CEO

New Sears CEO vows to improve sales, clothing

AP News
|
Posted: May 03, 2011 4:48 PM
New Sears CEO vows to improve sales, clothing

Sears' new CEO pledged Tuesday to help turn around the ailing retailer by relying on its core brands like Crafstman and Lands' End and being smarter about marketing to customers.

Louis D'Ambrosio told shareholders at Sears Holding Corp.'s annual meeting that improving the company's long-sagging clothing business will be a priority. He did not lay out a detailed plan for how to achieve that, although he cited strong hopes for two new clothing lines in particular: the Kardashian Collection, which debuts in August in 400 Sears stores, and Sofia Vergara, from the star of ABC's "Modern Family."

He has a lot of work to do. Sears' shares fell about 10 percent Tuesday after the company warned late Monday that its first-quarter loss will be bigger than expected. Standard & Poor's Equity Services changed its view of the retailer's shares from "Hold" to "Sell."

"We believe these results point to the increasingly dire prospects for Sears," another analyst, Gary Balter of Credit Suisse, said in a note to clients Tuesday.

D'Ambrosio was brought in by Chairman Edward Lampert two months ago as Sears' first permanent CEO since 2008.

He hopes to succeed where his predecessors could not: End a sales slide that has been going on at Sears' stores for years.

In its earnings warning after the market closed Monday, the company cited a drop in appliance, clothing and electronics sales. It forecast a loss for the quarter that ended April 30 of $145 million to $195 million, or $1.35 to $1.81 per share, compared with a first-quarter profit a year ago of $16 million.

Both top executives on Tuesday cited the adverse impact of unusually bad weather, soaring gas prices and other high costs. But Lampert said there are no excuses to explain the extent of the poor results.

"I know that we can do a lot better," he said.

The slump is hitting both its Sears and Kmart chains. Revenue at Kmart stores open at least a year fell 1.6 percent during the quarter, while the figure fell 5.2 percent at U.S. Sears stores. Revenue at stores open at least a year is an important measurement of a retailers' health, because it excludes the effects of stores that open or close during the year.

D'Ambrosio, who previously was CEO at technology company Avaya Inc., said Sears can take better advantage of its 4,000 stores and its huge real estate holdings, although he did not elaborate. He indicated that the company's best-known brands _ Kenmore, Craftsman, DieHard, Lands' End _ will be the centerpiece of any future strategy.

"We have a set of powerful brands that in many ways are the envy of the industry," he said.

Another top priority, D'Ambrosio said, will be extending Sears' industry lead in appliance sales through innovation and selective discounting. Sears maintains a 30 percent share of the appliance market and has a 20 percent or more in tools, power fitness equipment and power lawn and garden tools.

He also wants to expand Sears' services business, possibly by branching out into electronics and by outsourcing home improvement services to outside firms.

Lampert, who's been at the helm of Sears since 2005, signaled his dissatisfaction with ever-declining clothing sales. He said the company needs to "repurpose" the huge amount of space devoted to apparel, either by adding new brands or partnering with other retailers.

"We need to have the brands that customers (in malls) want to shop for," he said. "If there are other brands at other companies that they want, why can't we partner with them?"

Sears has experimented with renting out space in its stores to other retailers, including Forever 21 and Whole Foods Market.

If the new clothing lines don't produce promising sales, the company is likely to cut back. "We're not going to wait too long" for results, D'Ambrosio said.

Responding to a question about Sears' survival as the sales swoon continues, he said he expects the company to "survive and thrive" by getting more out of its real estate, brands and services.

Sears shares skidded $8.30, or 9.9 percent, to close at $75.88. The stock is down 38 percent from a year ago.