Berkowitz Boosts Sears Holdings Position After Turning Activist
Dec. 31, 2015

Retail industry loses legends in 2015
Dec. 23, 2015

Study: Most holiday shoppers check out this retailer
Dec. 17, 2015

Sears Holdings Corp Given Average Rating of "Strong Sell" by Brokerages
Dec. 12, 2015

Retail Outlook: Experts Predict What to Expect in 2016
Dec. 10, 2015

Sears connects mobile shoppers to stores
Dec. 7, 2015

Sears Becomes Old J.C. Penney
Dec. 4, 2015

Sears Hometown and Outlet sales decline
Dec. 4, 2015

Sears's Retooling Can't Fix Everything
Dec. 3, 2015

Sales Still Sliding at Sears
Dec. 3, 2015

Retailers Give Thanks for Cyber Week
Dec. 2, 2015

Lessons retailers learned this Black Friday
Nov. 30, 2015

Retailers with the best--and worst--return policies
Nov. 30, 2015

Target Escalates Battle For Holiday Web Sales
Nov. 27, 2015

Kmart app seeks attention from mobile shoppers
Nov. 24, 2015

Target to debut smaller store format in Manhattan
Nov. 13, 2015

JCPenney beats department store doldrums
Nov. 13, 2015

First Look: Bloomingdale's, Honolulu
Nov. 12, 2015

Social Security Proposals Show Shifting Ground
Nov. 10, 2015

Sears ad called 'misleading' by consumer advocate
Nov. 9, 2015

5 companies grab 70% of your online dollars
Nov. 5, 2015

The 2016 SHC's Medical Changes Summary
Oct. 29, 2015

More consumers plan to boycott Black Friday
Oct. 28, 2015

Sears puts 'S' in seamless experience
Oct. 21, 2015

Kmart plans a Happy Halloween for shoppers
Oct. 20, 2015

Medicare Rates Set to Soar for Many Seniors
Oct. 15, 2015

Martha Stewart: I should have bought Kmart
Oct. 14, 2015

The Companies With The Biggest Jumps In Employee Happiness
Sep. 8, 2015

Why Sears Holding Corp. Stock Fell 15% in September
Oct. 13, 2015

J.C. Penney CEO Ellison makes $1 billion promise
Oct. 9, 2015

Sears Holdings makes big moves on home front
Oct 9, 2015

Amazon.com extends its lead in e-commerce wars
Oct 6, 2015

Sears names new chief for Kenmore line
Sep 15, 2015

BOZIC MICHAEL Age 74, of Pittsburgh
Oct. 4, 2015

J.C. Penney makes big change to pension plan
Oct. 2, 2015

Is This Where Sears Holdings Corp. Can Finally Prove Its Critics Wrong?
Sep 28, 2015

Sears Holdings Is In The Emergency Room And Shock Therapy Is Needed
Sep 21, 2015

Sears Holdings Names New President To Lead Fulfillment
Sep 21, 2015

Sears Shares are Getting Destroyed -- Why it Could Get Much Worse
Sep 11, 2015

Sears Hometown Taps Mike McCarthy
Sep 11, 2015

Documentary celebrates Julius Rosenwald's legacy
Sep 3, 2015

Sears' big-data strategy? Just a service call away
Aug 31, 2015

Insurers Win Big Health-Rate Increases
Aug 27, 2015

Sears Holding Shares Tank After Earnings Report
Aug 23, 2015

REIT does the trick: Sears turns a profit as sales continue to fall
Aug 4, 2015

Sears's Sales Deteriorate Further; Spinoff Cushions Result
Aug 4, 2015

Sears Holdings Names Joelle Maher As Sears Roebuck & Co's President And Chief Member Officer
Jul 14, 2015

Jimmy Carter's Early Life on a Georgia Farm
Jul 10, 2015

Barnes & Noble taps Sears Canada CEO for retail business
Jul 3, 2015

Sears Losses Pile Up as Turnaround Falters
Jun 9, 2015

Sears' REIT files for $1.57 billion rights offering, to list on NYSE
Jun 9, 2015

Sears' Great Retail Sector Giveaway
Jun 9, 2015

Sears Is Under Pressure as Rollout of REIT Nears
Jun 8, 2015

Sears lawsuit alleges store sales to benefit CEO
Jun 2, 2015

Struggling Companies, Creditors Weigh REIT Conversions
May 28, 2015

Target Tops Wal-Mart as Turnaround Gains Traction
May 21, 2015

Macy's to Push Best Stores Upscale
May 14, 2015

Penney Loss Narrows, Sales Increase
May 14, 2015

Memorial Service for Clif Hooks Friday, May 29
May 10, 2015

Sears future may include slimming down
May 7, 2015

How Close Is J.C. Penney to Bankruptcy?
Apr 30, 2015

Sears gets $150 million in third real estate deal
Apr 30, 2015

Melville Hill Jr., Sears executive for 30 years, Dies at 91
Apr 22, 2015

Sears Hometown (SHOS) CEO to Step Down
Apr 21, 2015

Sears Hometown and Outlet CEO to Leave Aug. 1
Apr 21, 2015

Poor Returns Weigh on Sears Pension Plan
Apr 16, 2015

J.C. Penney Marks Two Years Since Johnson Nearly Ruined It
Apr 13, 2015

Sears to gain $114M from real estate pact with Simon
Apr 13, 2015

Bye buy: 14 big stores shrink fastest
Apr 10, 2015

Former Sears CEO selling pedigreed Lake Forest estate
Apr 7, 2015

Sears' Latest Deal: More REIT Than Light
Apr 2, 2015

Sears Moves to Raise $2.5 Billion By Selling Real Estate
Apr 2, 2015

Sears's $2.5 billion REIT plan may be blueprint for deals
Apr 2, 2015

Sears Tries to Calm Supplier Jitters
Mar 19, 2015

Can Advertising Spark a Turnaround for Sears and Kmart?
Mar 17, 2015

Blackstone Strikes Deal on Chicago Tower
Mar 16, 2015

Sears Annual Meeting
Mar 13, 2015

Target has a new CEO: Will he re-energize the retailer?
Mar 2, 2015

Shoppers Return to Chain Stores
Feb 27, 2015

Sears Extends Dismantling of Company
Feb 27, 2015

4 Different Turnaround Tales at Retailers Sears, Kohl's, Gap and J.C. Penney
Feb 27, 2015

Sears plans $275 million contribution to pension funds
Feb 26, 2015

Sears loses money again but CEO sees hope in smaller decline than 2013
Feb 26, 2015

Wal-Mart Raising Wages as Market Gets Tighter
Feb 20, 2015

Sears Holdings To Hold Fiscal 2014 Fourth Quarter And Full Year Financial Results
Feb 20, 2015

Lois Brennan, wife of Edward A. Brennan, dies at 81
Feb 16, 2015

J.C. Penney zeros in on hair salons as a key to recovery
Feb 6, 2015

With Sears spinoff complete, Lands' End CEO Huber resigns; Marchionni named successor
Feb 2, 2015

The Aging of Abercrombie & Fitch
Jan 30, 2015

Sears slashes 100 jobs at headquarters
Jan 28, 2015

Sears lays off 100 workers at Hoffman Estates headquarters
Jan 28, 2015

Former home of Sears Loop store for sale
Jan 23, 2015

Catalog Makes a Comeback at Penney
Jan 20, 2015

Clif Hooks, retired Sears executive VP, dies at 79
Jan 9, 2015

J.C. Penney, Macy's to shut stores, lay off scores
Jan 9, 2015

Macy's weighs off-price version of namesake stores
Jan 9, 2015


Breaking News


Berkowitz Boosts Sears Holdings Position After Turning Activist
Dec. 31, 2015

Bruce Berkowitz increased his shareholding of Sears Holdings Corp. after announcing a more active role in the company as its stock price slipped 39% this year in its third under leadership of CEO and investor Eddie Lampert.

According to insider data, Berkowitz reported Dec. 29 purchasing 390,100 additional shares of the company and selling 51,200, giving him a total of 27,835,448 shares, amounting to a 26% stake. The transactions took place between Dec. 24 and Dec. 29 at prices ranging from $20.81 to $21.74 per share. Sears shares traded around $20.15 Thursday afternoon, near a 10-year low, after a 0.89% decline since the start of the trading day.

Berkowitz mentioned Sears in his New Year's letter he released amid his purchasing on Dec. 27:

"I don't want to belabor the point, but we believe successful investing requires seeing facts and consequences far ahead of the crowd," Berkowitz wrote.

"Warren Buffett may yet again be the first to affirm this with his recent purchase of Seritage Growth Properties before this REIT redevelops to obtain market-based rents. And, what is true of Seritage is true of former parent, Sears, which holds more than three times as much low-risk real estate and other assets."

In an activist filing rare for the Fairholme mutual fund investor dated Dec. 17, Berkowitz also said he would "be in contact" with members of Sears' board and management "regarding alternatives that the issuer could employ to increase shareholder value" and his "views on the long-term prospects" of the company.

Hedge fund manager and retail investor Eddie Lampert has struggled to execute his plan to turn around the retailer since taking over in 2005. Lampert has undertaken to transform Sears into an asset-light company more comparable to Facebook, Alibaba and Google. He also wanted to change its culture from a store-first to customer-first model more in line with companies founded in the last decade, he said in his 2015 shareholder meeting.

The process led to some missteps over the past five years resulting in programs and technology "people weren't ready or equipped to use," he said.

In the third quarter Sears revenues declined to $5.8 billion from $7.2 billion in the corresponding quarter last year, and net loss of $454 million compared to $548 million. Cash of $294 million remained on its balance sheet, increased from $250 million at Jan. 31, with long-term debt of $2.2 billion, decreased from $3.2 billion.

bloruleshort.gif (618 bytes)

Retail industry loses legends in 2015
By Mike Troy
Dec. 23, 2015

Some of the retail industry's most innovative, influential and accomplished leaders passed away in 2015. The following is a look at some of those who made a difference and the impact they had on retail.

The following list is by no means exhaustive or intended in any way rank those who passed based on their accomplishments. Rather, the goal is to present in chronological order some of the most noteworthy individuals whose departure came to the attention of Retailing Today and recognize their accomplishments one more time.

Lillian Vernon: She grew a home business selling monogrammed pocketbooks and belts, into one of America's best-known mail-order businesses. Vernon and her family came to the United States in 1937 as Jewish immigrants from Germany fleeing Hitler. She was newly married and pregnant with her first child when she started her business in 1951. The Lillian Vernon Corp. was the first company owned by a woman to be listed on the American Stock Exchange, in 1987, according to the New York Times. Vernon is credited with being the first to create gift catalogs dedicated to Easter and Halloween. She lived to be 88.

Doug Tompkins: He founded the The North Face in 1964 and co-founded the Esprit apparel company in 1968. Tompkins eventually sold his stakes in The North Face and Esprit and retired to Chile to use his fortune for environmental causes. He acquired hundreds of thousands of acres in Patagonia, a sparsely populated region of untamed rivers and natural beauty that straddles southern Chile and Argentina to create Pumalin Park, encompassing 716,606 acres of forest, lakes and fjords stretching from the Andes to the Pacific. He reached the age of 72.

Charles E. "Chuck" Williams: Williams was the founder of Williams-Sonoma. He lived to be 100. The Florida native took a trip to France in 1953 that inspired him to open the first Williams-Sonoma store in 1956 in Sonoma, Calif. Williams added more stores and distributed product catalogs and his approach to experiential retailing incluenced countless merchants. Williams sold the company in 1978 and in 1983 Williams-Sonoma became a public company listed on the New York Stock Exchange.

Bruce Dayton: One of five brothers, he helped build a department store that he and his sibling inherited in downtown Minneapolis into a trend-setting retailer company that would give rise to Target. He lived to be 97 and was the father of Minnesota Governor Mark Dayton. He was also a huge benefactor of the Minneapolis Institute of Art, where he was a longtime trustee, providing more than $80 million in financial support more than 2,000 works of art worth additional millions.

Tom Stemberg: One of the retail industry's true innovators, Stemberg was a co-founder of Staples and passed away at the young age of 66. With the backing of Bain Capital and its co-founder, Mitt Romney, Stemberg co-founded Staples in 1986, and went on to lead the company through a period of rapid growth to dominate the office products industry. A native of New Jersey, Stemberg went to Harvard to study organic chemistry, but ended up becoming a retailer. After leaving Staples, Stemberg joined the venture capital firm of Highland Capital Partners in 2005, where he served as a general partner.

Leon Gorman: Gorman is the former president and longtime chairman of L.L. Bean., a company founded by his grandfather. Gorman served as chairman for 34 years and during his tenure the company experienced tremendous growth. When he became president in 1967 the company had one store, but Gorman oversaw efforts to modernize the business while adhering to a strong customer service culture.

Alfred Taubman: He founded the Taubman company in 1950 and would go on to have a tremendous influence on the development and evolution of the shopping center industry. He opened his first mall in the late 1950's, the 350,000-sq.-ft. Arborland in Ann Arbor, Mich., and during the following six decades the company he founded operated nearly 20 properties in the U.S., including the recently opened Mall of San Juan in Puerto Rico.

Bob Piccinini: The longtime chairman of Save Mart in California, he purchased the company in 1985 after working his way up in the retail industry. He joined Save-Mart as a box boy and later became a truck driver, store manager, vice president of real estate and eventually president and CEO. He helped the privately held company succeed against larger rivals and grow to operate more than 200 stores.

Walter J. Salmon: As a longtime Harvard Business School professor, Salmon influenced generations of retailers during a 41 year career. He taught a wide variety of MBA courses during his tenure and also conducted extensive research in areas such as distribution, issues of organization and logistics, information systems and balancing consumer interests in breadth of selection with a desire for low prices

Leonard Lieberman: He was the former chairman and CEO of Supermarkets General, which owns Pathmark. Liberman first served as general counsel of Supermarkets General, which was part of the ShopRite cooperative chain. The company opened and acquired additional locations and, in 1967, it left the ShopRite chain under the ownership of Supermarkets General and named its stores Pathmark. Lieberman became president of Supermarkets General in the early 1980s and assumed the role of chairman and CEO in 1983.

bloruleshort.gif (618 bytes)

Study: Most holiday shoppers check out this retailer
By Dan Berthiaume
Dec. 17, 2015

Close to nine in 10 consumers will take a look at one specific retailer before making a holiday gift purchase. According to a survey of 3,000 U.S. consumers by marketing platform provider BloomReach, 87% of respondents will comparison shop at Amazon.com before buying a gift. This frequency of product searches is paying off for Amazon, as 73% of respondents said they will buy from Amazon and 71% will spend more than a quarter of their holiday budgets on Amazon.

In addition, more than 31% will spend more than half of their holiday budgets on Amazon. Even if consumers find exactly what they want with acceptable prices and shipping, 28% would still compare the product on Amazon, virtually the same percentage as the 29% stating they'd buy it right then.

BloomReach asked Amazon shoppers exactly why they continually choose the company over other retailers. Surprisingly, prices were not the top reason. Approximately 43% of respondents said the main reason was Amazon's ability to intuitively find or predict exactly what they want more quickly. Only 33% said that better prices were the main reason.

Furthermore, results show that many U.S. consumers appear to view Amazon's product-searching capabilities better than search engines — specifically Google. For example:

    • 39% of respondents said Amazon has better product-searching capabilities; 8% said Google; 53% said it was equivalent.
    • 46% of consumers won't use Google Shopping to look for gifts, and 29% don't know what it is.
    • 68% of Google Shopping users said they found the gifts they wanted half the time or less, with 24% reporting they "never" found what they wanted.

Amazon also appears to be expanding its use cases to be more of its own retail search engine. About 40% of respondents named Amazon as the starting point when they knew what they wanted to get a particular person. However, when they did not know what to get someone, 35% still named Amazon as the starting point.

Another 23% said search engines, while 20% reported a preferred retailer's physical store and 14% named a preferred retailer's website. Only 6% said deal marketplaces like Groupon.

Finally, as consumers value Amazon's predictive experience as the top differentiator, they see other retailers' digital experience as frustrating.

    • The top consumer frustration about digital retailing was irrelevant search results on a retailer's site-search, followed closely by poor product descriptions.     • 61% will only try twice to search for a product on a retailer's site before giving up.     • 56% expect a retailer site to have relevant auto-complete search functionality.     • 51% will leave a retail site if they see three irrelevant search results after searching.

bloruleshort.gif (618 bytes)

Sears Holdings Corp Given Average Rating of "Strong Sell" by Brokerages
By Micah Smith
Investing, Zacks Consensus Ratings
Dec. 12, 2015

Shares of Sears Holdings Corp have received an average broker rating score of 5.00 (Strong Sell) from the one analysts that provide coverage for the stock, Zacks Investment Research reports. One investment analyst has rated the stock with a strong sell rating.

Zacks has also assigned Sears Holdings Corp an industry rank of 98 out of 265 based on the ratings given to related companies.

In related news, major shareholder Bruce R. Berkowitz acquired 22,100 shares of Sears Holdings Corp stock in a transaction on Wednesday, November 4th. The stock was purchased at an average cost of $23.65 per share, with a total value of $522,665.00. Following the purchase, the insider now directly owns 71,700 shares in the company, valued at $1,695,705. The purchase was disclosed in a legal filing with the Securities & Exchange Commission, which is available through the SEC website. Also, CEO Edward S. Lampert acquired 127,446 shares of Sears Holdings Corp stock in a transaction on Monday, September 14th. The shares were bought at an average cost of $25.17 per share, with a total value of $3,207,815.82. The disclosure for this purchase can be found here.

Shares of Sears Holdings Corp opened at 22.15 on Wednesday. The company's market cap is $2.36 billion. The company's 50-day moving average price is $22.25 and its 200-day moving average price is $25.55. Sears Holdings Corp has a 12 month low of $18.03 and a 12 month high of $46.23.

Sears Holdings Corp (NASDAQ:SHLD) last posted its earnings results on Thursday, December 3rd. The company reported ($2.86) EPS for the quarter, missing the Zacks' consensus estimate of ($2.84) by $0.02. The business earned $5.80 billion during the quarter, compared to the consensus estimate of $5.51 billion. During the same quarter in the prior year, the company earned ($2.84) EPS. The firm's revenue for the quarter was down 20.2% on a year-over-year basis. Equities analysts forecast that Sears Holdings Corp will post ($9.89) EPS for the current fiscal year.

Separately, Vetr downgraded Sears Holdings Corp from a "hold" rating to a "sell" rating and set a $22.06 price objective on the stock in a report on Monday, October 5th.

bloruleshort.gif (618 bytes)

Retail Outlook: Experts Predict What to Expect in 2016
Retail News Insider
Dec. 10, 2015

New technologies, new products, new consumer preferences — change always threatens to disrupt the status quo, and the retail landscape is no different. The trick is to determine which trends are passing fads and which have real staying power.

To help, we asked six experts from the Daymon Worldwide family of companies (Interactions is a subsidiary of Daymon Worldwide) to share their predictions for trends that will have the biggest impact on the U.S. retail environment in 2016.

Improved Transparency and Distribution

According Jim Holbrook, CEO of Daymon Worldwide, one of the biggest themes in retail in 2016 will be 'less bad, more good.' That is, we will see more products introduced with less sugar, less salt, less words you can't pronounce, less GMOs and so on. CPGs will also be focused on providing products with more nutrition, more flavor and more simple ingredients. This is going to continue to accelerate across all categories."

Holbrook is quick to note that this isn't simply a matter of CPGs wanting to help improve nutrition.

"What's really happening here is there is a shift in trust away from brands and companies and onto other consumers and people they know," he said. "The Internet and social media are huge facilitators for that, as are Millennials. They have a far different trust hierarchy than previous generations. While they may be willing to rent out their living room or an extra bedroom to strangers [through a service like Airbnb], they don't trust a product when they can't pronounce the ingredients."

Beyond the shelf, Holbrook also predicts changes in distribution. "Availability and accessibility of products will also change dramatically," he said. "There's a changing landscape of formats — for example, Walmart is testing out online ordering combined with in-store pickup and Amazon just announced they are opening a physical bookstore. Retailers are heading in the direction of covering all points of distribution."

As for the rise of e-commerce options, "it's not that people will stop going into the store to see what's available," Holbrook explained. "It's that they want choices and an improved experience. For example, we might see a service where you can preorder your staples, then pull up to the store and have your paper towels, diapers, laundry detergent and so on loaded into the back of your car while you go inside to pick out more interesting items."

Closing the Digital Divide

"The digital shift will continue to be a major player in retail in 2016," said Bharat Rupani, president of interactions and SAS Retail Services. As evidenced by the expansion of online retailers and falling brick-and-mortar market share in 2015, "brick-and-mortar retailers need to find better ways to effectively compete in the digital space."

According to Rupani, one way some retailers will do this in 2016 is by starting to engage with consumers well before they enter the store. "Today, brands are engaging with consumers through apps and other digital interactions before they ever enter the store. In the coming year, retailers will want to embrace technology and figure out how to get engaged with a digital audience. Shoppers want to feel like they are having a personal experience with retailers, and technology can help make that happen by being available everywhere a shopper is: in person, on their mobile device, through an app, and so on."

Rupani also predicts that technology will be used in new ways to enhance the in-store experience. For example, "when you sample a product in store today, it is likely with a Sales Advisor and the product. The product demo of the future will include technology to give a more dynamic experience to the shopper, while collecting vital information for the retailer and brand to make the shopping trip a more personalized experience."

Technology is becoming engrained in our culture and Rupani predicts, "Consumers will continue to demand connectivity through technology; they want ease of use and information at their fingertips. The expectation has been set, now retailers have to meet it."

Retailers Take More Control of Shelves

"The biggest trend we're going to see as it relates to retail merchandising is that more and more retailers are going to take back control of shelf conditions and the environment in stores," said Michael Bellmant, president of SAS Retail Services. "As a result, decisions about which items to carry and where to place items on shelves will be more driven by analytics than by brand bias."

As part of this, Bellman believes that more retailers will move from the older merchandising model (where suppliers employ brokers to merchandise items on retailer shelves) to a newer single source model like the one SAS Retail offers many of its retail partners. Not only does the newer model help eliminate brand bias, "it also gives retailers a more effective and efficient way to utilize existing merchandising dollars. Plus, shoppers benefit from new items getting to the shelves faster," explains Bellman.

Bellman also predicts that "we're going to see a shift in planograms from being supplier-driven to being more retail-driven. Retailers have the sales data, and they will increasingly use that to decide where items should be placed on the shelves and how much space they should have on their own, as opposed to allowing the supplier to dictate that. This will benefit both the retailer and consumers by providing better itemization and an improved shopping experience."

Beacons Go Mainstream

"The biggest single technology trend that will affect the retail environment in the coming year will be the rise of beacons as an increasingly accepted form of digital communication with shoppers," said Dr. Lance Eliot, VP of global IT for Interactions. "Currently, most of the retailers using beacons are doing so on a very subtle and cautious trial basis."

Eliot explains that this is because "stores aren't sure yet whether consumers will love or hate beacons. Consumers might come to hate them if they are perceived as overly obtrusive. Shoppers do not want to walk into a store and feel as though 'Big Brother' has suddenly taken hold of their smartphones. Nor do they want to constantly have their shopping experience disrupted by numerous messages and alerts telling them about special deals in the store."

According to Eliot, as more retailers introduce the technology in the coming year, the key to success will be to "use the shopper communication power of beacons judiciously. Target, for example, has wisely opted to keep its pilot use of beacons to a reasonable two messages per shopper per visit." Moderating use like this can allow retailers to harness the advantages of beacons, while minimizing potential shopper objections.

Still, Eliot cautioned that "we have to wait and see whether enough retailers will be careful with beacon use, because all it will take is a major retailer to go overboard and the entire barrel will be spoiled by that one bad apple."

Delivering the Unexpected

"In 2016, we'll see more entertainment in stores," predicted Nicole LeMaire, VP for interactions. "Live music, wine tastings, specialty food sampling, live chef events — these are going to become more common as retailers incorporate more of a social environment into the retail store. This will apply not just to grocery, but also to department stores and other formats. Retail spaces will become more of a place to gather, similar to what coffee shops have become."

LeMaire also said that retailers will begin to change their physical environments to help increase shopper engagement

"Stores have to become more than just vast aisles of products," she said. "For example, we're starting to see smaller formats, and more outdoor and European-style markets. These offer that local feel people are seeking where shopping is a social activity and in some cases like a scavenger hunt to find new and unique items."

Ultimately, LeMaire says "it's incumbent on retailers to find new ways to surprise and delight their shoppers. Shoppers don't always know what they want and aren't always going to ask for something new. But when they see something unexpected that they love, that will be an experience they will remember."

bloruleshort.gif (618 bytes)

Sears connects mobile shoppers to stores
By Dan Berthiaume
Dec. 7, 2015

Sears Holding Corp. is trying to turn surging mobile traffic into a driver for store visits and purchases.

Sears has refreshed its mobile app with a number of features that help provide a seamless, store-centric customer experience. For example, members of its Shop Your Way loyalty program who enable location-based services can place mobile orders for out-of-stock items while in the store and get free home shipping.

In addition, mobile loyalty members can schedule curbside pick-up, return or exchange of online purchases at any Sears store with a guarantee of service in five minutes or less, without leaving their vehicle. Shoppers can also initiate a new layaway contract and make all payments via the Sears app. In-store, shoppers can now scan products directly from the app to add to their layaway list.

Sears is also offering contests and e-coupons via the app.

"In 2015 we've seen more than a third of our online traffic come from a mobile phone -- a 46 percent increase from last year," said Leena Munjal, senior VP, customer experience & integrated retail, Sears Holdings. "Mobile devices are so much a part of our members' lives and they're not only researching and sharing, they're also buying. So it's more important than ever to have a robust, simple-to-use shopping app with features and services that no other major retailer offers."

Sears has long been a pioneer in offering a seamless customer experience. The retailer launched its first "ready in five" guarantee for five-minute in-store pickup of online purchases in 2005, and added vehicle-based pickup in 2014.

