Sears to replace full-line president, open third Grand

DSN Retailing Today, August 2, 2004 by Laura Heller

HOFFMAN ESTATES, ILL. -- Changes abound at Sears these days as the retailer shuffles executives, creates a new leadership position and prepares to open a third Sears Grand location in Las Vegas this week.

On July 12, Sears announced that Mark Cosby, evp and president of full-line stores, had left the company "effective immediately to explore other opportunities," according to a press release. This follows a string of disappointing sales as the chain struggles to execute a soft lines strategy and sees sales in core hard-lines negatively affected.

Cosby joined Sears in late 2002 after serving as coo of KFC. During his tenure, the company launched the Covington line of apparel, acquired Lands' End and developed the Sears Grand concept, a hybrid Sears full-line store situated away from the regional mall with a wider selection of everyday items, including consumables.

But sales have failed to materialize. Cosby's departure came just days before the chain announced sales of $7.7 billion for the second quarter ending July 3, down from $7.9 billion the prior year, while comp-store sales dipped 2.9%. Sears pulled in just $3 million in operating income at its domestic stores. Consolidated operations--including Sears Canada and its Credit and Financial divisions--posted a loss of $806 million for the 26 weeks ending July 3.

Sears sold both the credit card operations and National Tire and Battery last year and is under intense pressure to realize sales from its domestic retail operations. Sales did not materialize under Cosby, and the company is now conducting an outside search for someone to fill that role as "President of Sears Retail," a newly created position.

"The new role reflects the next phase of the company's growth strategy, including Sears' recently announced accelerated expansion off-mall," according to the company. "The new position will include responsibility for all existing U.S. Sears full-line and specialty retail stores and leadership of the company's aggressive new off-mall growth agenda."

Last month, Sears acquired 54 stores from Kmart and seven former Wal-Mart units, with plans to convert three to the Grand format. The remaining units will become a new hybrid full-line store that has many elements from Sears Grand, including a single level race track design with a centralized checkout. These new units also will include pantry items and consumables, according to the company.

Sears is also looking to new apparel brands, such as Structure for men and Gerber Beginnings for babies, to boost sales. But the recent softness isn't expected to let up anytime soon, as Sears expects continued declines in comp-store sales and expects third quarter earning in the zero-to-10 cent per share range. Analysts on average had estimated third quarter earnings to total 44 cents per share, according to First Call. EPS for the just-ended second quarter were 24 cents compared to analyst expectations of 71 cents per share.

Sears may be looking for a new second-in-command to chairman and ceo Alan Lacy, but it also announced the addition of Catherine David to the post of vp and gin of The Great Indoors, responsible for merchandising, marketing and operations. David joins Sears from Newell-Rubbermaid's Burnes Group and has held positions at Target Corp. She will report to Beryl Buley, Sears' senior vp and gram of home stores.

In August 2003, the company closed three units and commenced a strategic review of The Great Indoors, but Lacy told reporters last spring that profitability was improving at the concept and a new growth phase could be in the works. According to Buley, "We are ahead of schedule in working through our strategic redefinition.

But Sears needs to deliver on its promise to grow sales at its full-line stores and with Cosby's departure; the search is on for the merchant who can do just that.