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.

Report: Sears Tests Auto Center in Kmart Stores

Chain Store Age

CHICAGO - Sears Holdings Corp. is testing its Sears Auto Centers format in Kmart stores—a move that, if rolled out companywide, could double the size of Sears’ auto-repair business and make use of hundreds of vacant repair shops at Kmart stores around the nation, Crain’s Chicago Business reported. Some of the first Sears Auto Centers are expected to go into Kmart stores in the Detroit area, the publication said.

U.S. Auto Care’s Big O Tires Inc., a franchise which had been operating 13 outlets in Kmart stores in the Detroit area and went into Chapter 11 bankruptcy reorganization last year, shuttered outlets in March after Kmart told the Bankruptcy Court that it had another tenant for the spaces.

Kmart declined to name the potential tenant in court filings, but Crain’s Chicago Business said people familiar with the operation say Sears officials have been in Michigan looking to turn at least some of the former Big O locations into Sears Auto Centers.

Martha says no to Sears

Attempt to add Stewart's housewares line at Sears stores fails

Susan Chandler
Chicago Tribune

HOFFMAN ESTATES, Ill. - The talks between Eddie and Martha have broken down.

Sears Holdings Corp. Chairman Edward Lampert acknowledged as much Wednesday, saying customers won't be seeing Martha Stewart's housewares in Sears stores because the two sides haven't been able to come to terms.

"We've tried to have a bigger relationship with them, and we haven't been successful," Lampert told reporters after Hoffman Estates-based Sears Holdings' annual meeting. "Maybe they don't like us anymore," he added, referring to Stewart's recently announced plans to design a more upscale line of housewares for Macy's, the national department store chain.

Expanding distribution of Kmart's popular Martha Stewart Everyday line to Sears was supposed to be one of the major synergies behind Kmart's acquisition of Sears, Roebuck and Co. last year. Stewart's array of home goods was Kmart's best-known exclusive brand, and one of the few things the struggling chain had going for it.

But Stewart's long-term contract with Kmart contained rich guarantees that Lampert was trying to renegotiate in exchange for expanding the merchandise to Sears' nearly 900 stores, sources previously told the Tribune.

On Wednesday, Lampert said the contract gives him the right to roll out Martha Stewart in Sears, but the move wouldn't make sense because the contract has only four years to run.

"A lot changes in four years, but we would like to make sure there is continuity in what we do," he said.

Lampert also raised the possibility that Martha Stewart has become overexposed.

"You see her everywhere," he said. "I don't know how much time she spends on the product."

In response, Martha Stewart Living Omnimedia Inc. said, "We have a contract with Kmart through the end of the decade. We remain committed to working with them to deliver the distinctive products that Kmart customers have come to expect from us."

Sears shareholders took the breakdown in stride.

In fact, Sears Holdings' first annual meeting was a virtual lovefest, with shareholders praising Lampert for much of the nearly two hours he spent answering questions. It was a sharp contrast from last year's Sears, Roebuck and Co. meeting, when angry Sears shareholders vented their unhappiness with the Kmart deal, and security guards ended the 20-minute question period by flanking a shareholder who tried to fit in one more question.

This year's gathering at Sears' headquarters was sparsely attended, with dozens of chairs remaining empty. Many shareholders hailed from hedge funds and other investment firms and have held their Sears Holdings stock since Lampert, a hedge-fund operator himself, took the helm. Only a few dozen mom-and-pop shareholders were in attendance, the type that used to fill the seats at Sears' annual meetings.

The new unanimity was expressed in the in-favor vote totals on the four proposals up for shareholder approval: 99.07 percent; 96.64 percent; 98.05 percent and 99.36 percent.

Some of the old-timers turned out to be Lampert fans as well.

"You've turned the battleship around. Keep up the good work, captain," said one shareholder who said he had held Sears stock since 1970.

Another small shareholder was far less complimentary. She accused Lampert of conspiring with former Sears CEO Alan Lacy to hide the fact that the two were secretly discussing a potential merger in the summer of 2004 when Sears purchased 50 stores from Kmart at premium prices, which was revealed later in regulatory filings.

"Mr. Lampert was more than an influence in the mismanagement of Sears Roebuck from the time of his initial stock purchase in October 2000," said Carmen Liggett of Indianapolis. "It is my opinion that you were a ghost CEO directing Alan Lacy in his failed leadership."

Lampert declined to respond and took another question.

Sears to convert 14 Kmart stores

By JOYCE SMITH
The Kansas City Star

KANSAS CITY, Mo. - Sears Holdings Corp. is converting 14 Kmart stores, including five area locations, to smaller versions of its Sears Grand concept.