With mobile becoming more of a primary option for consumer web access, Sears is intelligently adding these and other seamless services that blend store and digital to its app. Despite its stodgy reputation and recent lackluster financial performance, Sears has actually always been a leader in omnichannel customer engagement. But if more customers don’t start responding, leadership may not be enough.

bloruleshort.gif (618 bytes)

Sears Becomes Old J.C. Penney
By Douglas A. McIntyre
24/7 Wall St.
Dec. 4, 2015

Sears Holdings Corp. now has become J.C. Penney Co. Inc. in 2012, when its revenue fell 25% from 2011. Same-store sales dropped by roughly the same amount, and J.C. Penney teetered toward extinction. Sears just announced same-stores sales at Kmart dropped 7.5% last quarter. Sears Domestic same-store sales fell 9.6%. Revenue for the entire company plunged from $7.2 billion to $5.75 billion, a 20% drop. Sears Holdings lost $453 million. The company is disappearing.

The overall brick-and-mortar environment is worse now than in 2012. ShopperTrak reported physical store sales fell 10.4% over the four-day Thanksgiving weekend to $20.3 billion. Kmart and Sears operate in a retail world in which same-store sales have to rise for a national retailer to come close to gaining ground.

Sears has been criticized more than most struggling large retailers. CEO and majority shareholder Eddie Lampert has not updated the inside of Sears and Kmart stores. He has not, or cannot, match the promotion and marketing budgets of many rivals. All he has to offer is free shipping, which has become a standard marketing tool throughout the industry. When Sears Holdings released results, he said:

"We remain focused on restoring Sears Holdings to profitability by concentrating on our best stores, rewarding our best members and pursuing our best categories through innovative solutions to product and service offerings. Through deliberate strategic actions, notably with respect to our promotional design and marketing spend, we have made meaningful progress in our transformation and reported a fifth consecutive quarter of improved year-over-year results..."

It is hard to find anyone who believes that. While J.C. Penney barely escaped a collapse, retail has changed since then, as e-commerce has taken over. Sears cannot be turned around.

bloruleshort.gif (618 bytes)

Sears Hometown and Outlet sales decline
By Gina Acosta
Dec. 4, 2015

Sears Hometown and Outlet stores narrowed its loss in the third quarter despite weak sales growth in the appliance and garden categories.

The retailer said same store sales decreased 1.6% in the third quarter ended Oct. 31. Net sales fell 3.2% to $547.1 million as the company reported a loss of $3.8 million, or 17 cents a share, compared with a loss of $171.2 million, or $7.55 a share, a year earlier.

"While our inventory position improved during the quarter, the increasingly competitive promotional environment impacted the value proposition of "as-is" home appliances as competitors reduced prices for new in-box appliances," said Will Powell, CEO and president. "We reduced selling and administrative expenses on both a dollar basis and a rate basis in the quarter. Also, Adjusted EBITDA was negatively impacted by our previously announced store-closing initiative, which resulted in 53 closings during the quarter. Sales were down in lawn and garden, we believe due to unseasonably warm weather that delayed fall clean-up and snow-thrower sales in several parts of the country."

In the third quarter of 2015, the company opened 10 new stores (five in Hometown; five in Outlet) and opened a total of 28 new stores in the first three quarters of 2015 (15 in Hometown; 13 in Outlet). Of the 13 new Outlet stores, it converted eight from Hardware stores. In these converted locations, the company expects future profit results to improve and inventory working-capital requirements to decline significantly.

"Thus far in 2015, we have taken steps to better align operating costs with recent performance and to improve the quality and speed of execution of our plans by restructuring the executive team and reducing overall payroll and benefits costs at our support center and in our field organization. These changes resulted in savings of over $1 million in the third quarter of 2015, and we expect to achieve savings of $2 million for the full year 2015," Powell said.

As of Oct. 31 the company operated 1,172 stores across all 50 states as well as in Puerto Rico and Bermuda

bloruleshort.gif (618 bytes)

Sears's Retooling Can't Fix Everything
By Steven Russoliol
Wall Street Journal
Dec. 3, 2015

Sears's financial maneuvers could provide short-term opportunities, but they won't change a grim long-term trend.

There are investments and there are trades. The difference between the two is notable when it comes to Sears Holding Corp.

Since 2010, the once iconic retailer has become a shadow of its former self. Its share price has fallen to the $20s from the $90s, while its market value today is one-tenth of the nearly $26 billion it fetched a decade ago.

Shorter time horizons, though, have often told a different story. On nine occasions over the past five years, Sears's shares have popped more than 20% over two-week stretches.

Whether quarterly results weren't as bad as expected, or Sears was unloading assets to bolster cash, the stock has provided savvy short-term traders with opportunities. Meanwhile, it has burned those of the buy-and-hold variety.

That is something to consider as Sears reports fiscal third-quarter results Thursday. Evercore ISI Group, one of the only firms to provide an estimate, expects a quarterly loss of $2.84 a share, slightly worse than a year ago.

Faced with declining sales and waning shopper traffic, Sears has been cutting costs and unloading properties. Financial engineering has bought Sears more time as it attempts to transform itself in the digital age.

Sears spun off 235 properties into a real-estate investment trust earlier this year and has created joint ventures with three mall owners. Those moves generated $3 billion in proceeds.

Yet Sears still needs to cover its massive operating losses. And unless fundamentals drastically improve, Sears will likely need to embark on more financial maneuvering sooner than later. Evercore ISI estimates that Sears will keep burning through $1 billion in cash annually.

Any further engineering could indeed provide more short-term succor for traders. But they aren't likely to alter the grim long-term trend.

Same-store sales, for example, have fallen in the past seven quarters, including double-digit percentage declines in each of the past two. Sears recently snapped a streak of 12 consecutive quarters in the red, but that was only because of its real-estate spinoffs.

Sears prowess at selling assets isn't matched by much success selling merchandise. Until it is, the stock will be nothing more than a trader's plaything.

bloruleshort.gif (618 bytes)

Sales Still Sliding at Sears
By Marianne Wilson
Chain Store Age
Dec. 3, 2015

Sears Holdings Corp. is doing a much better job at cutting costs than at stopping its sales decline.

The retailer’s total revenue in the third quarter, ended Oct. 31, fell 20% to $5.75 billion, from $7.21 billion in the year-ago period, amid store closings and divestitures and a drop in apparel and consumer electronics sales. (Sears had 1,687 stores at the end of the quarter, down from 2,249 a year earlier.)

Total same-store sales were down 8.6%. Kmart same-store sales declined 7.5%. Sears domestic same-store sales fell 9.6%.

Sears narrowed its loss to $454 million, or $4.26 a share, compared with a loss of $548 million, or $5.15, a year earlier, helped by a reduction in advertising and payroll costs. Excluding items such as store closures and amortization, the adjusted loss widened to $2.86 a share from $2.71.

Sears said it continues to remain focused on its Shop Your Way loyalty program. Sales to people enrolled in program made up 75% of eligible sales for the quarter.

In a statement, chairman and CEO Eddie Lampert said he remains optimistic about returning to profitability by "concentrating on our best stores, rewarding our best members and pursuing our best categories through innovative solutions to product and service offerings."

"Through deliberate strategic actions, notably with respect to our promotional design and marketing spend, we have made meaningful progress in our transformation and reported a fifth consecutive quarter of improved year-over-year results," he said. "As expected, the results of these actions have led to comparable store sales declines despite an increase in profitability. At the same time, we recognize a lot of work remains and we have brought in a number of experienced leaders to drive our business forward with a plan to win as a member-centric integrated retailer."

Heading into the fourth quarter, Lampert said Sears is focused on product offerings and promotions to enhance member engagement through the holiday season.

Sears CFO Rob Schriesheim said the company plans to continue taking "significant actions" to alter its capital structure to position it for profitability.

In July, Sears spun off 235 properties into a real-estate investment trust it created called Seritage Growth Properties, and it also created joint ventures that hold additional properties with three mall owners.

bloruleshort.gif (618 bytes)

Retailers Give Thanks for Cyber Week
By Dan Berthiaume
Dec. 2, 2015

Despite a few hiccups with site availability, Cyber Week 2015 on the whole was a huge success for the retail industry and bodes well for the remainder of the holiday season.

According to data from Adobe, from Thanksgiving Day through Cyber Monday, consumers spent $11 billion online. This marked a 15% increase from Cyber Week in 2014 and represented 30% of a total $39.5 billion in November online sales. Adobe predicts consumers will spend $1 billion a day online every day from Dec. 1- Dec. 18.

Verizon Retail Index data indicates that the concept of “Cyber Week” is very much a reality, with consumers spreading their digital shopping more evenly through the five-day period. Verizon found that broadband traffic attributed to e-commerce shopping activities between Black Friday and Cyber Monday this year was up 18 percentage points (Saturday) and 21 percentage points (Sunday) from normal daily volumes.

Average daily mobile traffic attributed to mobile commerce during the holiday weekend was in line with Black Friday traffic on Saturday, Nov. 28, which saw a 6% increase, yet dipped on Sunday, Nov. 29 to pre-holiday traffic volumes. Interestingly, broadband traffic attributed to e-commerce shopping activities on Cyber Monday dipped dramatically from Sunday, Nov. 29 and was actually three percentage points below average daily volumes, which was a similar trend in 2014.

Mobile traffic that Verizon attributed to online shopping was also down on Cyber Monday and was one percentage point below average daily traffic volumes. Year-over-year, average daily traffic for e-commerce remained relatively consistent, with mobile commerce activity slightly lower during the same time period.

Although individual products offered for discount by major retailers differed significantly day by day, analysis by Clavis Insight indicates promoted categories remained fairly consistent. Between Black Friday and Cyber Monday, Amazon, and Walmart.com all focused promotions on the top categories of clothing, shoes and jewelry, electronics, home & kitchen, sports, fitness & outdoors, and toys & games. Target.com followed a similar pattern, replacing home & kitchen with appliances. The order in which these categories were promoted varied by day and by retailer.

However, Macys.com deviated from this norm a bit with its top five promotional categories of clothing, shoes & jewelry, home & kitchen, baby, appliances, and beauty. Macys.com focused much more strongly on clothing, shoes and jewelry than the other major retailers profiled.

And finally, it has already been publicized that retailers including Neiman Marcus, Walmart and Target experienced varying degrees of difficulty in maintaining e-commerce site functionality at different times during Cyber Week. However, this did not necessarily negate profit opportunities.

For example, Target had to deny site access to different groups of consumers for periods of time on Cyber Monday to avoid a total crash. Yet Target, which offered 15% discounts on almost all online items, still reported its biggest online sales day ever.

bloruleshort.gif (618 bytes)

Lessons retailers learned this Black Friday
By Mike Troy
Nov. 30, 2015

Huge numbers of shoppers feasted on deals over Thanksgiving weekend, but how and when Americans did so has forever changed, as online activity exceeded store visits.

Retailers such as Walmart, Target, Best Buy and Macy's spoke of well executed promotional strategies that leveraged their physical and digital presence and those insights were validated by data from the National Retail Federation's Thanksgiving Weekend Survey conducted by Prosper Insights & Analytics.

More than 151 million people said they shopped either in stores and/or online over the weekend, according to a National Retail Federation (NRF) survey of more than 4,000 shoppers conducted on Friday and Saturday. That figure far exceeded the 136 million people who said they intended to shop over the weekend when NRF conducted a similar survey in mid-November. Most notably, 103 million people said they shopped online compared to 102 million who said they shopped in stores.

"We recognize the Thanksgiving weekend shopping experience is much different than it used to be as just as many people want that unique, exclusive online deal as they do that in-store promotion," said NRF President and CEO Matthew Shay. "It is clear that the age-old holiday tradition of heading out to stores with family and friends is now equally matched in the new tradition of looking online for holiday savings opportunities."

NRF said the findings from this year's survey were not comparable to a similar survey conducted last year due to a change in methodology.

Average spending per person totaled roughly $300, with $230 of that amount going towards gifts, according to NRF. Spending was highest among younger shoppers, with those between the ages of 25 and 34 indicating they spent an average of $428 on holiday purchases.

Although more stores are open on Thanksgiving Day, Black Friday remains the dominant day for shopping activity. Of those who shopped in stores over the weekend, 73% (74.2 million) said they shopped on Black Friday. By comparison, 45.9% (46.8 million) shopped on Saturday and 34% (34.6 million) shopped on Thanksgiving Day. Black Friday was also the most popular day for online bargain hunting with 73.1% (75.3 million) shopping online on Friday, compared to 39.8% (41 million) who shopped online on Thanksgiving Day.

"Holiday shopping started well in advance of Thanksgiving weekend this year, but there's no question that people were still incredibly eager to get their hands on the deals that retailers were offering on electronics, apparel, toys and even small appliances," said Pam Goodfellow, the principal analysts with Prosper Insights and Analytics, the firm that conducted the survey on behalf of NRF. "The ease of online shopping through mobile devices now lets millions of people research what they want as well as make timely purchases any day of the weekend – a win-win for both retailers and shoppers."

Smartphone and tablet devices served as their own channel for holiday shoppers this year. According to the survey, 56.7% of smartphone owners used their phone to research products, purchase holiday items, check in-store availability and other mobile shopping activities while 57.7% of tablet owners used their device to browse holiday deals and purchase items.

bloruleshort.gif (618 bytes)

Retailers with the best--and worst--return policies
By Marianne Wilson
Nov. 30, 2015

When it comes to return policies, Nordstrom and Forever 21 couldn't be further apart.

At least that's according to an annual survey of return policies by GOBankingRates.com. The study rated Nordstrom as offering the best return policies of 2015, with Forever 21 offering the worst.

"Return policies should be a big consideration for holiday shoppers -- two-thirds of people return at least one holiday gift," said Elyssa Kirkham, lead reporter on the GOBankingRates study.

The survey noted many of the best return policies include a satisfaction guarantee. Nordstrom, L.L. Bean, and Costco all have policies that allow them to even refund, exchange or replace used items if it keeps a customer happy.

GOBankingRates ranked return policies from major retailers based on six key factors that make returns easy and customer-friendly, identifying the top 10 with the best policies and the top five with the worst. Here are its rankings:

Best Return Policies:
1. Nordstrom
2. L.L.Bean
3. Bed Bath & Beyond
4. J.C. Penney
5. Costco
6. Staples
7. Zappos
8. REI
9. Macy's

Worst Return Policies:
1. Forever 21
2. Kmart
3. Barnes & Noble
4. GameStop
5. Sears

bloruleshort.gif (618 bytes)

Target Escalates Battle For Holiday Web Sales
Dow Jones Newswire
Nov. 27, 2015

As thousands of shoppers waited outside Target stores on Thanksgiving Day to buy toys, electronics and kitchen gadgets, workers inside were getting ready to send some of those very items out the door.

The Minneapolis-based retailer enlisted small teams of workers in about one-quarter of its 1,800 U.S. stores to pack up some of the orders placed through Target.com earlier in the day. The employees worked in shifts, in a few cases starting up to 10 hours before the official 6 p.m. store opening, navigating dimly lighted aisles and picking items to mail to customers who pounced on Web deals hours before shoppers could in a store.

The strategy is a new twist on the Black Friday weekend. What for decades had been a purely in-store shopping frenzy has ceded much ground to the Internet. A Deloitte LLP survey found shoppers expect to spend 59% of their money online for the four days starting Thursday, compared with 36% in stores. The remaining 5% is spent on catalogs. The growth in online spending is affecting how one of the nation's largest retailers operates on one of the busiest shopping weekends of the year. The change is born out of a need to cut down on delivery time and shipping costs to keep pace with Amazon.com, and to put inventory sitting on store shelves to better use by using it to fulfill orders coming from the Internet.

"With the shift online, you've got to take advantage of the inventory where it is and when you can," says Rodney Sides, a vice chairman at the consultancy Deloitte.

Target CEO Brian Cornell says shipping from store, even on Thanksgiving, is a more efficient way to get orders to customers for that last stretch, especially in lieu of heavily investing to open dozens of additional online shipping centers.

Physical retailers have long grappled with managing the logistics of selling online. The problem stems from a legacy that includes hundreds of stores that must be filled with millions of pieces of inventory and manned by thousands of employees. Layered on top of that is a network of online fulfillment centers.

Amazon and other pure-play online retailers don't have that complexity. They can spread out inventory at a smaller number of locations -- Amazon says it has more than 50 distribution centers -- and focus on shipping packages.

The online giant is compressing shipping times further, with same-day delivery available in 16 metro areas free for members of its Prime service, and offering to deliver orders in as little as an hour in some markets.

Retailers call their answer omnichannel, a strategy that views all inventory the same and uses algorithms to calculate whether it makes more sense to ship online orders from a distribution center or a store. In some cases, customers want the order ready at a store to pick up.

The National Retail Federation says nearly one-third of retailers are working on shipping products from stores. However, many take a pause during the busiest times of the year, and none is taking it as far as Target this year. Best Buy, Macy's and Wal-Mart Stores all were open Thanksgiving, but expected to suspend efforts to ship items from stores.

"It's just a very busy time," says Dan Toporek, a spokesman for Wal-Mart, which plans to ship nearly all online orders from distribution centers in the 48 hours around Black Friday. "We want to make sure we're delivering the best experience in stores for customers."

While the logistics of shipping from stores before the rush of Thanksgiving shoppers can make sense -- stores will be empty, orders will be easy to find before the crowds mess up things -- the financials can be a challenge. The biggest cost of shipping from store is labor, analysts say, and holiday-pay rates mean it costs at least 1.5-times more than normal. "Ship from store can turn the model upside down if you're not careful," Mr. Sides says.

Retailers face additional margin pressures from shoppers, who don't want to pay shipping fees. Best Buy and Target have eliminated shipping charges on all orders for the holidays. Wal-Mart, meanwhile, has a $50 threshold to eliminate the charge.

There is also the incongruity of whittling your inventory on one of the few appointment shopping days of the year. "All of your efforts have been toward driving traffic to stores," says Nikki Baird, managing partner at Retail Systems Research, a research firm. "Why would you then ship from stores to meet demand that's coming from online?"

Target isn't shipping out of stores some of the most heavily advertised items. The prime deals -- $249 55-inch televisions and $395 drones with high-definition cameras -- are reserved for shoppers in stores, says Eddie Baeb, a spokesman. Anyone who bought those items on Target.com Thursday, where the same deals were available, would get them from distribution centers.

Target has 462 stores around the country shipping items from stores. Most were expected to have workers arrive two to four hours before Thursday's opening. Forty-four stores meanwhile have souped up shipping operations with expanded backrooms for packing up to 1,500 orders a day.

Drew FitzGerald, Suzanne Kapner and Sarah Nassauer contributed to this article.

bloruleshort.gif (618 bytes)

Kmart app seeks attention from mobile shoppers
By Dan Berthiaume
Nov. 24, 2015

Kmart is preparing for what many experts predict will be a mobile-heavy holiday shopping season with an expanded mobile app.

Kmart is adding new features to its app aimed at holiday shoppers, including real-time, opt-in push notifications of exclusive online Bluelight Specials. Notifications will include product details and allow direct purchase from the app.

In addition, app users will receive exclusive in-store coupons every Friday, and also be able to pick up online purchases for free in-store. Further extending omnichannel capabilities, Kmart is also letting app users reserve items online, pay in store and then bring or have products shipped home. And a new Layway and Go feature lets customers scan products from the app and automatically add them to a layaway list.

Furthermore, a mobile coupon center lets members of the Shop Your Way loyalty program load applicable coupons to their account. Coupons will automatically get applied at checkout – through the app, online or in-store.

"Mobile continues to play an important role in the shopping mix. In fact, mobile's share of our online sales has increased 100 percent year-over-year," said Leena Munjal, senior VP, customer experience and integrated retail at Sears Holdings. "We've added features and updates to our mobile app, making it easier than ever for our members to shop, earn points and get the best deals online, in-store or through their smartphones."

A recent NRF survey found that 22% of shoppers plan to purchase on mobile during the season. In addition, 38% said they'll be using smartphones to research purchases, and 20% will use them to look up product availability in store.

Kmart is leveraging its app to make it easier for consumers to perform all of these different mobile functions for their holiday shopping, and keeping the store at the center of its omnichannel holiday experience.

bloruleshort.gif (618 bytes)

Target to debut smaller store format in Manhattan
By Marianne Wilson
Chain Store Age
Nov. 13, 2015

Target Corp. is bringing its smaller-sized, urban format to one of lower Manhattan's trendiest -- and wealthiest -- neighborhoods.

The retailer will open an approximately 45,000-sq.-ft. store on Greenwich Street in Tribeca, near Battery Park, a fast-growing and affluent residential area, and the Financial District.

The two-level store is scheduled to open in October 2016. It is located in a 14-story, 625,000-sq.-ft. mixed-use building, whose landlord is Jack Resnick & Sons.

Similar to its other urban stores, or what Target calls its "flexible format," the new Target will feature a merchandising mix geared to local needs, including smaller packaging for shoppers traveling on foot or in public transit. It will also offer in-store pick-up of online orders.

Target already operates one store in Manhattan, a traditional big-box store in Harlem. And as previously announced, the company is opening a flexible-format store in Brooklyn, in July 2016.

bloruleshort.gif (618 bytes)

JCPenney beats department store doldrums
By Gina Acosta
Nov. 13, 2015

Home goods and Sephora helped JCPenney turn the page on the next chapter of its story of transformation by exceeding top-line growth expectations in the third quarter.

For its third quarter ended Oct. 31, the company reported net sales of $2.90 billion compared to $2.76 billion in the third quarter of 2014. Same store sales increased 6.4 % for the period. JCPenney cut its loss by 27% to $137 million, or 45 cents a share. Total sales increased 4.8 percent to $2.9 billion versus $2.76 billion last year.

"The continuation of our strong sales performance this quarter demonstrates ongoing progress towards achieving the company's long-term financial targets," said Marvin Ellison, chief executive officer. "We grew the top line, improved margin and intensified our expense discipline. As we look ahead to the fourth quarter, we are well positioned to compete effectively during the key holiday shopping period thanks to the hard work and dedication of all our associates."

JCPenney outshined department store retailers Macy's and Nordstrom, who both reported weak financial results this week. Ellison said JCPenney is looking to continue its momentum into the busy holiday shopping season.

"We have not noticed any headwinds in terms of our customer demographic going into the fourth quarter," Ellison said.

For the third quarter, JCPenney said all merchandise divisions had positive comp sales gains over last year. Men's, Home, Footwear, Handbags, and Sephora were among the company's top performing divisions.

Looking ahead to the full year, JCPenney reiterated its outlook for same store sales to increase 4% to 5%. Ellison concluded: "While there is significant work to do to improve our company, the JCPenney team remains determined to regain our status as a world-class retailer."

JCPenney operates 1,020 stores and jcpenney.com.

bloruleshort.gif (618 bytes)

First Look: Bloomingdale's, Honolulu
By Marianne Wilson
Chain Store Age
Nov. 12, 2015

Bloomingdale's has opened its first location in the state of Hawaii, at Ala Moana Center in Honolulu. (The Bloomingdale's facility was formerly occupied by Sears.)

The three-level, 165,000-sq. ft. store is designed to offer a slice of New York City while also capturing the essence of Hawaii and its culture. From louvered wood panels to walls outfitted in graphic palm frond prints and birds-of-paradise motifs, the store pays homage to the Honolulu locale. The Hawaiian motifs are combined with Bloomingdale's iconic aesthetic, including its signature black and white décor and polished concrete floors.

Technology is utilized throughout the space to enhance the overall shopping environment. "Smart" fitting rooms are equipped with wall-mounted tablets that allow customers to view product availability and communicate with associates. The mirrors are equipped with touch-screen options that let customers adjust the lighting to an optimal level for trying on the latest fashions. And the fitting room areas have communal tables with charging stations where guests can mingle and reboot.

The new store also features such amenities as a visitors center on the main floor catering to international and domestic shoppers, and Bloomingdale's first limited-access VIP lounge offering such additional services as light foods & beverage, Bluetooth printer and iPads, a charging station, a private restroom, and more.

bloruleshort.gif (618 bytes)

Social Security Proposals Show Shifting Ground
By Nick Timiraos
Wall Street Journal
Nov. 10, 2015

Competing plans from presidential candidates stir resistance in both parties

Competing visions over how to fix the shaky Social Security system have opened rifts within both parties over what to do with a program long considered the third rail of American politics.

Several candidates in the Republican presidential field are promoting plans that address looming Social Security shortfalls by curbing benefits, primarily for higher-income retirees. The measures could nudge Social Security from a universal old-age insurance system toward a benefit focused on the neediest seniors.

Still, the Republican proposals show how the party is regrouping after a failed bid by then-President George W. Bush a decade ago to augment the retirement-insurance program with a new system of private savings accounts. Even these less-ambitious plans are stirring resistance from other GOP candidates attuned to the party's growing reliance on older voters.

Democrats, meanwhile, are backing higher taxes on the wealthy to shore up the program, while tussling over whether benefits should be expanded further. That marks a turn from a few years ago, when President Barack Obama signaled support for slowing the rate of benefit increases as part of a broader overhaul of entitlements.

"This shows how much the ground has shifted," said Andrew Biggs, who advised Mr. Bush on that proposal and is now a fellow at the American Enterprise Institute, a conservative think tank. "On both sides, it's fair to say the center of gravity on the Social Security debate has moved somewhat to the left."

Republicans largely shied away from the issue in the 2012 presidential campaign and in last year's successful effort to take control of Congress.

But it is gaining attention in the presidential race, because Social Security, originally designed as a pay-as-you-go program, has been paying out more in benefits than it collects in tax revenue since 2010 as the ratio of retirees to workers climbs. The program ran a small surplus last year due only to interest it earned on reserves.

AARP, the influential seniors-advocacy group, launched a campaign last week called "Take a Stand," designed to pressure candidates of both parties to provide more specifics on Social Security.

Federal trustees project that by 2022, the program will run a deficit even after accounting for interest earnings, leading Social Security to exhaust its reserves by 2035. Without action from Congress, that would result in across-the-board benefit cuts of more than 20%.

