SEARS STRIKES BACK : Inside the Retail Giant’s Struggle to Regain Its Position--and Profits--in the Los Angeles Market It Once Dominated Completely

BY THE SPRING of 1983, the empire of Sears, Roebuck was finally mending. The great corporation of the Heartland--a company that had employed one in 30 Americans and dominated between 1% and 2% of the GNP since World War II in the act of supplying Americans with the trappings of everyday life--had survived years of crisis and internal upheaval so profound that many of the half million people who worked for Sears along its vast supply line believed the company would die.

If the United States was indeed the consummate culture of consumers in all of history, then Sears had served as the warehouse of the culture. Under founders Richard Sears and Julius Rosenwald, the company’s famed catalogue had made a world of new invention available to the average American. The business wizard who inherited the catalogue empire in 1924, Gen. Robert E. Wood, dedicated himself to taking the company beyond mail-order merchantry into an even more powerful system of retail stores. The General envisaged Sears at once as the supply house of the people and as the last refuge of true democracy. Wood, the leader of the company for half a century from the time he took over, declared that Sears, Roebuck would be a corporation that “had a soul.” The General would preach a doctrine of individual freedom and managerial independence that his “boys” had accepted over time as Holy Writ. The managers bought goods from the army of buyers in Chicago through an internal free market. The localities controlled how the stores were operated, how they looked and how much the goods in them would cost.

The big stores were divided into five powerful and astonishingly independent territories, each of them run from the former “catalogue towns,” where huge warehouses had been built during the golden age of mail order. So independent was the Pacific Coast Territory of Sears that it was known within the company as the “separate kingdom.” By 1977, the longtime “King of the West,” John Lowe, ran a sovereign business that employed 60,000 people--as many as entire corporations such as Boeing and General Mills. Lowe had built his organization a steel-and-glass headquarters in Alhambra with money generated from his stores, from his sales.

But on a fall day in 1977, Edward Telling, who had been named chairman of the corporation only hours earlier, flew to meet John Lowe on a wind-swept airstrip in Pueblo, Colo., and there, for the first time since the General ceded the true power at Sears out to the territories and the stores, Telling forced Lowe to relinquish his power base.

By 1977, Sears was in big trouble. Profits had fallen away, and customers were defecting in droves. The Sears stock price--adjusted for an intervening split--had collapsed from a 1972 high of $61 per share to $24, and was headed much lower. The company had careened out of control under the decentralized system, and Ed Telling believed that the only way to pull it back together was to take the power away. The company was running out of control, and any effort to impose change from above was resisted at the grassroots. by employees who’d been taught that resistance was their right under the democracy of Sears. He was determined to crack Sears’ calcified system so that power and the ability to make business plans and employ economies of scale could return to headquarters in Chicago.

But under Telling’s reformist regime, by the end of the 1970s Sears descended into a bitter civil war that pitted the powerful buyers in Chicago against the merchants who dominated the huge network of retail stores. He replaced John Lowe with one of his longtime cronies, Henry Sunderland, who’d begun his career in the old L.A. mail-order plant. before heading to the Eastern Territory. When Henry Sunderland left Los Angeles in 1959 there were 21 powerful Sears stores, no Penney’s, no K marts--nothing but Sears. When he returned there were 27 big Sears stores, but there were also 27 Ward stores, Penney’s in the malls everywhere you turned and K marts that appeared on almost every corner.

“Henry,” Telling said to Sunderland when he sent him out to replace John Lowe, “I want you to go out there and bring them back to the company.”

