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Sears plans a trimmer approach for Grand
Future Sears Grand stores will be a little less grand.
In recent months, Hoffman Estates-based Sears, Roebuck and Co. has opened two of the freestanding stores--each exceeding 200,000 square feet--to better compete against the growing dominance of discounters like Wal-Mart Stores Inc.
The stores, one in Gurnee and the other in suburban Salt Lake City, mirror a traditional mall-based Sears store for about 80 percent of its merchandise, while the remaining space is devoted to new lines such as magazines, convenience food items, cosmetics and toys.
On Thursday, Sears Chief Executive Alan Lacy told shareholders at the company's annual meeting that the retailer is considering two new, smaller approaches to Sears Grand.
Larger versions of the store will top out at about 185,000 square feet, and smaller formats will be in the low 100,000-square-foot range.
He didn't comment on changes to the merchandising mix, but he did say wine would be sold in future stores.
Despite the trimmer size, Sears Grand remains the "principal store growth vehicle for the foreseeable future," Lacy told shareholders concerned about Sears' stagnating store base.
On Wednesday, Bill White, general manager for full-line stores, said results for Sears Grand has exceeded expectations and that the company sees the potential for as many as 500 stores. Lacy didn't elaborate Thursday on how many additional stores are under consideration.
Lacy also said that Sears' Great Indoors home-improvement chain might be in a growth mode again by year-end after closing some stores last year. Sears once had visions for 150 stores, ended up opening 21, and now has 18.
Great Indoors' sales rose in April for the first time in months.
"I'm hopeful that at the tail end of this year we'll see store growth again," Lacy said.
During the meeting, Lacy had some explaining to do to unhappy shareholders.
With proceeds from last year's sale of its credit business, Sears has repurchased stock, paid down debt and contributed to its pension obligations.
Dividend increase urged
But one Morton Grove shareholder complained that Sears investors were overdue for a special dividend or an increase in their regular dividend. Lacy defended Sears' use of the proceeds, explaining that Sears' stock appreciation over the past year is largely the result of the stock buyback strategy.
Sears bought back nearly a third of its stock in 2003. In the fourth quarter alone, Sears repurchased 36.2 million of its shares at an average price of $48.72, for a total of $1.8 billion.
Sears' stock has since fallen to about $38.
Another shareholder said he felt that "Sears is in deep trouble." He said the value of his investment has dropped 17 percent and blamed continually weak sales.
He called Lacy "a monumental failure" who should have his role reduced at the company.
For his part, Lacy said Sears stock is up 45 percent since he took the helm in late 2000, outperforming rivals including Wal-Mart, Kohl's Corp. and Home Depot Inc. Lacy also noted that first-quarter sales were up and that Sears has delivered on its earnings forecasts so far this year.
Lacy was asked about Sears' largest investor, ESL Partners, a Greenwich, Conn., investment firm that has boosted its stake in Sears from 9 percent to almost 14 percent over the past year.
ESL Chief Executive Edward Lampert, who invested in Sears' stock early in Lacy's stewardship, is "a very happy shareholder," said Lacy, who talks to the investor "periodically."
Support up for 1-year terms
Shareholders on Thursday voted to elect directors on an annual basis instead of the current three-year terms. The measure was approved by 67.8 percent of the votes cast. That was up from the 60.6 percent backing that the shareholder resolution got last year.
Still, Sears' board of directors is unlikely to adopt the measure.
Lacy also shed more light on the apparel problems that hurt Sears' April sales.
In particular, the Lands' End clothing line had execution problems, Lacy said. A key supplier went bankrupt and other suppliers shipped late. Rather than accept the late shipments, Sears' canceled the orders.