Some Republicans propose curbing benefits for future retirees. Several candidates support gradually lifting the retirement age, which is set to rise to 67 by 2027, and changing formulas used to calculate living-cost adjustments to provide less generous benefit increases.

Others go further. New Jersey Gov. Chris Christie, who has advanced the most detailed plan, would reduce benefits for retirees who earn more than $80,000 a year in non-Social Security income. Benefits would phase out entirely for those who make $200,000 or more, which could affect about 1% to 2% of all households eligible for Social Security.

Social Security already uses a progressive benefit formula that provides slightly larger payouts as a share of earnings to lower-income workers and slightly smaller ones relative to earnings for higher-income workers.

"Indirectly, both parties are going to make the system more progressive in the future" to address the looming shortfall, said Eugene Steuerle of the Urban Institute. "The question is, how do you want to go about doing it?"

Among Democratic candidates, Vermont Sen. Bernie Sanders has called for expanding benefits by raising the cap on income subject to payroll taxes, currently set at $118,500. He has criticized former Secretary of State Hillary Clinton for refusing to rule out benefit cuts and declining to embrace broad benefit increases.

Means tests have long drawn critics on both sides of the aisle. Liberals worry that eliminating benefits for the wealthy would erode the program's universal appeal, creating a class of people with no stake in the program or incentive to support it. Conservatives worry that means tests will create disincentives for older Americans to save or work longer while requiring a more intrusive tax-collection regime to determine who is and isn't eligible for benefits.

Former Florida Gov. Jeb Bush would address those concerns by tweaking the formula to make benefits more progressive than they already are. That would reduce benefits for the wealthy, but unlike Mr. Christie's plan, it would create fewer disincentives for work or saving than an outright means test.

Florida Sen. Marco Rubio has supported proposals to limit the growth of benefits for the wealthy. This idea has support from some conservatives because it is seen as preferable to raising taxes, said Mr. Biggs, who has provided advice to several GOP campaigns on Social Security. "Paying higher taxes to get higher benefits is not a trade-off they want," he said.

Part of the challenge for the GOP is that its base has aged. Republicans in last year's elections carried voters 65 years or older by 16 percentage points. GOP front-runners Ben Carson and Donald Trump haven't made specific proposals on how to address Social Security's finances, but Mr. Trump has warned that pushing big changes is politically foolhardy for Republicans.

Republicans have taken pains to say that any changes should be made for future, not current, retirees. "My mother is on Medicare and Social Security. I'm against anything that's bad for my mother," Mr. Rubio said at last month's debate.

Some Republicans, including Texas Sen. Ted Cruz, still echo support for private savings accounts. The George W. Bush proposal would have allowed younger workers to divert a share of their Social Security payroll taxes for personal investment accounts, but the president failed to win over reluctant Republicans.

"My brother tried, got totally wiped out," said Jeb Bush, campaigning in New Hampshire earlier this year.

The proposal didn't directly address the solvency problem. Instead, it was promoted as a way to offer higher returns to future retirees as part of a broader "ownership society."

bloruleshort.gif (618 bytes)

Sears ad called 'misleading' by consumer advocate
By Gregory Karp
Chicago Tribune
Nov. 9, 2015

Sears is taking some heat from a consumer advocate over what he claims was a misleading online ad for the retailer's popular family-and-friends sale that took place Sunday in stores but runs online through Tuesday.

An ad on the home page of Sears.com originally promised discounts of up to 20 percent and said members of its loyalty program, Shop Your Way, would get back an extra 10 percent in rewards points. Despite its name, the sale is open to the public, without need to be a friend or family member of a Sears employee.

However, the ad by Hoffman Estates-based Sears has some serious problems that made it misleading, said Edgar Dworsky, a former deputy attorney general in Massachusetts who tracks advertising fibs and foibles at MousePrint.org.

First, a drop-down list of fine print related to the ad, mostly detailing exceptions to the sale, went on for many scrolls of the computer screen and some 1,500 words. It has since been shortened to about 600 words.

"The disclaimer really deserves to be in the Guinness Book of World Records," Dworsky said. "Who's going to wade through that? What consumer is going to pick up on the nuances ... for what seemed like a very simple offer.

"You have a, like, 10-word claim, and you have hundreds of words to explain what you meant by it."

Second, the promise of an extra 10 percent in rewards points, amounting to $150 on a $1,500 TV purchase for example, was not for all members as the ad suggests. It was only for members who used the Sears credit card and was limited to the first $500 worth of merchandise purchased -- meaning $50 worth of reward value.

Limiting the dollar amount on those rewards "changed it completely," Dworsky said. "The ad is absolutely misleading because, seemingly, they're not giving consumers an extra 10 percent back in points as they explicitly promised."

A Sears spokesman did not immediately respond Monday afternoon to a request for comment.

Apparently in response to Dworsky's inquiries, Sears late Sunday changed the family-and-friends sale ad to eliminate mention of the bonus points. A separate ad on Sears.com highlights the bonus points offer for credit card users but clearly states in fairly large letters that it's available "on the first $500 of qualifying purchase with your Sears credit card."

Even if Sears cleared up its misleading ads, Dworsky is curious about what happens for customers who made purchases on Sunday based on misleading information. "Are they going to give the promised 10 percent back?" Dworsky asked.

Dworsky said he has nothing against Sears and praised it for having a signature sale like family-and-friends, along with "a rich rewards program." "Smart shoppers' ears perk up because the family-and-friends sale has always been special," he said.

But the lesson to consumers is the usual: Buyer beware.

"Unfortunately, you have to read advertising with a little bit of skepticism," he said. "But that doesn't excuse a retailer from being truthful in their ads, correcting ads when they're erroneous and frankly, honoring the ad when it's not a blatant mistake."

bloruleshort.gif (618 bytes)

5 companies grab 70% of your online dollars
By Matt Krantz
USA Today
Nov. 5, 2015

The Internet was supposed to democratize and open up information, commerce and communication. But so far, the spoils are going to a relative few.

Now that social media giant Facebook has reported its quarterly profit, investors can see how lucrative Internet business has become for the industry's winners. Just five companies in the Internet Software and Services and Internet and Catalog Retail industries within the Russell 3000 index, including Amazon, Google holding company Alphabet and Facebook, collected 70% of the industry's more than $300 billion in revenue the past 12 months, according to a USA TODAY analysis of data from S&P Capital IQ. Even that statistic masks just how concentrated the Internet business is. Amazon and Alphabet together hauled in 57% of the total revenue generated by the Internet companies over the past 12 months.

A lion's share of the massive digital opportunity has been grabbed by a small cadre of online behemoths that continue to get even bigger.

Internet profit is even more concentrated than revenue is. Alphabet generated $16.4 billion in net profit over the past twelve months, which accounts for two-thirds of the aggregate net income collected by all the Internet companies in the Russell 3000. Since Amazon is a retailer and makes a profit on a smaller portion of its revenue than Alphabet, its profit the past 12 months is just 1.3% of the industry's total. Facebook trails Alphabet, claiming 11% of the industry's total net income.

Investors are quickly coming to terms that if they want a piece of the Internet and technology revolution, they'd better stick with the big companies that just keep getting stronger. The big three Internet companies -- Amazon.com, Alphabet, and Facebook -- command more than 70% of the industry's total market value of $1.5 trillion. Meanwhile, smaller players are falling further behind. Online coupon provider, Groupon, is the latest smallish Internet company that has faded as the big players get even more dominant. Groupon is the 11th largest Internet company in the Russell 3000 by revenue, but has slipped to the point its shares are trading for just few bucks. Shares have lost nearly two-thirds of their value this year and are trading Thursday less than $3 a share.


Company, Symbol, % of Internet revenue *, Revenue TTM ($ bils)**

Amazon, AMZN, 33.2%, $100.6
Alphabet, GOOGL, 23.7%, $71.8
eBay, EBAY, 5.8%, $17.7
Facebook, FB, 5.3%, $15.9
Liberty Interactive, QVCA, 3.3%, $9.9

Source: S&P Capital IQ, USA TODAY

* Based on companies in the Internet and Catalog Retail and Internet Software and Services industries in the Russell 3000 index. Based on revenue reported the past 12 months.

bloruleshort.gif (618 bytes)

The 2016 SHC's Medical Changes Summary
NARSE Press Release
Oct. 29, 2015

The 46,000 retirees with Retiree Life Insurance coverage will be notified in early November that the current contract with Prudential will be replaced with identical coverage provided by Securian (formerly Minnesota Life) effective January 1, 2016. The only impact this will have is the contact information will change.

The 300 retirees with Group Universal Life (GUL) will continue to have their coverage provided by Prudential.

All 9 of the pharmacy plans offered for 2015 will be offered again for 2016. Enrollment materials will be mailed 2 weeks prior to the open enrollment period of 11/9 through 11/20.

The RHA website will not be online until 11/9. It is important to note that if Aetna/RHA does not receive notification of a change in the 2015 coverage, or complete discontinuance of coverage, currently enrolled participants will be automatically reenrolled in their 2015 plan.

If a retiree decides to discontinue their pharmacy coverage with Aetna, and are told by the new provider that they will take care of cancelling their Aetna coverage, this cannot be accomplished for "group" plans. The insured must personally cancel the coverage.

The costs for the offered pharmacy plans in 2016 will remain the same for the plan providing minimal coverage. For median coverage, there will be a $5.00 increase, and $15.00 increase for the richest coverage. The other changes in pharmacy coverage involve the government mandated changes, such as changes in the Gap (Donut Hole) coverage for 2016.

Aetna Part B Supplemental (Medigap) insurance cost for pre 65 insured will increase by 3 1/2%. There is no increase in premium cost for the post 65 PPO and Medicare Advantage coverage. However, there will be an increase the Part B Supplemental cost share to 20%, and the the $50 copayment for emergency room visits will increase to $75.

New ID cards will be issued before January 1 to those making a selection change in their insurance coverage. If there is no change in the insured's 2015 coverage, existing ID cards can be used until new ones are issued.

The enrollment materials for 2016 will only be sent to 2015 Aetna/RHA participants, or those who have previously requested a suspension in coverage. The same applies to the Vision and Dental offerings.

bloruleshort.gif (618 bytes)

More consumers plan to boycott Black Friday
By Gina Acosta
Oct. 28, 2015

More consumers plan to shop on Cyber Monday than on Black Friday, according to a recent Morpace Omnibus report.

Holiday intentions for U.S. consumers were revealed when the Omnibus data showed that out of 1,001 individuals surveyed, more than 57% plan to shop on Cyber Monday this year, compared to only 35% planning to shop on Black Friday. And of those planning to shop on Black Friday, only 23% will be strictly going to retail locations while another 55% will be shopping both in-store and online.

"There could be many reasons for this, but the prevalence of retailers offering promotions throughout the weekend, particularly online, and the fact that the draw of "limited quantity door-busters" has lost its appeal to the masses are significant contributors," explained Kirk Baetens, Vice President and leader of the Morpace Retail & Consumer Goods practice.

The Morpace study also found that:

• 75% of holiday shoppers plan to shop online and 87% of these individuals plan to shop on Amazon.
• When shopping online, 19% of consumers plan to use a tablet and 22% plan to use a smartphone.
• When it comes to holiday shopping, consumers aren’t always planning ahead. About 46% of shoppers plan to shop between one to four weeks before the holiday, compared to 40 percent who plan to begin their shopping two to three months before.
• 54% of males surveyed plan to begin shopping one to four weeks before the holiday, while only 38% of women plan to do the same.

"Consumers are looking more for convenient ways to shop, and mobile or tablet use will continue to increase," Baetens said. "Yet there is still that group of consumers who plan to brave the stores on Black Friday, and those who are always going to be procrastinators. The key is identifying how to reach different consumer segments in an effective way and understanding channel demand during this busy season."

The Morpace Omnibus is an online, nationwide survey of at least 1,000 people that collects data and highlights consumer preferences and trends for the business community.

bloruleshort.gif (618 bytes)

Sears puts 'S' in seamless experience
By Mike Troy
Oct. 21, 2015

Sears Holdings is quite the omnichannel innovator and it just launched another new capability melding digital and physical.

A new customer service initiative called "Meet with an Expert" has launched at Sears Holdings as a means to connect online home appliance shoppers with the retailer's in-store sales associates. Because the path to purchase for big-ticket, high-consideration products like appliances typically begins online, Sears wanted to create an option for online shoppers to have continuity of their experience in a physical store. Online shoppers are now given the option of scheduling a time to meet with a Sears appliance specialist at a store location convenient to them.

"We want to blur the lines between our offline and online channels because that is how our customers are shopping," said Leena Munjal, senior VP of customer service and integrated retail at Sears.

After meeting with a Sears appliance expert, a shopping recap can be emailed to the customer with links to products in which they expressed an interest to help close the sale.

"I don't like to use the word selling. I prefer servicing because it is about customers and understanding the needs they have and letting them decide what works best for them," said Munjal, an 11 year Sears veteran.

The new Meet with an Expert capability is the latest development in Sear's integrated retail journey than began 14 years ago when the company was among the first to offer buy online, pick up in store.

"We introduced the buy online pick up in store service early on because we saw the changes happening where customers were getting more comfortable buying online," Munjal said.

Since then, Sears has steadily deepened the level of physical and digital integration. Around 2005, the company launched its "Ready in Five," guarantee, which like it sounds, guaranteed customers who purchased a product online that it would be ready for pickup within five minutes of their arrival in store.

Other noteworthy developments have occurred more recently. In early 2014, Sears began offering in-vehicle pick-up, which involves employees bringing products to customers' vehicles. Building on that, the company then began offering customers the ability to return products without getting out of their vehicles. Also in 2014, the company introduced its "Reserve It," service. Online shoppers are able to select apparel products, select a local store, and an associate will pull the garments and have them hanging near a fitting room ready to try on when the customer arrives.

The strategy appears to be working.

"Sixty percent of online sales are multichannel in nature, meaning a store was involved in the online transaction," Munjal said.

bloruleshort.gif (618 bytes)

Kmart plans a Happy Halloween for shoppers
By Gina Acosta
Oct. 20, 2015

Shoppers who hit the aisles at Kmart this Halloween are in for more treats than tricks.

The company said that shoppers in costume on Oct. 31 will receive a coupon for a purchase over $30. Additionally, the first 100 children ages 12 and under who show up to trick or treat will receive a fun-size candy bar.

"Halloween is a super fun time of the year for kids and kids at heart," Kmart chief marketing officer Kelly Cook said. "At Kmart, we love seeing the creativity and energy that goes into costumes and home decorations each year," said Kelly Cook, chief marketing officer, Kmart." We want to remind our members about our amazing selection of costumes to help make this Halloween extra special."

Here's some of the spooky deals at Kmart:

Starting Sunday, Oct. 25 through Oct. 31, costumes and capes will be 50% off in stores and, to make sure Halloween is a treat, fun-size candy favorites are on sale as well. Just grab two Hershey, Mars or Nestle fun-size candy bags for just $5, while supplies last.

Kmart is also encouraging shoppers to follow Kmart's Halloween deals at Kmart.com/Halloween, or follow the conversation on Facebook and Twitter using #TrickTreat.

bloruleshort.gif (618 bytes)

Medicare Rates Set to Soar for Many Seniors
By Stephanie Armour and Anne Tergesen
Wall Street Journal
Oct. 15, 2015

No cost-of-living increase for Social Security benefits means the projected increase in Part B premiums will occur unless there is a fix Congressional lawmakers so far have failed to agree on a way to stave off an unprecedented premium increase for millions of Medicare recipients for 2016.

That is creating uncertainty for many seniors on Medicare Part B, which covers outpatient care such as doctor's visits. About 30% of the roughly 52 million people enrolled in Part B could see a 52% rise in those premiums if Congress and the Obama administration don't find a way to freeze or reduce the increase.

The Social Security administration said Thursday that there won't be a cost-of-living increase for Social Security benefits, which means the projected increase in the Part B premiums will occur unless there is a fix.

Open enrollment for Medicare for 2016 starts Thursday, though Congress could act to prevent the rise.

Pressure on Congress is mounting because many state budgets also would be hard hit. The premium increase would affect about nine million lower-income Medicare beneficiaries whose premiums are paid by state Medicaid programs because they are eligible for both plans. Many of those state programs are already stretched thin.

New beneficiaries, those with high incomes and Medicare recipients who don't get Social Security would be hit with the increase. For them, the standard Part B premium would rise about $55 a month, or about $650 a year. Higher earners would pay even more.

The rise in premiums seems increasingly likely following the Social Security Administration's announcement Thursday that low inflation, held down by low gas prices, means Social Security beneficiaries won't get a cost-of-living increase for 2016.

Most Medicare recipients have premiums deducted from Social Security. A "hold harmless" provision of the Social Security Act protects about 70% of Medicare recipients from having their Social Security checks reduced if Medicare premiums rise but Social Security benefits don't.

But the government must spread out projected Medicare cost increases among those who aren't covered by the provision. That means millions could face the higher rate.

Health and Human Services Secretary Sylvia Mathews Burwell has said her agency would search for ways to curtail the increase. The agency is expected in coming weeks to announce Medicare Part B 2016 premiums and deductibles and any programs that may reduce the anticipated premium jump.

The White House also said it is aware of the concerns. "We share the goal of keeping Medicare's premiums affordable, are exploring all options, and appreciate the interest and ideas of members of Congress," said White House spokeswoman Katie Hill.

House Democrats including Minority Leader Rep. Nancy Pelosi (D., Calif.) have been working on legislation to protect seniors. House Speaker John Boehner (R., Ohio) wants any legislative fix to include ways to increase other revenues to make up for the billions of dollars that would be lost if premiums don't rise, staffers said. He and Mrs. Pelosi are continuing to work on the issue, they said. A senior Democratic aide said both want to find some way to make up the income losses.

Some Senate Democrats back a bill that would prevent the increase. Legislation introduced this month by Sen. Ron Wyden (D., Ore.) doesn't specifically address ways to offset the hit, but Democrats are open to exploring options, according to staffers.

If no agreement comes together soon, Democratic staffers said a freeze or other fix to the premium increases might be part of any year-end budget deal in Congress.

Glen Hogue, a 66-year-old retired consumer researcher in Manhattan Beach, Calif., is tracking the political skirmish. He is among about 1.6 million Americans who could see the increase because he receives Medicare but deferred claiming Social Security benefits.

"A 52% increase kind of gets my attention," said Mr. Hogue, who said he may consider signing up for Social Security if his Part B premium rises.

About 3.1 million more participants would be subject to the rise because of their incomes. The Medicare trustees projected that single individuals earning between $85,001 and $107,000--and couples earning $170,001 to $214,000--would see monthly premiums rise from $146.90 a person this year to $223 in 2016.

"Part B premiums have gone up before, but this increase is unprecedented," said Matt Salo, executive director of the National Association of Medicaid Directors, which represents state Medicaid officials. In total, he said, the states may see costs surge by $2.3 billion if Medicare Part B premiums rise with no intervention.

Mr. Salo said states may cut services to Medicaid recipients or reimbursements to doctors and hospitals without a fix from Washington.

In an Oct. 1 letter to California's congressional representatives, the state's Department of Health Care Services estimated the state faces about $550 million in additional costs in 2016. "The fiscal impact to the State of California for these cost increases is significant and concerning," the letter states.

"It's poor public policy to expect the states to cover the Medicare shortfall," said Tom Betlach, Arizona's Medicaid director, who said the state faces $16 million in additional costs in 2016 due to the projected premium increase.

Some relief could come in later years. If Social Security recipients get a cost-of-living adjustment in 2017, the "hold harmless" provision will affect a smaller portion of Medicare recipients. That means Medicare costs will be shared more equally. Indeed, the Medicare trustees are projecting that the base premium for Part B will reset for everyone at $120.70 a month in 2017.

bloruleshort.gif (618 bytes)

Martha Stewart: I should have bought Kmart
Crain's Chicago Business
Oct. 14, 2015

If Martha Stewart had her way, Kmart could have been KMartha.

The home goods mogul said she regrets not buying Kmart before a deal with the discount chain went sour.

"We thought about buying it, but we didn't do it, and we should have," Stewart said in an interview with the Associated Press. "That could have been our store--KMartha!"

Stewart said another executive at Martha Stewart Living was "less bold" than she was and was against a buyout. "We'd have a fantastic chain of stores right now," she said.

A spokesman for Hoffman Estates-based Sears Holdings Corp., which owns Kmart, declined to comment.

For more than a decade, Kmart sold Martha Stewart-branded furniture, towels and other home decor. The partnership unraveled and the companies parted ways in 2009. Now, Martha Stewart products are sold at several stores, including home improvement retailer Home Depot, department store chain Macy's and craft retailer Michaels.

Not everything about Kmart was a good thing: Stewart wasn't a fan of its offices in Troy, Mich. "It was one of the most horrible headquarters," Stewart said. "Just look at the pictures. It was an architectural nightmare."

Kmart moved out of the space in 2006; the site is empty and owned by the Forbes Co., which owns a high-end shopping mall across the street. The Forbes Co., which isn't associated with the business magazine, declined to comment.

Stewart is focused on another deal. Brand management company Sequential Brands Group is in the process of buying Martha Stewart Living Omnimedia for $353 million, a fraction of the $2 billion the company was worth after Stewart took it public in 1999. Sequential, based in New York, also owns the Jessica Simpson clothing brand. It expects the deal to close by the end of the year.

Stewart said she is "very enthusiastic" about her company's new owners and expects Sequential's team to grow the brand.

"I will be on the board of Sequential and be creative director," she said, "so my job is only getting bigger."

bloruleshort.gif (618 bytes)

The Companies With The Biggest Jumps In Employee Happiness
By Kathryn Dill
Sept. 8, 2015

The words "workplace happiness" may call to mind images of Bay Area tech companies with open

workspaces and office fridges stocked with local craft brews. But as it turns out, contented employees have much simpler desires–good workplace relationships, fair compensation, the chance to grow, just to name a few–and often find them at mature companies.

To determine the companies with the greatest improvements in employee happiness over the year,  fulfillment-focused jobs search and review site CareerBliss considered factors including an employee's relationship with his or her boss as well as coworkers, work environment, available resources, compensation, opportunities for advancement, a company's culture and reputation, as well as daily responsibilities and the employee's personal agency over those tasks.

Company reviews are scored between one and five, and the companies that appear on this list received a minimum of 10 independent employee reviews throughout 2014 and 2015 on CareerBliss.

"Happiness is the one of the most valuable currencies," said Heidi Golledge, founder of CareerBliss.

At the top of the list this year is business process and information technology company Genpact, with the highest jump in employee happiness over the past year. The company saw a 19% increase in employee happiness between 2014 and 2015, bumping its overall rating up to 4.82. Sears was next with a 13% increase and a 3.81 overall rating.

AT&T rounds out the top three with an 11% increase in happiness and an overall rating of 4.24. (Though AT&T's overall happiness rating is higher than number two Sears', its overall percentage increase is smaller.)

"We know that happy work environments are productive work environments," said Golledge.

"It's wonderful to see such a wide array of industries represented."

1. Genpact – 19%
2. Sears – 13%
3. AT&T – 11%
4. Oracle – 10%
5. Caterpillar – 8%

bloruleshort.gif (618 bytes)

Why Sears Holding Corp. Stock Fell 15% in September
The Motley Fool
Oct. 13, 2015

After a pleasant pop in August, Sears Holding Corp. stock posted another significant decline last month. Did reality sink back in for shareholders?

What: Shares of Sears Holding Corp. fell 15.3% in September, according to S&P Capital I.Q. data.

So what: Sears' skid during September follows a fairly sharp rise of 24% from the previous month. The retailer's shares are being batted back and forth between investors' hopes and fears as it continues to struggle to stabilize its business. In September, implications of the company's fiscal second-quarter 2015 report, released in late August, began to sink in. The most eye-opening aspect of Sears' earnings was the speed with which the resources from real estate transactions completed during the second quarter were used up. Sears received over $2.6 billion, net of transaction costs, through sale-leaseback transactions with its real estate investment trust spinoff Seritage Growth Properties.

Of this amount, Sears managed to squirrel away roughly $1.5 billion to cash on the balance sheet. But most all of the rest was consumed by negative operational cash flow and the paying down of roughly $800 million of short-term borrowings.

While the cash represents something of a cushion (Sears had $1.8 billion of cash on hand as of Aug. 1), it's no panacea for the retailer's ongoing losses. Add back $633 million of gain from various real estate transactions, and Sears shows an operational loss of $712 million in the first two quarters of the fiscal year, on $12.1 billion in sales. This translates into a cash burn from operations of $832 million during the period.

At that rate, it won't take terribly long to work through the replenished cash coffers. And now that it's completed the sale-leaseback deals with Seritage, as well as a financing transaction of $426 million through three new real estate joint ventures earlier this year, Sears' total property and equipment on its books is currently down to $2.7 billion, from $5.1 billion this time last year. There's only so much real estate left to sell to raise cash and buttress operations.

Now what: The holiday shopping season is almost upon us, and this year it will be critical for Sears. With its extra bit of ready-money, the company theoretically should have some leeway to find the right merchandising mix and incentivize customers to shop in earnest during the next three months. It will be early 2016 before investors can get a full picture of how this important season falls out for Sears. Above all, the company will need to show some progress on revenue and profitability, as its outside funding options are quickly dwindling.

bloruleshort.gif (618 bytes)

J.C. Penney CEO Ellison makes $1 billion promise
By Gina Acosta
Oct. 9, 2015

J.C. Penney CEO Marvin Ellison contends the retailer's turnaround plan is working and by executing three key strategies it will achieve a financial milestone that was unthinkable a few years ago.

Ellison drew a line in the sand on Oct. 8 when he told attendees at a retail conference that the company is on track to reach $1.2 billion in earnings by 2017. In addition to the financial target, Ellison shared his thoughts on the retailer's strengths, shortcomings and key growth strategies with roughly 300 attendees gathered at the Westin Galleria in Dallas for the 30th annual Retailing Summit organized by the Texas A&M Center for Retailing Studies at Mays Business School.

The theme of the event, "Redefining Retail," was a perfect fit for Ellison given the change he is driving at J.C. Penney. He has the retailer focused on implementing a strategic framework that revolves around providing a seamless shopping experience, strengthening private brands and increasing revenue per customer.