Stores in Kansas City, North; Lee’s Summit; Lenexa; Liberty; and Merriam will hold grand openings as Sears Grand locations in May. They are expected to remain open during the conversion process.

Sears Grand is a one-stop, home-and-family solution center offering clothing, appliances, lawn and garden supplies, electronics, tools, toys, automotive products and services, sporting goods, apparel, hardware, health and beauty products, greeting cards, dry grocery items, pet food, books and magazines, mattresses, and home and seasonal decor.

The stores will still operate pharmacies.

Sears’ brands such as Kenmore, Craftsman, Lands’ End and DieHard will be featured in the stores, as well as Nike, CoverGirl, General Electric, Levi’s, Sony, Carter’s, Huggies, Apostrophe, KitchenAid and other brands.

“This is fundamentally a Sears store and so it will not at this point have Kmart brands,” said Chris Brathwaite, spokesman for Sears. “But Kmart has been in the pharmacy business, the convenience side, pantry, etc. business a lot longer than we have and they do that very well.”

Brathwaite would not release employment figures for the Kmart stores but said typically a few additional employees are needed to operate the smaller Sears Grand concept.

Other area Kmart stores are continuing to operate under the Kmart format, for now.

Sears selected the Kansas City market for several conversions to identify the value of having several of the stores in a single market “in terms of operating efficiency, synergy and strategic benefits, such as localizing assortments,” Brathwaite said.

The converted area stores are a bit smaller — an average of 105,000 square feet — than new Sears Grand stores, which average about 160,000 square feet. However, while they might not have the depth of products as a new store, they will have all of the same departments, Brathwaite said.

Sears Holdings, parent company of Kmart and Sears, Roebuck and Co., has annual revenues of about $55 billion. The merger of the two companies closed March 24, 2005.

Sears converted 50 Kmart stores to its Sears Essentials concept, which offers typical Sears departments along with convenience items. However, Sears recently said it made more sense to have one name for its off-mall formats, and would now convert those stores to the smaller Sears Grand format. The company also has eight large Sears Grand stores, though none in the Kansas City area.

Sears Essentials brand to be shelved

Sears Essentials store. Image is property of Sears Holdings Corp.

Michael Sasso
Tampa Tribune

ST. PETERSBURG, Fla. -- In case you blinked, you may have missed the advent -- and apparent demise -- of Sears Essentials, a young "off-the-mall" store format by Sears Holdings Corp.

Barely a year after announcing the creation of Sears Essentials, Sears is planning to end its run. Sears will convert the roughly 50 existing Essentials stores into a similar store concept called Sears Grand, Sears spokesman Christian Brathwaite said Tuesday.

Two Tampa Bay area Sears Essentials stores, at 9500 Ninth St. N. in St. Petersburg and 2130 Gulf-to-Bay Blvd. in Clearwater, will adopt the new Sears Grand name and a new store design, he said. Brathwaite couldn't give a timetable for changes, but some conversions could be months in the future. In the meantime, the stores will keep operating as Essentials, Brathwaite said.

Sears decided to eliminate the Sears Essentials brand because it wanted to consolidate operations, Brathwaite said. In recent years, Sears has been trying to expand outside of malls, where it traditionally has built stores.

So it developed two separate formats that operate "off-the-mall": Sears Grand stores, which generally are huge supercenters built from the ground up; and Sears Essentials stores, which were converted Kmart stores. For example, the two Essentials stores in St. Petersburg and Clearwater formerly were Kmart stores.

Sears Grand stores are bigger than Sears Essentials stores, but they generally feature the same assortment of Sears' brands, such as Kenmore appliances and Craftsman tools, along with pharmacies, food pantry items and health and beauty products, Brathwaite said.

Sears decided it didn't need two similar store formats, so it decided to re-brand its off-the-mall stores as Sears Grand, Brathwaite said. During the next few months, Sears will focus on converting 14 Kmart stores (none of which are in Florida) into Sears Grand stores. Later, it will come back and convert the existing 50 Sears Essentials stores into Sears Grand locations, Brathwaite said.

When they are converted to Sears Grand, those former Essentials stores will remain the same size but receive several improvements, including new flooring, lighting, fixtures and signage. They also will have a "store-within-a-store" feel, meaning each merchandise department will feel like a separate store, Brathwaite said.

Although Sears may have wanted to consolidate its operations, Sears Holdings Chairman Edward Lampert may be frowning on the Sears Essentials concept, which at one time was thought to have great potential. After Sears Roebuck and Co. and Kmart Corp. merged last spring, the newly merged company touted Sears Essentials as a great way to renovate and re-brand some Kmart stores. By July, Sears spokeswoman Lisa Gibbons told the Tribune that Sears Holdings planned to convert up to 400 Kmart stores into Sears Essentials stores by the end of 2007.

