Slash at Sears

Feeding back "excess "profits

In full-page ads across the country, Sears, Roebuck & Co. trumpeted a 5% reduction in its catalogue prices as a "voluntary" move "to help fight inflation." But the sudden--and suspect--volunteerism came after weeks of rising pressure from the Council on Wage and Price Stability (COWPS) and a phone call to the company's Chicago headquarters from none other than Jimmy Carter. It was the President's first such jawboning-by-wire, and the highest official he could reach was the senior vice president for public affairs; the others were out to lunch, and Chairman Edward Telling was in an airplane flying over Kansas at the time.

Sears may have been the target because it is the world's largest retailer (1978 sales: $18 billion), and a victory would give a lift to Carter's price fight. Surely a boost is needed. Consumer prices rose at a 13% annual rate in the first quarter, and wholesale prices for April were reported last week to have increased at an 11.4% annual rate, despite declines for some foods, including pork and coffee.

The Administration claims that in the six months through last January, Sears increased prices at an annual pace of 4.2%, well over the 3.2% allowed it by COWPS. The rollback is designed to bring the company into line with the Government's guidepost for the year and feed back to the public any "excess" profits. About 20% of Sears' business is catalogue sales, and the company will automatically send refunds to any customers who mail in too much money. Sears also will make "selective'' price reductions in its stores.

The move stands to do more to burnish the public relations image of Carter's anti-inflation commandos--and Sears--than to contain overall U.S. prices. First, inflation in general retailing has been relatively modest, averaging well under 5% over the past five years. Second, Sears' major competitors, including J.C. Penney, K mart and Montgomery Ward, do not intend to cut prices.

Quite possibly, Sears would have reduced its prices even if COWPS had not acted. The company's sales have slumped for eight consecutive months, largely because it moved away from discounting in an effort to improve profit margins. Now Sears can claim that price reductions are an act of inflation-fighting patriotism instead of a necessary step to woo back customers, and it can blame any lower profits on Government pressure to cut.

In any case, the company has the last laugh. One of its executives was suffering from a bad case of flu when he met with COWPS officials in Washington after the President's phone call. Some time later COWPS Director Barry Bosworth and several other agency officials were put to bed with what their colleagues are calling "Sears' revenge."

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