"We believe that (our) turnaround will be driven by three things," Ellison said. "We have to make sure that we have a great omnichannel experience for customers, ensure that our private brands are something that create key points of differentiation, and we have to monetize every engagement with the customer so that when he or she comes in we offer them something that gives them the ability to solve a problem, serve a need and excite them to come back the next day."

Ellison said these three strategic pillars are necessary to create customer loyalty and are the underpinning of the company's strategy going forward.

The company is also looking at what it does well and not so well, and he likened the analysis to a balance between art and science. The company does a great job with "art" and must get better at "science," according to Ellison. He described "art" as the retailer's fashion partnerships with celebrities such as Michael Strahan, merchandising, presentation, the Sephora and Disney shops, the beauty salons, and other features in-store.

"We're the only department store with Disney shops. We have the Sephora stores, which is a great brand with great loyalty," Ellison said. "But there must be a balance between art and science. We have to create that balance. What is the science? We don't have great analytics. We need e-commerce, supply chain, data processing help."

The company is getting that help by adding executives to its ranks who have expertise in areas such as omnichannel, supply chain, credit and customer data. Most notably in the omnichannel area, J.C. Penney two months ago created the role of executive VP of omnichannel, and to fill the position it hired Michael Amend, Home Depot's former VP of online, mobile and omnichannel. Complementing the omnichannel role, J.C. Penney named Mike Robbins to the role of senior VP of supply chain. Robbins most recently served as Target's senior VP of global supply chain.

"Their backgrounds perfectly align with our long-term growth plan to become a world-class omnichannel retailer," Ellison said when the appointments were made.

While Amend and Robbins were external hires, the company looked internally to fill its head merchant role last month. Veteran J.C. Penney merchant John Tighe was elevated from his role as senior VP and general merchandise manager to fill the chief merchant job held by the retiring Liz Sweney.

"We have a lot of work to do, but we feel really good about creating that balance between art and science," Ellison said. "And with that balance we believe that we can reach our objective of getting to $1.2 billion in earnings by 2017."

The company has a long way to go, but if J.C. Penney can achieve that financial target it will be one of the more remarkable turnaround stories in retail. Ellison came to J.C. Penney last November from Home Depot, where he was executive VP over its 2,000 U.S. stores. He spent 12 years at Home Depot and before that, 15 years at Target. Ellison took over the reins from Mike Ullman, who was CEO of J.C. Penney from 2004 to 2011. Ullman had left the company and J.C. Penney sought a new direction under the leadership of former Apple executive Ron Johnson. However, the strategies Johnson implemented alienated shoppers and caused month after month of double-digit comp declines, which caused his tenure to be short-lived and saw Ullman return as CEO in April 2013.

"The revenue decline at J.C. Penney was not driven by technology, or a competitor, or customers leaving the company," Ellison said. "It was driven by bad decisions from one leader. Can you reverse it? Yes, we can and we have started to do that."

Indeed, there are signs in the company's financial results that it is overcoming self-inflicted wounds and more effectively serving shoppers with an omnichannel approach.

Total sales in the second quarter ended Aug. 1, increased 2.7% to $2.89 billion from $2.8 billion and most impressively, same store sales increased 4.1% and exceeded the quarterly comp from rivals Macy's, Kohl's and Dillard's. Despite the top line improvement, the company still posted a net loss of $138 million, or 45 cents a share, but that was an improvement from the same quarter the prior year when the company had a loss of $172 million, or 56 cents a share.

As for what's next, Ellison is about focus, strategic refinement and acknowledges that, "we can't serve everybody."

"What we are trying to do is focus on the customers that we believe will love coming to shop at J.C. Penney, customers that will embrace our environment, and we're going to offer those customers an exceptional experience," Ellison said.

bloruleshort.gif (618 bytes)

Sears Holdings makes big moves on home front
By Mike Troy
Retailing Today
Oct. 9, 2015

Sears holdings has made a key acquisition to bolster its connected home effort and named a new executive to lead its home service division. 

The retailer said it hired former Best Buy executive Sean Skelley as president of its Home Services division. Skelley spent 20 years at Best Buy but most recently served as senior VP of service solutions for Asurion, global provider of device protection and support services for smartphones, tablets, consumer electronics and appliances.

While at Best Buy, Skelley held positions of increasing responsibility in areas ranging from stores to merchandising/category management, to business development and services and was responsible for the acquisition and nationwide rollout of Geek Squad.

"Sean is a proven, innovative leader who brings a history of strategic customer focus to his new role as the leader of Home Services," said Edward S. Lampert, Sears Holdings' chairman and CEO. "He possesses a unique understanding of service and product repair needs, and his abilities to identify service efficiencies will be a great asset as we focus on our members and drive the company's transformation."

According to Sears, its Home Services group is the top national service provider and trusted advisor serving 39 million households. Its roughly 7,500 technicians make more than 13 million calls annually.

That call volume could be increasing in the years ahead as homes gain new technological capabilities and increased complexity with the rise of the connected home phenomenon. Sears is eager to play a major role in that world, which is why in May of this year Sears Home Appliances and Services opened a technology development office in Seattle's Columbia Center to focus on home appliance innovation with front-end development, product management, program management, design and research. Then in June, Sears launched a Connected Solutions flagship store designed to simplify the way people shop for their connected home.

The Connected Solutions store features a living room, kitchen, nursery, workout room, garage and outdoor area, so shoppers can experience the benefits of smart technology. Sears is expanding its Connected Solutions assortment to hundreds of stores to offer what it says is one of the industry's largest cross-category selections of smart technology products.

The company's most recent move on the connected home front involves the acquisition of WallyHome technology for devices which sense changes in moisture, temperature and humidity, from SNUPI Technologies. Sears also will license related technology from SNUPI, which will provide consulting services for the development of future Sears Connected Solutions products. The acquisition also includes the lease of a 10,000-sq.-ft. technology development office on the campus of the University of Washington and the addition of four new employees.

"This acquisition reinforces our commitment to the Connected Solutions business and the technology that we think can help fuel our company's transformation," said Ryan Ciovacco, president of Consumer Electronics and Connected Solutions, Sears Holdings.

Managing the operations of the new office will be Parag Garg, CTO of Connect Solutions for Sears Holdings.

"We think this location will enhance our recruiting and hiring of technical talent for hardware, embedded engineering and Connected Solutions," Garg said.

SNUPI Technologies (Sensor Network Utilizing Powerline Infrastructure) is an ultra-low-power, general-purpose wireless sensing platform that has whole-home coverage and is easily installed and maintained. SNUPI's patented technology leverages the existing electrical wiring as a whole-home antenna to provide Connected Home partners with coverage and longevity for their products. The technology was first developed at the University of Washington and Georgia Tech.

bloruleshort.gif (618 bytes)

Amazon.com extends its lead in e-commerce wars
By Gina Acosta
Retailing Today
Oct. 6, 2015

Amazon.com is the No. 1 website for online shoppers in the United States, according to a new survey.

A Survata study commissioned by BloomReach reports that in a survey of 2,000 U.S. consumers, 44% bypass the entire Internet and go directly to Amazon.com first to search for products, compared to 34% who use top search engines like Google, Bing and Yahoo!.

This means that Amazon's dominance in the record-setting $300 billion U.S. e-commerce market continues to rapidly grow over its competitors. As recently as 2012, Forrester found that only 30% of consumers research products on Amazon.com first.

"Amazon has turned a slow-bleed of search engines' and retailers' e-commerce importance into a gushing wound," said Joelle Kaufman, head of marketing and partnerships for BloomReach.

"Search engines like Google have done their part by making product discovery and search intuitive, convenient and seamless; but if retailers want to slow Amazon's dominance, then they must integrate technology that creates frictionless experiences for their customers across channels. Amazon has a commanding lead, but retailer personalization and brand experiences can power a counterattack." 

Retailers are faring worse, with only 21% of consumers saying they'd start their product search at a specific retailer’s website. In addition, consumers are overwhelmingly being influenced by Web personalization technology; 87% said they'd specifically buy from the company that best predicts their intent and suggests products intuitively over all others.

Amazon has invested heavily in and touted its advanced algorithmic recommendation capabilities, and today a colossal 75% of consumers feel that no other online retailer can personalize experiences better than the company, with its nearest competitor Walmart.com registering 9% followed by eBay at 8%. 

However, while Amazon advances the battlefield on one front, the traditional allies of retailers -- the search engines -- have inadvertently squeezed retailers from the other front.

BloomReach also studied consumer attitudes toward shopping on smartphones -- compared to digital marketer perceptions and strategies. Conducting research on products and prices is the main reason (47%) people shop on smartphones, and almost half of those researching are specifically "showrooming" while in store.

Yet with mobile search traffic surpassing desktop for the first time in the U.S., 81% of consumers say that laptops/desktops still are the preferred way to make purchases, and 64% said the challenges of smartphones (smaller screens, typing) negatively affected their willingness to purchase.

"People don't think 'Now I'm going to shop on my phone; now I'm going to shop on my laptop; now I'm back on my phone.' They just shop," said Kaufman. "But marketers often painfully approach omnichannel personalization in this way -- siloing data and chalking every solution up to a responsive-design problem. Marketers are ignoring the 25x mobile-influence factor, inaccurately thinking that 'omnichannel' and 'personalization' are mutually exclusive."

This study was unveiled one year after BloomReach released a similar study of UK consumers and marketers, finding that 82% of UK consumers thought Amazon was the best at personalizing.

bloruleshort.gif (618 bytes)

Sears names new chief for Kenmore line
By Gina Acosta
Sept. 15, 2015

Sears Holdings has turned to a veteran of tech and innovation companies to lead the business unit in charge of the company's most iconic brands.

The company has named Tom Park as president of the retailer's Kenmore, Craftsman & DieHard division.

"Tom is a veteran in the consumer and business-to-business technology space," said Edward S. Lampert, Sears Holdings' chairman and CEO. "His experience at Disney, one of the country's most treasured brands, in addition to his over 30 years of experience in sales, operations, sourcing and logistics, product management and finance, positions him well to serve as the steward of our brands as we continue to transform our company."

Park most recently served as the VP and general manager of the Linksys division of Belkin International where he has held various senior level roles since 2004. Prior to Belkin, he served as the director of finance for Walt Disney Imagineering, the arm of the company focused on theme parks, resorts and other real estate development.

Park was promoted to vice president and controller of Disney Consumer Products and then to VP and general manager of Disney Collectibles, which later became Walt Disney Classics under his leadership. He also was senior VP of Disney Direct Marketing and president of The Disney Store Worldwide. Park has also previously held positions at Unisys, EStyle and MGA Entertainment.

Park holds a Bachelor of Science degree in Accounting from Villanova University.

bloruleshort.gif (618 bytes)

BOZIC MICHAEL Age 74, of Pittsburgh
Oct. 4, 2015

Michael Bozic, age 74, of Pittsburgh, PA, died on Wednesday, September 30, 2015. Beloved and loving husband of Stephanie Sural Bozic; son of the late Michael Bozic, Sr. and Nada Gurgevich; loving father of Amanda Michelle Pyper and Peter Elliot Bozic; grandfather of Ellie and Lucy Pyper. He was preceded in death by his brother, David Bozic.

Michael began his retail career in 1963 as a management trainee for Sears Roebuck and Company in its Greensburg, PA store. Over his 28-year career with Sears, he rose to become the youngest President and Chief Operating Officer of the 4.0 billion Canadian subsidiary and later as Chairman and Chief Executive Officer of the Sears Merchandise Group, encompassing operations in the United States, Canada and Mexico.

After leaving Sears Roebuck, he joined Hills Stores Company in 1991 as President and C.E.O. and subsequently Levitz Furniture Corporation in November 1995 as Chairman and C.E.O. Michael was recruited to Kmart Corp. in December 1998 where he served as Vice Chairman until retirement in November 2000. He served as a Director for Morgan Stanley Mutual Funds, American Road Harley LLC, Weirton Steel Corp., and was also a trustee of Hillsdale College.

In lieu of flowers, donations in Michael Bozic's name to Hillsdale College, 33 E. College Street, Hillsdale, MI 49242 or to the Pittsburgh Institute for Neurodegenerative Diseases (PIND), Attention Jim Olsen PMHSF, 3600 Forbes Ave., Pgh., PA 15213.


bloruleshort.gif (618 bytes)

J.C. Penney makes big change to pension plan
By Mike Troy
Oct. 2, 2015

Citing favorable market conditions and a desire to "de-risk" its pension plan, nearly 14,000 participants in J.C. Penney's retirement plan opted to receive lump sum payments.

The deal is expected to reduce J.C. Penney's $5 billion U.S. pension obligation by 25% to 30% and doesn't require any cash contribution from the company. Approximately 12,000 retirees and surviving beneficiaries elected to receive voluntary lump-sum payments to settle the pension plan's obligation to them and another 1,900 former employees of J.C. Penney who have deferred vested benefits also elected to receive voluntary lump-sums, according to details released by the company.

J.C. Penney's benefit obligations for up to 43,000 other retirees and their beneficiaries will be assumed by The Prudential Insurance Company of America. A deal reached with Prudential calls for the purchase of a group annuity contract that will settle a substantial portion of J.C. Penney's remaining retiree pension benefit obligations, according to a statement by the company.

After the closing of these transactions, which is anticipated later this year, the plan is expected to remain over-funded and the company expects that it will not be required to make cash contributions to the plan for the foreseeable future.

"We are confident that Prudential, an expert in this field, will provide great service to our retirees receiving monthly payments," said Ed Record, J.C. Penney's CFO. "These actions not only continue to provide excellent benefit security for our retirees, but also further the objective of de-risking the plan while improving the company's long-term risk profile."

The contract with Prudential calls for J.C. Penney to transfer a portion of its obligations and assets to Prudential who then pays and administers future benefit payments to select retirees. Prudential also will assume financial responsibility for making the annuity payments as provided in the group annuity contract.

According to J.C. Penney, the transactions may result in a non-cash pension settlement charge with the impact to be determined at the closing of the transaction. This charge will be excluded from the company's 2015 adjusted results.

bloruleshort.gif (618 bytes)

Is This Where Sears Holdings Corp. Can Finally Prove Its Critics Wrong?
By Rich Duprey
The Motley Fool
Sept. 28, 2015

The retailer's fortunes have been on a multiyear slide, but there's one way it can change course.

Sears Holdings sales are in freefall, but the old-line retailer just might have a secret weapon at its disposal. 

More than a decade ago, Kenmore appliances owned a 40% share of the market, but along with the fortunes of its owner, Sears Holdings, the retailer's crown jewel has become a shadow of its former self. According to a survey of consumers by TraQline, Kenmore's market share has shriveled to just under 14% at the end of the second quarter.

There have been made by Sears Chairman Eddie Lampert since merging the chain with Kmart, but it's the appliance business that could be where he finally makes good on his promise to resurrect the retailer.

Lampert's been investing a ton of money into Sears online capabilities, and because it's a retailer's online presence that plays a key role in the consumer's decision-making process when it comes to buying an appliance, it's possible Sears could once again grow into a destination shoppers turn to.

The warm fuzzies

Right now, the Sears experience ranks at just about the industry average, but between the lingering power of the Kenmore brand and Lampert's decision to bring on board both a former Johnson & Johnson executive to fill a just-created position overseeing the retailer's hardlines and Amazon.com's logistics chief to spearhead online fulfillment, Sears Holdings suddenly has plenty of opportunity to win back customer loyalty and sales.

J.D. Power released last week its third annual survey of consumer interaction with a retailer's website and the decisions they make when it comes to buying an appliance. It revealed that when consumers have a positive experience with a site (primarily a result of it being less complicated to navigate than expected), they were more likely to buy more from the site as well as visit its stores.

The 2015 Appliance Shopper Website Evaluation Study analyzed four factors to come out with their brand and retailer rankings, with satisfaction calculated on a 1,000-point scale:

• Information and content
• Navigation
• Appearance
• Speed

It found that 62% of shoppers were more likely to visit a showroom because a website was less complicated than expected while just 22% had the same feelings if a site was more complicated. Importantly, though, the better retail websites caused two-thirds of consumers to "definitely" consider making other purchases by the brand, with more than half of those visiting brand websites saying the same thing.

Kenmore has long been a shining star for Sears, and customer satisfaction surveys show it can be again.

Wash, rinse, repeat

That's huge for Sears. The Kenmore brand, even if it's lost much of its share of the market, is still highly regarded by consumers as a quality brand. A year ago, J.D. Power found Kenmore's Elite models were top-ranked in consumer satisfaction surveys for different types of appliances, such as top-load clothes washers, dishwashers, and side-by-side refrigerators. It ranked highly for other types of appliances, too.

Sears valued the Kenmore brand, along with Craftsman, Diehard, and the other trade names and intangible assets it owns, at almost $2.1 billion this past January. While that's down considerably from the $2.8 billion it assessed their value at the year before, they'll still generate significant cash flows for the retailer.

Kenmore was also able to hold its own in the J.D. Power website survey, tying for third place with Amana behind No. 1 General Electric and second place KitchenAid.

A growing e-commerce presence

What Sears needs to do then is further the customer experience. Internet Retailer ranks Sears fifth overall in its Top 500 Guide of e-commerce companies, having grown online sales from $3.1 billion in 2010 to $5.7 billion, for an annual growth rate of nearly 13%. Its Shop Your Way member loyalty program, which has become an essential component of Sears integrated retail experience, now accounts for about three quarters of all its eligible sales.

But as mentioned earlier, it's currently only a so-so experience for consumers as the J.D. Power survey found it ranked right in line with the industry average, with an 828 score (the average was 829).

Kenmore was also able to hold its own in the J.D. Power website survey, tying for third place with Amana behind No. 1 General Electric and second place KitchenAid.

Perhaps not surprisingly, Lowe's ranked highest among appliance retailers with a score of 848, up by nine points from 2014. In its second-quarter earnings, same-store sales came in stronger than expected due to increased sales of appliances and outdoor power equipment. The DIY center has quickly become the go-to place to find your large home-goods needs.

Best Buy and Home Depot also placed well, but both Costco and h.h. gregg fell short of the industry average.

Hard choices

Sears' new president of hardlines, Lyn Pendergrass, has a strong background in promoting global brands while Girish Lakshman's appointment to be president of the retailer's fulfillment post shows the retailer is serious about bolstering its online presence.

For all the fumbles and value destruction CEO Lampert has engineered at Sears, it could be that he's finally found where his wheelhouse is and he's swinging for the fences with it. The retailer has plenty of room to grow in gaining back customer loyalty when it comes to appliances, and with a valuable asset like Kenmore, this could be the path to do it.

bloruleshort.gif (618 bytes)

Sears Holdings Is In The Emergency Room And Shock Therapy Is Needed
Seeking Alpha
Sept. 21, 2015

Sears Holdings' underlying business is falling apart, and the significant deterioration in the operating performance is reflected in all the key metrics. Specifically:

1) Revenues have been on a continued downtrend, with declines coming from almost every category such as home appliances, apparel, lawn and garden, automotive, and consumer electronics. Also, the company has been losing money from continuing operations for years now. Unfortunately, things do not seem to change in 2015.

2) Sears had negative adjusted EBITDA from continuing operations of $200 million and $341 million in Q2 2015 and H1 2015 respectively, which makes any further discussion about the EV/Adjusted EBITDA ratio meaningless. And this is nothing new of course, given that the company's adjusted EBITDA was negative in 2014, 2013 and 2012.

3) Since 2013, the operating CF from continuing operations has been into negative territory and the company has been burning cash. Excluding CF from investing activities, Sears Holdings burned approximately $700 million in 2013, $1.4 billion in 2014 and $1.7 billion in 2015. To reduce its burn rate, Sears Holdings has primarily resorted to a series of spinoffs and asset sales over the last years. In 2012, it spun off Sears Hometown & Outlet Stores. In 2014, it spun off its Lands' End subsidiary and sold the majority of its stake in Canada. In 2015, it lost an important source of collateral for its debt financing and monetized a significant portion of its real estate value by selling roughly 235 of its stores to Seritage Growth Properties, which would lease the stores back to Sears. Also, in 2015, it sold stakes in properties to various other REITs such as Macerich, General Growth Properties and Simon Property Group. Obviously, asset sales coupled with sale & lease back agreements are not a sustainable strategy that can help Sears Holdings see light at the end of the tunnel.

4) On August 1, 2015, the company's debt (long-term debt and capital lease obligations) was approximately $3.1 billion. Thanks to its cash of $1.8 billion primarily coming from the recent deal with Seritage Growth Properties, the company purchased for cash $1 billion principal amount of its outstanding 6 5/8% senior secured notes due 2018, mitigating its annualized cash interest expense by approximately $62 million and bringing its debt to approximately $2 billion in early August 2015. However, I project that this debt reduction is temporary because Sears will continue to burn cash by the end of July 2016, excluding the holiday shopping season in Q4 2015. In other words, I forecast that Sears will burn most of its remaining cash of approximately $800 million and the debt will rise higher than $2 billion by the end of July 2016, barring new asset sales or spinoffs.

5) The gross profit margin has been gradually declining on a year-over-year basis, while the operating income has been into deeply negative territory since 2013.

6) The stockholder equity turned negative in January 2015 and has remained in negative territory since then. Although the negative stockholder equity is an alarming sign from a fundamental perspective, it can be somewhat overlooked as long as the company can pay its debts when they come due. For instance, there are companies, such as Revlon Inc., that have stayed afloat while growing their business although their stockholder equity has been negative for years.

The Band-Aids And The Shock Therapy

To kick the can down the road, Sears Holdings will most likely shutter many under-performing locations by the end of 2016 that in turn, will lead to asset impairment charges and severance payouts to workers, among others.

My opinion is that refinancings including debt-to-equity swaps, could also be part of the company's strategy, based on the CFO's recent statements, as quoted below: "We intend to continue taking significant actions to alter our capital structure, as circumstances allow, to position Sears Holdings for success and profitability, which could include further reductions in debt or changes in the composition of our debt".

To me, these are just Band-aids of rescue while the company is in the emergency room from a fundamental standpoint. I believe that Sears Holdings has to undergo a major restructuring and pursue a coherent pricing-and-product strategy in order to return back in the forefront of retailing strategically and financially.

And, this coordinated effort must be a battle on several fronts. It will be wrong if the company restructures only one item at a time. An almost perpetual restructuring will largely pass unnoticed. Simply put, the company needs shock therapy although nobody can guarantee a successful outcome and the company's survival. But, one thing is for certain. By only closing stores and refinancing the debt, this corporate entity is doomed to die sooner rather than later. Therefore, my opinion is that Sears Holdings has to implement the following ideas altogether:

1) A couple of decades ago, Sears was the place where a thriving middle class was living the American dream. But, the Sears brand is not trendy anymore. The Kmart brand is not trendy either. Both brands have already reached their heyday and currently, they are weak and fading, while customers aren't as excited about going to Sears and Kmart as they were a couple of decades ago.

Therefore, Sears Holdings has to spruce up its image and revitalize its dying brands. Given that reinvigorating a brand isn't easy and can't happen overnight, a name change for both brands (Sears, Kmart) could likely be the single most effective way to reinvent the Sears and Kmart experience and quickly attract new customers.

2) Times change, Sears didn't. Sears has lost focus and there is a lack of clear positioning. Being an "all things to all people" business does not work anymore. I do not want to buy my dress shirt or a fancy night-out top for my girlfriend at the same place where I also buy batteries for my car and tools to fix my leaking toilet. Less is more. Therefore, Sears has to narrow its target group and define its niche market because it is too impersonal and too generic to survive "as is".

On that front, exiting completely from low margin businesses, such as consumer electronics, and selling parts or its entire automotive-service unit to companies like AutoZone, Advance Auto Parts, O'Reilly Automotive or Pep Boys-Manny Moe & Jack could push Sears Holdings in the right direction.

3) Most Sears’s stores do not have a lively look. They are dated and haven't gotten the upgrades that they need to compete. In addition, many of Sears' product offerings primarily from the clothing, shoe and jewelry departments look outdated and old fashioned.

Given that Sears is not a discount store like Kmart, the management team has to change the desultory appearance of its stores as soon as possible. The tired-looking stores have to be renovated, and colorful shops decorated with artistic elements will help distinguish Sears from the peers. Moreover, a totally revamped supply chain with more trendy designers is required to meet the changing demands of consumers and capture market share from competitors like Macy's, Kohl's, J.C. Penney, Dillard's, Belk and even Nordstrom…

Actually, if Sears Holdings was a car, it would be a Pontiac. Or to say it differently, if Sears Holdings was a ship, it would be Titanic. Therefore, do not let Lampert's maneuvers cloud your judgment, because he is just rearranging the deck chairs on the Titanic.

bloruleshort.gif (618 bytes)

Sears Holdings Names New President To Lead Fulfillment
By Sears Holdings Corporation
Sept. 15, 2015

HOFFMAN ESTATES, Ill., Sept. 21, 2015 -- Sears Holdings Corporation today announced the appointment of Girish Lakshman as president, Fulfillment. His new role will support the company's continued efforts to enhance the member experience, flawlessly fulfill member and customers' needs and advance its integrated retail strategy.

Lakshman most recently served as vice president of Worldwide Transportation Strategy, Technology and Customer Returns at Amazon. During his 15 years with Amazon, Lakshman held positions with increasing responsibility in a variety of roles in transportation, technology, logistics, operational excellence and management. Lakshman's early career experiences included operations planning for manufacturing and industrial engineering functions.

"Girish's strong operational discipline, process thinking and experience leading change make him a strong fit for Sears Holdings," said Edward S. Lampert, Sears Holdings' Chairman and Chief Executive Officer. "He will work closely with me and our supply chain and inventory management leaders to enhance our members' experiences and support our transformation as an integrated retailer."

Lakshman holds a Bachelor of Science degree in Mechanical and Industrial Engineering from Osmania University in India.

bloruleshort.gif (618 bytes)

Sears Shares are Getting Destroyed -- Why it Could Get Much Worse
By Brian Sozzi
The Street
Sept. 11, 2015

NEW YORK -- The ugly stick may continue to be used on shares of embattled department store retailer Sears Holdings Corp. this year.