However, in a letter to Sears Holdings stockholders on Dec. 6, Lampert says Sears Essentials was never the "strategic rationale behind the merger."

Through December, the Sears Essentials stores had "achieved various degrees of success," Lampert wrote.

Kmart to Carry Auto Batteries

The Atlanta Journal-Constitution

Hoffman Estates, Ill. --- A day after Sears Holdings Corp. Chairman Edward Lampert committed to putting more Sears products in Kmart stores, the retail company said Wednesday it is introducing DieHard batteries in nearly 1,400 Kmarts nationwide.

Besides DieHard, Sears said it has expanded its offerings of Kenmore and other home appliances into 90 Kmart stores after first adding them at Kmart in May.

Kmart acquired Sears, Roebuck and Co. in March for $12.3 billion and renamed the enlarged retailer Sears Holdings. The company has since converted about 50 of the approximately 1,500 Kmarts to the new Sears Essentials format.

Off-mall idea still puzzling for Sears

Retailer says it will pull back from its Sears Essentials concept, the underperforming format that had been touted as the company's way to compete with Wal-Mart, Target and Kohl's

By Susan Chandler
Chicago Tribune staff reporter

You can take Sears away from the shopping mall, but creating a stand-alone store that works is proving harder than expected.

Sears Holdings Corp. Chairman Edward Lampert on Tuesday announced a retreat from Sears Essentials, the retail format that was supposed to combine the best of Sears and Kmart and was once touted as the company's future.

The idea was to mix Sears' Kenmore appliances and DieHard batteries with everyday items such as snack foods and laundry detergent in former Kmart locations away from crowded shopping mall parking lots. Sears has opened 50 Sears Essentials stores around the country--including three in the Chicago area and one near Rockford--and previously had promised that 400 were coming in the next two years.

But the stores have fallen far short of expectations, and Lampert dropped hints Tuesday that such lofty numbers may never be reached.

Sears Essentials' sales are tracking about 30 percent below Sears' target, according to sources close to Sears, and are down about 15 percent from those racked up by the former Kmart stores at the same sites. Sears declined to confirm those figures.

Sears had hoped the stores would generate between $15 million and $20 million in annual sales, significantly less than an average Sears store, the sources said. But the proposition was attractive because the cost to convert the former Kmarts was low, and the process was much speedier than building new stores from the ground up.

Alan Lacy, the former CEO of Sears, embraced Sears Essentials as the fastest way to move Sears away from shopping malls and better compete with off-the-mall giants such as Wal-Mart, Target and Kohl's. Lacy's plans initially were adopted by Lampert when he proposed the acquisition of Sears by Kmart last year, a transaction that closed in March.

Sears Essentials hasn't worked out for a variety of reasons, retail experts say.

Kmart shoppers can't afford--or don't want to pay--$40 for a pair of brocade pants in Sears' Apostrophe line or even $20 for a Lands' End men's flannel shirt. Kmart's apparel was much cheaper. On top of that, their favorite Kmart brands, such as Martha Stewart's popular line of housewares and linens, are missing from Sears Essentials.

Many Sears shoppers may not know that Sears Essentials exists because many are tucked away in out-the-way sites, and Sears Essentials hasn't been doing much advertising.

"When Sears Essentials came in, you had a lot of morons running around screaming this was the greatest thing. I said it was a bowling alley with no customers," said Howard Davidowitz, the outspoken chairman of Davidowitz & Associates, a national retail consulting and investment banking firm in New York. "This business of going off-the-mall is much more complex than it looks."

In his quarterly letter to shareholders, Lampert distanced himself from the Sears Essentials strategy and said it was a mistake to view Essentials as "The strategic rationale behind the merger, or at least the critical barometer of the success of the combination." Lampert acknowledged the track record to date has not been gratifying.

"We will not simply throw money behind any concept, but instead will test, evaluate, refine and `prove the math,' so that the investment is justified before we make it," Lampert wrote.

In its 10-Q filing with the Securities and Exchange Commission, Sears said it has reduced the number of Kmarts that will be converted to Sears Essentials in 2006 but provided no specific numbers.

Lampert hinted that Plan B may be to simply insert Sears' hardline brands into Kmart stores, a strategy he referred to as "Sears Inside of Kmart."

"These offerings present the possibility of achieving increased customer satisfaction and increased profit without the customer education needed to convert to a Sears Essentials format," Lampert said. "I have always believed that Kmart customers had the inclination to buy more valuable products at Kmart if presented with the right value offerings."

