Sears's New Focus On Retail Business Pays Off Nicely

`IF you haven't been in our stores lately, I suggest that you come in and take a look, and I think you'll be pleasantly surprised at what you see,'' says Edward Brennan, chief executive officer of Chicago-based Sears, Roebuck & Company.

After undergoing what has been called the largest repositioning of a company in United States business history, Sears has emerged leaner, stronger, and is ``very well-positioned for the future,'' Mr. Brennan told a group of fellow CEOs at a Northeastern University business school forum in Boston last month.

``Clearly, people are going back to Sears,'' says Joseph Ronning, an analyst at Brown Brothers Harriman & Co., an investment banking firm in New York. ``With the exception of the automotive business, where they still have lingering problems ... the business really has turned [around], which is a remarkable performance for a company that size.''

CORPORATE statistics indicate that Sears's efforts to focus on retailing have paid off. After what Brennan called a ``disastrous year'' in 1992, Sears earned a record $2.3 billion in 1993 and has been showing better comparable store sales gains than its competition in 1993 and in 1994 to date.

After spinning off its Dean Witter Financial Services Group, and selling its Coldwell Banker residential real estate business, Sears Mortgage Corporation, and 20 percent of Allstate Insurance Group, the retailer today does $50 billion in annual business. It comprises Sears Merchandising, Homeart Development Company, which develops store sites, and Allstate, which is 80 percent owned by Sears.

Mr. Ronning attributes the turnaround to hiring more people with experience, competitively pricing its hard goods (such as appliances and tools), and improving its apparel business. Sears's $4 billion capital improvement program, launched last year, focuses on apparel - the stores' most profitable division - accounting for about $6 billion in annual revenue. Improvements included wider store aisles, better lighting, and more name brands. Analysts also agree that the firm's advertising campaign, ``Come See the Softer Side of Sears,'' launched last fall, has been a huge success. It calls attention to changes in the apparel division.

Sears's challenge will be continuing momentum it has built up recently. ``While you won't see the big sales gains that they saw in the past 12 months repeat in the future, you will see good sales and continued margin improvement, and that could last several years,'' says Daniel Barry, senior analyst with Merrill Lynch. Sears's future also depends on Allstate's performance, he says, since it accounts for slightly more than half of profits.

Sears is now taking its furniture business out of merchandising stores and building Homelife stores; there are now about 100 in the US. ``We will continue to build them as quickly as we have new locations,'' Brennan says. Sears is also opening specialty stores for appliance and lawn and garden items.

Despite its many changes, Sears has maintained a strong customer base, Brennan says. Sixty-million households do business annually at Sears or Allstate, he says. About 40 million homes have a Sears credit card.

Brennan, a third-generation Sears employee, also contends that the store's decision to close its legendary $3.5 billion catalog business last year, ``was absolutely the right decision,'' saying it was ``structurally impractical'' to run.

You've read  of  free articles. Subscribe to continue.
QR Code to Sears's New Focus On Retail Business Pays Off Nicely
Read this article in
QR Code to Subscription page
Start your subscription today