Sears' stock has cratered to the tune of 30.3% over the past six months, about four times worse than the 7.4% drop in the Dow Jones Industrial Average. During that span, the stock has performed the worst among those department stores operating in malls across the country. Shares of J.C. Penney have skyrocketed some 28% in six months time as investors have bought into its turnaround strategy, which includes revamped shoe and jewelry departments and better operational management under the leadership of a new CEO. On the other hand, Macy's shares have fallen 8% due to sluggish demand for men's and women's apparel, which in part has prompted the announcement of up to 40 closures of under-performing stores in early 2016. Yet, even struggling Macy's has a stock price that has not lagged as much as Sears.

For Illinois-based Sears, its weak stock price is particularly troubling in light of measures execs have taken this year to raise badly needed cash and shutter under-performing locations.

On July 7, Sears closed on a deal to form a real estate investment trust called Seritage Growth Properties. In the transaction, Sears sold 235 Sears and Kmart stores to Seritage along with Sears' 50% interests in separate joint ventures with Simon Property Group, General Growth Properties and The Macerich Company, which together hold an additional 31 Sears Holdings properties. Sears received aggregate gross proceeds of $2.7 billion from the transaction, coming just in time to fund inventory purchases for the holiday season.

Nevertheless, the market may be dumping the stock due to some cold, hard truths related to Sears that may play out in the beginning of 2016. The first is the likelihood of Sears announcing a very disappointing holiday season, given little sales momentum so far this year. Sears notched yet another same-store sales drop in the second quarter, plunging 14%. The retailer saw alarming declines in almost every category it offers -- home appliances, apparel, lawn and garden, automotive, and consumer electronics. The story at value-oriented Kmart was better than at Sears, but still not very good: Same-store sales declined 7.3%. Sales declines were reported in consumer electronics, grocery and household goods, apparel and the pharmacy.

Pressured sales led to more worrying losses for Sears. Excluding one-time items, Sears reported a second quarter net loss of $256 million, just slightly improved from the $293 million adjusted loss from a year earlier.

And as a result of the prolonged stretch of losses, Sears' cash flow from operations continues to dwindle. That brings up the second cold, hard truth facing Sears: It may have to raise more cash from outside sources to fund its operations in 2016, with investors unsure today precisely where that cash would come from, given the company's weakened financial state.

For the 26-week period that ended Aug. 1, Sears' cash used in operations, which includes debt servicing, was $832 million, compared to $747 million a year earlier. According to a review of Sears' last three annual reports and its year-to-date cash flow statement, it has not produced cash flow from its operations in over four years.

That's a source of concern not lost on the company's execs. "We intend to continue taking significant actions to alter our capital structure, as circumstances allow, to position Sears Holdings for success and profitability, which could include further reductions in debt or changes in the composition of our debt," said Sears CFO Rob Schriesheim in an Aug. 20 statement.

The final cold, hard truth on Sears is that its financial troubles will likely trigger the closing of many more stores in 2016 in a bid to preserve cash. In turn, that could not only lead to asset impairment charges and severance payouts to workers, but also send a negative signal to the market that the company is in turmoil. Year to date, Sears has closed a total of about 168 stores, mostly weighted toward the Kmart brand (114).

bloruleshort.gif (618 bytes)

Sears Hometown Taps Mike McCarthy
By Alan Wolf
Sept. 11, 2015

Had managed the Hometown and Outlet chains during his tenure at Sears

Former Sears, Macy's and Pep Boys exec Mike McCarthy was named merchandising and inventory VP at Sears Hometown and Outlet Stores.

In his new role, McCarthy -- the first major appointment of recently named CEO Will Powell -- will be the point man for product selection and assortment planning strategy; inventory management and productivity; product and visual merchandising; product marketing and awareness strategies; promotional design; and vendor relationships and support.

He most recently served as VP of Pep Boys' store operations and administration, and before that was executive VP of Macy's north region.

He spent 29 years at Sears, including a stint as senior VP with responsibility for the Hometown, Outlet and other Sears' specialty chains. He left in 2011 as senior VP and general manager of the company's eponymous flagship stores.

The Sears Holdings spinoff operates 1,215 stores in all 50 states. The chain is the fifth-largest major retailer in the land, generating $1.6 billion in white-goods revenue last year, according to TWICE's Top 50 Major Appliance Retailers Report.

bloruleshort.gif (618 bytes)

Documentary celebrates Julius Rosenwald's legacy
By Lynn Sweet
Chicago Sun-Times
Sept. 3, 2015

WASHINGTON -- A new documentary tells an important story about a Chicagoan you should know, Julius Rosenwald. When I was growing up, my folks called the museum he founded the Rosenwald Museum, though it's the Museum of Science and Industry.

In Bronzeville, the Michigan Boulevard Garden Apartments complex Rosenwald developed in 1929 for African-Americans shut out of decent housing in segregated Chicago is still talked about in some precincts as "The Rosenwald."

The seed money Rosenwald provided to build more than 5,000 schools for African-Americans in the impoverished rural Jim Crow South, became known unofficially as Rosenwald schools.

There's much more to Rosenwald's extraordinary philanthropy, and now Aviva Kempner, a Washington, D.C., filmmaker whose subjects are under-known Jewish heroes, is telling it in her movie "Rosenwald. "

It opens in Chicago on Friday (September 4) at the Landmark Century Centre, 2828 N. Clark St., and at the Landmark Renaissance Cinema in Highland Park.

Chicago "is the focal point of where Julius Rosenwald lived and worked and made his fortune and expressed his philanthropy," Kempner told me on Wednesday. Rosenwald, born in 1862, grew up in Springfield, across the street from Abraham Lincoln's home.

Rosenwald went on to build Sears, Roebuck and Co. into a powerhouse retailer. As the president and then chairman he earned a fortune from the business, headquartered in Chicago. He lived in a mansion at 4901 S. Ellis and he also had a home in Highland Park.

Inspired by Booker T. Washington, the former slave who founded Tuskegee, the historically black university in 1881, and Rabbi Emil Hirsch, who led the Chicago Sinai Congregation, then on the South Side, Rosenwald decided to turn to philanthropy.

He used his money -- in all, $62 million -- to address what in Hebrew is called "tikkun olam" -- to repair the world and charity, or "tzedakah."

His concerns about racial inequality led him to projects to help African-Americans secure an education, reserved in his time for whites only. He aided a variety of Chicago Jewish organizations and other city institutions, including the University of Chicago. African-American artists and writers won grants from his Rosenwald Fund fellowship and scholarship program.

Through the 12 years it took Kempner, an independent filmmaker, to make "Rosenwald," she traveled to Chicago about a dozen times. In the city, she immersed herself in Rosenwald's legacy and the people who have, even decades after his death in 1932, been touched by him.

The documentary features many voices of Chicagoans, including Peter Ascoli, the Hyde Parker who is Rosenwald's grandson and whose book, "Rosenwald: The Man Who Built Sears, Roebuck and Advanced the Cause of Black Education in the American South," provided Kempner with an understanding of Rosenwald's life and work.

Steven Nasatir, the president of the Jewish Federation of Chicago, and Rabbi Howard Berman, rabbi emeritus at Temple Sinai, talked about Hirsch's influence and Rosenwald's role as a major leader and donor to Jewish charities in Chicago.

Donald Stewart, the former CEO of the Chicago Community Trust, helped recount how Rosenwald gave $25,000 to help build a YMCA for African-Americans in Chicago -- and offered the same sum to any city to get the ball rolling to construct more.

The Rosenwald strands come together in interviews with Barbara Bowman and her sister Lauranita Dugas, who passed away in May.

Their grandfather, Robert Taylor, was the first architecture teacher at Tuskegee. Taylor "actually provided the plans for the Rosenwald schools," Bowman recalls in the film.

The father of Bowman and Dugas was Robert Rochon Taylor, who was raised at Tuskegee. He became the first manager of the Michigan Boulevard Garden Apartments.

"It was the only place where middle-class African-Americans could live in a well-tended, well-organized building," Bowman says in the film. "I spent my childhood playing in the Rosenwald garden."

Longtime Chicago civil rights champion Timuel Black recalled, "We would brag about we went to the Rosenwald." Rep. Danny Davis, D-Ill., also reflects on Rosenwald's legacy in the documentary.

Bowman's daughter is White House Senior Adviser Valerie Jarrett. She viewed Kempner's film with her mom a few months ago.

Said Jarrett, "We both thought it was an excellent history lesson about the importance of Rosenwald in the history of the African-American community."

Kempner flew back to Chicago on Wednesday to launch "Rosenwald."

bloruleshort.gif (618 bytes)

Insurers Win Big Health-Rate Increases
By Louise Radnofsky & Stephanie Armour
Wall Street Journal
Aug 27, 2015

President Barack Obama, speaking a t July town hall in Nashville, Tenn, played down fears of a jump in health-insurance premiums in his signature health law's third year.

"My expectation is that they'll come in significantly lower than what's being requested," he said, saying Tennesseans had to work to ensure the state's insurance commissioner "does their job in not just passively reviewing the rates, but really asking, "OK, what is it that you are looking for here? Why would you need very high premiums?"

That commissioner, Julie Mix McPeak, answered on Friday by greenlighting the full 36% increase sought by the biggest health plan in the state, BlueCross BlueShield of Tennessee. She said the insurer demonstrated the hefty increase for 2016 was needed to cover higher-than-expected claims from sick people who signed up for individual policies in the first two years of the Affordable Care Act.

Several regulators around the country agree with her, and have approved all or most of the big premium increases sought by the largest health plans in their states for the new sign-up season that begins Nov. 1.

Not all states have made their rate decisions, and some have approved relatively modest increases. A number of the states with lower average increases this year had higher rates to begin with. Some also fared better with enrollment under the law. Insurance premiums vary from state to state, for a number of reasons, including regional disparities in the costs of care.

Still, the upsurge is likely to be a big talking point not only during the three-month enrollment season, but through the 2016 campaigns, where GOP opponents of the law are expected to use it as a defining issue against their Democratic rivals.

The law provides for government subsidies in the form of tax credits for some consumers who buy insurance on their own because they don't have coverage through a job or government program such as Medicare. Those subsidies will blunt the impact of increases for individuals who get them, but the tab is picked up by the federal government.

White House spokeswoman Katie Hill said rate-review processes, which were beefed up under the law, had helped lower proposed premiums "in a number of states." She also said that under the health law, it was easier for customers to switch to a new insurer.

"Last year, more than half of re-enrolling customers on HealthCare.gov actively shopped and selected a new plan, something that wasn't possible for many consumers prior to the ACA, due to the risk of being charged a higher premium or denied coverage entirely due to a pre-existing condition," she said.

Tennessee's Ms. McPeak said she is required to protect state residents by blocking unjustified increases, but also by guaranteeing health plans stay financially sound. "Politics and any opposition to the ACA, doesn't have anything to do with it," she said. "Do I wish they were lower? Absolutely, because I know what it means to consumers."

Kentucky Insurance Commissioner Sharon Clark approved the 25.1% increase requested by the Kentucky Health Corporation, the largest insurer on the state's insurance exchange.

Oregon's Laura Cali allowed an average 25.6% increase for Moda Health Plan Inc., the biggest plan on that state's exchange. In Ohio, Lt. Gov. Mary Taylor approved a 14.5% increase from Medical Mutual. In Michigan, BlueCross BlueShield won approval fro the average 11.4% increase from insurance director Patrick McPharlin.

In Idaho, insurance director Dean Cameron said that an average 23% increase by Blue Cross of Idaho Health Service Inc. was disappointing but "not unreasonable," and that he didn't have the power to stop it.

The 2010 federal health law overhauled the way insurance is sold, requiring companies to allow anyone to buy policies, regardless of medical history and with only limited variation in premiums based on age.

Many of the most popular plans in the country offered low rates for the first and second year of the law's rollout, unsure what to expect but eager to snap up new business. That was especially true in Tennessee, which had some of the lowest premiums in the U.S. initially.

Now, insurers have found business has been more costly than expected. They have incurred steep losses, the American Academy of Actuaries said in a recent paper, and some programs designed to cushion them against high-risk enrollees are ending.

Some people will be able to switch plans and pay a modest increase from 2015, according to an analysis of proposed rates earlier this year by the consulting firm Avalere Health LLC.

For the Obama administration, that means a stepped-up campaign this fall to persuade people to return to HealthCare.gov and shop around in the coming open enrollment season.

The administration said late Tuesday it would automatically renew the coverage of people who signed up through the site last year and don't come back to it by Dec. 15 this year.

States that were able to keep rate increases down breathed a sigh of relief this week. In Indiana, Anthem Inc. had asked for and was granted, a 3.8% average increase. In Virginia, Anthem reduced an initial request of 13.2% to 8.6%. In Arkansas, BlueCross and BlueShield was approved for an average increase of 7.15%.

bloruleshort.gif (618 bytes)

Sears' big-data strategy? Just a service call away
By Phil Wabba
Aug 31, 2015

A version of this article appeared in the July 1, 2015 Fortune Magazine

The largest repairer of home appliances in the U.S. goes digital by embracing its analog repairmen.

If you'd like to see less of your Sears repairman, rest assured, the feeling is mutual. The venerable (but unprofitable) department store, which is the single largest seller of home appliances in the U.S. and installed 4.5 million of them last year, recently opened a new technology center in Seattle. One of its mandates? Mine data gleaned from the tens of millions of visits that Sears technicians have made to American homes over decades to more effectively diagnose a problem that an air-conditioning unit or dishwasher is having--well before a service call is made.

That's right: The Sears repairman, clad in his royal-blue shirt, is as valuable a data vehicle as a cookie stored in your web browser. With 7,000 technicians, Sears is the biggest repair service in the country, visiting 8 million homes a year. Its technicians have catalogued hundreds of millions of records, taking note of the location, model, and make--Sears services a wide array of brands, not just its own 102-year-old Kenmore line--on each visit, so its diagnostic technology can calculate the complexity of a repair as well as a cost and time estimate.

The upside of that data crunching? A reduction in the number of times Sears must dispatch technicians, saving the retailer a nice chunk of change at a time when its sales are flagging, sparing customers a lot of aggravation, and helping it snatch away business from competing repair services. Industry-wide, service calls fix the problem on the first visit 75% of the time; Sears' lofty goal is to get that to a 95% resolution rate. (The company won't disclose its current rate, saying only that it is above average.)

"How do we leverage the data we have and our digital experience to disrupt a pretty sleepy industry?" asks Arun Arora, a former Staples and Groupon executive who now oversees home appliances and services for Sears. "We're going to use the digital backbone and data we have that we have not uniquely taken advantage of."

Its new facility also gives Sears a plum spot in the emerging market for smart home tech and services, something that fits well into CEO Eddie Lampert's strategy to revive the retailer and reinvent it by turning it into--what else?--more of a technology company.

bloruleshort.gif (618 bytes)

Sears Holding Shares Tank After Earnings Report
Investor Guide.com
Aug 23, 2015

Shares of Sears Holdings were down 4% to $23.34/share after reporting second quarter earnings. The company reported its second quarter results before the market opened on August 20th, 2015. Sears Holdings reported a mix of bag of news to shareholders. For the first time in three years Sears has reported a profits of $208 million dollars or $1.84/share.

The Company operates in two segments, Kmart and Sears Domestic. The Kmart segment operates approximately a total of 979 Kmart stores across 49 states, as well as Guam, Puerto Rico and the U.S. Virgin Islands. Their store count consists of 968 discount stores and 11 Super Centers. Their stores are one-floor, free-standing units that carry products such as consumer electronics, seasonal merchandise, outdoor living, toys, lawn and garden equipment, food and consumables, and apparel, including products sold under well-known labels like Jaclyn Smith, Joe Boxer and Alpha-line, and certain proprietary Sears brand products (such as Kenmore, Craftsman and DieHard) and services.

For the last few years Sears has been on a restructuring strategy under the leadership of Chairman and CEO Edward Lampert. He continues to restructure the company and to leverage its vast real estate portfolio.

Sears Holdings reported a profit of $208 million or $1.84 dollar/share, thanks to gains from real estate deal. When you exclude real estate gains for the second quarter, Sears would have reported a net loss of $256 million dollars. In the same period last year Sears reported a net loss of $573 million.

The company's revenues in the second quarter declined 22% to $6.6 billion from $8 billion in the second quarter of 2014. Sears' management explained that their revenue decline primarily came from their actions in streamlining operations and focusing on making Sears stores member-centric stores. The company said that their comparable store sales dropped 10%. Kmart and Sears Domestic saw a 7.3% and 14% decline in store sales during the second quarter. The company saw gross margins fall to $307 million dollars and saw administration expenses decline to $424 million dollars in the second quarter.

Edward S. Lampert, Holdings' Chairman and Chief Executive Officer, said in the company's press release, "The second quarter marked our fourth consecutive quarter of improved results. During the quarter we completed many of the objectives we laid out to transform Holdings from a traditional, store-network based retail business model to a more asset-light, member-centric integrated retailer leveraging our Shop Your Way platform. The successful completion of these actions has positioned Sears Holdings for long-term success and is consistent with our strategy to focus on our best stores, reward our best members and pursue our best categories as part of our transformation. As our results over the last four consecutive quarters demonstrate, we are successfully enhancing our margin rates and improving EBITDA performance as we become more efficient with our promotional programs and the use of Shop Your Way to replace more traditional forms of marketing with more targeted and personalized digital interactions with our members."

Rob Schriesheim, Holdings' Chief Financial Officer, said in the company's press release, "In the second quarter of 2015, the Company completed its rights offering and sale-leaseback transaction with Seritage Growth Properties and received aggregate gross proceeds from the transaction of $2.7 billion. In addition, we completed an amendment and extension of the Company's existing asset-based credit facility. With the successful completion of the amendment and extension of the domestic credit facility and the Seritage transaction, we have substantially enhanced our financial flexibility and achieved our objective of reducing our reliance on inventory as a source of financing. We are pleased with the outcome of the Offer, which was in line with our expectations and helped mitigate our annualized cash interest expense. We intend to continue taking significant actions to alter our capital structure, as circumstances allow, to position Sears Holdings for success and profitability, which could include further reductions in debt or changes in the composition of our debt."

bloruleshort.gif (618 bytes)

REIT does the trick: Sears turns a profit as sales continue to fall
By Daphne Howland
Retail Dive
Aug 4, 2015

Dive Brief:

• Sears Holdings Corp. Monday said Q2 sales declined, causing shares to sink 10%, the lowest price in more than a decade.
• Q2 same-store sales fell 10.6%—down 13.9% at Sears's U.S. stores and 6.9% at Kmart.

The struggling retailer did manage to turn a profit, though, thanks to a series of spinoffs, notably the spinoff of its real estate assets into a Real Estate Investment Trust.

Dive Insight:

The massive shift of Sears' formidable real estate portfolio into its own investment trust has accomplished what it was intended to do–restore some order to the retailer's dismal balance sheet. But with yet another poor sales showing, Wall Street wasn't much mollified.

The question now is whether Sears can persuade enough investors that this is just a short-term moment in its very long-term strategy. The retailer isn't without its cheerleaders, who say that the company is doing just what it needs to do–close poorly performing stores, pivot to an omnichannel retail stance (which it's done, admirably), and allow time for the comeback to take hold.

If those true believing investors are still out there, they'll get Sears shares at a bargain at the moment.

bloruleshort.gif (618 bytes)

Sears's Sales Deteriorate Further; Spinoff Cushions Result
By Suzanne Kapner
Wall Street Journal
Aug. 4, 2015

Shares sink 10% to lowest level in more than a decade

Sears Holdings Corp. on Monday revealed steep declines in second-quarter sales, though the retailer shored up its finances through a series of spinoffs and negotiations with its lenders.

Investors were focused more on the sales, though. Shares of Sears sank 10% to $19.39 in Monday trading, their lowest level in more than a decade. The company, which had sales of $31 billion last year, now sports a market value of $2.1 billion.

Sears's chief financial officer, Rob Schriesheim, previously has voiced frustration that Sears's stock price alone doesn't fully account for the value the company has created for shareholders by spinning off assets that include real estate as well as its Lands' End business, a chain of Hometown and Outlet Stores and a stake in Sears Canada.

Same-store sales were down 10.6% in the second quarter as of July 25, reflecting drops of 13.9% at Sears's domestic stores and 6.9% at Kmart. The quarter ended Aug. 1.

The declines are similar to the first quarter but show a marked deterioration compared with a year ago, when sales excluding newly opened or closed stores fell 0.8%, with a 0.1% increase at Sears and a 1.7% decrease at Kmart.

The retailer said it is on track to post its first profit in three years thanks to a gain from the spinoff of some real estate--the latest in a series of asset sales that Chief Executive Eddie Lampert has undertaken to strengthen Sears's cash position.

Sears has been struggling to transform itself by investing in new technologies and services to better equip it for the digital age.

It also has focused on returning to profitability, sometimes at the expense of sales. The company has said that in many merchandise categories it is logging improvements in profitability despite sales declines.

Earlier this year, Sears spun off 235 properties into a real-estate investment trust it created called Seritage Growth Properties, and it also created joint ventures that hold additional properties with three mall owners. Together, the transactions raised $3 billion in proceeds.

As a result, Sears says it expects to post a profit of between $155 million and $205 million for the second quarter. The company plans to report second-quarter earnings around Aug. 20.

Sears forecast its cash flow to be in the range of negative $189 million to $249 million, before accounting for $26 million in rent payments resulting from its recent real-estate deals. That compares with negative cash flow of $298 million a year ago.

The retailer said it expects to show cash and borrowing capacity of about $3 billion at the end of the second quarter.

Sears completed an amendment and extension of its credit facility with about $2 billion maturing in 2020 and the remaining $1.3 billion or so of the existing facility in place until April 2016. Sears also launched a tender offer to buy up to $1 billion of its senior secured notes due in 2018.

bloruleshort.gif (618 bytes)

Sears Holdings Names Joelle Maher As Sears Roebuck & Co's President And Chief Member Officer
July 14, 2015

Role critical to meeting needs of the Sears' Shop Your Way members

HOFFMAN ESTATES, Ill. -- Sears Holdings announced today that Joelle Maher has joined the company as president and chief member officer for the Sears format. In this role, Maher will be responsible for developing the S Your Way® member-centric business strategy for the Sears format, managing the Sears P&L and aligning merchandising, marketing, pricing and selling with the needs of our members.

Maher comes to Sears Holdings from Gymboree Corporation, where she served as chief operating officer and was responsible for leading all operational aspects of the company, including stores, planning and allocation, real estate and construction, international, distribution and logistics, operational process and strategy, and information technology. Prior to Gymboree, Maher spent seven years at Levi Strauss & Company in various senior leadership roles including serving as executive vice president and president, Global Multichannel Retail. She also worked at Lucky Brand Jeans for seven years, and began her career in merchandising and planning roles at Old Navy, Macy's East and Lord & Taylor.

"Joelle's depth and breadth of retail and business experience and ability to achieve superior results in established organizations make her a strong fit for this member-focused role at Sears Holdings," said Edward S. Lampert, Sears Holdings Chairman and CEO. "She will work closely with me and our business unit leaders to lead our iconic Sears brand in its continued transformation as an integrated retail format."

Maher received a Bachelor of Science degree from Cornell University.

bloruleshort.gif (618 bytes)

Jimmy Carter's Early Life on a Georgia Farm
Wall Street Journal
July 10, 2015

The former U.S. president recalls working the fields and what he learned from being a plowman

Jimmy Carter, 90, was the 39th president of the U.S. and is a recipient of the Nobel Peace Prize. He has written 29 books, including his latest, "A Full Life: Reflections at Ninety" (Simon & Schuster). He spoke with Marc Myers.

My daddy taught me to read in front of our living-room fireplace. He'd peel oranges and reward my younger sister and me with slices when we were able to read a whole page.

Our farm was physically challenging, but you learned pretty much all you needed to know there about life and people. We lived in Archery, Ga., a rural area back then about 2 miles outside of Plains. My father, Earl, bought 360 acres there in 1928, and we were the only white family in a community of about 150 people. Half the land was planted for corn, since it served as food for our family and the five families that worked on the farm, as well as for the animals. I don't remember my father having many personal friends come to the house, except kin folk and the black families who lived around there.

Our house was from a model sold in the Sears, Roebuck catalog. You received everything you needed except the lumber, which was harvested from the trees on our land. Daddy had many talents and took pride in being self-sufficient. Our house had three bedrooms. I stayed in one, my parents were in another and my two sisters were in the front bedroom. My brother, Billy, didn't arrive until I was 13.

My room was just a place to sleep after a long day at school or working on the farm. I had my books in there and a gift from my Uncle Tom—a model of a Chinese junk. I also had a print of Thomas Gainsborough's "Blue Boy," which captivated me and was a prize for reading the most books in school. I had never seen a boy dressed like that.

When I was young, I followed my father around on the farm, which let me learn some of his skills as a farmer and craftsman. I learned the basics of blacksmithing, which we used for repairs, sharpening plow points, and shoeing mules and horses. As I grew older, welding and cutting metal with a torch were added. We also did our own carpentry work. But my primary duties were in the field, where I picked cotton with the workers and plowed fields with a pair of mules. It was difficult work but rewarding, since I was able to see my accomplishments at the end of every day.

My mother, Lillian, was a nurse. She chose one of only three professions a woman could achieve back then—stenographer, teacher or nurse. Mother was the best educated in our family. Daddy only finished 10th grade.

I still remember the smell of the air. It was pure. We didn't have tractors, just mules and plows. The air was filled with the smell of animals—pigs, goats, geese, cows, horses, mules and chickens. Daddy always worried about rain and was most distressed when we had too much of it. It was a struggle to control all the weeds and grass that choked the crops when we couldn't plow.

With my father busy on the farm and my mother working as a full-time nurse, Rachel Clark, the wife of Jack Clark, was a second mother to me. She and Jack worked on our farm. Rachel taught me all the basic lessons of life—including our relationships with nature, the outdoors, God and people. She set an extraordinary example of humility, self-confidence and pride. She also had the aura of a queen. There was something about her that was never expressed but set her a little above all the other farm people I knew, black or white.

