Sears betting on grand experiment

Deseret News (Salt Lake City) November 13, 2003 | Constance L. Hays New York Times News Service WEST JORDAN — Sears, Roebuck is a 117-year-old retailer wandering in search of its future. And the trail has led to a Salt Lake suburb and a month-old store called Sears Grand.

From the outside, the 210,000-square-foot store is a box like the other chain-store boxes lined up in a shopping plaza in one of the nation’s fastest-growing regions; Wal-Mart, Sam’s Club and Lowe’s are all here, too. Inside, though, an evolving Sears personality is on display. Along with the usual array of Craftsman tools and Kenmore dishwashers, shoppers find merchandise Sears has not stocked before: racks of DVDs and music CDs; a grocery section with milk, eggs and frozen pizza; and a garden center, empty now ahead of the Utah winter but soon to brim with seedlings and fertilizer as well as rakes and hoses.

There is the usual Sears pledge of customer service, but it plays out differently. Shoppers can summon help from a sales associate by pressing a button at one of the many bright yellow service kiosks around the store, an idea borrowed from technologically savvy rivals like Target that helps keep the headcount down. Instead of scattering cashiers all over the selling floor like a department store, Sears has gathered them in the front, like Wal-Mart, and shoppers wheel their purchases up in carts, as in a supermarket. go to website sears coupon code

Does it all add up to something that is recognizably Sears? Is it, finally, the store concept that can revive the venerable retailer and stop the hemorrhage of business to the other stores?

At the exact moment that Sears is trying to answer such questions, it is back to being a pure retail company, after selling off to Citigroup the credit-card business that generated about 60 percent of its earnings. Its traditional stores, nearly all in shopping malls, are flagging despite an expensive program of renovations. In stores open at least a year, sales fell 2.7 percent in October after two months of growth, a sign that “the improvements weren’t anything sustainable,” said Heather E. Brilliant, an analyst for Morningstar in Chicago.

For Alan J. Lacy, the chairman and chief executive, breaking out of the mall, where the excitement faded years ago, is critical to turning the company around. Selling the credit card unit was one big move. Buying Lands’ End, the well-regarded clothing brand, for $1.9 billion last May was another. Now he is tinkering with the stores themselves, trying to create a shopping experience that will bring customers into Sears rather than its rivals.

“We are doing a good job with our customers who live close to our existing stores,” he said. “The issue is, the further away you get, the more customers have, nearer their homes, other acceptable choices.” In rapidly growing places like the Salt Lake area, the customers most on Sears’ mind are the ones moving in to the big new homes springing up like weeds from the desert, with an average of 4.2 children to a family and enough cars, bikes and lawnmowers to fill the triple garage. The non-mall chains have gotten there faster, selling them power drills and washing machines and long johns the way Sears used to, and now in Utah at least, Sears is joining the migration.

“I get lots of questions about, ‘Do you not like your current stores?’ ” Lacy said. “I like what we have. I just want more stores.” Others are less sure that the Sears Grand hybrid, set to grow to five stores in the next few months, can deliver. “It’s the kind of concept where it will be very difficult for them to make inroads,” Brilliant of Morningstar said. “It’s an area where Wal-Mart and Target are very much present, so Sears is coming up as No. 3.” She said: “People will drive out of their way to go to a Wal- Mart. People don’t drive out of their way for Sears.” Lacy is keenly aware of the difficulty of trying to figure out a new direction for Sears at a time when its younger, brasher no- frills rivals show no sign of losing steam, and are still building their own new stores at a rapid clip. searscouponcodenow.com sears coupon code