Still, that leaves Lampert with the dilemma of what to do with Kmart, a chain that has been losing market share over the last few years at an astonishing rate. Many retail analysts believed that Sears Essentials was basically a strategy to liquidate Kmart. But if that's not the plan, Lampert will be faced with the redundant costs of running two separate retail chains for the long-term.

Profit down sharply
Lampert's letter accompanied Sears Holdings' third-quarter financial reports, which showed a modest decline in revenue and a steep fall-off in profits for the combined company.

In the quarter ended Oct. 29, Sears reported net income of $58 million, or 35 cents per diluted share, a 61 percent decline from pro forma earnings of $150 million, or 93 cents per diluted share, in the same period a year ago. (Pro forma results treat Sears and Kmart as if they had been combined at the beginning of 2004 for apples-to-apples comparison purposes.)

Revenue declined 5 percent, to $12.20 billion from $12.84 billion.

For the first nine months, Sears reported a profit of $141 million, or 87 cents per diluted share, down 52 percent from $295 million, or $1.84 per diluted share, in the year-earlier period. Revenue declined 2 percent, to $38.18 billion from $39.12 billion.

Sears and Kmart no longer issue the monthly sales reports that are forthcoming from other major retailers, but they do provide numbers on a quarterly basis. In the third quarter, sales at Sears domestic stores open at least a year declined 11 percent, led by disappointing apparel sales. Kmart same-store sales fell 2.8 percent, hurt by lackluster sales of home goods.

It was hardly an encouraging lead-in to the important holiday selling season, but Wall Street found reason to cheer anyway.

Investors bid up Sears shares $6.26, or more than 5 percent, to $122.97. They were encouraged because Sears easily surpassed analysts' earnings estimates of 28 cents per share and because its gross margin widened because of fewer price-oriented promotions.

``Expectations for them are very low,'' Arun Daniel, an analyst at ING Investment Management, told Bloomberg News. ING's $40 billion assets included about 293,000 Sears shares as of September. ``Any improvement they can show on the merchandising side without compromising margins is a positive.''

Rumors of stalled Sears strategy grow

BY SANDRA GUY Business Reporter

A Wall Street analyst gave voice Monday to rumors that Sears' ballyhooed strategy of building new stand-alone stores is in trouble.

Sears is counting on its newest store, Sears Essentials, to compete with big-box rivals such as Target, Kohl's and Wal-Mart, while also selling refrigerators, treadmills, lawn mowers and patio furniture.

Sears has denied reports that it is slowing or halting its plans to convert 400 Kmart stores into Sears Essentials stores within three years -- at a cost of about $3.5 million per store. But Sears hasn't yet announced how many Sears Essentials stores it will open in 2006.

Furthermore, two top Sears executives integral to the strategy have left or are leaving the Hoffman Estates-based retailer, Gregory Melich, an analyst at Morgan Stanley & Co., said in a note to investors Monday.

Catherine David, a former Target executive that Sears named to oversee Sears Essentials and two other stand-alone stores, left the retailer in September.

Sears hired David in July 2004 to turn around the struggling Great Indoors home-decor chain, which Sears had downsized a year earlier to 17 stores.

Sears also is losing Luis Padilla, another former Target executive and a merchandising whiz credited with putting the "chic" in Target's "cheap chic" reputation. Padilla is leaving at month's end, following Sears Chairman Edward S. Lampert's decision to install his own top strategists.

Furthermore, Sears is investing less than its retail rivals in its stand-alone stores, and has cut its advertising by more than 40 percent, Melich wrote.

More than 50 percent of Sears Essentials stores are within five miles of a Target, a Lowe's or a Home Depot, giving them tough conditions under which to compete, he said.

Other analysts have questioned the Sears Essentials format as unfocused and underwhelming.

"The store seems a hodgepodge of everything, and there's no clear message to consumers about what to expect," said Kim Picciola at Chicago-based Morningstar.

John Melaniphy III, a Chicago real estate expert at Melaniphy & Associates, said Sears has been noticeably silent about Sears Essentials' performance, in contrast to its bragging about exceeding expectations with Sears Grand, the company's largest stand-alone stores that are twice the size of a Sears Essentials.

Investors were hoping Lampert, a billionaire hedge-fund whiz, would have dropped any designs he had on retailing and sold much of Sears' real estate to turn a quick profit.

As time goes by, investors have gotten impatient. Analysts had estimated that Sears' stock would climb to $169 to $200 by year's end if Lampert sold assets. The stock ended the day Monday at $125.07.

Sears will open 49 Sears Essentials stores by year's end.

