Sears to battle CE specialists with stand-alone superstores - consumer electronics stores

Discount Store News, May 9, 1988 by Laura Liebeck

Sears to Battle CE Specialists With Stand-Alone Superstores

CHICAGO--Sears is taking on the appliance and consumer electronics superstores at their own game.

The retailer announced last month that it will create appliance and CE "superstore" departments and then spin off the concept into freestanding stores to compete with such specialty retailers as Silo, Luskins, Highland, and Circuit City. Sears also announced that it will create freestanding auto service centers.

The superstores will be fashioned much like the appliance and CE stores available now, offering many popular brands in addition to Sears' own labels. The stores will bear the Sears name.

"We will not permit the so-called superstore to usurp one of our strongest businesses," said Michael Bozic, chairman and chief executive officer of Sears merchandise group. "We will do whatever is necessary to strengthen our position as America's premier retailer of appliances and home entertainment products."

Bozic made his remarks to an audience of financial analysts who were assembled here following the retail giant's announcement that the company suffered a 37.7 percent decline in profits in the first quarter--from all segments except financial services.

While net income for the quarter fell to $179.5 million from $287.9 million a year ago, sales rose 16 percent to a record $12.16 billion. Sears, Roebuck & Co. chairman and ceo, Edward A. Brennan, noted that the company's profits decline is not an indicator of its 1988 results. Income for first quarter 1987 rose a record 47 percent.

A company spokesman told DSN that Sears decided to convert the retailer's traditional appliance and consumer electronics departments into superstores "to maintain our position as a premier marketer of appliances and home electronics and to present the customer with a wide variety of choices."

The superstore program will be implemented in three phases: first, Sears will install the superstore departments in select markets and refine the program; second, the retailer will expand the concept throughout the chain; and third, it will open freestanding units. The spokesman gave no timetable for this process. He also declined to name the specific name brands to appear in the superstores.

Sears already offers consumers Sears brand CE equipment plus Sony, RCA, Pioneer and Magnavox products but only Kenmore home appliances.

The superstore departments will be expanded by more than 50 percent of their current size, with existing floor space being rearranged so as to utilize "used selling space" contained in the stores' storage and warehouse areas.

Sears, with 813 stores at year-end 1987, will add 39 new or relocated stores including 24 smaller market concept stores in 1988. Between 1989 and 1992, the retail giant plans to open 85 department stores and 147 smaller stores for a total of 1,050 units.

The retailer currently has two store formats: the full-size or mall store, with at least 100,000 square feet of selling space; and the smaller--up to 100,000 square feet--market-driven stores that feature merchandise specifically focused on a particular market.

Like its competitor, Montgomery Ward, which is transforming itself into a specialty retailer, Sears is likely to intensify its move into the specialty arena.

So far this year, Sears has opened two Sleep Shops in Miami in February and announced plans to open a Chicago neighborhood apparel and home fashion shop and a home fashions store in New York City. Both concepts are experimental.

The two Sears Sleep Shop locations offer bedding under the Sears name plus Sealy, Simmons and Spring Air in addition to sleep sofas and headboards in units of between 4,000 square feet to 5,000 square feet.

The neighborhood store in Chicago will open sometime this summer or fall in a 59,000-square-foot location. The target customer is the apartment dweller, about the same as for the home fashion unit opening in Manhattan this summer.