Job Cuts, Make-Over in Store for Sears

Sears, Roebuck & Co. said Wednesday that it will undertake its biggest make-over in a decade. The retailer plans to overhaul its stores and cost structure in an effort to fend off discounters and others that increasingly have moved in on the 115-year-old retailer’s turf. The company also posted better-than-expected earnings and announced significant job cuts.

Chief Executive Alan J. Lacy, who succeeded longtime leader Arthur C. Martinez a year ago, said Sears will move away from a “traditional department store business model” in a bid to increase operating income by 50%, or $1 billion, during the next three years.

Sears will offer upgraded clothing, simplified store layouts, more self-service areas and centralized checkout counters. The newer-model stores also will offer fewer salespeople.

The company’s challenge, analysts say, is to offer something unique within its niche reaching middle-income consumers--an ever-difficult proposition against innovative rivals such as Kohl’s Corp. and Target Corp., which have succeeded in off-mall locations by offering national brands at value prices.

Some analysts question whether women--Sears’ primary customers--will be willing to buy clothing at Sears.

After Martinez’ popular “Come see the softer side of Sears” campaign, which prompted a brief surge in apparel sales, clothing sales suffered enough that some analysts urged the company to get out of soft goods altogether.

Sears’ new formula will attempt to be another hybrid: a mall store with some department-store fixtures, such as area checkout counters, combined with some discounter cost-savers, such as self-serve shoes.

“Sears will emerge as a very different company when this overhaul is complete,” said retail analyst Kurt Barnard of Barnard’s Retail Trend Report. “It’s going to be much more efficient, far more focused and run far more in line with the consumer and consumer’s lifestyle and needs.”

As part of its financial realignment, Sears will cut 4,900 jobs in the next 18 months--1,300 from its headquarters in suburban Chicago and 3,600 from Sears stores and field operations.

Still, Lacy said Sears will be able to offer better customer service by focusing salespeople in those areas where they are needed most.

“We’re creating a store environment where she’ll find the level of service she needs where she needs it,” said Sears spokeswoman Linda Blakley. “There are some areas where she wants us at her elbow, there are other areas where she doesn’t, where she wants to get her goods and get out of there.”

That means help will abound in the appliance department, where customers continue to seek help and advice, Blakley said.

It also means a self-service shoe department, with boxes lined up by style and size instead of having a traditional counter with back-room stock, she said.

But rather than take on a discounter model outright, the changes announced Wednesday are aimed at emphasizing Sears’ niche between the traditional department store and the mass merchant.

So although Sears will no longer offer the department store style of checkout, with counters dotted throughout departments, neither will it offer the giant bank of cash registers lined up at the exit doors.

Instead, the newer model will have what the company is calling “centralized checkout,” or one area of registers within each department.

Sears also will cut under-performing items and expand offerings in appliances and tools.

Since he took over, Lacy has worked to increase awareness of the breadth of Sears offerings.

Although 36 million U.S. households shop at Sears each month, only 5.5 million of them shop several areas of the stores, Sears research found.

That led to the new marketing campaign, launched earlier this fall, “Sears. Where else?” aimed at showing customers Sears’ ability to be a time-saving, one-stop shop.

Those efforts, Lacy said Wednesday, will continue with a more focused, streamlined marketing campaign.

Sears announced better-than-expected third-quarter earnings of $262 million, or 80 cents a share, excluding one-time charges. That’s up from $261 million, or 76 cents a share, a year ago.

Revenue fell 1.3%, to $8.37 billion from $8.48 billion a year ago. Executives said the company would meet full-year earnings estimates of $4.09 a share, not including charges.

Sears shares gained 52 cents on Wednesday to close at $38.31 on the New York Stock Exchange.