Kmart can learn some lessons from Sears - Buyers & Sellers - Editorial

Discount Store News, Feb 21, 1994 by Don Longo

A few years ago, the general concensus among retail trade observers was that while both Sears and Kmart weere giants in transition, the Chicago-baased store, catalog , insurance and financial services behemoth probably faced the more difficult road ahead.

In retrospect, it seems the only difference between the two reconstruction projects is that Sears began the grief of restructuring before Kmart had to endure renewal pains.

When Kmart was racing past Sears in the 1980s to become the largest retailer, Sears was suffering from many of the same types of problems that currently plague the Troy, Mich.-based discounter:

* Lack of financial, operational and strategic focus on the core retail business;

* An old store based in need of refurbishment;

* High expense structure in comparison to its main competitors;

* A general malaise throughout the organization as defenders of the status quo faced off against champions of change;

* An unfulfilled quest to deliver shareholders value;

* A merchandising uncertainty that for Sears resulted in an aborted everday low pricing strategy, upscaling attempts and an influx of more fashion-forward merchandise.

Today, Sears is stronger and more focused. Chairman Ed Brennan has jettisoned all or past of such divisions as Dean Witter, Discover Card, Coldwell Banker residential brokerages and the Sears Mortgage unit and shut down Sears' catalog operations.

Joe antonini launched Kmart's renewal in 1990, focusing on creating bigger, easier to shop stores with dominant lifestyle departments, centralizing merchandise replenishment, using technology for better customer service, and nurturing new retail formats to fill specialty niches.

Despite this attempt to put on a fresh new face for the '90s, Kmart in 1991 has capped five years of disappointing earnings with a dismal performance in 1993. What must have been even more galling to Antonini was watching Wal-Mart's sales explode, giving Kmart scant time to enjoy its standing as the world's largest retailer.

As he ponders a renewal that's turning out to be a much bigger job than he must have originally envisioned, Antonini might benefit from a chat with Brennan.

Brennan would likely give Antonini this advice:

* Be persistent. Few chief executives have faced as much criticism from external and internal foes as Brennan. Among Antonini's prlbmes is maintaining the full backing of his own board of directors. Brennan, from personla experience, would say, "Don't back down."

* Hire a right-hand man (or woman). NO one person can do everything. One of Antonini's greatest assets is the force of his personality and will. This has enabled him to create change in a resistant environment. One the other hand, this same strength makes Kmart too dependent on Antonini, one of the few executives in retailing to hold the three titles of chairman of the board, president and chief executive officer. Brennan would point to the recruitment of former Saks executive Arthur Martinez, who developed the game plan to revitalize the Sears Merchandise Group.

* Tolerate no sacred cows. Brennan would approve of the dismantling of Kmart's specialty retail division, particularly the sale of PayLess Drugs and Pace Membership Clubs. Just as Sears closed 113 smaller stores and specialty units and its time-honored catalog operation, Kmart is on the right track in re-evaluating which specialty chains are the right fit for the high-volume, mass market strategy of the corporation.

* Focus on expense control. Even mostly symbolic gestures like selling the Sears Tower (see also "Tolerate no scared cows," above) go a long way toward getting the message out to associates and shareholders that the company is serious about being competitive.

Of course, not all Brennan's advice would be appropriate for Kmart. Antonini must follow his own vision for Kmart's future, but a few lessons from someone who's been through it already can't hurt.