From that point--between 1977 and 1983--Sears experienced a revolution. Resistance to Telling’s will to change the company led to a stalemate that paralyzed the business. At the end of 1980, about 1,500 of Sears’ top 2,500 executives left the corporate family on a single day as part of an early retirement program. Telling eventually backed away from the turmoil surrounding the embattled Sears merchandise business--bequeathing it early in 1980 to a youthful, third-generation Sears executive named Ed Brennan--and turned to the work of reconstituting Sears as something entirely new. At the end of 1981, Telling electrified the national business community when Sears purchased the large Wall Street brokerage firm of Dean Witter and the same week announced the acquisition of Los Angeles-based Coldwell Banker, the nation’s largest residential real estate firm. Just as the company had disseminated the people’s goods, Sears would sell average Americans their homes, provide them with their mortgages, sell them their household goods, insure those goods through its subsidiary Allstate Insurance Co., and even store and invest customers’ money through Dean Witter.

Away from the national spotlight cast on Telling’s new venture, Brennan began the task of knitting the ravaged “fabric of Sears” back together. Telling’s breaking of the old power centers had so destabilized the old order that Brennan saw the possibility of bringing the retailer back together as an organizational unity. “All we are,” the charismatic Brennan would tell demoralized Sears employees as he barnstormed the corporation during late 1982 and early 1983, “is one big store.”

1983: Cutting the Losses

ACCORDINGLY, DURING the spring of 1983, a company plane from Chicago once again carried change to John Lowe’s former kingdom. Brennan and his team swept into Los Angeles and went to the glass-covered, cube-shaped Alhambra headquarters. There Brennan intended to review the state of the Los Angeles Sears stores--once the most powerful profit machine in the company. Brennan’s entourage took seats at one edge of a huge, whale-shaped table, as the leader of the Los Angeles group of stores, the veteran merchant Howard Lasky, stood before the visitors from Chicago.

The beginning of Lasky’s review was like an economic history of the entire region. Maps showed the first stores that Gen. Wood had dropped into the central neighborhoods of the city during the late 1920s, and maps showed the addition of later stores that served Americans fleeing dust and poverty, who came to the sunny western edge of the country in search of the freedom to assemble a life in reflection of the one portrayed in the Sears Catalog. Other maps showed the arrival of the arterial freeways that connected the paved-over orange groves and paved-over foothills, marked everywhere with the stars of Sears stores. The towns Sears customers settled in, like Glendale, grew by some 2,000% during the decades before World War II. By 1964, the 44-year-old group manager, John Lowe, ran 16 powerful “A” stores, the big Sears stores that “had everything.” Between 1960 and 1970, general merchandise sales in the Far West grew 70.3%, while in the rest of the nation they increased by 43.8%--and the general merchandise market in California was utterly dominated by Sears.

As the review continued to flash behind Howard Lasky, the dots of stores from other companies appeared. Then they slowly surrounded the once-inviolable Sears outposts. About 275 dots representing other stores surrounded 26 Sears stars on Lasky’s more current maps. Huge retail garrisons called shopping malls appeared on the screen. Twenty major shopping malls were opened during the 1960s and 1970s in Los Angeles without Sears, Roebuck’s participation. Millions upon millions of square feet of new store space had come into Sears’ sights and passed unchallenged.

Lasky ran through an in-depth analysis that compared his stores in terms of their age, volume, net profit, selling space and level of catalogue orders. He broke down the nature of the markets surrounding the stores using sophisticated delivery schedules, “consumer-inclination” research, analyses of driving distances to the stores and credit-card “penetration” treatments. Maps chained with aggressive coded colors ripped across the wall behind Lasky. Maps subdivided the 76-mile-long group into subregions like “the San Fernando Valley stores,” the “Greater Los Angeles stores.” Lasky’s group contained stores that had sold more than $30 million worth of goods in the late 1960s but were now producing less than $10 million in sales. The pioneering store in Glendale that once racked up $40 million in 1965 sales was now 41 years old and sadly infirm. There were other once-proud old stores in Los Angeles that were even sicker than Glendale.

Ed Brennan was stripped down to a scarlet waistcoat, one adorned with ornate golden baubles. “These were some good stores. Long Beach,” Brennan said in agitation as he paused at a page in the book in front of him. “No. 1 in the company at one time.” A mall had moved in across the street from the Long Beach store and conspired with the diminishing buying power of local inhabitants to strangle it. Long Beach had just been closed.