“This is not an easy situation, repositioning this company,” he said. “We are three years into it. We have made a number of big decisions, and we have a number of big decisions to go.” Shoppers interviewed on a recent afternoon under the bright lights of the Sears Grand seemed either delighted or ambivalent about the store. While it is sprawling, in the manner of a discounter, its prices are not necessarily low — something customers were quick to notice. “I like the convenience,” said Darcy Fox, pushing her two young daughters along in a shopping cart and referring to the groceries stocked at the store’s far end. “But you do pay more.” Lacy’s bet that Lands’ End fleeces, slacks and sweaters on the shelves would bring in customers who had been avoiding Sears seemed to be paying off, at least where JoLane Chadwick of West Jordan was concerned. “I haven’t shopped at Sears in a long, long time,” said Chadwick, a grandmother of 14, saying that she usually bought at Nordstrom, Dillard’s or Target. “I came because my children told me they had Lands’ End.” The Lands’ End line, formerly available to most shoppers only by catalog or Internet order, seems to be doing well at Sears, Brilliant said, though it remains to be seen whether it will draw shoppers from one end of the store to the other. Expecting its appliance and hardware customers to roam into the apparel aisles in search of Lands’ End, Sears spreads it around, displaying Lands’ End merchandise alongside similarly styled items from less expensive brands; in a Sears in Murray, a red Lands’ End “Classic Squall” jacket priced at $67.50 hung inches away from a Weather Tamer jacket, also in red, for $40.

Sears’ attempt to branch out into groceries has some analysts concerned, given the presence of Wal-Mart and traditional supermarkets in that category, where margins are especially thin. “It’s the biggest stretch for the company,” said Kate Delhagen, a retail analyst for Forrester Research in Cambridge, Mass. “Sears is probably thinking, well, we’ll pick off a few shoppers who see that Wal-Mart parking lot is too crowded.” Certainly, it was easier to find a convenient parking space outside the Sears Grand store than it was by the Wal-Mart a stone’s throw away in the same Jordan Landing shopping center. A walk through the two stores’ grocery sections found Sears beating Wal-Mart on some prices, but Wal-Mart determined to fight back, even if only symbolically. For example, DiGiorno frozen pizzas, a staple for the time-pressed, were priced at $4.99 at Sears Grand and $4.98 at Wal- Mart. Klondike ice cream bars were $3.39 for a package of six at Sears Grand, while Wal-Mart was offering two packages for $5. A 100- ounce bottle of liquid Tide detergent, on special for $5.50 at Sears Grand, could be had at Wal-Mart next door for $5.27 under a sign that proclaimed, “Save on their sale price.” Lacy said groceries were not a cornerstone of the Sears Grand concept, merely a convenience for customers. The real money for Sears is still in the hard goods, like the refrigerators that stand like stainless-steel sentries along several aisles of the store.

For decades, Sears helped drive sales of appliances and other big- ticket items with generous credit terms, including zero-percent financing for its credit-card holders, and it was slow to give up on customers who failed to make payments, usually waiting eight months before charging a delinquent account off its books. Lacy said the zero-percent offers will continue now that Citigroup owns the credit- card operation. Citigroup executives are talking about other changes to improve profitability of the card portfolio, like charging off bad accounts at six months. It also plans to offer its own ATMs in Sears stores and to sell financial products like insurance as well.

“This is a partnership with Sears’ 2,700 business distribution points that we can use to get customers cheaply and effectively, much more so than direct mail,” Todd S. Thomson, Citigroup’s chief financial officer, said in a conference call with investors on Monday. Even so, one investor, who did not want to be identified, questioned whether anyone would be able to pull off the growth of 4 million new accounts a year that Citigroup envisions for the Sears business, even if the retailer’s efforts at revitalization are a big hit.

For Sears, Lacy said, it all comes down to “a question of the right footsteps through the door — and the footsteps through the door are increasing.” Investors have bid up Sears stock to $53.32 a share, from a low of $18.25 in mid-March, before it announced the sale of the credit-card division. Sears has said that it will save $200 million a year, the cost of the zero-percent financing offers now handled by Citigroup. In addition, the company estimates it will receive another $200 million a year for opening new credit accounts in its stores. However, a spokeswoman for Citigroup, where the payments are called bounties, could not confirm that figure. “We did not put a number on that,” said the spokeswoman, Maria Mendler.

Constance L. Hays New York Times News Service