In Chicago's suburbs, Sears has converted former Kmart stores in northwest suburban Palatine and in southwest suburban Homer Glen to the Sears Essentials format. A Sears Essentials will open this weekend in west suburban Elmhurst.

Said Neil Stern of Chicago's McMillan Doolittle consultancy, "It's critical to the future of the company as a retailer to make this [Sears Essentials] work."

Work for Sears, shop at Sears!

By ROBERT TRIGAUX
St. Petersburg (FL) Times Business Columnist

Career tip 101: Never flaunt a competitor's product at work when the new chief executive is around.

Sears' new CEO, Aylwin Lewis, recently hit the roof after learning an employee boarded a company-paid airplane carrying a rival store's shopping bag. Lewis then demanded that employees prove their loyalty by no longer bringing competitors' shopping bags, packages or anything advertising competitors' logos onto Sears Holdings property. That happens to include Sears, Kmart and the new, standalone Sears Grand and Sears Essentials stores.

"During my years at PepsiCo, we wouldn't tolerate Coke," he wrote in a memo, the Chicago Sun-Times reported.

As reinforcement, the company ordered Sears' sales employees to wear only clothing sold by the retailer. Years ago, that might have scared a few image-conscious workers. But Sears brands now range from Lands' End, Covington, Structure and Dockers to Arrow, Apostrophe, A-Line, Latina Life, First Issue, Belongings and c.l.o.t.h.e.s.

Lewis also told workers to visit a Sears Holdings store three to four times a month, use the Sears credit card for purchases and urge friends and families to visit a Sears store and make suggestions.

No word if Lewis has swapped his own wardrobe for Sears suits.

First Store Re-Opens At Edgewater Mall

Trang Pham-Bui
WLOX-TV, Biloxi, MS

Audrey Snyder and Irma White are back to doing what they love -- browsing.

Audrey Snyder said "We're just getting out and we saw a sign that said "Sears open" and we said we'll go see what they got".

For the sisters, shopping is a chance to take their minds off their hurricane worries. For Julie Ruesch, shopping is a necessity.

Julie Ruesch said "My family's from Bay St. Louis, and they all lost their homes and contents, and everything".

To help people like Ruesch get back on their feet, Sears rushed to clean up the foot of water, mud and debris and opened half of the store.

Sears Executive Ronald Gregory said "We're here for them. That's what we brought in was all merchandise for the public and I think we have what everybody needs".

While appliances were hot sellers, other unusual items, like mattresses, caught some shopper's eyes.

Tami Seidule said "I'm very surprised. I just can't believe it. I just hope to get a good deal".

Mattresses may seem rather unusual here, but how often have you walked into Sears and found food? The store now carries all sorts of groceries, from canned goods and baby formula, to yes, even dog food.

Gregory said "It's a different concept for us as a company going forward, to see if we do ever have damage like this in the future, how do we do this for the public? We decided not to bite the whole thing off at the same time. We just took a piece of it and said let's bring in what they need".

It's a move many shoppers seem to appreciate.

Audrey Snyder said "So why should we let the storm stop us? When you get old, that's the attitude. Every day is a great one".

Erma White said "We're getting back to normal. We're trying to. That's what everybody's doing".

The store is open from 10 AM until 5 PM.

Report says future dim for mid-level dept. stores

BY SANDRA GUY Business Reporter
Chicago Sun-Times

Is there a future for middle-America department stores?

No, two retail experts said in a report released Monday.

"The mid-market department store will disappear altogether," said Wendy Liebmann and Candace Corlett, principals in WSL Strategic Retail in New York.

Carson Pirie Scott & Co., as well as regional department stores such as Dillard's and Belk's, must either move upscale or become part of a mass-market national chain to survive, Liebmann and Corlett wrote in a report titled "Department Stores Are Transformed."

Department stores will split into two types -- big national chains such as Macy's, J.C. Penney and Sears, or upscale stores in niche markets, such as Nordstrom, Neiman Marcus and perhaps Saks Fifth Avenue.

They call it the "supersize or specialize" model of 21st century retail success.

Two long-time stalwarts of Chicago's retail scene are getting new owners, and separate developments Monday showed just how much the retail landscape is changing.

* Marshall Field's announced it is remodeling its downtown Minneapolis store much like the flagship store at 111 N. State in Chicago, including opening a Barbara's Bookstore and other exclusive boutiques.

The Field's in Minneapolis will feature a Louis Vuitton boutique four times the size of the existing one, and a shop dedicated to Signoria di Firenze hand-embroidered Italian luxury linens. The Minneapolis store already has introduced several boutiques that made their United States debut at the State Street store, such as Field's Culinary Studio, Levenger reading and writing accessories and British menswear shops Thomas Pink and Alexandre Savile Row.

