Sears to shift to independently run units

Assets easier to sell in pieces, analyst says

By Sandra M. Jones
Chicago Tribune

2:48 PM CST, January 20, 2008

Sears Holdings Corp. is reorganizing the retail company into a fleet of independently run operating businesses, each with its own leader and agenda, in a move that could make it easier to sell off assets.

The change, confirmed by the company on Saturday, comes as billionaire hedge fund investor Edward Lampert attempts to save his biggest investment, salvage his reputation and recover billions of dollars in lost equity. Lampert owns 48 percent of Hoffman Estates-based Sears through his Greenwich, Conn.-based hedge fund.

"We are introducing an organizational structure that provides operating businesses with greater control, authority and autonomy," Sears said in a statement. "Each operating business unit will have a designated leader and an advisory group comprised of senior Sears Holdings executives to provide direction and oversee the business unit's performance."

Sears Holdings operates Sears, Kmart and some specialty companies. Just how many units will be created is unclear. But Sears has in the past studied the prospect of putting its real estate holdings into a separate entity. It also could create individual businesses around its Craftsman tools, Kenmore appliances and DieHard batteries brands and sell or license them.

Sears declined to comment beyond the statement.

The reorganization, first reported in the Wall Street Journal on Saturday, was announced inside the company Thursday.

"It seems to me this is more like asset management than brand management," said Neil Stern, partner at McMillan Doolittle, a Chicago-based retail consulting firm. "It would make it easier to sell the parts in pieces, but harder to run as a retail company."

For example, Stern said, if Kenmore appliances are run as a separate business, it would make sense to sell Kenmore at rival stores such as Home Depot or Lowe's in order to boost product sales. But the move could be bad for Sears retail outlets because the broader department store relies on the brand, which is exclusive to Sears, to bring shoppers into the store, where they will hopefully buy other products as well.

Initially, investors bet that Lampert's track record as one of Wall Street's best performing hedge fund managers would allow him to work some magic on Sears, a retailer with lots of assets but little retail flair. But Sears isn't improving as a retailer and Lampert has so far held on to most of Sears' assets.

Sears continues to lose market share to more nimble competitors such as Wal-Mart, Target and Best Buy. After some initial profit improvement under Lampert, thanks to cost cuts and investments, earnings are in decline too.

Profit dropped 99 percent in the third quarter over the year-ago period, its worst quarter by far since the billionaire took control of the department store chain and combined it with Kmart in March 2005. If not for the money made on investments, Sears would have been in the red.

And it's not getting any better. Last week, Sears warned that fourth-quarter earnings per share are expected to decline 35 percent to 51 percent.

With sales falling, the economy sputtering and little room left for more cost cuts, Lampert faces growing pressure to sell assets to generate cash, something investors have been awaiting for more than two years.

Just how autonomous the new business units will be from Lampert is hard to say. Lampert has a reputation as a micromanager, and that can get in the way of recruiting talented retail executives.

Last week, John Walden, the chief customer officer Lampert hired from Best Buy Co., resigned after less than a year in the job, Sears spokesman Chris Brathwaite confirmed. Walden, who reported directly to Lampert, was hired to help Sears become "more entrepreneurial and customer driven," Lampert said in a news release at the time.

Lampert has said from the start that he intended to run Sears as a retailer first and foremost. That left asset sales as a backstop if things went bad.

Wal-Mart Stores To End Layaway Service

chainstoreage.com

Bentonville, Ark. - In another departure from its traditional roots, Wal-Mart Stores said Thursday it will end layaway service this year due to falling demand and rising costs. The service originated in 1962 to assist the cash-strapped rural customers that Sam Walton was committed to serving. Effective Nov. 19, Wal-Mart will stop accepting items for layaway and the pickup deadline for existing layaway goods will be mid-December. Layaway services are used mainly by consumers at the lowest end of the income scale, who don’t have credit cards and may not qualify for credit.

“Demand for layaway services has declined steadily as consumers turn to current options, including on-line shopping, shopping cards and no-cost credit alternatives that were not available when the company was started,” said Pat Curran, executive VP of Wal-Mart store operations.

Following the news from Wal-Mart, Kmart reaffirmed its commitment to layaway services.

“As a value-added service and as part of the company's mission to build long-lasting relationships with our customers, Kmart continues to offer a comprehensive layaway plan at nearly 1300 locations nationwide," said Don Germano, senior VP, Kmart retail. Kmart has offered layaway services for nearly 40 years.

Man drives into Kmart, then tries on some women's shoes

A car comes crashing into a Hampton, Va. Kmart, and the driver was just getting started.

WAVY-TV

HAMPTON, Va. -- Early Saturday morning a loud crash shattered the silence and the front window at a Hampton Kmart. The damage was extensive.

The 20-year-old driver is facing several charges, including driving under the influence of drugs. But it doesn't end there.

Police say Bryant Weiford drove through the front window, then got out of his car to try on clothes, perhaps taking shopping to a whole new level.

"The guy just drove through the front of the store with a car!" said store employee Jeff Ray.

Workers took stock of the mess early Saturday hour after a Kmart store off West Mercury Blvd. had closed. Police say a 1986 Pontiac driven by him crashed into the Kmart.

"I heard a loud crash. I thought it was a shelf falling, but then I heard car music and I knew somebody was in here" employee Vernita McClaurin told us.

Rey says he confronted Weiford.

"When I came over to ask him the first time, he kept walking to the shoe department and he changed his shoes and I said, what are you doing? He said, 'I'm just having fun', and I said, 'Well, I'm calling the police'"

"He went on to the women s shoe department and started trying on some women's shoes" Rey chuckled as he told the story.

"Then he went to the sporting goods department, looking for a gun" said McClaurin. "The police said he said he was going on a shooting rampage. Good thing they got him".

Weiford is being held in the Hampton city jail.

A spokesperson for Kmart declined to comment.