Rachel also could pick more cotton than anyone else—350 pounds in a single day. On my best day, I managed 150 pounds, and the average man picked only 200 pounds.

Everyone in my family was usually in bed before 8 p.m. I would lie down in front of the fireplace and set the clock on our mantel. When it was 8, I'd turn on the radio and listen to the Glenn Miller Orchestra performing live someplace for 15 minutes before going to bed.

I always assumed I would be a farmer, but my parents wanted me to attend college. Our goal was for me to attend the U.S. Naval Academy at Annapolis. I completed my sophomore year at Georgia Tech before receiving a congressional appointment and attending the academy in 1943.

Today, my wife, Rosalynn, and I live in the same house we built in 1961 in Plains. When I'm not on my computer writing, I like to paint and make furniture in my wood shop out back. My main income comes from books and teaching at Emory University, where I've been a professor for 33 years.

Working with my father in the fields taught me to be tenacious. I also learned to hunker down, take the duties that come to me, do the best I can and not worry about the consequences. A lot of the lessons I learned as a plowman still come in handy.

bloruleshort.gif (618 bytes)

Barnes & Noble taps Sears Canada CEO for retail business
By Angel Wallace
Rapid News Network
July 3, 2015

Barnes & Noble is spinning off the college unit, which will be called Barnes & Noble Education, so it can focus on helping its retail business adapt to the rising popularity of digital books and online shopping. (NYSE:ALK) has 128.95 million outstanding shares with market capitalization of 8.43 Billion and its share price finished at $65.01 by moving up 1.10% in last traded session.

"I am enthusiastic about the opportunity to play an expanded role within our organization, and I am committed to working closely with all our Sears associates and business partners to make progress on our goals to delight our customers and return Sears Canada to profitability", said Brandon G.

Most exciting investors analysis over DAL performance this year?

In consumer stocks news, book seller Barnes & Noble ( BKS ) says it named Ronald D. Boire will join the company in September as CEO of... He held the position of Exec VP, Chief Merchandising Officer and President, Sears and Kmart Formats at Sears Holdings (SHLD). Boire will lead its retail business, turning to an industry veteran familiar with the challenges facing retailers

bloruleshort.gif (618 bytes)

Sears Losses Pile Up as Turnaround Falters
By Suzanne Kapner
Wall Street Journal
June 9, 2015

Sears Holdings Corp. extended a string of losses into the first quarter as sales declines accelerated, signs that its business continues to deteriorate even as it completes a series of financial moves aimed at shorig up its balance sheet.

Sears lost $303 million in the three months to May 2, compared with a $402 million loss a year earlier. Sales fell to $5.9 billion from $7.9 billion a year earlier as the retailer closed stores, and spun off its Lands' End clothing business and a stake in Sears Canada.

Sales at existing stores, a key measure of a retailer's health, fell 14.5% at Sears and 7% at Kmart, a faster drop than previous quarters. For the company as a whole, comparable-store sales fell 10.9% in the period, more than a 1.8% drop in 2014 and a 3.8% decline in 2013.

Shares of Sears fell 4.2% to $39.01 Monday but remain 18% higher so far this year.

Chief Executive Edward Lampert, who has been trying to turn around the ailing retailer, has been slashing costs and selling off assets to bolster the company's cash position in the face of declining sales and shopper traffic. Earlier this year, some of its suppliers demanded tougher payment terms over concerns about the retailer's access to cash.

Sears is planning to raise more than $2.5 billion by selling more than 200 of its top Sears and Kmart properties and leasing them back through a new real-estate investment trust, Seritage Growth Properties. Sears said Monday that it expects to be declared effective by the Securities and Exchange Commission this week and launch the offering Friday.

The retailer has also formed joint ventures with mall owners including Simon Property Group Inc. and Macerich Co. Altogether, Sears expects the moves to bring in more than $3 billion for the company.

Sears also said it is negotiating with creditors to extend a $3.275 billion revolving credit facility that comes due in April 2016. The refinancing, which it hopes to complete in the second quarter, would provide it with a $2 billion facility that matures in 2020. The remaining $1.275 billion of the existing facility would remain in place until April 2016.

Despite efforts to improve the business, losses have piled up totaling more than $7 billion since 2011. In the quarter, the retailer said Sears U.S. sales declined in consumer electronics, apparel, home appliances, lawn care and its auto centers. The only category the company cited as having a sales increase at Sears was mattresses. At Kmart, sales of appliances increased.

Sears scaled back promotions in the recently completed period, which helped gross margins widen to 25.8% from 23.2% a year earlier.

Mr. Lampert has been trying to stem the sales declines by encouraging shoppers to join its loyalty program, called Shop Your Way, so Sears can better tailor its marketing to those consumers.

Neil Saunders, the chief executive of Conlumino, a research and consulting firm, said that Sears will need to start increasing sales before it can return to profitability. He added that the Shop Your Way program isn't "compelling or differentiated enough to drive comparable sales into positive territory."

– Chelsey Dulaney contributed to this article.

bloruleshort.gif (618 bytes)

Sears' REIT files for $1.57 billion rights offering, to list on NYSE
By Reuters
June 9, 2015

Sears Holdings Corp's planned real estate investment trust, Seritage Growth Properties, filed for a $1.57 billion subscription rights offering that allows Sears shareholders to buy up to 53.3 million common shares of the REIT.

Seritage, which has been set up by Sears to shore up finances, said it would offer existing shareholders subscription rights to buy its shares for $29.58 per share.

The REIT will buy and lease back about 254 Sears and Kmart stores, Sears said previously.

The REIT also said it would offer 9.5 million class C non-voting shares in lieu of certain of its common shares at the same price to Sears' No. 2 shareholder Fairholme Capital Management LLC.

If the offering is fully exercised, Fairholme will hold more than 11.7 percent of the REIT's shares.

The subscription rights offering will expire on July 2, Seritage said.

Seritage also intends to apply to list its shares for trading on the New York Stock Exchange under the symbol SRG.

The REIT is the latest in a series of steps Chief Executive Eddie Lampert has taken to raise cash for the retailer, which has posted losses for nearly three years.

Sears on Monday reported its 12th straight quarterly loss as revenue slumped 25 percent, hurt in part by the sale of most of its stake in its Canadian operations, the spinoff of the Lands' End clothing chain and the closure of stores.

Lampert controls more than half of Sears and Fairholme holds about a quarter of the shares.

bloruleshort.gif (618 bytes)

Sears' Great Retail Sector Giveaway
By Justin Lahart
Wall Street Journal
June 9, 2015

What happens to Sears Holdings' business matters more for most investors than what happens to its stock.

Sears on Monday reported that it lost $303 million in its fiscal first quarter that ended May 2, marking its 20th consecutive quarter in the red. Same-store sales fell 10.9%, year over year, far worse than the 1.8% decline called for by the consensus of analysts tracked by FactSet. But that consensus now consists of just one analyst, Evercore ISI's Greg Melich, with Credit Suisse 's Gary Balter having stopped covering the stock earlier this year.

That scant coverage reflects a scantily held stock for a company that is worth far less than it once was. Chief Executive Eddie Lampert and the hedge fund he controls own 49% of Sears shares. Bruce Berkowitz's Fairholme Capital Management, Sears board member Thomas Tisch and passive investment managers Vanguard Group, BlackRock and State Street own an additional 33%.

The investors that remain hold just 18% of a company that now has a market capitalization of just $4.6 billion. That is less than one-fifth of the $25.9 billion Sears was worth at the end of 2006, before it started hiving off assets amid deteriorating sales.

So there isn't much dog left in this fight. But Sears still counts as a pretty big retailer. It generated $5.9 billion in sales last quarter, versus $7.9 billion a year earlier. A bit less than half of that $2 billion decline was related to the spinoff of its Lands' End business and selling the bulk of its stake in Sears Canada.

The rest was lost sales—that is sales that its competitors were picking up.

The company said same-store declines in appliances continued at its Sears stores, which probably made for share gains for retailers such as Home Depot and Lowe's. Same-store consumer electronics sales slipped at both its Sears and Kmart stores—a positive for the likes of Best Buy. Apparel sales also fell, which would have benefited companies like Macy's.

Sears ended the quarter with just $286 million in cash and $726 million available in its credit facility. But it expects to raise more than $2.5 billion by selling 235 of its properties to a real-estate investment trust due to launch this week. That should give Sears enough funding to avoid worrying suppliers like last year, but does nothing to stem losses in market share. For other retailers, and their investors, Sears is the gift that keeps on giving.

bloruleshort.gif (618 bytes)

Sears Is Under Pressure as Rollout of REIT Nears
By Associated Press
New York Times
June 8, 2015

Sears's first-quarter loss narrowed but sales continue to slump as it prepares the introduction of its real estate investment trust this week to raise cash. Sears Holdings, which operates Sears and Kmart stores, said that it expected the real estate investment trust that it is forming, Seritage Growth Properties, will be declared effective by the Securities and Exchange Commission this week. Sears is planning to sell to the REIT about 235 properties, most of them Sears and Kmart stores, and lease them back. The company expects $2.6 billion in proceeds. Sears is trying to replenish its cash to turn around its retail business. The company lost $303 million, or $2.85 a share, in the latest quarter. Sales at Sears's domestic locations open at least a year dropped 14.5 percent, while sales at domestic Kmarts open at least a year declined 7 percent.

bloruleshort.gif (618 bytes)

Sears lawsuit alleges store sales to benefit CEO
By Robert Channick
Chicago Tribune
June 2, 2015

Class action lawsuit seeks to stop $2.5 billion sale of 254 Sears stores to REIT

A shareholder class action lawsuit has been filed against Sears Holdings alleging the company's plan to sell its prime real estate holdings to a trust controlled by CEO Eddie Lampert would strip the struggling retailer of one of its last remaining valuable assets, leaving it a debt-laden, money-losing renter in its own stores.

The proposed $2.5 billion sale, the suit says, will benefit Lampert at the expense of shareholders and hasten the demise of Sears, once a quintessential American retailer.

"The proposed transaction is a financially and structurally unfair deal," the lawsuit says. "Sears and its stockholders would receive a severely inadequate cash payment that the defendant Lampert-controlled company may use to cover operating losses and debt obligations for another year or so, before stockholders are left holding the bag in an insolvency widely viewed as inevitable if the proposed transaction occurs."

The proposed transaction would sell 254 Sears stores to Seritage Growth Properties, a real estate investment trust created by Sears Holdings. Lampert, a hedge fund billionaire who owns 49 percent of Sears Holdings, would control both the Hoffman Estates-based retailer and the newly formed REIT. The transaction is expected to close this month, with Seritage leasing the stores back to Sears at a cost of $150 million to the retailer in the first year

The lawsuit, filed late Friday in Delaware Chancery Court, names Lampert, Sears Holdings, Sears board members and Seritage as defendants. It seeks to stop the proposed transaction, saying the $2.5 billion purchase price is a "paltry" amount that in the face of ongoing operating losses makes imminent insolvency a likely outcome for Sears.

"The complaint contains numerous factual misstatements and is legally without merit," Chris Brathwaite, a Sears spokesman, said in a statement. "The company plans to contest it vigorously and believes the proposed real estate investment trust transaction will provide substantial benefits to SeaHoldings and its shareholders."

The suit was brought on behalf of Sears shareholder John Solak by Robbins Arroyo, a San Diego-based law firm

Craig Johnson, president of Customer Growth Partners, a retail research and consulting firm, was not surprised that the proposed sale-leaseback transaction would concern existing Sears shareholders, given Lampert's controlling interest in both the buyer and seller. "Shareholders don't want to be played for chumps," Johnson said. "They're rightfully guarding their interests."

The retailer has seen its sales decline since Lampert combined Sears and Kmart in an $11 billion deal in 2005. The company reported losses of $1.7 billion last year, with revenue declining nearly 14 percent to $31.2 billion.

Sears Holdings closed 234 stores last year. At the end of its fiscal year Jan. 31, Sears Holdings operated 1,725 stores, including Sears, Kmart and Sears Auto Centers, 684 of them in properties it owns. That's down from 3,949 stores at the end of its 2010 fiscal year.

In recent years, the company has spun off assets including Orchard Supply Hardware and Sears Hometown and Outlet stores, as well as Wisconsin-based Lands End, one of the few bright spots in the Sears Holdings portfolio.

The proposed sale, announced April 1, would transfer some of the best-performing Sears and Kmart stores to the real estate trust, the lawsuit says. As part of the transaction, the REIT has the right to capture half of the store space in the properties to rent to other tenants, shrinking the footprint of Sears and Kmart stores. Consumer electronics may disappear from some stores as they get smaller.

bloruleshort.gif (618 bytes)

Struggling Companies, Creditors Weigh REIT Conversions
By Matt Jarzemsky
Wall Street Journal
May 28, 2015

Distressed businesses look at structure as a way to generate value to compensate creditors

Real-estate investment trusts have a new group of fans: struggling companies and their creditors.

Investor groups eyeing Oncor, the crown jewel of bankrupt Texas power company Energy Future Holdings Corp. , have ambitions to convert it to a REIT or a similar structure, according to people familiar with the matter. Their efforts follow a plan by casino giant Caesars Entertainment Corp. CZR -0.41 % to transform its largest unit into a REIT that would be largely owned by creditors.

Meanwhile, department store chain Sears Holdings Corp. SHLD 1.26 % plans to spin off as many as 300 of its highest-performing stores into a REIT to ease the ailing retailer’s cash crunch.

The REIT structure, traditionally applied to commercial property firms, has gained traction lately with businesses of all stripes that have significant real-estate assets, such as data centers, outdoor advertising firms and casino chains.

REITs pay little or no corporate income tax on their earnings, as long as they earn most of their profit from rent on real estate and distribute at least 90% of those earnings to shareholders as dividends. Investors have snapped up REIT stocks in recent years as low interest rates have made fixed-income investments less attractive.

Now, distressed companies are looking to turn into REITs as a way to generate value that can be used to compensate creditors.

"REIT conversions are an increasing part of the restructuring dialogue, both in and out of chapter 11," said Andy Dietderich, a partner at law firm Sullivan & Cromwell LLP. "Many distressed investors see REIT conversion as a way to increase the value of an income-producing asset."

Deal-makers are betting that heightened investor interest in REITs will increase the value of Energy Future and Caesars Entertainment Operating Co., thus increasing the money available to repay creditors. If they are successful, lawyers and bankers say they expect to see more REIT conversions in big chapter 11 bankruptcy cases.

To be sure, REIT conversions aren’t easy. Corporate executives and boards seeking the status open themselves to increased scrutiny from the Internal Revenue Service and other regulators. An increase in interest rates could also make them a less attractive option for struggling companies as more investors may seek the safety and steady payouts of bonds.

Bankruptcy adds another layer of complexity. The Caesars plan, for example, is part of a broader reorganization effort that is facing numerous creditor challenges, and a bankruptcy judge will have a final say on the proposal even if creditors ultimately bless it.

"In addition to all the regulatory and tax hurdles, the bankruptcy hurdle makes things more complicated, but it’s doable," said Edward Weisfelner, head of the bankruptcy and corporate restructuring group at law firm Brown Rudnick LLP.

But the bankruptcy code also gives companies flexibility to make sweeping changes.

Financiers continue to stretch the limits of what can be done in chapter 11, Mr. Weisfelner said, citing the pioneering combination of American Airlines and US Airways.

Among the bidders for Oncor is the Texas oil family behind energy conglomerate Hunt Consolidated Inc. The Hunts, backed by a group of Energy Future creditors, have entered a bid for Oncor that would involve converting the power-delivery business into a REIT, according to people familiar with the matter.

Hunt pioneered the use of REITs to hold energy assets such as transmission infrastructure and pipelines. In 2010, it used Texas power assets to form a REIT called InfraREIT Inc., HIFR -0.43 % which it took public this year.

Separately, a group of junior Energy Future creditors including hedge fund Anchorage Capital Group LLC is seeking to raise financing to team with the Hunts or another operator for a separate Oncor bid that would involve a REIT conversion, people familiar with the negotiations said.

Yet another Oncor bidder, Florida energy company NextEra Energy Inc., NEE 1.21 % could potentially sell some of Oncor’s assets to its NextEra Energy Partners NEP 0.15 % LP affiliate, according to people familiar with the discussions. NextEra Energy Partners is a yieldco, a relatively new class of companies that provide power under long-term contracts and, like REITs, pay out much of their cash flow to shareholders.

Caesars Entertainment Operating Co., meanwhile, expects its planned conversion to a REIT to "maximize its value and provide the most financial recovery" to the unit’s creditors, Chief Executive Gary Loveman said in December. The unit, whose properties include Bally’s Atlantic City and much of the iconic Caesars Palace Las Vegas, owes creditors more than $18 billion.

bloruleshort.gif (618 bytes)

Target Tops Wal-Mart as Turnaround Gains Traction
By Paul Ziobro
Wall Street Journal
May 21, 2015

Retailer's profit tops expectations as its stores attracted more shoppers who spent more on average

Target Corp. outdid big-box rival Wal-Mart Stores Inc. at the beginning of the year, as stronger growth in more profitable categories like apparel and home goods produced a third straight quarter of sales growth.

Both companies are in the middle of turnarounds after long stretches of weak traffic and sales in their home U.S. markets. But Target appears to have the edge for now, posting better-than-expected earnings a day after a disappointing showing by Wal-Mart sent that company's shares down sharply.

Target's improving as it refocuses on stylish categories like fashion and apparel that years ago earned it the moniker Tar-zhay. In some cases, that means selling items that are higher quality, more expensive and more appealing to a shopper who's generally better off than Wal-Mart's core customer.

"It's the quality that we've put in," Target chief merchant Kathee Tesija said on Wednesday's earnings call. "They're recognizing those benefits, and they're wanting to be able to trade up."

Wal-Mart, meanwhile, is back to reinforcing that its prices are low every day and isn't seeing much improvement. It drew in more shoppers in the latest quarter, but their spending per trip was flat. According to data from the consultancy Kantar Retail, 42% of Target's shoppers make more than $75,000 a year, versus 28% at Wal-Mart.

Minneapolis-based Target reported a 52% increase in profit to $635 million for the three months that ended May 2, largely due to eliminating its money-losing Canadian operations earlier this year. Revenue rose 2.8% to $17 billion.

Sales at established stores rose 2.3%, narrowly ahead of Target's February forecast for 2% growth, with more customers visiting and spending more on their trips. Online sales rose nearly 38%.

The U.S. sales increase doubled what Wal-Mart reported Tuesday and was a break from the generally dreary results posted by retailers to start the year. The results broadly have dashed hopes for a strong rebound among consumers enjoying lower gasoline prices and better job prospects.

Instead, shoppers have been using the savings from lower gas prices to pay down debt, while homeowners have been plowing money into improvement projects. Target saw signs of that conservatism, too. Chief Financial Officer John Mulligan said on a call with reporters that shoppers using the company's credit cards are paying down more of their debt instead of growing balances.

"Consumers learned a lot during the last recession," he said. "They continue to operate conservatively."

The dynamic is turning retailing into a market-share game. And by some measures, Target is winning.

"Everyone shops everywhere, and for us it's about getting more trips from them and more share of their wallet," Mr. Mulligan said.

Target's shares gained 26 cents to $78.18 on Wednesday. Wal-Mart shares fell 53 cents to $75.90, after dropping more than 4% on Tuesday.

The results show that Target Chief Executive Brian Cornell, a little more than nine months in the job, is generating good progress on plans to refocus the retailer business on so-called signature categories like baby and children's products, fashion and beauty.

In the years before Mr. Cornell's appointment, Target suffered a series of stumbles including unimaginative merchandise, a bungled expansion into Canada and a data breach that ultimately forced change at the top.

Target now is benefiting from focusing all of its resources on the U.S. and trying to bring back a sense of uniqueness to its stores. The biggest refresh is due in grocery, where sales grew below the company average in the first quarter. Target wants to play up healthier fare and up-and-coming smaller brands at the expense of large packaged food companies. Target is testing new food models in a number of markets now but isn't planning a major change until the middle of next year at the earliest.

"We're letting consumers lead us to the right answer," Mr. Mulligan said.

bloruleshort.gif (618 bytes)

Macy's to Push Best Stores Upscale
By Suzanne Kapner and Chelsey Dulaney
Wall Street Journal
May 14, 2015

Severe winter weather damped sales in latest quarter

Macy's Inc. plans to push its best stores upscale, as it works to squeeze more growth from a slowing department-store business.

The retailer discussed its plans Wednesday after reporting a second straight quarter of weak sales. Rough winter weather, trouble with West Coast ports and lower spending by tourists all contributed to sales dropping 0.7% to $6.23 billion for the three months that ended May 2, the company said.

The results out of Macy's don't bode well for other retailers scheduled to report earnings this week.

Some analysts had been predicting that pent-up demand from shoppers would lift retail sales, but government data showed they were flat in April as consumers remained cautious.

Retail sales have been flat or down in four of the past five months, a trend that could weigh on the broader economy.

Sales at existing stores in the Macy's empire—which also includes the Bloomingdale's chain—slipped 0.1%, weaker than the 2% growth the company has forecast for the year. Profit fell to $193 million from $224 million a year ago.

In Wednesday trading, Macy's shares fell $1.60, or 2.45% a share, to $63.73.

The results extended a rough patch for a chain that dominates the department store landscape but is having trouble posting solid growth as shopper habits change.

Earlier this year, the company reassigned two top executives to focus on initiatives like a budding outlet business designed to take the company beyond its traditional mall-based operations.

On Wednesday, Macy's said it plans to add higher-end merchandise to some of its 150 best-performing stores and may remove some clearance goods from its top 30 locations to make room for fresher products.

The best stores will also get larger stocks of popular items, redesigned departments, additional staff, new technology and enhanced visual presentation.

Macy's already stocks its stores based on local tastes, and this would be a furthering of that strategy.

"We believe there is opportunity to elevate these stores further and accelerate their growth," Karen Hoguet, Macy's chief financial officer, told analysts on a conference call. "Hopefully we will begin to see the benefit this fall, particularly in the fourth quarter."

Ms. Hoguet said Macy's chose the 150 stores based on sales growth at the locations, external economic factors in their markets, customer service levels at the stores and their profitability.

"If you think about it, the top malls in the country are doing extraordinarily well, as are we," Ms. Hoguet said. "But we think we can actually push that growth further."

The moves are Macy's latest effort to get sales moving. Earlier this year, it announced plans to open four off-price stores called Macy's Backstage this fall, part of a high-low strategy that has worked well for other retailers. The retailer also spent $210 million to acquire beauty-products seller Bluemercury Inc., its first acquisition in a decade, and is exploring international opportunities for expansion.

The parent company currently operates 886 stores, with 773 Macy's, 37 Bloomingdale's, 13 Bloomingdale's Outlets and 63 Bluemercury boutiques.

In addition to the port delays and weather, Ms. Hoguet pointed to a slowdown in tourist traffic due to the strong dollar. Tourists account for about 5% of Macy's annual sales, and sales from these tourists fell by double digits during the period, she said.

Sales also were hurt, Ms. Hoguet said, as executives assigned to new roles earlier in the year struggled to get inventory to the right place, particularly whether it should be kept in warehouses or stores.

Macy's gross margin rose slightly, to 39% of sales from 38.9% a year ago, as delayed shipments of spring goods from the West Coast ports meant there was less clearance merchandise in stores.

The lack of clearance goods was reflected in Macy's average ticket, which increased 1.4% in the period, largely as a result of more full-priced sales. But units per transaction declined 1.2%, mainly because people tend to buy fewer items when goods aren't on sale.

The delayed receipt of goods is expected to weigh on the current quarter's margins and profits, as Macy's discounts merchandise that should have been cleared in the preceding three months.

As a result, Ms. Hoguet expects second-quarter earnings to fall below year-ago levels.

Second quarter sales at existing stores should post growth, but will likely fall short of the 2% target that Macy's is projecting for the full year, she said.

Ms. Hoguet also said Macy's is reviewing strategies with its investment banks for unlocking value in its real estate, although the company hasn't yet seen opportunities to do so on a global scale. She said Macy's was closely studying transactions by two competitors, Hudson's Bay Co. and Sears Holdings Corp., which have alternately formed joint ventures with mall operators and taken steps to spin off real estate into a separate entity and then lease it back.

bloruleshort.gif (618 bytes)

Penney Loss Narrows, Sales Increase
Wall Street Journal
May 14, 2015

Despite improvement, sales remain $1 billion below their level four years ago

J.C. Penney Co. JCP -6.55% continued to claw its way back from a disastrous overhaul, reporting that its first-quarter loss narrowed from a year earlier. It also raised its sales forecast for the year. Penney now expects sales at established stores to increase 4% to 5%, compared with its earlier forecast of 3% to 5%, and its profit margin and cash flow should improve as well, the company said Wednesday.

The progress in recent quarters has pulled Penney well away from the brink of financial collapse. But it is doing little to get it out of the hole it fell into under former CEO Ron Johnson. While sales rose 2% to $2.86 billion for the three months ended May 2, they remain $1 billion below their level four years earlier.

Chief Executive Myron "Mike" Ullman said the company has 87 million active customers in its stores, the same level as in 2011, before the botched overhaul. But he said some departments aren't getting the level of spending that they once did.

One drag has been the company's home department, which was revamped during Mr. Johnson's tenure. Although Mr. Ullman unwound many of the changes—he brought back more traditional styles and did away with displays organized by brand rather than product category—sales have been slow to rebound.

"It's just taking longer than any of us liked," said Marvin Ellison, Penney's president, who is scheduled to take over as CEO in August.

The company's loss for the quarter narrowed to $167 million from $352 million a year earlier. Margins improved in part because the company is carrying more house brands, and also because it is carry less merchandise from discontinued brands, which were marked down steeply.

Mr. Ullman said sales growth slowed in late April. As a result, sales at existing stores rose 3.4% for the quarter, less than the company had projected.

