at Penney, whose Home Collection merchandise
is used in A&E's "House of Dreams."
The low-budget shows benefit because they can select the
products they want for free. And retailers like to participate
because they are mentioned on or connected with hot shows
that often have blockbuster ratings - for only the wholesale
price of the merchandise. It costs major retailers millions
of dollars each year to reach consumers through commercial
airtime. Audience fragmentation and technology are forcing
them to rethink media strategies.
Episodes of "Extreme Makeover: Home Edition"
are watched by more than 10 million people, a good share
of whom are in the sought-after 18-to-49 age group. At the
top was "The Apprentice," featuring Donald Trump
and his wannabe moguls, with 40 million viewers. The Container
Store is in the process of making the shows' featured Trump
Towers apartment more space-savvy for next season. In exchange
for some Elfa shelving and other storage products, the retailer
will get a link from NBC's Web site. "This has really
picked up," said Container Store spokeswoman Audrey
Robertson. "It's not just shows that we're naturals
for, such as HGTV's 'Mission Organization' or Fine Living's
'Simplify Life.' But we've even been on 'Date Patrol.'
" Reality TV shows allow retailers to be "embedded
in the content of the program, and we're looking for other
opportunities," Penney's Cape said. So is competitor
Sears, which in April hired entertainment agency Norm Marshall
& Associates in Los Angeles to find it more exposure
in high-profile programming. The retailer is tickled with
the response it gets from ABC's "Extreme Makeover:
Home Edition."
After the episode in Los Angeles, the show received dozens
of e-mails and letters from people who said they had left
but were bringing their business back to Sears, said Conrad
Ricketts, senior producer of the show, which has been No.1
or 2 in its time slot and ranks sixth among reality shows.
"A lot of Americans still make buying decisions based
on a company's commitment in the community." Sears'
"Extreme Makeover" show-retailer relationship
has evolved beyond the bartering stage. Sears stores appear
in every program, and the retailer is a sponsor in the traditional
sense with paid commercials. As part of the deal, thousands
of televisions in the electronics departments in all 870
Sears stores play frequent highlights from "Extreme
Makeover" shows all day.
"There's a straight-line connection between what this
show does and what Sears does: Help families with their
homes," said Sears spokesman Edgar P. McDougal. The
first retailer to insert itself into a reality TV show is
believed to have been trendsetter Target Corp. In June 2000,
two "Survivor" participants arranged to have a
care package of goodies - marked with the red and white
Target logo - dropped from an airplane. But most reality
show-retailer relationships are just beginning. No measures
are yet in place to determine their effectiveness, and those
involved can't say for sure how many sales are directly
related to store appearances.
Still, it's clear from activity on Sears' Web site that
people are watching. Visits rise at least 25 percent on
the days immediately following a show, McDougal said. "After
the episode with the father home from duty in Iraq to help
his family with his home makeover, we had a 100-percent
spike in visits to our Web sites," he said. It's harder
to gauge the impact on sales because so many people research
on the Web and then follow up with purchases in the stores,
especially with appliances and tools, he added.
Golfsmith made sure its servers were up to speed for the
increased traffic it received after the April 20 "Queer
Eye for the Straight Guy" episode. A high-school coach
and the Fab Five spent a chunk of time shopping for a new
wardrobe inside one of the chain's store. The Golfsmith
brand appeared or was spoken at least half a dozen times,
said Andy T. Craig, spokesman for Golfsmith. "And it
was great exposure for our suppliers. You saw Calloway,
Link, Adidas and other products as they dressed the coach
in our store from head to toe."
Toddler and infant department overview
The mini department was chock full of fun items and
sets for early summer. The key tags on the floor included
TKS Basics, Healthtex, Covington, Little Wonders, Kid’s
Play and Carters. The favorite licenses included Pooh, Strawberry
Shortcake, Scooby, Mickey and Superman. Two and three piece
sets dominated the assortment for both girls and boys.
Opportunities in the infant's
and toddler's department
At the time of our visit, we noticed that there was
no shortage of choices available, especially where sets
were concerned. We also noticed that the floor was very
congested and hard to navigate for shoppers with small kids
in tow. We would love to see the floor organized in a novel
way: Keep product at eye level with roomy aisles. Then have
the product grouped according to lifestyle (much like the
Carter’s product is already set up). That would mean
that a shopper can zero in on a look or feel that suits
them best and find head to toe dressing on that fixture.
That would mean designing along those lines as well. Try
exploring themes such as safari, nautical, planes, trains
and automobiles, baby animals and Busy Bees (grown up work
themed product such as fireman, construction, mechanic etc..).
Items that coordinate are a great alternative to pre-made
sets for the demographic here so think along those lines
too. Also, try working in our favorite concept which is
two tops or two pairs of pants or shorts on one hanger as
a ‘twofer value’ type proposition.
A look into the department:
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