For Sears, Lands' End talent is icing on the deal - Lands' End veteran Mindy Meads is hired

DSN Retailing Today, April 21, 2003 by Emily Scardino

HOFFMAN ESTATES, ILL. -- Upper management at Sears is taking a hard look at softlines now that plans are underway to divest its weakening credit business and turn' its attention exclusively to retail. As it continues to search for a long-term solution to its struggling apparel business, Sears has replaced Kathy Bufano, who was brought in 14 months ago to oversee softlines, with Lands' End veteran Mindy Meads, who joined the company as a result of last year's acquisition. Meads will assume the title of evp of softlines and merchandising.

Meads' background in executing best-selling SKUs for Lands' End, the top-drawer catalog and No. 1 apparel e-tailer, is one that Sears obviously hopes to tap into for its overall softlines assortment. Sears acquired Lands' End during Bufano's tenure and merchandise is still slated to roll into all 870 stores by the end of 2003, up from the approximately 400 stores that currently carry it.

"I think that Meads' promotion is an excellent move," noted Christine Augustine, retail analyst at Bear Stearns. "We'll see even more of a focus for Sears on the store side for sourcing and quality."

According to chairman and ceo Alan Lacy, Sears hoped that high-priced Lands' End bestsellers, like its cashmere sweaters, would attract the well-heeled customers generally found in Sears' hardlines department to the apparel department. However, "The higher-end items that we introduced initially under the Lands' End brand did not perform as well as we had hoped," Lacy noted, though he is "pleased with the overall performance of the brand as it expands across all stores."

At the same time, certain demographics have been slow to embrace Lands' End, specifically, Sears' traditional working-class and ethnic consumers unfamiliar with the middle-class, Midwestern brand, Lacy told DSN Retailing Today.

As Sears' expensive investment moves into all doors, more focused brand management is critical to making Lands' End a bricks-and-mortar success. Having Meads at the reins with her expertise in positioning the Lands' End brand was seen as critical.

The move to replace Bufano was made by Mark Cosby, who joined Sears as president of full-line stores last December. He oversees both hardlines and softlines, reporting directly to Lacy.

"Over the last quarter, Cosby has taken stock of our current progress and team and is making changes where appropriate," Jan Drummond, Sears spokeswoman, told DSN Retailing Today. Lacy was "extremely pleased" to find Cosby, previously coo of KFC, to oversee both retail and operations, as he had been looking for some time for an executive that could execute both job functions.

If Sears' credit operation, which brought in $1.5 billion or 60% of its bottom line in 2002, sells, the retailer will be completely dependent on its retail division, which traditionally has been strong in hardlines and weak in softlines. According to Drummond, "if" is an important question; there are no buyers as of yet. The sale of the division would bring in, at most, $7 billion, according to analyst estimates, so a dramatic uptick in retail performance would be necessary to offset this potentiality.

Management has been reticent about the performance of another brand, Covington, the major private label initiative that Bufano was responsible for bringing to market. Covington had brought in about $2.00 million as of January since its launch across all stores in September 2002 according to Lacy--not inordinately impressive considering that overall sales were $9.73 billion during fourth quarter 2002 alone, approximately 40% of this coming from softlines.

Millions of dollars in advertising dedicated to Covington and new fixturing were not enough to commit customers to an assortment that was, in a word, "off." Conceived before the acquisition of Lands' End, basics-oriented Covington is not clearly differentiated in terms of merchandise from Lands' End aside from its lower prices; Covington is sold off-price two-thirds of the time.

"Clearly design has been an issue and is why Covington is getting remerchandised for fall," added Augustine. Going forward, Covington will be more fashion-oriented--but Sears must be careful to avoid overlap in the misses department, as its Apostrophe private label already provides trendy casual and career separates. Though family lifestyle brand Covington was a consolidation of numerous Sears private labels, the assortment may still prove oversaturated in terms of proprietary brands.

However, offsetting suppliers' potential fears that Lands' End is becoming the be-all, end-all apparel brand at Sears, the retailer recently played up its 20th Partners in Progress annual vendor awards.

"Genuine supplier partnerships are critical as we strive to make Sears a more customer-driven company," stressed Lacy of the continued emphasis on partnership with national brands.

Still, Lands' End is crucial to Sears' strategy to improve its apparel sales, and paramount in its initiatives through 2003.