Sears plans to beef up its L&G, tool mix - Brief Article

Home Channel News, Feb 7, 2000 by Brae Canlen

Dept. stores would trim other core hardlines

HOFFMAN ESTATES, ILL. -- In an ongoing effort to boost declining sales, Sears plans to expand its home decor, tools and lawn and garden departments inside its large department stores.

"Sears is taking a hard look at the assortments they're most dominant in," said Wayne Hood, an analyst with Prudential Securities in Atlanta, whose report on the company was obtained by NHCN. Hood, who recently met with CEO Arthur Martinez and other Sears executives, told NHCN that the nation's second-largest retailer may slim down product offerings in paint, faucets, lighting, and miscellaneous electrical and plumbing. "There's a good chance that [Sears] will exit or, at the very least, downsize that assortment," Hood added.

Sears already has reduced the number of vendors it will buy from for spring 2000 by 16 percent, according to Hood's report. This year, a floor plan with reallocated selling space will be tested in three markets: Cincinnati, Milwaukee and Indianapolis. The new format may also include centralized checkouts, fewer merchandise fixtures and an overall reduction of "clutter" in the stores.

A spokesman for Sears had no comment on the analyst's report, though he did confirm an experiment with shopping carts in some Midwestern and New York stores. He added that "no decision has been reached" on a national rollout of Sears' "Tool Territory," an expanded tool section that was tested last year in Virginia Beach, Va. and Hartford, Conn. But according to Hood's report, Sears management plans to install some version of the tool territory department in 700 stores to spur a 20 percent sales increase in this category.

Last year was turbulent for Sears, which suffered the ignominy of being replaced on the Dow Jones Industrial Average by Home Depot. The year-end financial results for Sears, released on Jan. 21, were a mixed bag. Revenues for 1999 were down 1.2 percent to $41.5 billion. Profitability rose dramatically, however. Net income jumped 38 percent to $1.45 billion.

Sears made a strong showing in the last quarter of 1999. Net income increased 42 percent to $740 million on $12.5 billion in sales that were up 2.3 percent.

Sears currently operates 858 full-line department stores and 2,100 "off-the mall" units. It remains to be seen how Sears can expand tools and home decor in its department stores without cannibalizing sales in its specialty stores such as Sears Hardware and The Great Indoors. Last November, Sears announced plans to build 150 more units of The Great Indoors, which focuses on floor coverings, window treatments, bed and bath linens, tabletop and decorative accents -- many of the same products that Sears will start embellishing in its flagship stores.

Logistics may dictate a selloff of some assets, a strategy Sears refused to discuss during its meeting with Prudential's analysts. One rumor that has been circulating around the industry in recent weeks -- that Sears is trying to sell Sears Hardware to Home Depot, which would use that chain to expand its Villager's Hardware format -- caught Hood off guard. "But I wouldn't be surprised if that were to occur," Hood added. "Sears needs to focus on its core business. [Units] that are off-the-mall are likely candidates to be sold."