Sears board flexes muscle on retail business plans - more involvement in retailer's growth

Discount Store News, July 20, 1992 by Arthur Markowitz

CHICAGO - Sears board of directors has heightened its involvement in the company's on-going efforts to strengthen its bottom line and its drive to revive its stagnant retailing business.

Separately, Sears has taken a number of steps to boost its retailing business, including the catalog division and its uncertain future operation.

A sears spokesman specifically denied a Crain's Chicago Business report that the board was weighing the catalog's future and may close it. It "is absolutely not true [that the catalog arm is in a race for survival]," the spokemsan said. "A multi-year strategy was approved by the board, and we are on plan and in some respects ahead of it."

Sears board's greater direct involvement in the company's business was evident by its actions it took at a special meeting last month. It approved a confidential voting measure and a requirement that directors hold a minimum number of shares, two stockholder proposals that had been rejected at Sears annual meeting in May The board also dropped the mandatory retirement age for directors to 70.

But the board gave mixed signals about its support for Edward A. Brennan, the chairman and chief executive officer whose leadership has been questioned by dissident shareholders, some security analysts and trade observers, all of whom noted that Sears' core retailing business has been floundering.

At the meeting, the board limited nominating committee membership to outside directors, thereby removing Brennan from the committee. But it turned down a proposal that the posts of chairman and chief executive officer - a move also rejected at the annual meeting - be split in two. While this was seen as support for Brennan, some trade observers said that filling whatever post was taken from Brennan could be a major problem and may be behind the board's decision.

Brennan, after the special meeting, said the board action was "responsive" to shareholder interests. At the annual meeting, he said the share-holder proposals were issues of "corporate governance" and weren't directed against his leadership.

While questions swirl about Brennan's management and the catalog division, the retailers has taken the following steps to boost its business: * Begun selling prescription drugs through its catalog division, using Allscripts Mail Service Pharmaceuticals as the drug supplier. Over 10,000 drugs are available, with consumers ordering script through a toll-free number. * Started accepting bank credit cards for goods ordered from the catalog and provided direct delivery of mailable goods to wherever the customer wanted. Bulky cataloger merchandise will still have to be picked up in a Sears store.

These moves were designed to make catalog shopping easier and faster, Alfred G. Goldstein, president of Seats Specialty Merchandising said. His mandate is to turn around the catalog business, which has reportedly been losing money for a number of years.

Sears has begun closing its 178 catalog agency stores, run by independent contractors. The company said that move to direct delivery of catalog goods eliminated the need for the agency system.

The direct delivery system also resulted in Sears closing down the catalog order and pick-up desks in its retailer stores, turning the space into retail selling area. The net effect of this move is to expand a store's merchandising area without enlarging the facility. * Rolled out the Sears Best Customer program that offers services, special coupon savings and sales, priority repair services and other benefits to consumers that frequently shop Sears and purchased higher amounts of goods using the SearsCharge card. The program's goal is strengthen Sears' relationship with its most loyal customers and encourage them to buy even more goods from the chain. * Enhanced the Sears Industrial Sales Catalog distributed just to businesses by adding Atrix International products that are used by electronic producers and service firms.

The Sears Industrial Sales Catalog is produced by Sears Contract Sales group, a little-publicized part of the Sears Merchandising Group. The contract sales group sells Sears and non-Sears merchandise to commercial companies like contractors and manufacturers through the Industrial Sales Catalog and 120 salesman.

The contract group's sales are part of the overall revenues reported for the Sears Merchandising group, but its specific volume isn't broken out by the company.

Sear's turnaround effort for the troubled catalog arm includes more focused product offerings, target marketing, cost reductions and new customer acquisitions," the company stated in response to the report that the catalog business could be closed."