Sears Is Ready to Launch New Pricing Policy : Will Reduce Costs on 50,000 Items Next Week

Sears, Roebuck & Co., which has been suffering from sluggish sales, said Thursday that it will cut prices on more than 50,000 items next week as part of its new strategy aimed at reducing inventories and boosting revenue.

Earlier this month Sears, which is undergoing a massive restructuring to raise earnings, said it would change its retail strategy of frequent sales and promotions to one of “everyday low pricing.”

Analysts said that while the lower prices are bound to lure customers into the stores, the effect on profits is unclear. They also said they were concerned that customers would be confused by the new pricing policy.

“The short-term impact on sales should be positive,” said Bernard Sosnick of Deutsche Bank Capital Corp. Sosnick said Sears’ new pricing strategy “will stir investor attention and, undoubtedly, attract many curious shoppers. But experience shows it usually takes two to three years to judge the full impact of a low-price strategy.”

Sears shares were down 12.5 cents at $41.125 in afternoon trading on the New York Stock Exchange.

Sears announced a sweeping restructuring in October after a sluggish third quarter. Its fourth-quarter earnings dropped 79% to $117.4 million because of restructuring costs.

Major Ad Campaign

More than 800 Sears stores will close for 42 hours beginning Monday evening and will reopen at noon Wednesday, Michael Bozic, chairman of Sears’ merchandising group, said in a statement.

The new pricing policy will be supported by a multimillion-dollar promotion campaign, with advertisements in more than 900 newspapers and on national radio and television networks, he said.

Analyst Linda Morris of Provident National Bank said she was concerned about the effect the new program would have on profit margins. She said she was also concerned about how long it would take to re-educate the consumer “to think this will be forever rather than a one-shot deal.”

Janet Mangano, an analyst with Josephthal & Co., said: “The unknowns are what the stores will look like and how are the core product lines actually going to be merchandised? Another big question is how will the consumer be able to differentiate between Sears’ everyday low pricing and others.”

New price lists reflecting the price changes are being mailed to catalogue holders, and future catalogues will incorporate the lower prices, Sears’ Bozic said.

The advertising campaign will include a pledge to meet or beat the competition’s current advertised price on identical items, he said.

Similar Concepts

A new home and electronics unit, called Brand Central, will be added to 400 Sears stores this year. Brand Central was introduced in 1988 in 18 Indiana and Kentucky stores to sell brand-name appliances in addition to Sears’ Kenmore brand.

Similar concepts are under development for all its merchandising group, including a children’s store, and for automotive goods, hardware, lawn and garden products, home fashions and men’s and women’s clothing, Sears said.

The new low-pricing policy will substantially cut costs by reducing the need for repricing sale items. It also will eliminate the bulge in inventories required for the frequent sales items and lead to balanced production and shipments, Bozic said.

John Landschulz of Cowen & Co. called the new strategy “a critical element to galvanizing the growth factor at Sears. Until now, in many areas the company was not competitive in the daily price arena.” He said Sears had to make itself more sensitive to the competitive environment and consumer needs.