Sears Searches for Success

After going uptown, now back to basics for Middle America

Like an aging beauty trying to regain her charm with another facelift, Sears, Roebuck & Co. is struggling to recover its longtime merchandising prowess. After flirting with fashion and trying to outdiscount the discounters, the nation's largest retailer (1979 sales: $17.5 billion) is returning to its tried and true, highly successful selling formula: aiming straight for the charge accounts of America's middle class. The artist picked to give Sears its beautiful new visage is Edward Brennan, 46, who was installed earlier this month as the second youngest president in the firm's 94-year history.

Sears' search for a new direction is overdue. The firm's earnings last year slid by a hefty 12.1%. Standard & Poor's has downgraded Sears corporate bonds from AAA to AA. Says Chicago Retailing Analyst John Landschulz of Mesirow & Co.: "Sears has been resting on its laurels for a decade. They need a complete merchandising overhaul."

For more than half a century, Sears won the nation's hearts and pocketbooks with solid, if unspectacular, private brand merchandise like Kenmore washing machines and Diehard batteries, which it sold at moderate prices and backed up with reliable service. But beginning in the early 1970s, Sears went astray. Pinched on one side by shopping-mall specialty stores and on the other by discounters like K mart, Sears tried to move uptown. Suddenly, along with familiar bestsellers like Craftsman home tools, Sears emphasized stylish items like Musk Oil aftershave. A merchandiser from New York's Bloomingdale's was hired as fashion director to lend some tony ambience.

But Sears shoppers wanted to maximize cash, not cachet. When the upgrading effort flopped badly, Sears switched directions and tried to recoup by launching a price-cutting drive. Sales rose 15% in 1977, but market shares slumped and profit margins dropped. Last year Sears again shifted tactics by cutting down promotions and long-running sales to rebuild earnings. But that also failed, and sales declined 2.3%. Sears was developing an acute case of corporate schizophrenia. Says Morgan, Stanley Analyst Walter Loeb: "There is a certain sexiness about Penney's, a certain chauvinist budget-orientation about K mart. But Sears' heavy-handed male orientation doesn't appeal to women--and women are the shoppers."

To push Sears back to basics, Chairman Edward Telling reached beneath the top layer of senior management to pluck Brennan from the regional office in Atlanta, where he ran 150 Southern stores. The new chief executive officer is a third-generation Sears man. His grandfather started as a Sears plumbing and heating supply buyer in 1898, and his father was a slacks buyer in the 1940s. Brennan began his company career at 22, as a salesman in the Madison, Wis., store. Then he hopscotched to Sears outlets around the company and up through the organization. Brennan, who still wears Sears suits, is highly regarded for his drive and likable ways in a company noted for granite-like personalities.

The new president's first task will be to rein in the huge bureaucracy that has allowed the firm's 864 stores to be run much like medieval fiefdoms. Sears has begun peeling away layers of encrusted management, streamlining the field organization and centralizing decision making and buying at Chicago headquarters. Earlier this month, the company started an aggressive campaign to keep its 23 million charge customers despite Washington's demands for credit restraints. Merchandising experts say that the firm may eventually have to drop its policy of refusing to stock little besides its own brands. Sears still resists selling national labels like Levi's or Gloria Vanderbilt, which middle-class customers now demand.

Brennan's task will be made more difficult by the growing recession. Last month retail sales were down a sharp 1%. With its emphasis on easily deferrable big-ticket purchases like appliances, Sears could be hurt harder than most. All of Edward Brennan's company breeding and 24 years of training will be needed to help the Grande Dame of Retailing recover the attractiveness of her youth. -

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