Mr. Johnson, a former Apple Inc. executive, crushed sales by doing away with discounts and popular house brands. Mr. Ullman has reversed many of those changes.

The CEO said Penney's stores are attracting more traffic than the malls in which they are located and increased the number of browsers it converted to buyers in the quarter. The company is also working to enhance its shoe and handbag departments

He also said Penney was pleased with the response it got from its home catalog, which it mailed in March, the first such mailing in a half-decade. He said the catalog helped to bring back lapsed customers.

Shares, up by more than a third so far this year, were little changed at $8.66 in late trading after the results were reported Wednesday.

bloruleshort.gif (618 bytes)

Memorial Service for Clif Hooks Friday, May 29
Chicago Tribune
May 10, 2015

Clifton Finley "Clif" Hooks of Richland, MI

Clif, age 79, died Wednesday afternoon, January 7, 2015, at his residence following a lengthy illness and with his loving family by his side.

Clif, the son of Clayton Hershel and Mary Ella (Lea) Hooks, was born on May 16, 1935 in Overland, MO, and was united in marriage to the former Betty Joann "BJ" Frisby on August 11, 1956 in Mt. Vernon, IL. After many corporate moves, Clif and BJ purchased their first Gull Lake home in 1986, moving to the Lake permanently in 1992. Clif was a graduate of Southern Illinois University and the Wharton School of Business at the University of Pennsylvania.

Clif retired in 1992 as an Executive Vice President for Sears, Roebuck Company after 37.5 years of service. He was a member of the First Presbyterian Church of Richland; Gull Lake Country Club, where he enjoyed many rounds of golf; a former member of the Gull Lake Area Rotary Club and a board member of various corporations in the Chicago area while residing in the Chicago suburbs of Glen Ellyn, Dundee and Lake Forest. Clif worked with Habitat for Humanity and was a volunteer driver for the American Red Cross.

Surviving is his wife of 58+ years, BJ; two daughters, Gail Marie (Dr. Robert) White of Chagrin Falls, OH and Donna Kay (Dan) Weaver of Chicago, IL; his son, Clifton Alan (Laura MacVicar) Hooks of Mequon, WI; seven grandchildren; three great grandchildren; four sisters, Katie Hobbs of Nashville, TN, Betty Dix of Collinsville, IL, Jackie (Bill) Nicol of Starke, FL and Billie Jean (Tom) Allen of Annville, PA and a brother John (Karen) Hooks of Tuscaloosa, AL. Clif was preceded in death by his parents; two sisters, Genea Dugger and Mary Zimmer and two brothers, Bob and Dale Hooks.

The Memorial Service to celebrate Clif's life will be held on Friday, May 29th at 4:00 p.m. at the First Presbyterian Church of Richland, 8047 Church Street with Rev. Dr. Mark W. Jennings, Pastor, officiating. Family and friends will continue celebrating Clif's life at the Gull Lake Country Club, 9725 W. Gull Lake Drive, Richland, immediately following the Service. Interment was in Prairie Home Cemetery, Richland.

In lieu of flowers, a donation in memory of Clif Hooks to the University of Chicago Medicine would be greatly appreciated. Checks should be made payable to the "University of Chicago Medicine" and sent to the following address: University of Chicago Gift and Record Services, Clif Hooks Memorial, 5235 S. Harper Court, Chicago, IL 60615. The family has secured "Bereavement Rates" at the Radisson Plaza Hotel (269-343-3333) or the Candlewood Suites (269-216-3599), both in Kalamazoo, MI.

bloruleshort.gif (618 bytes)

Sears future may include slimming down
By Alexia Elejalde-Ruiz
Chicago Tribune
May 7, 2015

Some Sears and Kmart stores could stop selling electronics.

Eddie Lampert, chairman and CEO of Sears Holdings, said during the company's annual shareholders meeting Wednesday that the $2.5 billion the company expects to generate from the sale of 254 properties to a real estate investment trust should "put to rest a lot of the doubters and skeptics" wary of the retailer's financial state after years of losses.

While the company has not committed to how it will spend the money, Lampert said that, in addition to instilling confidence among suppliers that Sears can pay its bills, some would go to pay down debt and pension obligations as well as accelerate Sears' transformation into an asset-light, technology-first retailer focused more on its members and less on stores.

Sears Holdings announced its third real estate deal of the month on Thursday, saying it"By completing the REIT, even the most skeptical analyst would have a difficult time saying that anything but a mega event wouldrom cong to operate," Lampert told a mostly full room at the company's Hoffman Estates headquarters.

The sale to the REIT, called Seritage Growth Partners, is expected to close in the second quarter. It will lease the stores back to Sears at a cost of $150 million to the retailer in the first year.

Lampert said that cost should decline as the REIT has the right to capture half of the store space in the properties to rent to other tenants.

Some Sears and Kmart stores will shrink in half, from an average of 150,000 square feet to 75,000 square feet, which Lampert said will make them more productive and profitable on a square foot basis, as well as drive more traffic as shoppers are drawn to the new tenant.

Consumer electronics, which have had sluggish sales, may disappear from some stores as Lampert said the company also will likely close an undisclosed number of stores this year.

Sears Holdings closed 234 stores last year. At the end of its fiscal year Jan. 31, Sears Holdings operated 1,725 stores, including Sears, Kmart and Sears Auto Centers, 684 of them in properties it owns. That's down from 3,949 stores at the end of its 2010 fiscal year.

Lampert, a hedge fund billionaire who owns 48.5 percent of Sears Holdings, has been tapping its vast real estate portfolio to generate cash.

In addition to Seritage REIT, Sears last month announced three joint ventures with mall operators Simon, Macerich and General Growth, contributing 31 properties in exchange for $429 million. Sears, which owns 50 percent of the joint ventures, will also lease back those stores.

"Even if we were making a ton of money, I still think these actions were the best actions," said Lampert, noting that most retailers lease their stores. These real estate deals follow a series financial maneuverings last year, including the spin-off of Lands' End, the sale of much of the company's stake in Sears Canada, and a rights offerings, which combined generated $2.4 billion that helped get the retailer through the holidays.

The company plans to significantly grow its Shop Your Way member program that is the cornerstone of its transformation. Shop Your Way consists of several components, including a rewards program, a crowdsourced personal shopper service, a sweepstakes contest and a network of brand partners where shoppers can earn and redeem points.

Shop Your Way has about 150 brand partners, the idea being that it strengthens the relationship with members when they can benefit from shopping not just at Sears and Kmart, and this year the company plans to "grow the platform significantly," Lampert said.

Sears does not disclose how many members Shop Your Way has but says its penetration has been growing. Members accounted for 74 percent of eligible sales last year, up from 69 percent in 2013 and 59 percent in 2012.

Though the number of active members has declined as the company closes stores, Lampert said, a bigger focus is on getting existing members to shop more.

"We always want more members, we don't need more members," Lampert said. "We want deeper relationships with members."

Getting customers to engage with all of the tools it offers is one of the greatest challenges, Lampert said.

To highlight the potential for personalized relationships with members, Lampert showed three videos of a woman's trip to a store.

In the traditional shopping trip, she would have gone in with a shopping list and left with the wrong replacement part for a weed trimmer she had previously bought.

But if she used the Shop Your Way app, and if sales associates chimed in to let her know the services available, the same shopper would have gotten an oil change at Sears Auto Center using a coupon pushed to her via Beacon, purchased a pair of shoes on her smartphone, gotten a ping that it was time to replace her water filter, and picked the correct replacement part because the app knows what type of weed trimmer she owns.

"We're not short on ideas, we're not short on talent," Lampert said. "But our execution needs to improve, and certainly our financial results need to improve."

Sears lost $1.7 billion last year and revenue declined 14 percent to $31.2 billion. It has lost money for 11-straight quarters. The company's workforce shrank to 196,000 people as of Jan. 31, compared with 280,000 employees at the end of fiscal 2010.

A common criticism of Sears is that it does not invest to refurbish its stores, making for a lackluster experience.

Asked if some of the capital would go towards store renovations, Lampert pointed to the investments in integrated retail, including its in-vehicle pick-up service, and higher levels of service and technology in some stores.

"I face time with a lot of stores," Lampert said. "There's always room for improvement, but it's not really the issue that the stores are outdated.

"The real issue is, do you have the right sizes, the right product, the right pricing. Which is very different from how do the stores look. It's not Bloomingdales, it's not Nordstrom. But they look right."

bloruleshort.gif (618 bytes)

How Close Is J.C. Penney to Bankruptcy?
April 30, 2015

Struggling retailer J.C. Penney has reported a net loss in each of the past four years. The company's balance sheet is loaded with debt -- over $5 billion as of the most recent earnings report -- resulting in over $400 million of interest payments per year. Sales collapsed when former CEO Ron Johnson attempted a dramatic makeover a few years ago, and while some progress has been made since then, J.C. Penney is still generating far too little revenue.

While any immediate threat of bankruptcy has subsided, with the company having around $2 billion worth of liquidity available in the form of cash and credit lines, the current state of the business is unsustainable. How much time does J.C. Penney have to turn things around before bankruptcy becomes a real possibility?

The story so far
Even after the financial crisis, J.C. Penney was in decent shape. At the beginning of 2011, the company was profitable and sales were growing. The balance sheet looked fine, with cash almost completely covering the company's debt, and while margins weren't as high as they used to be, things were improving.

Johnson took over as CEO in late 2011, implementing a new strategy to shake things up. Discounts and coupons were replaced with everyday low prices, which drove loyal customers away and caused massive sales declines. Johnson was fired in 2013, and the company is still struggling to recover.

The balance sheet has taken quite a hit over the past few years:

Metric January 2011 January 2015
Cash and cash equivalents $2.62 $1.32
Total debt $3.10 $5.42
Net debt $0.48 $4.10
Book value $5.46 $1.91

All values in billions USD. Source: J.C. Penney earnings reports.

A reasonable net debt of less than $500 million has ballooned to more than $4 billion, and the company's book value has declined by nearly two-thirds. With losses continuing to pile up, the situation will only get worse before it gets better.

With over $1 billion of cash, it may seem as if J.C. Penney isn't in all that much trouble. But there's a simple way to quantify the company's bankruptcy risk: the Altman Z-Score. It's a single number calculated from figures on a company's balance sheet and income statement, and it has proved to be fairly accurate over the years as a predictor of bankruptcy. Any Z-Score below 1.81 means a company is distressed, and bankruptcy in the next few years is likely.

Here's how J.C. Penney's Altman Z-Score has changed over the past few years:

Year Altman Z-Score
2010 2.75
2011 2.66
2012 1.48
2013 0.79
2014 1.24

Calculations by author. Data from J.C. Penney annual reports.

J.C Penney's Z-Score became distressed in 2012, and while there was some improvement in 2014 compared with 2013, it remains distressed today. That doesn't mean bankruptcy is guaranteed, as the Altman Z-Score is far from perfect, but it does show that J.C. Penney's financial situation is tenuous at best.

Time is running out
J.C. Penney managed to report positive free cash flow in 2014 despite a net loss of $771 million, allowing the company to maintain over $2 billion of liquidity. This situation buys J.C. Penney some time, but the way the company is saving cash isn't sustainable. J.C. Penney is underspending on capital expenditures, committing just $252 million in 2014, compared with a depreciation charge of $632 million. This approach can continue for a while, but the company is really only delaying its capital spending.

J.C. Penney is also allowing inventory to decline, freeing up some much-needed cash. Again, this isn't sustainable in the long run, and eventually inventory will start increasing again, especially as sales grow.

After another year or two, neither of these methods will be possible any longer, and the company's liquidity is going to start declining again if profitability hasn't returned. That's a tall order, especially given the $400 million in annual interest payments, and if J.C. Penney is still losing hundreds of millions of dollars per year at that time, bankruptcy begins to look increasingly likely.

Betting on a J.C. Penney turnaround remains extremely risky, and a better investment may be fellow department store Kohl's (NYSE: KSS). While Kohl's has had some issues with declining sales and profits over the past few years, the company is still extremely profitable, and share buybacks are driving per-share earnings higher.

During the holiday quarter, Kohl's managed to grow same-store sales by 3.7%, only slightly slower than J.C. Penney's 4.4% increase. That showing comes even as J.C. Penney grew its sales from a depressed base, and it shows that J.C. Penney is going to have a difficult time winning market share from its competitors.

Kohl's stock has run up a bit recently, but the stock is still reasonably priced. Based on 2014 earnings, the stock has a P/E ratio of about 16.7, and analysts expect earnings to grow significantly over the next few years, reaching $5 per share in 2016 compared with $4.24 per share in 2014.

Kohl's is a far less risky investment than J.C. Penney, which is running out of time to return to profitability. The company's steps to preserve liquidity have worked so far, but J.C. Penney will be in serious trouble if vast improvements in profitability aren't realized in the next couple of years. There's no short-term risk of bankruptcy, but the clock is ticking.

bloruleshort.gif (618 bytes)

Sears gets $150 million in third real estate deal
By Associated Press
April 30, 2015

Sears gets $150M from joint venture with Macerich, its third real estate deal in April

NEW YORK — Sears Holdings announced its third real estate deal of the month on Thursday, saying it received $150 million after starting a joint venture with mall operator Macerich.

Sears is contributing nine stores in malls operated by Macerich. Sears will lease the real estate from the joint venture. The companies will own the joint venture on a 50-50 basis.

Sears Holdings Corp. is also planning to sell about 254 properties, most of them Sears and Kmart stores, to a real estate investment trust that it recently created called Seritage Growth Properties. The company expects more than $2.5 billion in proceeds from the sale. It closed more than 200 Sears and Kmart stores in 2014.

Sears and Kmart have struggled for years with sales declines and lack of investment in its stores. Sears Chairman and CEO Edward Lampert has said the company is trying to transform itself from a traditional retailer into a membership-focuses business online and in stores centered on its Shop Your Way loyalty program.

In the last few years the company also spun off its Lands' End, Sears Hometown and Outlet Stores Inc. and Orchard Supply Hardware Stores businesses to raise cash. Orchard Supply filed for bankruptcy protection about a year after it was spun off and was acquired by home improvement retailer Lowe's Cos. in 2013.

bloruleshort.gif (618 bytes)

Melville Hill Jr., Sears executive for 30 years, Dies at 91
Chicago Sun-Times
April 22, 2015

Hill Jr., Melville C. Age 91, of Winnetka, IL. Graduate of New Trier High School and Amherst College. Received his MBA from Harvard Business School. WWII Army Air Corps Officer. Executive at Sears and Roebuck for 30 years.

Beloved husband of Mary Hill (nee Johnson); loving father of Anne (Christopher) Bird, Susan (Peter) Mesrobian, Sally (Alan) Deehan, and Melville C., III (Heather) Hill; proud grandfather of Geoffrey and James Bird, Michael, Mark, Claire, and Andrew Mesrobian, Allison, William, and Caroline Deehan, Amelia West, and Christopher Hill.

Memorial Service Saturday, April 25, 2015, 2:00 p.m. at Winnetka Presbyterian Church, 1255 Willow Road, Winnetka, IL 60093. In lieu of flowers, memorials to Chicago Botanic Garden, 1000 Lake Cook Rd, Glencoe, IL 60022. Info: www.donnellanfuneral.com or (847) 675-1990

bloruleshort.gif (618 bytes)

Sears Hometown (SHOS) CEO to Step Down
Street Insider
April 21, 2015

Sears Hometown today announced that, by mutual agreement with the Company's Board of Directors, W. Bruce Johnson, Chief Executive Officer and President, will leave the Company on August 1, 2015, the end of the Company's second fiscal quarter. In that connection Mr. Johnson, a member of the Company's Board of Directors, will not stand for re-election to the Board of Directors at the Company's Annual Meeting of Stockholders to be held on May 27, 2015. He will continue to serve on the Board of Directors until that time.

The Company also announced that the Board of Directors has commenced a search for a new Chief Executive Officer and has retained Heidrick & Struggles, a leading global executive search firm, to assist the Board in identifying and evaluating external and internal candidates.

William R. Harker, Chairman of the Board of Directors, said, "The Board and I are very grateful for Bruce's many contributions and efforts since the Company was separated from Sears Holdings Corporation in October 2012. We will miss Bruce's strong leadership and insights."

Mr. Johnson said, "I am proud of the Company's accomplishments since the separation. I will be leaving an excellent team in place that is dedicated to the Company's success. I believe the Company has a bright future."

Mr. Johnson has been a director and Chief Executive Officer and President of the Company since July 2012. He served in various capacities as Executive Vice President of Sears Holdings Corporation from February 2011 until July 2012. He served as Sears Holdings' interim Chief Executive Officer and President from February 2008 to February 2011 and as a member of the Board of Directors of Sears Holdings from May 2010 to May 2011. He previously served as Sears Holdings' Executive Vice President, Supply Chain and Operations since the merger of Sears, Roebuck and Co. and Kmart Holding Corporation in 2005. Since July 2010 he has served on the Board of Visitors of Duke Law School, and since January 2009 he has served on the Board of Directors of the Ann & Robert H. Lurie Children's Hospital of Chicago, working on its finance committee.

bloruleshort.gif (618 bytes)

Sears Hometown and Outlet CEO to Leave Aug. 1
By Maria Armental
Dow Jones Wire
April 21, 2015

Announcement follows quarter of disappointing results

Sears Hometown and Outlet Stores Inc. said Chief Executive W. Bruce Johnson will leave the company Aug. 1, through mutual agreement with the company.

The departure announcement follows a quarter of disappointing results, as sales dropped 6.7% and the company swung to a loss during the holiday quarter.

Mr. Johnson, who had held the top post since 2012 and also serves as board chairman, won't seek re-election at the company's annual meeting, scheduled for May 27, the company said in a news release.

The retailer, which was spun off Sears Holdings Corp., has hired Heidrick & Struggles International Inc. to help search for a new CEO.

Shares, largely flat in recent after-hours trading, are down nearly 69% over the past 12 months.

bloruleshort.gif (618 bytes)

Poor Returns Weigh on Sears Pension Plan
By Suzanne Kapner
Wall Street Journal
April 16, 2015

Weak performance threatens to necessitate additional contributions

The problems at Sears don't end with its stores. The retailer also has to worry about its cash-draining pension plan. There, too, some of the damage has been self-inflicted.

Sears Holdings Corp. has poured $2.85 billion into shoring up its pension plan over the past nine years. Much of that expense stemmed from a quirk in accounting rules under which low interest rates swell the current value of future payments Sears has promised to retirees.

The company's pension plan posted a return of just 1.5% in 2014, landing it in the bottom 5% of U.S. pension funds above $1 billion in assets, according to Wilshire Trust Universe Comparison Service. That compares with a 7% median return for funds of that size.The poor returns could force Sears to contribute more funds to its pension plan, beyond the sizable amount it already is providing, according to pension consultants. The company estimates it will invest an additional $1.3 billion to the plan through 2019.

It is hard to know exactly what derailed Sears's returns in a year when the S&P 500 rose by 11.4%, because the company won't disclose the fund's holdings until October. But Maggie Ralbovsky, a managing director with the pension consulting firm Wilshire Associates, guesses the portfolio was hit by plunging oil prices.

Ms. Ralbovsky said Sears's pension had a higher-than-average weighting in a category called "cash and other investments," which tends to reflect nontraditional investments such as commodities.

"If you think about how badly they performed, they must have had a lot of the fund allocated to commodities," Ms. Ralbovsky said. "That was the worst- performing asset class last year."

Sears spokesman Chris Brathwaite declined to comment on the fund's holdings. He said the company continues to meet its pension obligations. Funding demands are expected to decline with a $275 million contribution projected for this year, less than the $417 million Sears kicked in for 2014.

As of Dec. 31, 2013, Sears's pension plan had 204,050 participants, including active Sears and Kmart employees, former employees and their beneficiaries. To be eligible, employees had to have worked at the company before January 2006, when the plan was frozen.

The plan had $3.6 billion in assets and $5.9 billion in liabilities as of late January, the end of the company's financial year.

Companies calculate their liabilities in part by estimating how long beneficiaries will live and using interest rates as an indicator of how much those obligations are worth at present. Sears's unfunded obligations increased by $768 million in 2014 because of a drop in interest rates and an increase in estimated lifespans.

Sears's pension plan performed better in 2013 and 2012, when its investments returned 10.5% and 9.8%, respectively, though that was still worse than the median returns of 15.8% and 13.2% for large funds those years, according to TUCS.

Edward Lampert, the hedge-fund manager who runs the company, has been struggling against a tide of red ink and declining sales that has plagued the retailer that he created a decade ago by merging Sears and Kmart. He has plowed money into the company's website and new technologies, such as digital signs, radio-frequency tags and a membership program, but has been reluctant to spend more cash refurbishing the bulk of the two chains' stores.

The drain from its pension plan has left Sears with less money to run its business at a time when losses have piled up and its cash reserves have dwindled. With interest rates kept near zero by the Federal Reserve for years in an effort to spur economic growth, the pension plan's obligations have grown.

Sears says a 1% increase in its benchmark interest rate would reduce its pension liability by about $600 million.

The company had $250 million in cash on Jan. 31, less than half what it had a year ago. Losses since 2011 have totaled more than $7 billion, forcing the company to sell assets or spin them off to shareholders to raise money.

"The pension obligations have been a constraint," Mr. Lampert, Sears's chief executive, said on a prerecorded conference call in February.

So far this year, Sears expects to raise $2.5 billion by selling 254 properties that house Sears and Kmart stores to a real-estate investment trust. It has already raised an additional $279 million through the formation of joint ventures with Simon Property Group and General Growth Properties. It expects to raise a further $279 million by selling its 50% stake in the ventures to the REIT.

Poor investment results can lead to a lower funded ratio, higher cash contribution requirements and higher premiums paid to the Pension Benefit Guaranty Corp., a federal agency that insurers private pension benefits.

Sears disclosed in a regulatory filing that it is in discussions with the PBGC about its pension obligations and the REIT transaction.

Mr. Brathwaite, the Sears's spokesman, said that Sears regularly communicates with the PBGC about its financial condition, but wouldn't elaborate on the discussions. A PBCG spokesman declined to comment on the talks.

bloruleshort.gif (618 bytes)

J.C. Penney Marks Two Years Since Johnson Nearly Ruined It
By Matt Townsend
April 13, 2015

It's been exactly two years since Ron Johnson's tenure at J.C. Penney Co. came to a screeching halt, and the company is still recovering.

On April 8, 2013, with its sales in free fall and the company burning cash, the board ousted Johnson as chief executive officer. The department-store chain replaced him with his predecessor Mike Ullman, who returned to the CEO job after just 18 months, and set about undoing almost all of Johnson's changes. The company didn't restore sales growth again until last year, and its stock remains down more than 71 percent from when Johnson took the helm in 2011.

It wasn't supposed to be this way. Johnson came to J.C. Penney in 2011 from Apple Inc., where he built one of the most lucrative and prestigious retail chains of all time. But his attempt to turn J.C. Penney into a chic, boutique-style retailer didn't resonate with shoppers. And many of Johnson's proclamations from that era sound even more outrageous after two years of perspective. The executive didn't immediately respond to attempts to reach him, while J.C. Penney declined to comment.

Here's a look back at some of Johnson's misadventures at J.C. Penney:


The conventional wisdom was that retailers catering to the middle class like J.C. Penney needed to use coupons and promotional events to get people in the door ("President's Day Sale!"). Johnson looked at this and saw a huge waste of money and resources on a never-ending schedule of discounting. His solution was switching to everyday low prices (selling a T-shirt for $7, rather than starting at $15 and marking it down). So the coupons stopped, and the company poured money into advertising to build its brand.

"If we can succeed in that, we would triple our business," Johnson said at the time.

The effect was dramatic, but not in the way he expected. Without as many discounts, sales fell 20 percent that next quarter. In 2012, Johnson's one and only full year at the Plano, Texas-based company, about $4 billion of revenue vanished.


In Johnson's eyes, people wanted to shop by brand, not department. His proof? Specialty chains had been taking market share from stodgy department stores for years. He also noted that the Sephora-branded makeup counters were often the best-performing part of J.C. Penney stores. So he began describing J.C. Penney as a "specialty department store."

"We have to radically rethink presentation because the retail industry is very tired on how we present merchandise," Johnson said.

His big idea here was to chop the chain's stores into 100 shops (yes, 100). He envisioned adding a few of these every month, with the massive overhaul being completed in three years.

"This is like turning retail on its head," Johnson said.

The construction ran over budget and was delayed. And in stores where the strategy was adopted, the result wasn't as radical as promised. The individual "shops" were often just areas of the store with more pronounced branding for companies like Levi Strauss. About a dozen of them were added to stores before Johnson's departure.


Most department stores embrace open space, but Johnson felt that J.C. Penney needed more walls.

"Retailers like us don't like walls because they consume so much inventory and they're hard to maintain," Johnson said. "But we're looking at walls as our friends because they're the backdrop to shops. By putting in walls, we can tell stories and we don't have to be so dense on the floor."

Shoppers never got to see the potential for walls, and the layout of most J.C. Penney stores today don't look much different than they did a decade ago.


Johnson inked a deal with design guru Martha Stewart to make exclusive household products for J.C. Penney. "Imagine the Apple Store for technology married with Martha Stewart, and it's going to be unbelievable," he said.

Unfortunately, Stewart was still under a similar contract with rival Macy's Inc. The situation blew up into a full-scale legal battle. After Macy's sued and the case went to trial, the standoff was widely covered by the media, including tabloids. J.C. Penney eventually severed ties with Stewart and had to liquidate millions in Stewart-branded merchandise.


Johnson envisioned coffee bars and food stands dotted throughout J.C. Penney stores. He also wanted a "street" -- a wide aisle of flooring -- that was to lead shoppers to a "town square," home to such activities as yoga and pilates. None of that ever happened.

After Johnson was shown the door, the company apologized to customers in a television commercial in May 2013.

"We learned a very simple thing -- to listen to you," the company said in the ad. "Come back to J.C. Penney. We heard you."

bloruleshort.gif (618 bytes)

Sears to gain $114M from real estate pact with Simon
By Thomas Mulier and Nicholas Turner
April 13, 2015

Sears Holdings Corp. agreed to form a real- estate joint venture with Simon Property Group Inc. that will generate $114 million, the department-store chain's latest push to use its extensive properties to shore up its finances.

