Sears Unveils Plan To Increase Operating Income By $1 Billion, Or 50 Percent, By 2004
Objective to Double Retail and Related Services Profits in Three Years
Will Revitalize Full-line Stores Through Improved Merchandise Assortment,
Marketing and Customer Service Initiatives
Productivity Initiatives to Yield Annual Savings of $600 Million;
Reduce Salaried Staff by 4,900, or 22 Percent
HOFFMAN ESTATES, Ill., Oct. 24 /PRNewswire/ -- Sears, Roebuck and Co. (NYSE: S) today announced a comprehensive three-year plan to increase its consolidated operating income by more than $1 billion, approximately 50 percent, to more than $3 billion. The company also expects to double profits from its retail and related services operations by 2004 through a number of strategic initiatives to revitalize its full-line stores and significantly reduce operating expenses.
"Our new approach to merchandising reflects a distinctive competitive positioning, a clear emphasis on home and family, and a lower-cost operating model," Sears Chairman and Chief Executive Officer Alan J. Lacy said in explaining the company's move away from a more traditional department store business model. "We have begun to execute this strategy, which will substantially improve Sears financial performance by creating an easier shopping experience for our customers while operating with greater focus, speed and efficiency."
Details on Sears plans are being outlined at a meeting with the financial community held in Chicago today.
Full-line Store Revitalization Plan
Lacy outlined several major goals of the full-line stores improvement plan including:
-- Realign and improve merchandise offerings;
-- Create a more balanced and efficient marketing investment;
-- Improve customer in-store experience; and
-- Implement more efficient store and home office processes that are
substantially lower in cost.
Improved Merchandise Offerings
Sears merchandise offerings will be improved with greater emphasis on core merchandise categories, such as home appliances and home fashions, and will feature improved merchandise quality, depth and consistency. Apparel will continue to play an important role in the Sears store with the company putting an even stronger focus on apparel offerings, upgrading the merchandise as well as improving the depth and clarity of its assortments. Sears will move to a single proprietary casual brand across its men's, women's and children's assortments.
More Balanced Marketing
The company's marketing resources are being reallocated to focus on more effective promotional activity and to provide a stronger emphasis on the Sears brand. Sears is eliminating less productive promotional activity, allowing the company to invest more heavily in marketing the Sears brand.
Improved Customer In-Store Experience
Sears will adjust customer service to better meet customer expectations, offering a higher level of service and expertise for major purchases and more self-service in areas where customers need less assistance. The company plans to move toward a self-service environment. Centralized checkouts will be in approximately 140 stores by year-end, and in all stores by the mid-2002. Planned store changes also include simplifying signage and fixtures and layouts.
"By going to market in a much more cohesive and consistent way, Sears will become significantly more efficient and more profitable," said Lacy. "These changes will improve customer satisfaction and significantly improve our profitability and growth potential."
More Efficient Processes
New store organization initiatives are being put in place that, when fully implemented in 2003, will result in more clearly defined of roles and responsibilities throughout the organization. Roughly 3,600 salaried positions will be eliminated from Sears stores and field organization over the next 18 months.
Productivity Initiatives and Home Office Review
The company expects to achieve annual expense savings of approximately $600 million by 2004, based on a variety of productivity and home office initiatives, including the full-line store organization initiative mentioned above. Sears also anticipates increasing full-line store, credit and other business profits by more than $400 million due to revenue enhancements during this time period. It is management's expectation that these actions will necessitate additional special charges, the amount and timing of which is currently being determined.
Home office initiatives include the alignment of support activities with redesigned store processes, improving efficiency and eliminating unnecessary work. As part of the home office productivity initiative, the company plans to eliminate 1,300 positions at the home office in Hoffman Estates, Ill., by 2003. Supply chain initiatives include improved integration and order management, network optimization, better use of space in stores and outside storage, and improved inventory controls.
Support of Other Growth Vehicles
Sears will continue its commitment to several growth areas: credit services, The Great Indoors and direct-to-customer, which includes online, catalogs and specialty merchandise sales. While The Great Indoors remains a promising retail format, Sears projects a more conservative 2002 store opening plan than previously announced. The company now plans to open seven stores in 2002.
The Sears Gold MasterCard, which provides selected customers with a more value added credit product, also continues to be an important aspect of renewed credit revenue growth. In 2002, the company plans to add more than 5 million new cardholders. Sears Credit continues to show solid portfolio credit quality overall.
Third Quarter Earnings and Outlook
In a separate release issued today, Sears reported third-quarter 2001 earnings excluding non-comparable items of $262 million or $0.80 per share, compared with $261 million or $0.76 per share in third quarter 2000, exceeding analyst consensus estimates. The company also stated that it is comfortable with analysts' current full-year 2001 consensus estimates of $4.09, excluding non-comparable items and net securitization income.
Meeting Webcast and Replay
Lacy and other senior executives are offering details on the company's strategy, including initiatives designed to improve the performance of Sears retail stores' performance, at a meeting held for retail industry analysts in Chicago today. The meeting, which begins at 8 a.m. Central/9 a.m. Eastern time, will be webcast live over the Internet at http://www.sears.com/ from the "About Sears" button. A replay of the webcast will be available on Sears Web site for approximately one week.
Forward-Looking Statements
This release includes "forward-looking statements," including projections relating to future sales and earnings, credit forecasts, and improvements in operations and product offerings, along with other statements using "plans," "expects," and other words of similar meaning. The statements are based upon assumptions about the future, which are subject to risks and uncertainties, such the effects of the general economic climate, including changes in consumer confidence; competitive conditions in retail; customer reaction to the company's product, marketing and in-store experience initiatives; developments relating to the roll out of the company's operating and other customer-oriented initiatives; changes in bankruptcy filings, interest rates, and other credit trends; and customer acceptance of Sears Gold MasterCard. Actual results could differ materially. The company intends these statements to speak only as of the date of this presentation and does not undertake to update them as more information becomes available.
About Sears
Sears, Roebuck and Co. is a leading U.S. retailer of apparel, home and automotive products and services, with annual revenue of more than $40 billion and approximately 300,000 employees nationwide, including 22,000 salaried employees. The company serves families in the U.S. through Sears stores nationwide, including approximately 860 full-line stores. Sears also offers a wide variety of merchandise and services through its Web site, http://www.sears.com/. Sears, Roebuck and Co. is the majority owner of Sears Canada Inc. The company makes available by phone a recorded message on sales performance of its domestic stores. The message is updated weekly and can be heard by calling (847) 286-6111.
SOURCE: Sears, Roebuck and Co.
Contact: Peggy A. Palter of Sears, +1-847-286-8361
Website: http://www.sears.com/