Beleaguered company refocuses on profitable mall locations
THE busy scene on this construction site looks more like a vision of Sears's future than of the company's past.
Earthmovers rumble and shiny steel girders soar into the sky right next door to the old Sears that opened in this Boston suburb in 1965. Though the existing store is one of the 113 units slated to be closed this year, a brand new Sears store is being built on an adjacent lot.
In addition to the store closings, Arthur Martinez, chairman of Sears's retailing division, this week announced the closing of its unprofitable $3.3 billion "big book" catalog operation, the 2,000 independently owned catalog-only stores, and a trim of 50,000 employees. Clerical and managerial staff will bear the brunt of the layoffs. The catalog, a company hallmark since 1898, had after-tax losses between $135 million and $175 million in each of the last three years.
"What will emerge is a company sharply focused on our core retailing business," says Perry Chlan, a Sears spokesman. "While these actions are painful, they address chronic problems in the merchandise group."
Previous restructuring efforts include the 1983 launch of the "Store of the Future," the 1987 installation of Michael Bozic to head the merchandising group, and the 1990 effort by chairman Edward Brennan to trim 48,000 jobs in that division.
Mr. Martinez was brought from Saks Fifth Avenue to head the retailing group last August. In September, Sears announced that it would sell its financial services and real estate subsidiaries, and part of its insurance unit. Then in October, Sears reported a $833.7 million loss for the third quarter, its first quarterly loss since 1933.
In spite of its problems, the company will still be the third-largest United States retailer, with about $28 billion in sales and 747 stores. "A lot of people would like to have the problems Sears has," says Mark Alpert, a professor at the University of Texas at Austin. Companies would "like to be that big, have the brand identification, that reservoir of goodwill."
The response to this restructuring will test how much goodwill Sears has in the bank. "These are classic things that [Martinez] has done," says John Whitney, a professor at Columbia Business School who has participated in several corporate turnarounds. "He won't have to come back and take another bite of the apple. The strategy when you do something like this is to really get it deep enough that you don't have to go back and do it again."