Sears ends licensing pact with Diamond Exteriors - Brief Article

Home Channel News, Feb 21, 2000 by Brae Canlen

Retail giant must temporarily discontinue its installation services

HOFFMAN ESTATES, ILL. -- Citing dissatisfaction with the handling of customer complaints, Sears ended its licensing agreement with Diamond Exteriors, an installer of roofs, gutters, fences and garage doors. As a result of the break-up, Sears said it will be "temporarily exiting" the business of installed services in these product categories.

Diamond Exteriors, meanwhile, may be exiting the business altogether.

Things began unraveling for the Woodstock, Ill.-based company on Feb. 1, when Diamond Home Services, the parent company of Diamond Exteriors, announced that Sears had terminated the contract.

On Feb. 2, bank lenders froze Diamond's accounts, forcing the company to lay off 900 employees in 70 offices around the country. Workers received no advance notice and were not paid for their last two weeks.

The next day, the company's chairman and CEO, Stephen Clegg, was locked out of his Woodstock headquarters by his landlord. That same day, a group of Diamond's shareholders, angry over a sharp decline in Diamond's stock value, pummeled Clegg in a conference call.

"This action by Sears came as a complete surprise to us," said Clegg in a prepared statement. "Diamond had the support of Sears as we worked together to put a difficult period behind us."

Exactly what happened during this "difficult period" is a matter of dispute. Diamond, which derived approximately 50 percent of its revenues from the Sears contract, claims that it had dramatically improved its performance in the last 60 days.

"Both the number of complaints and the number of unresolved complaints had really come down," said Thomas Laughran, an investor relations spokesperson for Diamond.

Clegg could not be reached for comment. But a source close to the company blamed Sears for the avalanche that buried Diamond Exteriors. "Diamond was doing fine before they pulled the plug," said the source, who spoke on the condition of anonymity. "We think Sears has been preparing to put in another [service provider]."

Sears tells a different story. Larry Costello, senior communications manager for Sears, told NHCN that Sears provided "a significant amount of help to get Diamond back on their feet" after the contractor defaulted on a bank loan last year. The help included accelerated payments and deferred licensing fees and advertising costs "that totaled in the millions of dollars," said Costello.

Diamond consistently failed to meet the minimum contractual levels for customer satisfaction, according to Costello. Although the contractor had made recent progress in its handling of customer complaints, "it was with complaints that were easy to address," Costello said. Other customers had more serious problems that went unresolved for months, he added.

Sears has sent out 5,000 letters to customers who had appointments or ongoing projects with Diamond, notifying them that Sears will stand behind its work, said Costello. While Sears will hire contractors to finish those jobs, the giant retailer has no plans to immediately find a replacement for Diamond, he said. It is currently reevaluating its contracts with Lyden Siding Co., a roofing installer in Hawaii, and Premier Fencing, an Atlanta-based licensee.

Sears, the nation's largest provider of home improvement and repair services, will still offer installed sales in heating and cooling, exterior siding, windows, and plumbing, and pest control, carpet cleaning and appliance repair.

Although Diamond Exteriors has shut its doors, its holding company, Diamond Home Services, continues to manufacture and distribute fencing and perimeter security products through a subsidiary called Reeves Southeastern Corp. Reeves operates 32 distribution centers, primarily in the eastern half of the United States.