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Wal-Mart's relentless efforts have yielded remarkably rapid growth. Just 10 years ago, company sales of $2.4 billion were less than 12% of Sears'. But in the past three years, while Sears' North American retail sales (including those from 131 Canadian and Mexican stores) have grown only 14%, from $28 billion to $32 billion, Wal-Mart's have doubled, from $16 billion to $32.6 billion. Sears' overhead expenses still consume 29% of sales, and K mart's 23%, but Wal-Mart's burn up only 16% of sales. Wal-Mart workers are more productive than Sears': they generate an average of $95,000 in sales per employee, in contrast to $85,000 for Sears employees.
Sears executives bristle at comparisons with Wal-Mart. Says a spokesman: "We compete with Wal-Mart on only 30% of the goods we sell." Maybe that's part of the problem. Critics say Sears management has lost touch with its customers and its mission. As a result, several retail expansions during the past few years have failed. Examples:
-- Sears is determined to upgrade and expand its fashion lines, but in stores better known for Kenmore washing machines, Craftsman tools and Weatherbeater paints, women's fashions have suffered a persistent image problem. Says Kurt Barnard, publisher of the Retail Marketing Report: "Ask the average woman if she would care to wear a Sears Roebuck cocktail dress. It's an oxymoron."
-- Sears also stumbled two years ago with McKids, a venture with McDonald's that ran a string of 47 stores featuring children's fashions and toys. The idea seemed sound, but the stores were badly organized and overpriced. Last week Sears shut the stores, though it will carry the clothes and toys in some Sears outlets.
In contrast to Wal-Mart's high-stepping esprit de corps, a debilitating siege mentality and lackluster follow-through afflict Sears, according to employees and managers. No effort to revitalize Sears' competitiveness, they say, is likely to succeed until management communicates a clear vision for the company. Says a closely informed source who did not wish to be named: "Why are we always ending up with these losing propositions? We arrive at a strategy, but not everyone in the organization adheres to it. They hedge. There's a lack of buy-in, and you never come out with anything coherent. A lot of the new stores look disjointed. They tend to become confusing places to shop. The bureaucratic culture is an enormous part of the problem."
Sears' weighty troubles sit on the shoulders of chief executive Edward Brennan, 57. Last week, emerging after 20 hours of deliberations with his board during two days, he announced that 9,000 more Sears employees must be laid off by December, bringing total job cuts this year to 33,000, more than 8% of the firm's 394,000 merchandising staff. The Sears board is divided as to whether Brennan should join their ranks; at least 4 of the 13 directors are said to be leaning toward new management. Admits a Brennan confidant: "We're in serious trouble. We needed to make some radical decisions that haven't been made. It's chaotic. We don't know what's going to happen."