A Field's spokeswoman said the company has yet to decide whether Field's employees will staff the boutiques or whether the suppliers will hire their own workers.

Field's is scheduled to be taken over by Macy's parent company, Federated Department Stores, by Nov. 1.

Federated CEO Terry Lundgren has yet to say what he will do with Field's boutiques, but he has increased the lines of exclusive merchandise sold at Macy's to set it apart from rivals.

Department stores are stepping up their efforts to be unique.

Nordstrom on Monday announced it had bought a majority stake in luxury designer stores Jeffrey New York and Jeffrey Atlanta, and hired owner Jeffrey Kalinsky as Nordstrom's director of designer merchandising for men and women.

*Bids reportedly were submitted Monday for Carson's and four other regional department stores owned by Saks Inc.

Bids also were submitted for the more upscale Saks Fifth Avenue and the department stores as one package.

A Saks spokeswoman was unavailable to comment further, but analysts have said the entire company could sell for anywhere from $22 a share to $30 a share.

The future of Saks Fifth Avenue's store at 700 N. Michigan and Carson's flagship at 1 S. State St. is uncertain.

A sale of Saks Fifth Avenue's stores in Chicago and New York could be part of the deal if all of Saks operations are sold, analysts have speculated.

Speculation also centers on changes at the Carson's store at 1 S. State, a Louis Sullivan design that has undergone a $17 million upgrade and could be transformed by new tenants.

As for mass merchants, Sears and Penney are building stand-alone stores away from malls, but their willingness to invest heavily in them isn't known. Sears will open 48 "Sears Essentials" stores by Oct. 29, but the Hoffman Estates-based retailer has yet to release a construction schedule for 2006.

Nike Pulls Swoosh From Sears

Daniel Acker/Bloomberg News
Nike, which controls more than a third of all sales of athletic shoes, is taking its swoosh out of Sears even as it spends heavily on advertising.

San Francisco (chainstoreage.com)- Nike Inc. will pull its products from Sears department stores, a brand decision that analysts say reflects Nike’s attempt to protect its high-end image by not selling its brand at Kmart. The move comes after Kmart recently began selling well-known Sears brands such as Kenmore and Craftsman following the Sears-Kmart merger.

Nike’s decision may also reflects the company’s move to capitalize on the increasing demand for premium-priced shoes such as the Nike Shox, which have boosted recent quarterly profits. Nike declined to say whether it plans to sell its lower-priced Starter brand, which is sold in Wal-Mart stores, to Sears or Kmart, according to reports. Sears, noting that it still carried other brand-name athletic shoes such as New Balance, Reebok and Adidas, said it plans to “continue talking to Nike.”

“As of October 2005, Nike will no longer be selling product to Sears,” Nike said in a statement responding to questions from Reuters. “This was a brand decision following a routine account review and the recent expiration of Nike’s agreement with Sears.”

It’s Official: Kmart + Sears

Shareholders agree on merger, transaction is completed

Kmart Holding Corp. (Troy, Mich.) and Sears, Roebuck and Co. (Hoffman Estates, Ill.) have announced the completion of the merger transaction first announced on Nov. 17, 2004. The two retailing giants will combine into a new retail company named Sears Holdings Corp.

It will be the nation’s third-largest retailer with approximately $55 billion in annual revenues and a national footprint of nearly 3500 retail stores in the United States (including 2350 full-line and off-mall stores, and 1100 specialty retail stores). It will be headquartered in Hoffman Estates, but each party will continue to operate separately under their respective brand names and Kmart will continue to have a presence in Michigan.

Starting March 28, 2005, Sears Holdings stock will be listed for trading on the Nasdaq National Market under the ticker symbol “SHLD.”

Edward Lampert, chairman of Sears Holdings, said, “This new enterprise will seek to leverage the combined strengths of Sears and Kmart to create greater long-term value than either could have generated on a stand-alone basis. Sears Holdings plans to offer customers a new, more compelling shopping experience with a differentiated and expanded product range. We believe Sears Holdings has the potential to be a great company with a truly great retail business.”

Alan Lacy, vice chairman and ceo of the new entity, said, “This combination accelerates Sears’ off-mall strategy and gives customers a complete, convenient shopping solution. Shoppers will have greater access to the leading proprietary brands of both Kmart and Sears, along with financial services products and the industry’s leading service organization. With a national store base of nearly 3500 stores, we expect to be able to leverage our scale and strategically grow the business.”

The combined new company will include the best of both brands: Sears’ strength as a home appliance retailer and a leader in tools, lawn and garden, home electronics and automotive repair and maintenance and the combined key proprietary brands including Kenmore, Craftsman and DieHard, Lands’ End, Jaclyn Smith, Joe Boxer, Apostrophe, Covington and Martha Stewart Everyday.

