Softer side of Sears to stress home fashions

Carole Sloan, October 29, 2001

Home fashions will be emphasized as a core segment of Sears softlines and will play a major role as the retailer changes the look and merchandise mix of its full-line stores.

Within home fashions, home textiles continues to be the dominant player, but Sears also has rolled out housewares, and in the next year will "offer new home accents and closet departments with an extensive presentation," said Alan Lacy, chairman and ceo.

The full-line Sears stores are the focus of the company as it strives to increase its operating income by more than $1 billion, or about 50 percent, by 2004.

The retailer's dominant role in hardlines, especially in major appliances and home electronics, will continue, but the changes will be focused on softlines, primarily the struggling apparel business.

Overall, the company will eliminate 4,900 personnel, or 22 percent of the workforce. Some 1,300 positions will be eliminated from the headquarters in nearby Hoffman Estates and other satellite home offices by 2003, and 3,600 salaried positions will be eliminated from the stores and the field organization over the next 12 months, Lacy said.

The latter will include in-store managers for product-specific areas, bringing greater responsibility to the store managers.

In addition, Sears will remain a high/low pricing retailer, and pricing initiatives will come back to the home office, said David Selby, senior vp, marketing, who discussed the company's marketing strategy.

In a detailed presentation to analysts and investors here last week, Lacy emphasized that the company's strategy for its full-line stores is that it is not a department store, not a discounter, "but Sears with a clear emphasis on home and family and a lower cost-operating model."

Plans for the more than 860 full-line stores include realigned and improved merchandise offerings, a more balanced and efficient marketing plan, improved customer in-store experience, and more efficient store and home office processes that are substantially lower in cost.

Across the softlines businesses will be an emphasis on higher quality with much of the offering in the "better" part of the good/better/best equation. Lacy sees Sears moving away from the discounters on the "good" level and from the specialty and department stores on the "best" level. "We have been too weighted on the 'good' level," Lacy said.

In home fashions, which will focus on bed and bath, kitchen and home decor, he noted, "We will consolidate home fashions, such as candles, from other departments, change adjacencies to support new product offerings and have more clarity in private brand positioning."

Home fashions, as strong as it currently is within the softlines world, has significant room to grow, Lacy said. "There has been a lack of consistency."

Today, he related, Sears has 23 percent of its customer's wallet overall, while home fashions has a 7 percent share of the same customer's wallet.

But as the company has put stronger product offerings out, customers have responded. In home fashions test stores, the housewares offering has seen a sales lift from 50 percent to nearly 150 percent, depending on category.

Lacy detailed the plans for remodels of the full-line stores. Fifty are scheduled for 2002, and then the pace will accelerate, with 160 in each of the next three years and 50 in 2006.

One of the key objectives in the remodeling, Lacy said, will be "to eliminate the clutter and bring in clarity" of assortment and presentation. "We've had too many shops and not enough critical mass."

The home fashions redesign will be 40 percent complete next year, 58 percent in 2003, 78 percent in 2004, and 97 percent in 2005.

In operational changes — another significant piece of the Sears plan for the next three years — Gus Pagonis, formerly executive vp, logistics, has been named to the new position of executive vp for chain management. He will be responsible for developing and operating effective supply chain management. Once merchandise has been purchased by the buyers, it is his responsibility to get it from suppliers to stores, Lacy said.

Under the new program, "We will lower the distribution costs, have more accurate promotional ordering and will monitor vendor cycle times. There will be non-compliance enforcement" on issues such as partial shipments, Lacy said.

In stores, cashier desks will move out of departments to central locations, and there will be no departmental sales people except for consultants in departments like appliances, mattresses and electronics.

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