Since joining Sears, Roebuck & Co. as chief executive of merchandising in 1992, Arthur C. Martinez has helped transform the business from a declining conglomerate with dowdy under-performing stores into a profitable retail-focused company.
While Sears unloaded its financial services businesses--Coldwell Banker real estate, the Dean Witter broker and the Discover credit card--Martinez quickly streamlined the retail operations by closing 113 unprofitable stores and terminating the Sears catalog. He packed stores with stylish women's apparel and began the make-over of the chain's image with the "softer side of Sears" ad campaign.
As profit rose, so did Martinez--to the rank of chairman and CEO of Sears in 1995. Martinez's reputation as a marketing and merchandising whiz grew until Sears stumbled in 1997. Profit slumped amid controversy over allegations that Sears bullied credit card customers into paying old debts that had been erased in their personal bankruptcy filings. Sales have continued to be sluggish.
Times staff writer George White interviewed Martinez during his recent trip to Los Angeles. What follows is an edited transcript.
Q: Department stores have been doing poorly compared to discounters like Wal-Mart and specialty chains like Gap. Once again, analysts are questioning the viability of department stores, which can't match discounters on price and lack the focus of specialty stores.
A: Well, rumors of the death of the department store have been around for 50 years. First it was the Limiteds of the world who were going to kill it. Then it was the catalogs that were going to kill it. The department store is very durable.
I would say you're accurate in your statement that if you look at the last six to 12 months, the specialty stores and the discounters have been showing larger sales increases than the broad classification of department stores, whether it be Target and the Wal-Mart on the discount end or Gap and Abercrombie on the specialty end.
The thing that department stores have to do is to create some differentiations. They have to continue to be extremely relevant to the consumer in their product offering. Frankly I think that we are very much advantaged in that regard because the range of our offering is more complete than department stores which are frankly nothing more than big apparel and accessory stores--if you go through Lord & Taylor or Robinsons-May or J.C. Penney.
Q: There is speculation that you plan to sell your HomeLife furniture stores.
A: We've got a $650-million furniture business right now, and we are a $45-billion corporation. We are asking ourselves if this [furniture] business can ever be big enough to make a difference in our company.
The furniture business right now is on the bubble. If we were to try to make it a big, important national business, it would take an enormous amount of capital--capital we could invest in our full-line stores. So we're looking at a range of alternatives, including bringing a partner in to join [HomeLife] to share the capital burden. We're looking at the outright sale of the business--that's a possibility. Nothing has been decided yet.
Q: You're expanding your role as a service provider--why?
A: Services and home services in particular are too often marketed by or presented to the customer by companies that don't stand behind promises to the customer. These [companies] are often poorly capitalized companies not around when you need to have recourse. We feel that the marriage of a complete family of services with the quality of our brand name is a big business idea for the company. It's a big concept. It's a very large market. It's highly fragmented, and we think we have the ability to get it fully organized.
Q: How have you expanded at this point?
A: We've made three acquisitions in the area. We made an acquisition in pest control, we made an acquisition in siding and windows, and we made an acquisition in carpet cleaning--all of which are designed to give us a very strong platform.
Q: What other services do you see Sears offering in the future?
A: We think we have a foot in many of the services we need to. But what we need to do is to expand our presence. Air-conditioning and heating ventilation are areas where we've got a very small market share but I think it's a real natural for us to expand. Plumbing and electrical services are also categories where we think we could go.
We don't want to be in the lawn care business. That's a low value-added service that is not consistent with what we think we're good at, which is managing complex situations with highly trained people.