Sears' belt tightening not enough for stockholders - Sears, Roebuck and Co. stockholders present 5 company reorganization plans

Discount Store News, April 20, 1992 by Arthur Markowitz

CHICAGO -- Sears is maintaining its relentless drive cut costs and become a more profitable retailer, but its efforts haven't satisfied dissident stockholders who are backing five proposals that could markedly impact the company.

Sears' latest cost-cutting move is the elimination by early 1993 of 2,000 full-time jobs, about half at its headquarters, resulting in a projected $30 million savings this year and $80 million annually thereafter.

The retailer inaugurated a new compensation plan for commissioned salesclerks last month that encouraged about 3,200 people to leave, resulting in an annual $60 million saving. About 650 positions will be eliminated and the rest replaced.

Sears this month is due to complete a reorganization of its field staff that involves closing 10 regional offices and 26 of its 72 merchandising districts, eliminating about 600 jobs and saving about $50 million by next year.

The responsibilities of the remaining 46 districts have been expanded to include "customer service, revenue growth, teamwork, associate development and training, store presentation, inventory productivity and facility management," the company said. Its also has begun to centralize replenishment at headquarters, with this program due to be completed early next year.

Separately, Sears cut 6,900 store level jobs--1,000 fulltime non-sales positions and 5,900 part-time clerical slots--earlier this month as it began to phase in a new computerized cash register system. It expected to save about $50 million a year starting in 1992 from this program, which calls for the purchase of 28,000 Compuadd POS terminals and 6,000 automated customer service kiosks, at a cost of $60 million.

The technology will enable clerks to issu temporary SearsCharge cards, gift certificates, access customer information and process payments, all at the same terminal. Previously, these functions were scattered among different terminals.

While reducing Sears Merchandising group expenses has been the company's main goal for the past few years, chairman Edward A. Brennan now says growing sales is the number one retailing priority.

The Merchandising group's sales and services (warranty and repair of Sears and non-Sears products) fell 1.7% in 1991 to $28,344.8 million from $28,958.8 million. Merchandising operations in the United States, which accounted for 78.8% of the group's volume, also declined, off 1.3% to $24,757.3 million from $25,093.2 million.

But the cumulative effect of cutting costs last year paid off in a $600 million reduction in expenses and the group's income (net of minority income and equity in unconsolidated companies) jumped 84% to $473.4 million from $257.3 million.

Brennan resumed the top retailing post at Sears in August 1990 and since then the company has cut or plans to eliminate 43,150 jobs, a 13% reduction in its retail work force. This move is expected to save $840 million this year and $940 million in 1993.

Brennan's plan to boost sales--part of his twin pledge to lower costs and increase volume-calls for expanding the retailer's merchandising of name brands, along with more sharply priced specials to draw customers. It's also venturing into new merchandising territority, such as offering Apple computers, the first time that line has become a mass market item.

The growth plan includes opening six new Sears and eight replacement units, 17 new Homelife furniture stores--13 as free-standing units and four within Sears--and about 100 specialty stores from its mix of Western Auto, Eye Care Centers of America, Pinstripes Petites, Business Centers and paint and hardware units.

Sears' proxy statement noted that Brennan was entitled to a bonus last year, but withdrew from Sears' annual incentive bonus plan to "reflect the spirit of the salary freeze that was in effect for salaried employees" in the Merchandise group and corporate staff in 1991. But he was paid $979,847 and also received $391,206 as part of Sears' long-term incentive compensation plan.

The proxy also listed five shareholder proposals--all of which Sears opposes--that will go before the annual meeting May 14 in Atlanta.

The key one calls for the board of directors to determine Sears' value if it were broken up into separate retailing and financial service companies and that shareholders be allowed to take "whatever action seems appropriate."

Sears contends a study isn't needed as its investment banker, Goldman Sachs, is already looking at Sears make-up and making suggestions to the board. A study, Sears added, would also harm its ability to raise funds, support its stock price and use assets.