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Lacy: CEO side of Sears
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November 7, 2000: 2:12 p.m. ET
New Sears CEO set to brief analysts on his plan for revitalizing No. 2 retailer
By Staff Writer John Chartier
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NEW YORK (CNNfn) - Like any good basketball coach, Alan Lacy has been steadily evaluating his players, his resources, their strengths and weaknesses.
Now it's tip-off time and Lacy is ready for the game. Only instead of the Knicks, his team is Sears, the No. 2 U.S. retailer, and he is the new Chief Executive Officer.
Lacy, 46, meets with analysts for the first time at a conference at New York's Waldorf Astoria hotel Wednesday, and he's likely to face some incisive questions.
 The newly minted CEO has kept a low profile since being appointed the replacement for Arthur Martinez, who officially stepped down Oct 1. He has turned down interviews with the media and analysts, instead taking time to evaluate why the once-popular "softer side of Sears" now means softer profits as well.
He describes himself as the coach -- specifically, a basketball coach as opposed to a football coach because "he's not sending in each and every play," a company official said.
But since officially taking the top spot last month, Lacy has been meeting with company executives and has initiated a twice-weekly visit to various stores with division heads, a source close to the company said.
He prefers to let others lead meetings so as not to micromanage, allowing others to make decisions and giving him time to focus on the bigger picture.
"He takes a fact-based approach. He really emphasizes fact-based decisions," said one employee who has attended several meetings. "He wants to make sure facts, not just guts, orient where we're going."
And that's good because the facts show an overall successful company, but also one that faces a few challenges in the wake of a decreasing consumer spending, high energy prices and mounting credit card debt.
Challenges ahead
The company squeaked past third-quarter estimates last month, but shareholders have seen its stock cut in half over the last four years from the low-to-mid $60 range in 1997 to $30 at the opening of trading Monday. The stock is also off from its 52-week high of $43.50 set in April.
It's not that Sears (S: Research, Estimates) is in bad shape. Rather, it's simply not charging ahead as boldly as it did a few years ago. An overall slowdown in apparel, particularly women's fashions, that has struck most broadline department stores, is partly to blame.
In August, a crucial month for retailers because of the annual back-to-school rush for clothing, Sears posted a modest 5.6 percent increase in stores open at least a year, a closely watched figure known as same-store sales.
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He wants to make sure facts, not just guts, orient where we're going
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Sears employee
Describing Alan Lacy |
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"They've not been able to sustain sales growth in their soft goods. I think their offerings lack differentiation and excitement," said Joe Grillo, a retail analyst with Deutsche Banc Alex. Brown. "Sears has really not been able to capture a sort of meaningful loyal customer base, and I think they're really going to need to find a way to sell their soft goods ... and find a way to differentiate themselves from the host of other offerings in different types of product areas."
Perhaps an even greater challenge is to capitalize on its appliances business, which while long popular now faces challenges from new entrants such as Home Depot (HD: Research, Estimates), Wal-Mart (WMT: Research, Estimates) and Best Buy (BBY: Research, Estimates), all of which are demonstrating early success in peddling washers, dryers and refrigerators.
Lacy and analysts see real opportunity for growth here since a major competitor in that area, Circuit City (CC: Research, Estimates), exited the appliance business earlier this year.
"His biggest challenge is to really seize the opportunity in their hardlines business, to be even more dominant," said Steve Kernkraut, a retail analyst with Bear Stearns. "There is a huge opportunity with Circuit City out of it, so now they'll have to really leverage it."
Michael Exstein, an analyst with Credit Suisse First Boston, believes Sears has suffered from an "overly grand" vision of itself over the last five years. He thinks the company has spent so much time expanding into new efforts such as hardware, the Great Indoors, and e-commerce initiatives, that it's core apparel and retail business has slipped.
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 VITAL STATS
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Sears by the numbers
860 full-line department stores
2,100 specialized retail stores
$40 billion annual revenue
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"I would call it more a focus crisis," Exstein said. "I think quite clearly he [Lacy] saw the down side of an overly aggressive agenda and he spent a year-and-a-half cleaning up the credit situation."
What's the plan?
Wall Street approves of Lacy taking the helm, given his solid reputation as a roll-up-the-sleeves kind of manager who led the turnaround of Sears' ailing credit operations.
But analysts are eager to quiz Lacy about his plans for revitalizing the company, which posted solid third-quarter earnings, but has been beset by softness in its core apparel and softlines business.
"I really want to hear him say how he's going to energize Sears," Kernkraut said. "I want to hear what he's going to do differently. I want to hear him say how aggressively he's going to grow Great Indoors and how he's going to get women to come into the store."
Lacy is not a new face at Sears. He joined the company from Philip Morris Capital Corp. where he served as vice president of financial strategy for a year before joining Sears in 1994. He spent a year as senior vice president of finance before becoming senior vice president and chief financial officer of the credit business in 1995. Last year he was tapped to lead the company's entire credit services division, which he is credited with turning profitable.
 The division had been wracked with delinquent credit payments and collection efforts were lagging until Lacy stepped in, analysts said. When he arrived in 1994, Lacy added more part-time collectors who worked at night when people were home and improved collection systems to make them more efficient. By making collectors part-time staffers he also saved money on salaries and benefits. In addition, he tightened up credit policies to lower the occurrence of delinquent accounts.
"Alan is a proven winner in every business he's been involved in," Kernkraut said. "He's turned around Sears credit, he's taken charge of their Internet business and given it life, and he's been able to reorganize their home-services business. Probably the best part about him is he's coming into his position as CEO and he understands how CEOs work, but he doesn't have the emotional bias. He can make a kind of fair assessment about what the customer likes and what he doesn't."
Exstein views Lacy as an in-the-trenches type of manager and clearly a strong choice for Sears. But he sees his lack of merchandising experience as a potential problem.
"I think there's an issue with Alan, and it's obviously the lack of merchandising experience. It's more of a financial background," Exstein said. "I think it's a tackleable issue."
Or perhaps in Lacy's case, it's a slam-dunk issue. 
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Sears
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