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Sears sets job cuts, overhaul
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October 24, 2001: 1:28 p.m. ET
No. 2 U.S. retailer's profits meet forecasts, sets 4,900 job cuts.
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NEW YORK (CNNmoney) - Sears Roebuck & Co. reported lower third-quarter profits Wednesday that met reduced forecasts on Wall Street, but the nation's No. 2 retailer said it will cut 4,900 jobs in a bid to cut costs and overhaul its 860 stores.
Sears, one of the nation's oldest retailers, has long struggled to create a more attractive shopping experience and boost sales of merchandise other than tools and hardware, where it has long been a leader.
The Hoffman Estates, Ill.-based retailer said net earnings fell to $262 million, or 80 cents a diluted share, from $278 million, or 81 cents a share, a year earlier. The results matches Wall Street forecasts, according to analysts surveyed by First Call, which tracks analysts' estimates. Sears also said it remains comfortable with full-year forecasts of $4.09 a share.
Sales rose to $9.75 billion from $9.59 billion a year ago.
Sears (S: up $0.33 to $38.12, Research, Estimates) stock, down 21 percent since July, edged higher after the announcements.
"An economy that was clearly bad has gone to worse after those (Sept. 11) tragedies took place," CEO Alan Lacy told analysts Wednesday, adding that the job cuts reflect a "structural change" at Sears and "not just a response to difficult economic times."
The job cuts, which will come at headquarters near Chicago and at stores, amount to about 1.6 percent of the company's total work force. Lacy said the cuts are part of larger changes planned for the 115-year-old retailer.
"We are moving away from a traditional department store business model. That has to change," Lacy said, adding the moves were meant to save $600 million a year by 2004.
Other retailers, including Gap Inc. and Nordstrom Inc., have laid off workers in response to slowing sales. For its part, Sears has lost ground to newer competitors such as Kohl's Corp. and discounters like Wal-Mart Stores Inc. While Sears dominates home-appliance and tool sales, its apparel business has been particularly weak.
Sears' stores have been criticized for being too cluttered, making shopping difficult. The company set plans for centralized check-out in all stores by mid-2002, and to pare casual clothing assortments and simplify store layouts.
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"From what I've seen, Sears is well underway to making itself into a more efficient and a more pleasant-to-shop retail establishment," said Kurt Barnard, president of Barnard's Retail Consulting Group. "It is likely to become a powerhouse in the mass-market arena and perhaps look a little bit like a combination of a large discount store and Kohl's."
Analysts had speculated Sears would sharply streamline apparel to emphasize more casual clothing, particularly for women. The company said it will move to a "single proprietary casual brand across its men's, women's and children's assortments."
The company also plans to overhaul marketing strategies and step up customer service. "We need to make our stores easier to shop. We have not presented a very good in-store experience for our customers," Lacy said.
Sears, along with many other retailers, has watched sales and profits tumble in the last year as widespread layoffs, higher gasoline prices and a volatile stock market put a crimp in consumer spending and helped move the economy closer to a recession.
"Clearly business is slowing down. Everybody is cutting back a bit, but our focus has been to structurally change how we do business because how we do business is not working," Lacy said in the conference call.
The company has already shuttered 89 underperforming stores and acquired 18 former Montgomery Ward stores. The company surprised Wall Street in July, saying it was abandoning the cosmetics business, a move that cost it $53 million after taxes.
The job cuts announced Wednesday amount to about 1.6 percent of its work force of 300,000.
-- Reuters contributed to this report 
From staff and wire reports
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