“What about El Monte?” Brennan asked of another struggling store.

“It’s a densely Hispanic trade area now,” Lasky replied. “If we shut it down, our other stores will recover 61% of the business. The group will lose $273,000 in profit, though, so we want to try downsizing.”

Downsizing was a method consolidating the active selling area of an overly large store to make it look less sick and make it less costly to run. Brennan had tried downsizing before, and he believed it to be an expensive and fruitless exercise in postponing the inevitable. “I think we have to ask ourselves if we really want another dollhouse-sized store,” he said. “You know we closed down the Chicago State Street store--the great State Street store. It cost us $3 million, but we just weren’t going to postpone the inevitable any longer.”

Few stores in the system were as emblematic of tradition as the huge Depresion-era store in the middle of the company’s hometown. Everyone knew State Street had been losing millions of dollars a year for a long time--dollars that were considered well worth losing in light of the symbolic consequences of closing the store. But Brennan took it down, altering the symbolism profoundly. The message on downsizing El Monte was quite clear.

The review went on to consider the fate of six or seven other stores, most of them in the poorest areas of town. The possible closing of the store on Pico Boulevard was discussed from the perspective of “political repercussions.” When Pico opened in 1939, a noted rival merchant contended publicly, “In my long experience in the retail field, I have yet to witness a retail unit which equals Sears’ Pico store in practical efficiency, merchandise engineering, operation, layout and presentation of merchandise.” People came from miles around to see Pico’s rooftop parking lot.

Howard Lasky said that Los Angeles Mayor Tom Bradley, whom Lasky considered a “good friend to Sears,” did a lot of his own shopping in Pico and that every time Lasky saw Bradley these days the popular politician said, “You guys aren’t gonna going to close down Pico, now, are you?”

“What did you say?” Brennan asked.

“I coughed,” Lasky said to the accompaniment of much forced laughter from the Los Angeles-based Sears executives.

Boyle Street: Rage and Unions

THE FOLLOWING morning Brennan planned to take his entourage toward Disneyland to look at one of the Orange County stores. Just seven suburban stores in Orange County accounted for half of the Los Angeles group’s profits. It stood to reason that Brennan would want to go to the suburbs. The Sears “franchise” in Los Angeles dwelled in Orange County and the San Fernando Valley. The seven aging stores in the gold-colored “minority/low-income” subsector of the Los Angeles retail group all together barely surpassed one-half of 1% of the group’s profit. But it was still not without irony that the old Sears stores had no place on the map of the future in Ed Brennan’s head or that his entourage would navigate the interchange near the great store called Boyle. In many ways the spirit of Sears, Roebuck that made Ed Brennan love the company--that sense of respect for goods and the institution of Sears--persisted in its purest state now in stores like Pico, El Monte and Boyle.

So many freeways come together in Boyle Heights that fully 12% of the district’s land was covered in roadway by the end of the 1940s. The 56-year-old tower atop the Boyle Street store rises above the knot of freeways from a bed of taco stands, Mexican mercados and corner hot-dog stands. The brickwork and the old-fashioned Sears logo make the sprawling store-and-warehouse complex look like an Art Deco pavilion from one of the many industrial expositions held in the era when the General had opened Boyle. The store was once No. 12 in the country, but now the acres of ample free parking were rarely filled to capacity.

The people of East Los Angeles make up nearly a third of Los Angeles’ total population. Ninety-four percent of the immigrants to the city live east of the Los Angeles River. Latino shoppers inside the Boyle store came to Sears in part because the Sears stores built in the cities of Mexico had served as emblems of middle-class life. Millions of Mexican citizens moved north to attain the dream of that life, to buy into a world they knew existed in part via Sears. Newcomers could even get a credit card from Sears and thus become card-carrying American consumers.