Shareholders Approve Sears-Kmart Merger

The late, great Sears Roebuck & Co. store at SouthPark mall, Charlotte, North Carolina (outisthorough)

Chicago - March 24 - It’s official. Shareholders of Sears, Roebuck and Co. and Kmart Holding Corp. approved the merger of the two companies. Sears Holdings stock is expected to start trading on the Nasdaq National Market under the ticker symbol “SHLD” on March 28.

Kmart chairman Edward S. Lampert said: “The combination of Kmart and Sears will create a leading retailer, and we expect will provide heightened value for our customers, associates and shareholders. Sears Holdings will have an enviable stable of proprietary brands, strong points of distribution and enhanced growth opportunities.”

Lampert also denied reports that the company was interested in selling its Lands’ End division.

Almost 70% of shares outstanding approved the $12.3 billion merger.

Lands’ End Reportedly on the Block

New York City - March 15, 2005

Sears, Roebuck and Co. is seeking a buyer for its Lands’ End division at an asking price below the $1.9 billion it paid in 2002, according to a report in Women’s Wear Daily (WWD).

Citing financial sources in the mergers and acquisition community, WWD said that Sears had put a price of $1.2 billion on Lands’ End in presentations it made to a few select companies and individuals.

Texas Pacific Group, majority stakeholder of J. Crew, is one of those said to be interested in the company, WWD reported.

Also named was David Dyer, president and chief executive of Tommy Hilfiger Corp., and former president and CEO of Lands’ End.

Both Tommy Hilfiger and Texas Pacific Group declined to comment. Sears, whose shareholders are set to vote on its proposed merger with Kmart Holding Corp. on March 24, also declined to comment.

The late, great Sears Roebuck & Co. store at SouthPark mall, Charlotte, North Carolina (outisthorough)

sears, sears, sears

A trio of stories from Chain Store Age:

Sears Unveils New Format: Essentials Hoffman Estates, Ill. - February 8
Sears, Roebuck and Co. announced a new off-mall format: Sears Essentials. The mid-sized format, set to debut this spring, will emphasize products that are essential to home and family life.Sears Essentials will mix basic product categories with convenience items such as health and beauty, household and paper products, pet supplies and toys. The retailer says the new format was devised in response to customers’ reception of the merchandise assortments featured at another Sears off-mall concept, Sears Grand.

To support the format, Sears will leverage 50 Kmart and six Wal-Mart stores acquired in the third quarter of last year. Sears Essentials will debut in 25 locations: six in California, five in Florida, three in Illinois, two each in Maryland and New Jersey, and one each in Arizona, Kentucky, Michigan, New Hampshire, Pennsylvania, Tennessee and Virginia.


Sears Centre Planned Hoffman Estate, Ill. - February 8
Sears, Roebuck and Co. has selected “Sears Centre” as the name for the new arena planned for development in its hometown of Hoffman Estates, Ill. The arena will host theater productions, soccer and basketball games, concerts, conferences and also serve as home base for a new United Hockey League franchise.

Ryan Cos. will serve as the general partner of the partnership, in which it will hold a 75% interest and also will provide design, development and construction services. Sears will hold the remaining 25% interest and contribute the land for the development


Ratings Concern for Kmart-Sears Merger New York City - February 3
Standard & Poors’ Ratings Services expressed concern over the yet-to-be-merged Kmart and Sears. “Although there is well-defined potential for the new entity to succeed, the combination of heightened business risk, intense competition and possible underachievement in the company’s off-mall strategy could lead to sales and margin problems, as well as deteriorating credit measures,” according to a report today.

The senior unsecured debt ratings on Sears Roebuck Acceptance Corp. (the financing arm for Sears) will be lowered to BB+ from BBB, and the A-2 commercial paper rating will be lowered to B.The closing of the merger of Sears, Roebuck and Co. and Kmart Holding Corp. is expected by the end of March.

more merger news (updates)

Typical Sears mall store

Sears Not Llikely To March Aaway From Malls

If Sears, Roebuck and Co. is plotting a mass exodus from the nation's shopping malls after it merges with Kmart Holding Corp., then real estate executive Robert Michaels doesn't yet see it.

The General Growth Properties Inc. president said his company met with Sears recently to find out how serious the Hoffman Estates department store chain is about exiting some mall locations if it converts hundreds of freestanding Kmart stores to Sears stores.

"There are a number of Sears stores we'd like to get back," Michaels commented Jan. 16 at the National Retail Federation convention in New York.

