Tuesday, July 22, 2003

Fashion makeover is part of Sears strategy

Retailer evolves: Appliances still strong

By Anne D'Innocenzio
The Associated Press

NEW YORK - Angela Powell walked out of the main Sears, Roebuck and Co. store in suburban Atlanta, where she had been looking for clothes and a television set. Not finding anything she wanted, she headed for the auto center.

"Hardware and auto service," she said. "That's what I think of when I think of Sears."

In Columbus, Ohio, Mo Porven had much the same assessment at her local Sears: "I trust them No. 1 for appliances."

That might be Sears' biggest problem as it plans a future solely as a retailer, beset by mounting competition. The nation's fifth-largest retailer has to change its image before it can resurrect its business.

Last week, Sears said it will shed the last of its nonretail operations by selling its credit card business. It also then warned that earnings for the year will be weaker than anticipated because of sagging sales at its stores.

"The real problem is that consumers haven't given Sears permission to sell them fashion," said Harry Bernard, partner at Colton Bernard, an apparel consulting company in San Francisco. He added that Sears "has made attempts in the fashion business, but never stayed with it."

What will it take to reverse 22 consecutive months of sales declines? Acquiring more labels? Snappier advertising? Will a new clothing line lure Hispanics?

"Sears is still trying to figure out what it wants to be," said John Champion, vice president at Kurt Salmon Associates, a retail consulting company. "And they have competitors left and right, snapping at their heels."

Analysts, however, offer kudos to chief executive Alan Lacy, who is spearheading a makeover of Sears merchandise and its stores.

The company said it is seeing positive results from last year's acquisition of Lands' End, with overall apparel sales reported two to four percentage points higher in stores that have the line than in those without it. Lands' End is in 433 stores so far and will be rolled out to the other 400 or so by this fall.

Meanwhile, Covington - Sears' new store brand that combined eight different labels in hopes of generating $500 million in sales - is still "grossly undermarketed," according to Burt Flickinger, managing partner at the consulting firm Strategic Resource Group in New York. And Champion questions Sears' move to get out of cosmetics, believing the category is an essential offering for women.

To court Hispanic customers, Sears plans to unveil Lucy Pereda, a line of dressy women's clothing bearing the name of the Cuban-born TV lifestyle personality, in 200 stores this fall.

Meanwhile, Sears faces new challenges in appliances. While it is the leader in that area, the company's market share has eroded recently because of competitors like Home Depot and Lowe's.

In May, Sears announced a new strategy to fight back by expanding its selection of lower-priced appliances and sprucing up its presentation.

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