In addition, Sears had rather quietly become the second-largest employer in East Los Angeles. To many members of Mexican-American households, a job working for Sears was nearly as valuable as the residency documents that made it legal to work at all. If a high school graduate was bright and industrious but unable to go to college, he or she could still do the family proud by going to work for Sears.

Most would go to work in the old catalogue warehouse next to the Boyle Street store, where territorial catalogue orders are still filled by a system, and even some machinery, that was designed for Sears by a German industrial engineer in 1906. The ancient plant had been one of the 11 capitals of Sears during the golden days of the catalogue.

Workers still careen about the 4 1/2 million square feet of the catalogue plant behind ramshackle wooden pushcarts. Many of the carts are ornately decorated with bright fiesta colors, religious iconography and invariably the name of the “picker” powering them along past acres of goods in the deep gorges of the aisles. The pickers are mostly women, and they move over the aged wood-block floors past pictures of saints, signs that say “Beat Seattle” and photographic portraits of Ed Brennan at a breathless pace that reflects the distribution from Boyle of some 300,000 pieces of merchandise every month. In a much newer section of the facility, a largely male work force loads trucks arrayed under signs indicating many of them are heading out to small towns like Crescent City.

As part of his 1978 charge to pacify the maverick Far Western Territory, Henry Sunderland decided that changes were needed at the old catalogue plant where he had begun his own career in 1952. In the Draconian spirit of the early days of Telling’s regime, Sunderland told the plant manager at Boyle to trim the work force, which was 70% Latino, and generally alter the atmosphere of complacency with stronger management. In less than 18 months, more than 30% of the full-time employees at the plant were laid off, many of them immediately replaced by part-timers.

As the size of the force reductions became known, female pickers left their wooden carts in the aisles and screamed, in tears, at their supervisors. A few plant managers recieved death threats. Employees claim that the layoffs were conducted without sensitivity. Proud fathers were fired and their wives and children hired back as part-timers. The heads of female-run households were laid off while other, intact families were spared. Latino department managers were forced to terminate people from their hometowns in Mexico, and others fired their own cousins by company decree.

The turning of the screws at the Los Angeles plant engendered a sort of rage that was more personal than economic. None of the managers at the plant were surprised when this un-Sears-like managerial behavior caused leaders to surface from the work force who called for resistance. Union organizers appeared outside the plant, so headquarters sent in its crack employee-relations specialists to orchestrate the Sears side of the union election. But in 1980, the workers at the Los Angeles warehouse voted to become members of a local affiliate of the International Brotherhood of Teamsters, the labor union that had once promised to organize all of Sears during the 1960s. “No union could ever have as great and as personal concern for the well-being of employees as the company itself,” Sears personnel chief Wally Tudor had said at the time. And at the time, Tudor was probably right.

One senior manager reflected that the upheaval in the old warehouse was the result of “the distant moral judgments of the time.” But the tragedy at the Los Angeles plant was as much a matter of pervasive sociological ignorance as it was the result of Henry Sunderland’s overzealous imposition of Ed Telling’s will to crack the old power centers.

‘Getting Ours Back’

“SIR,” SAID Avery young, dark-haired fellow, clearly directing his voice across the whale-shaped table to Brennan. “There are some other alternatives to downsizing and or closing a store like Pico.” The speaker was Fred Bruning, a 32-year-old territorial real estate manager who worked under a fellow called “Hollywood” Joe Duggan, the man in charge of Sears facilities in the Far Western Territory. Bruning was not even seated at the big table. He spoke in a clear, earnest voice from a chair against the wall. Several of the older managers grimaced when Bruning began to speak: He was in attendance only for his encyclopedic command of territorial numbers. But Bruning proceeded to put forth his belief that Sears could save a great deal of money, as well as mitigate the social effect of closing several older stores, if the company would help build a new shopping complex in the middle of the predominantly black Crenshaw district.