Sears, however, didn't "have any stores that we were talking about that they wanted to give back," Michaels said. Sears' mall stores "do quite well," he added.

Any plans that Sears has to uproot itself from the traditional enclosed shopping mall would take a "a long time" to execute, he figures.

In Michaels' eyes, "an ideal tenant mix" includes Nordstrom Inc. and Target Corp. "I'd replace a number of department stores with Target all day long," he said.

Sears, whose merger with Kmart was announced in November and is expected to close in March, is a tenant in more than 100 of the 209 properties that General Growth has interests in, records show.

Michaels' comments dovetail with those made Friday by Deutsche Bank analyst Bill Dreher after rumors surfaced that Federated Department Stores Inc. and May Department Stores Co. were in early merger talks.

The Federal Trade Commission, Dreher explained, could force Federated and May to divest scores of stores to overcome antitrust hurdles. That, in turn, could result in the supply of available retail space outpacing demand, he said.

If such a glut were to occur in the retail industry, Dreher doubts that Edward Lampert, chairman of the merged entity that'll be known as Sears Holdings Corp., would also flood the market with property.

"While Sears has at least 200 stores, and likely closer to 300 stores, they'd like to get out of, we wouldn't expect Eddie Lampert to participate in a fire sale and instead wait for demand to catch up to supply," Dreher said in a Jan. 21 note to clients.



Marshall Field's, Chicago

M&A Talk

Less than a week before the rumors surfaced about Federated and May, the topic of retail mergers and acquisitions arose during a panel discussion Jan. 16 at the national retailers' meeting.

Goldman Sachs analyst George Strachan told the crowd that the rationale for the deal between Sears and Kmart had been fueled by Sears' desire to expand away from shopping malls and Kmart's willingness to sell excess real estate.

The deal's timing, he figures, was due to the Nov. 5 disclosure that Vornado Realty Trust had bought a 4.3 percent stake in Sears. "This is a one-off deal," Strachan said of Sears and Kmart. "It doesn't mean we'll see a waterfall of M&A activity in retail."

But another panelist, Mesirow Financial Chief Economist Diane Swonk, said she foresaw an acceleration of either deals or store expansion programs because many retailers had plenty of cash. The department store sector, she said, is particularly vulnerable to a retail industry shakeup.

"There are too many department stores out there," Swonk said.

r.i.p: sears at northland mall

Sears at Northland Mall, Coulmbus, Ohio, is no more. After opening to much fanfare in 1964, Sears and most of the former mall has been torn down, after losing stores to the nearby Polaris Fashion Place in 2002, and closing down for good in 2003. (Chicago Tribune)


The closed Northland Sears store, awaiting demolition. (Ohio Grocery)

For more on the Northland demolition click here from This Week newspapers.

kmart and sears memories from chattanooga

Ah tyhe memories of Sears and kmart before they were dinosaurs! You've heard from me here in metro Roanoke, from Charlotte, and recently from the Quad Cities in the Midwest, now it's Chattanooga's turn courtesy of Harmon Jolley at The Chattanoogan:

Sears, Roebuck and Co.’s first retail outlet in Chattanooga opened in 1927 at the corner of Sixth and Broad streets. Initially, the store carried only sporting goods and automobile items such as its Allstate brand of car tires that had been introduced in 1926. However, after a 1928 expansion into adjoining buildings, Sears added a complete line of merchandise.

On Feb. 27, 1969, the first K-Mart in the Chattanooga area opened at 4121 Hixson Pike. The site was selected because of the rapid change of the Hixson/Red Bank area from rural to suburban. Highland Plaza had opened nearby just a few years earlier.

Read more at Remembering Sears And Kmart

Note: I sent him a response to his article. Here are some excerpts:

[Sears] was fondly remembered by Roanokers as “Sears-Town:” a combination Sears and Kroger grocery store with a P.H. Rose variety store and Peoples Drug store adjacent. It was the talk of the city when it opened in 1957, and it lasted basically intact for 28 years until the store at Valley View Mall opened. Many people, including myself, bought our first toys and clothes there while our parents shopped for furniture tools and appliances. The snack bar and candy counter with its hot nuts and popcorn were a hit with everyone.

Our first local Kmart predated the ones in your area by a few years, but the experience was similar. The old store on Melrose Avenue was built in 1964 and sported both a freestanding Kmart Auto Center and a Kmart Foods (which I don’t remember well as I was very young when that part of the store closed). Kmart eventually opened two more Roanoke stores and all featured those famous Blue Light Specials and a delicatessen with subs and popcorn my dad would buy for us every time we went. We also bought appliances for our home at that original store, which closed in 1983 and relocated to a former Woolco at Crossroads Mall.