Moving Back to Main Street

Ever since it practically invented the idea more than a century ago, Sears has seen a big sale as a sure cure for slow business. Even by the standards of the largest U.S. retailer, last week’s offering in Chicago was its most stupendous yet. Chairman Edward Brennan served as the star pitchman. “It’s a trophy,” hawked Brennan, 54, a cherubic former Sears salesman. “It’s an excellent facility, very well maintained; nothing of its size and value has ever been sold before. After all, it is the tallest building in the world.”

The retailing giant (1987 revenues: $48.4 billion) was putting its landmark headquarters, the Sears Tower, on the block. Target price: a record $1 billion-plus. The offering was remarkable not just for its size but for its symbolism: the 110-story tower, which commands a view of four states, had seemed to signify the company’s invincibility and dominance over the U.S. consumer marketplace.

No longer. Sears’ popularity as a retailer has slipped drastically, eroding the company’s profits and depressing its stock price. The slump finally forced the company’s management last week to launch a major restructuring that involves paring down its overhead and revamping its marketing philosophy. In a bidding process that may take six months or more, Sears hopes to sell its tower for perhaps six times the $200 million it cost to complete in 1974. In addition, Sears will sell off the commercial-property division of its Coldwell Banker real estate firm for an estimated $500 million, and the health- insurance programs of its Allstate insurance company for $1 billion or so.

What hastened the move was the arrival of the unthinkable: a rash of giant takeover deals that raised the possibility of Sears itself becoming a raider’s target. To make its stock more dear, Sears plans to invest at least $1.5 billion in buying back 10% of its outstanding shares. Yet later in the week came rumors that a takeover bid was being considered by such candidates as developer Donald Trump and Revlon chairman Ronald Perelman. With a market value of at least $16 billion, Sears is still a long shot as a takeover victim. But analysts think the company would be worth $36 billion if its assets were auctioned off separately.

Retailing experts trace the company’s decline to the construction of the hulking tower. The building was designed to serve as headquarters for an expanding conglomerate of “everything stores.” These were intended to offer everything from financial services to apparel (a strategy dubbed “socks ‘n’ stocks”). By the year 2000, the tower was to be occupied solely by Sears’ own corporate branches, in contrast to about 60% of the building’s 13,000-worker occupancy now. The view from the 110th floor may have been fine, but the vision was blurred. “The tower might have been one of Sears’ greatest miscalculations,” says Donald R. Katz, author of The Big Store, a 1987 history of the company. “To many Americans and even to a lot of people who worked there, Sears went from being viewed as the nice store down the street to this remote, powerful corporation.”

Even Brennan speaks of the tower’s jinx. Says he: “When your world is vertical and all your movement is by elevator, your contacts are inhibited, you don’t see people as frequently as you do in other environments and decision making is difficult. Some of that slow-to-react, hard-to-change culture takes place.” Brennan hopes that moving all but 600 senior-level corporate executives from the monolith will help Sears get back to its hometown roots.

Sears’ decline has come at the hands of mass-volume discount retailers like K mart and Target on the one hand and sprightly, full-line specialty stores like Circuit City (electronics) and the Home Depot (hardware) on the other. Sears’ sales grew only 4.3% last year, in contrast to Wal-Mart’s 34%. Sears’ dependable Kenmore appliances, which held a commanding 46% share of the market only five years ago, have reportedly slipped to a 33% share. Even Sears’ dominance as the No. 1 retailer is being narrowed to decimal points: Sears’ merchandise sales last year were $25.8 billion, vs. K mart’s $25.6 billion.

After shoring up Sears’ financial base, Brennan aims to transform radically the style and format of his company’s 825 retail stores. Brennan will reduce the number of Sears’ well-known promotions, like weekend sales, in favor of steadier discounting. The new advertising slogan will be “Everyday Low Pricing.”

Brennan also plans to expand the company’s offering of brand-name goods in boutique-like departments. Most Sears stores will be far more concentrated in automotive parts, electronics, appliances and apparel lines than in miscellaneous dry goods. Brennan the salesman is ever optimistic. “When you walk into a Sears store and you’re shopping for a particular product, you’re going to say, ‘This is it. I’ve found the right place.’ “

Because Brennan’s marketing revamp remains largely theoretical at this point, most experts are reserving judgment. “The changes could bring Sears back to Main Street where it belongs,” says Walter Loeb, a retailing analyst for Morgan Stanley. “But the customer may not like Sears anymore. A mature company is fighting for its life. The jury is still out, and as always, the jury is the consumer.”