Fred Bruning had been warned several times that his pet project was an inappropriate subject for a meeting of the magnitude of the April 5, 1983, headquarters review, but he had become quite passionate in his belief that the Crenshaw mall would be a good thing for the company. In the darkened conference room, Bruning said his research indicated that the new mall would serve a market of 800,000 people with an average income that was only $1,000 per family below the Los Angeles-Orange County median. “With a lot of support from the city, and a lot of support from the state and maybe two other ‘majors’ like May and Broadway,” Bruning said, “we could put up a two-level, up-to-date regional shopping center that would revitalize the entire district.”

Bill Bass, the Chicago-based executive in charge of the stores, broke the long silence that followed. “Crenshaw’s not a very good-looking area,” he said weakly.

Brennan leaned forward, put his chin in his hand, and looked over at Bruning with an intrigued, somewhat quizzical gaze. The startlingly youthful-looking real estate manager stared back without expression.

After graduating from law school in 1977, Fred Bruning had decided to come to work as a lawyer for Sears, Roebuck because of the incredible scale of things at the corporation. Where a young associate in a downtown Los Angeles firm would have been lucky to deal with a personal or corporate matter involving tens of thousands of dollars, Bruning was handling $12-million lawsuits for the Far Western Territory during his first year. He got interested in the high-gear world of California real estate at about the same time Sears was opening its veins and entering the throes of upheaval and exodus, and soon Bruning found himself--at the age of 28--in charge of about 1,000 pieces of Sears real estate worth many millions of dollars.

As committed as Bruning was to a Crenshaw center, when the discussion returned to the military nomenclature and thrusting imagery of stores and markets locked in conflict, he dutifully supplied Brennan with acronym-laden real estate data like a teletype machine. A detail of the San Fernando Valley came up, and Bruning contended that the store in Canoga Park was being squeezed to death between two plainly superior malls.

“Canoga Park,” Ed Brennan said, his voice losing its utilitarian edge for a moment and turning wistful. “The old San Fernando Valley store, Johnny Hawkins ran that one. Old Johnny.” Brennan was staring up into the smoke from his cigar. Johnny Hawkins was one of the great characters of the Pacific Coast territory’s glory days. He was a buddy of a notorious peg-legged wild man named Stan Donough, who used to roam the Pacific Coast Territory in a helicopter he kept on top of a Sears store in Seattle. Hawkins knew Ed Brennan’s step-grandmother, and he was there when Katy Brennan--a lifelong Sears employee, as with most of his relatives--laid the cornerstone for the Sears store in Pomona.

“We’ve got to get ours back in Los Angeles,” Brennan said, locking back into his more careful, oratorical voice. “We’re out of the action in this group. We used to own this city. We owned its markets and we taught the industry here a whole way of retailing. Ward moved in and cut us, then the discounters. And we should have seen it coming. But now the others are stumbling too. We can win our place back if we just leverage off the existing base and sell them more goods. I know we can get it back.”

The mending of Sears would continue through to the end of Edward Telling’s tenure as chairman, and the revival would persist into the chairmanship of his successor, Ed Brennan. Jan. 1, 1987, ushered in a new era as well as new year for the Sears merchandise group. Michael Bozic was named chairman and chief executive of the retail chain, whose sales had remained sluggish.

Today, Sears operates 71 stores throughout California--35 from Santa Barbara to San Diego . In 1984, a year after the Long Beach store closed, Sears pulled out of El Monte. A store remains in Alhambra, but the regional headquarters there have been relocated to Chicago. The Boyle store in East Los Angeles remains in business and the catalogue merchandise distribution center housed in the same area now services the West Coast, Alaska and Hawaii. Sears picked up Bruning’s recommendation to build a new store in the Crenshaw Shopping Center, which has since been renamed Baldwin Hills Regional Shopping Center. The new 162,000-square-foot facility is scheduled to open next September. In the meantime, Sears has decided to close its two free-standing stores--on Pico Boulevard and in Inglewood.