Sears will transfer 10 properties valued at $228 million to a company that it will own jointly with Simon, the companies said in a statement Monday. A leaseback arrangement means Sears will continue to operate stores at the locations. Simon, a real- estate company, separately agreed to buy another Sears property at the La Plaza Mall in McAllen, Texas.

The move follows an announcement this month that Sears is forming a real estate investment trust to acquire about 254 of its properties, generating more than $2.5 billion in proceeds for the money-losing chain. Sears Chief Executive Officer Eddie Lampert also has sold and spun off assets, such as the Sears Hometown & Outlet Stores Inc. chain and the Lands' End brand. He's trying to turn the company into a leaner retailer, focused on generating sales from e-commerce and loyalty-program members.

The Simon deal is "an important step in Sears Holdings' continued transformation to a membership company, without the significant asset intensity of its traditional retail business," Lampert, who also is Sears's biggest shareholder, said in Monday's statement.

The stock climbed 2.5 percent to $44 as of 9:33 a.m. in New York. The shares had gained 30 percent this year through the end of last week, rebounding from a decline in 2014.

Real Estate

Sears has previously tried to squeeze more value out of its real estate holdings by selling locations, leasing space to other retailers and developing properties. The REIT was applauded by investors, who bid the shares up 31 percent when Sears announced in November that it was exploring the possibility.

The Simon agreement gives the new joint venture the power to redevelop the 10 contributed properties and lease space to other parties, potentially creating another source of revenue. The retailer expects its new REIT, Seritage Growth Properties, to purchase Sears's 50 percent interest in the venture. Simon also will invest about $33 million in Seritage shares through a private placement.

"Sears Holdings will continue to operate these 10 stores and there will be minimal impact on their day-to-day operations or the overall shopping experience for our members," Lampert said.

bloruleshort.gif (618 bytes)

Bye buy: 14 big stores shrink fastest
By Matt Krantz
USA Today
April 10, 2015

It's going to be harder to find a Walgreens – the drugstore chain is closing hundreds of stores in the U.S. You'll also have to look harder to find office supply sellers and some apparel sellers, too.

Walgreens Boots Alliance (WBA), the parent of the Walgreens drugstore, is just one of 14 major publicly traded companies that are reducing their store counts the quickest even as the economy is growing, according to a USA TODAY analysis of data from S&P Capital IQ. The closures show just how some bricks-and-mortar retailers are contracting as online shopping grows and consumers tastes shift.

Department store Sears Holdings (SHLD), office supply seller Office Depot (ODP) and teen apparel retailer Aeropostale (ARO) reported the largest percentage declines in the number of stores in their most recently reported annual counts compared with a year ago. The analysis is limited to the stores that report annual store counts, which is most, but not all.

So far, investors don't seem to mind the strategy of cutting stores. A custom equal-weighted index of the 14 retailers closing stores the fastest is up 18% over the past year, topping the 11% gain by the entire Russell 3000 index during the same time period. Much of the outperformance has occurred this year.

Part of the run in the shares of retailers closing stores, though, is part of what's been a surprising retail stock rally. The index of retailers closing stores is actually underperforming the 27.7% gain of the S&P 500 Retailing index. It's the smaller retailers, measured by the S&P 600 Retailing index, that are underperforming as the smaller players struggle.

Sears Holdings, the retailer that's been trying to fix itself for years, is the U.S. retailer shrinking the most. The company reported 1,725 total stores of during its fiscal year ended January 2015. That's down 29% from the 2,429 stores it reported in fiscal 2013. Reducing stores is part of the company's strategy to regain its footing as consumers shift more spending online and prefer more specialized or larger retailers. It's the third straight year Sears reported a smaller number of stores. Sears now has less than half the number of stores it had in 2011. Unfortunately, the company's losses are only expanding. The company reported a net loss of $1.7 billion during the fiscal year ended in January. It hasn't made money since 2011. But hey, the stock is up 21% over the past year. A Sears spokesman says the company closed 234 stores last year. Most of the company's store count reduction was due to spinning off its Sears Hometown and outlet business.

Office supply stores have also been rapidly closing locations – urging customers to move their business online. Office Depot reported 255 fewer stores this past fiscal year, down 11% from the same period a year ago. Interestingly, the company's revenue rose in fiscal 2014 by 43% to $16.1 billion despite the fewer number of locations. But its losses widened, too, hitting $354 million during the fiscal year. The company is being bought by rival Staples, which reduced its number of stores by nearly 9%.

Walgreens is the latest retailer to turn to store closings this year. But it was already reducing store counts last fiscal year ended in August 2014. The company reported 273 fewer stores in fiscal 2014, which was a reduction of 3.2%. But the stock? That's up 41% over the past year.

Hope investors don't need to find a drugstore.

bloruleshort.gif (618 bytes)

Former Sears CEO selling pedigreed Lake Forest estate
By Dennis Rodkin
Crain's Chicago Business
April 7, 2015

The walled Lake Forest estate built by Edward Bennett, who co-authored the Plan of Chicago in 1909 and designed the Buckingham Fountain and Michigan Avenue bridge, is going up for sale today for the first time in 20 years.

The sellers are Caron and Alan Lacy, the last chairman and CEO of Sears Roebuck before its 2005 sale to Kmart. Lacy retired as vice chairman of Sears in 2006.

"It's one of those great, classic Lake Forest estate houses," Lacy said by phone from the couple's other home, in Carmel, Calif. "But other than some grand rooms on the first floor, it's not all that big, relatively, and it was a place where our two teenaged boys were allowed get rowdy." Both sons are grown.

The estate, with manicured grounds that include a fountain whose square-in-a-circle pool is a smaller version of Buckingham Fountain's, will be listed with Mona Hellinga of Berkshire Hathaway HomeServices KoenigRubloff Realty Group. The asking price is $4.25 million.

Dubbed "Bagatelle" by Bennett and originally a summer home, the estate stands on two acres on Deerpath Road near the center of Lake Forest. It includes three buildings: the main house and a coach house built in 1916 in the style of a French country house, and an artist's studio that Bennett drew up in the early 1930s in the Art Moderne style, similar to the look of the buildings he designed for the Century of Progress World's Fair on Chicago's lakefront in 1933.

The main house has a checkerboard marble-floored foyer that leads to broad formal living and dining rooms, each with a screened porch attached, all visible on the listing site.

Caron Lacy describes the core formal rooms as "a jewel box," her husband said. The two rooms' rear walls are lined with French doors that open onto a raised terrace. Beyond it lies a long lawn that terminates at a classical statue called Flora, placed by Bennett "at the end of that view axis," he said.

On the second floor, the three-room master suite and its porch look over the rear lawn. Also on the second floor are three other bedrooms originally designed for the Bennett family and several rooms intended for servants and used by the Lacys as computer and exercise rooms.

The master bath, kitchen and adjacent pantry were updated in the 1990s.

The coachhouse, which matches the house's creamy stucco walls and quoining (masonry blocks at the corner of a wall), has a two-bedroom apartment above a three-car garage. The studio, nestled beneath trees about 50 yards from the house, departs from the style, built of brick with a low-slung roof and rounded corners inside and out.

Alan Lacy said his research on the property determined that the land for the estate was a gift from the father of Bennett's wife, born Catherine Jones, and construction costs came from her uncle. Her initials grace the wrought-iron balcony, the J being largest. As Lacy puts it, Bennett may have been beholden to his wife's wealthy family, but "he's back there in the studio, painting nude women."

For about 40 years, Bagatelle was home to Henry Meers, a Merrill Lynch executive in Chicago and a philanthropist who headed the boards of Children's Memorial Hospital, WTTW-TV/Channel 11, the Latin School of Chicago and the Chicago Area Council of the Boy Scouts of America.

The Lacys became the estate's sixth owners in 1995 when they did a house swap with Bagatelle's previous owners, John and Ingrid LoGuidice, giving that couple their previous home, which Alan Lacy now describes as "a project that turned out to be more than we could handle," and some cash. Hellinga said the total transaction was valued at $2.725 million at that time.

The Lacys later replaced the slate roof on the two front buildings, had the grounds re-landcaped and made other upgrades, she said. Alan Lacy said one original detail he never managed to re-create is a glass canopy extending about 25 feet from the front door out to the estate's gate on Deerpath Road.

Although guests now mostly arrive via a gated side driveway on Green Bay Road, Lacy said, "arriving at the curb out front to walk in under that canopy must have been an elegant experience."

bloruleshort.gif (618 bytes)

Sears' Latest Deal: More REIT Than Light
By Justin Lahart
Wall Street Journal
April 2, 2015

Retail survival depends on more than light

The way Sears Holdings keeps scissoring off assets, maybe it should rename itself Shears.

The retailer on Wednesday announced plans to raise more than $2.5 billion by selling 254 properties to a real-estate investment trust it has formed and then leasing them back. The REIT, Seritage Growth Properties, will fund the purchase partly by selling stakes to Sears shareholders through a rights offering.

Separately, Sears announced it will contribute 12 properties to a joint venture with mall operator General Growth Properties, raising an additional $165 million.

These moves–just the latest in a series of cash-raising exercises that include last year's reduction of its stake in Sears Canada and spin off of Lands' End–will provide the company with much-needed funding. Sears had over $1.6 billion in negative free-cash flow in the fiscal year ended January, leaving it with just $250 million in cash, and an additional $800 million available to it through a revolving credit facility.

Sears shares rose as much as 12% on the REIT announcement and then gave those gains back. One reason why might be that with the REIT–which the company first signaled it would do late last year–in motion, the company has one less lever with which to fund itself. Now attention turns back to how its stores are performing, and once again how quickly the company is burning through cash.

There are still some options available to Sears. It could downsize some of the stores held by the REIT, reducing leasing and operating costs but still maintaining a presence in productive locations. And it can continue to close its unproductive leased locations as leases expire.

If its goal is to survive as a retailer, Sears will need to get better at selling the stuff on its shelves, rather than just its remaining assets.

bloruleshort.gif (618 bytes)

Sears Moves to Raise $2.5 Billion By Selling Real Estate
By Angela Chen
Wall Street Journal
April 2, 2015

Struggling retailer would sell some top properties then lease them back

Sears Holdings Corp. on Wednesday moved to raise fresh cash by selling some of its top properties to an affiliated real-estate trust and leasing them back, a financial step that will let shareholders including Chief Executive Edward S. Lampert buy valuable company real estate.

Sears CEO Edward Lampert said Wednesday that the real-estate joint venture is "an important step in the continued transformation" of the company from a store-focused network to a "more asset-light, member-centric retailer."

The struggling Hoffman Estates, Ill., retailer plans to raise more than $2.5 billion by selling 254 properties, most of them occupied by Sears or Kmart stores.

The step would help reassure suppliers that have been rattled by the company's string of losses and are seeking faster payment to keep shipping goods.

It also starts the process of unlocking the value of Sears's real estate for shareholders. Analysts have considered that property to be a central source of value for Sears since the retailer was formed in 2005 through a merger with discount store chain Kmart.

Shares were off five cents at $41.33 in 4 p.m. Nasdaq trading.

On Wednesday, Sears filed an offering by Seritage Growth Properties, a Maryland-based trust set up by the company. Seritage will buy the property from Sears and then lease it to the retailer. It will fund the purchase in part with money raised by selling stakes to Sears shareholders via a rights offering.

Mr. Lampert, who along with his hedge fund ESL Investments Inc. owns nearly half of Sears' stock, said he would buy his allotted stake.

Separately, Sears agreed to partner with mall owner General Growth Properties Inc. on a real-estate joint venture. Sears has contributed 12 properties located at General Growth malls in exchange for half ownership of the joint venture and $165 million in cash. Sears will continue to operate the 12 stores, which are valued at $330 million.

Sears said it would eventually sell its stake in the joint-venture to Seritage.

Sears Holdings has struggled in the 10 years after being formed. Sales have slid and losses have piled up amid underinvestment in its stores and weak traffic. The company posted a loss of $159 million over the holidays, as quarterly revenue plunged 24% to $8.1 billion

bloruleshort.gif (618 bytes)

Sears's $2.5 billion REIT plan may be blueprint for deals
By Lauren Coleman-Lochner, Bloomberg News
Chicago Tribune
April 2, 2015

NEW YORK – Sears Holdings Corp.'s plan to raise more than $2.5 billion from its real estate serves as a blueprint for future deals, helping Chief Executive Officer Eddie Lampert deliver the financial returns he's long promised to investors.

A newly formed real estate investment trust, Seritage Growth Properties, will buy 254 Sears and Kmart locations and then lease them back to the retailer. As part of a plan announced Wednesday, Sears also will contribute 12 properties to a 50-50 joint venture with mall operator General Growth Properties Inc.exchange for $165 million in cash.

While the company has previously sold locations, leased space to other retailers and developed properties, many investors have been waiting for Lampert to form a REIT since he merged Sears and Kmart more than a decade ago. The shares surged 31 percent when the company announced in November that it was exploring the possibility.

"For mall operators of high-quality malls, there have to be more deals to be done with Sears," said Cedrik Lachance, a managing director at Green Street Advisors in Newport Beach

REITs composed of a single retailer are rare because investors want to spread risk among multiple tenants. Yet investors could bite if they see the transaction as a way to wring more value from the Sears properties, most likely by breaking them up, Lachance said.

"The big challenge of the single-tenant REIT is the credit quality, of course, of that tenant," he said. "In this case, I think it's universally known that the credit quality of Sears is at best poor, and so buyers of the Seritage REIT will look for a redevelopment angle."

The deals announced Wednesday mark one of the more dramatic moves Lampert has made to reshape the company after more than three years of losses. Lampert has sold and spun off assets such as the Sears Hometown & Outlet Stores chain and the Lands' End brand while working to transform the company into a leaner retailer, focused on generating sales online and from loyalty-program members.

Seritage will fund the purchase with debt and proceeds from a rights offering that's expected to close by the end of the second quarter.

Lampert's ESL Investments hedge fund may own 53.2 percent of any Sears REIT spinoff, if the retailer exercises warrants for 10.5 million shares controlled by Lampert and ESL, according to Bloomberg Intelligence analyst Noel Hebert. Hebert estimates that Sears could consume at least $1.5 billion in cash this year.

The structure of the General Growth deal resembles a $1.8 billion agreement announced in February between Hudson's Bay and Simon Property Group, Green Street's Lachance said. It gives landlords plenty of flexibility to redevelop the Sears stores.

Green Street lists 131 of Sears's 628 mall stores as located in A, or top-quality, malls. Other landlords with Sears stores in A malls include Macerich Co. and Simon, Lachance said.

"It's a big pool of properties where something can be done, but it can only be done with the mall owner," he said.

The cash infusions come as Sears struggles to return to profitability under its new model. The retailer's loss last year widened to $1.68 billion as sales slid 14 percent. All told, Sears has lost $7.12 billion in its past four fiscal years.

Those losses have strained the retailer's balance sheet. Its cash balance as of Jan. 31 was $250 million, down 76 percent from a year earlier. Matt McGinley, an analyst at Evercore ISI in New York, estimated the moves could fund Sears's operations for about a year and a few months at its current cash- consumption rate.

While the properties that Sears unloaded today are among its best, McGinley said that REITs that own malls with other Sears locations may be interested in similar joint-venture deals. The company said in a filing last month that it had about 1,725 Sears and Kmart stores.

"If you're a shareholder of Sears, would you rather own a REIT that can diversify itself over time and live on as you redevelop these sites into something different, or would you want to just own this as a consolidated entity with a failing retailer?" McGinley said. "If I was a Sears shareholder, I would want to go with the REIT."

bloruleshort.gif (618 bytes)

Sears Tries to Calm Supplier Jitters
By Suzanne Kapner
Wall Street Journal
March 19, 2015

Retailer accelerates payments; weak results make it harder to insure orders

Sears said it continues to meet all of its obligations, including payments du vendors and suppliers, but some are nervous.

Sears Holdings Corp.'s weakened financial position is putting stress on its supply chain.

Suppliers of tools and other goods have begun asking for sweetened payment terms to compensate them for the risk of shipping to the troubled retailer, people familiar with the situation said.

Sears has offered to pay some vendors within 15 days, faster than its normal terms of up to 60 days for suppliers of apparel or hard goods, in return for a discount of around 3% to 5%, one of the people said.

The faster payments tie up more of Sears's cash, increasing the risk and complexity of basic functions needed to keep its business going. It has little choice but to bear those costs, however, after a dismal holiday season that rattled its vendors.

Carla Casella, a credit analyst with J.P. Morgan, said big department store chains typically pay their vendors in 30 to 60 days. She estimates that Sears was paying its vendors within about 29 days as of Jan. 31, compared with 38 days a year earlier. Each day that Sears shaves off its payment cycle ties up about $48 million in capital, Ms. Casella said

Chris Brathwaite, a Sears spokesman, said the company continues to meet all of its obligations, including payments due vendors and suppliers. He said insurance providers have never had to pay a claim to a vendor tied to Sears, and that Sears has ample inventory to operate its business.

Sears's holiday results have put more pressure on an already struggling company. Sales at existing stores fell 4.4% in the three months through January, and its cash pile shrank by more than half, to $250 million.

Last fall, Sears had to turn to its CEO and major shareholder, hedge-fund manager Edward Lampert, for funds to head off a cash crunch. Mr. Lampert now hopes to raise more than $2 billion by spinning off as many as 300 of Sears's best stores into a publicly traded real-estate investment trust. He also is lending the company $200 million until the sale happens or June 1, whichever is soone

The string of bad results has made it harder for suppliers to buy coverage against a default by the retailer. Insurer Euler Hermes Group SA canceled policies covering receivables from Sears last fall.

One firm that lends money to Sears's suppliers has turned to an obscure and expensive financial instrument known as an "accounts-receivable put" to protect itself in the event that its clients aren't paid, a person familiar with the matter said. The contracts, considered a last resort option when other forms of insurance are hard to come by, are sold by banks and would pay out if Sears files for bankruptcy protection. They allow suppliers to insure a shipment of goods for periods ranging from a few months to a year.

The cost of one-year protection on Sears has increased to 2.7% of the total protected a month from 1.9% a month in September, according to the person familiar with the matter.

Sears's Mr. Brathwaite said that doesn't mean the company is any less likely to pay.

"Put prices and other forms of insurance reflect perception and not factual reality," he said.

Retailers sometimes cut deals to pay suppliers early in return for discounts, provided the money saved is more than the capital that would be tied up by the early payments.

Sears's suppliers, however, are clearly concerned. A medium-size apparel supplier said he stopped taking orders from Sears this past fall as the retailer's finances worsened.

Sears has endured a deep, steady decline in sales since Mr. Lampert merged the company with Kmart in 2005. Critics say he has underinvested in the chains, allowing their store bases to deteriorate. He has said investing in already struggling stores would be fruitless.

The company shut 234 stores last year and has been spinning off assets like its preppy brand Lands' End and a stake in Sears Canada to shareholders while investing in a range of digital initiatives.

Although Sears's fourth-quarter loss narrowed to $159 million from $358 million a year ago, losses for the full fiscal year deepened to $1.7 billion from a $1.4 billion loss a year earlier. Sales fell to $31.2 billion from $36.2 billion the prior year—and are down from $49.1 billion in 2005.

Suppliers are closely watching the sale of the property, which would give the retailer an important infusion of cash, although it won't solve the larger problem of stabilizing sales at Sears and Kmart stores.

Ms. Casella of J.P. Morgan estimates that if Sears is unable to raise money from real-estate sales by late summer, it would run out of the funds needed to stock stores with back-to-school and holiday merchandise.

Sears said it has lots of ways to raise money. The company raised $2.3 billion last year. It also had $800 million available under its credit line at the end of January.

"Given the asset rich nature of our portfolio and our real estate, we have always had and continue to have numerous levers at our disposal to generate substantial liquidity should we choose to do so," said Sears's Mr. Brathwaite.

bloruleshort.gif (618 bytes)

Can Advertising Spark a Turnaround for Sears and Kmart?
By Noreen O'Leary
March 17, 2015

On the surface, the business that Sears Holdings is dangling before advertising holding companies is juicy: the chance to handle all marketing services across its Sears and Kmart brands, which collectively spend $560 million in media each year.

Total account revenue is significant as well—amounting to at least $20 million, according to sources. So why have teams from Dentsu and Omnicom Group dropped out?

The problems of Sears Holdings transcend advertising and are, some would say, existential. In short, how does a big-box retailer not known for innovation survive in the age of Amazon? Company leaders point to ShopYourWay.com, a digitally based consumer-membership service. But even remaining contenders in the review—Interpublic, Havas and Publicis Groupe—aren't so sure.

Sears' search for a holding-company solution comes as it cuts agency compensation and investment in stores, sheds assets and real estate holdings, and grapples with cash-flow issues. (Fitch Ratings believes Sears Holdings will likely run out of cash in 2016.) Given all those problems, some question how big a difference advertising can make.

"No level of marketing effort with regard to quality or quantity can reverse the damage that Sears has incurred," said Columbia University's Mark Cohen, former CEO of Sears Canada. "Without appropriate leadership, product assortments, pricing and acceptable levels of productivity, a sinking ship like this will just continue to founder. There is no viable strategy in place that customers find attractive or compelling."

Cohen added that Sears Holdings chairman Edward Lampert "for all his bluster, is nothing more than an asset stripper."

Bill Kiss, chief digital marketing officer for Sears and Kmart, disagreed, naturally.

"This [review] is not a cost-down, cost-cutting exercise," he said. "It's aimed at accelerating the growth of our brands and of ShopYourWay. We're committed to a digital transformation from bricks and mortar. Digital and technology is the secret sauce in what we do."

Perennially optimistic ad execs are buying into that vision. Agency sources echoed the sentiment of a former Sears marketing exec, who said, "Sears will always be an iconic brand and has come back from death's door a number of times," before also noting that "despite its issues, there's opportunity here: This is still a company of consequence, generating significant revenue, spending a lot of money on advertising. And, of course, there's the agency ego appeal of turning a company like this around."

It's rough sledding for all mid-tier retailers these days, but the decline in the Sears brand in particular has been steep. As recently as 2003, Sears spent $1.5 billion on all marketing expenses. When Ogilvy & Mather, Chicago worked on Sears from 1986 to 1993, the office was among the agency's most profitable in the U.S., with a profit margin of 15 percent on an account that spent $250 million in media annually, according to sources. But Sears' last lead agency, Dentsu's mcgarrybowen, saw account revenue decline from $10 million in 2011 to $5 million last year, sources said.

Some observers expect Sears Holdings to shift toward an all-digital marketing strategy, which would dovetail with its evolving business plan. Still, a retail consultant questioned such an approach. "Three years ago, [ShopYourWay] may have made sense, but there's no such thing as a pure online retailer anymore," said Brian Brands' Brian Kelly, a former marketing leader at Sears. "Everyone is omnichannel, while Eddie [Lampert] has been betting the house just on digital. Retail is a disaster in general, although what Eddie is doing may be even more of a disaster. He's just got the ugliest horse.

bloruleshort.gif (618 bytes)

Blackstone Strikes Deal on Chicago Tower
By Eliot Brown
Wall Street Journal
March 16, 2015

$1.3 Billion Price Is Highest for Office Tower

Blackstone Group LP has struck a deal to purchase the Willis Tower in Chicago for $1.3 billion in what would be the highest price ever paid for a U.S. office tower outside of New York, according to executives of the private-equity firm.

The deal for the formerly named Sears Tower, reached over the weekend, would be one of the highest-profile towers bought by Blackstone, which is better known for leveraged buyouts of chains like Hilton Worldwide Holdings Inc. than for individual property purchases.

Blackstone plans to invest heavily in the retail portion of the building and in upgrading the observation deck, the executives said, in hopes the deck will become a cash cow like those of other skyscrapers.

The company hopes "to really make this more of a comprehensive tourist attraction" as well as an office building, said Jonathan Gray, Blackstone's head of real estate.

The trade for the flashy tower also illustrates how private-equity firms like Blackstone are finding a dwindling number of bargains in the property sector

For years, the company and its peers had been scooping up distressed portfolios of retail properties, hotels and single-family homes meant to be rented out, often well below what the last owner paid. But the property market has recovered dramatically, particularly in major cities.

While commercial property values fell nearly 40% between 2007 and mid-2009, they have now risen 14% above their 2007 peaks, according to the Green Street Advisors commercial property price index. In the process, the billions of dollars worth of property that struggled under weighty debt payments has largely disappeared from the market, having been sold or restructured over the past half decade.

In the U.S., "there's not much in the way of distress left, which makes buying tougher," Mr. Gray said at an investor conference last June. It also makes it particularly hard to find Blackstone's bread and butter: properties cheaper than what the last owner paid.

The Willis Tower sale marks a big profit for the current owners, New York investors Joseph Chetrit and Joseph Moinian and Skokie, Ill.-based American Landmark Properties. They paid $841 million for the tower in 2004.

The owners had boosted the building's income by striking deals with tenants such as United Airlines and insurer Willis Group Holdings, which leased the naming rights in 2009. In addition, they redid the observation deck, adding glass boxes so visitors can look down from its peak. The owners settled on Blackstone, known for its "speed and agility, which makes them a formidable competitor for any large-scale offering," said Douglas Harmon, senior managing director at Eastdil Secured, a real-estate services firm that advised the sellers.

Still, the building's price is by no means sky-high. On a per-square-foot basis, its price, about $340, is a fraction of what trophy towers fetch in major cities. The property's initial annual income is between 6% and 7% of its purchase price, said a person familiar with the matter, a rich level by New York or San Francisco standards. There, income generally runs between 4% and 5% of a price for a top-quality tower.

To boost returns further, Blackstone plans to invest as much as $150 million in the building, largely in investments geared toward boosting it as a tourist and entertainment destination, said people familiar with Blackstone's plans.

Such a move has become increasingly common for investors like Blackstone who target so-called opportunistic purchases.

"What people are doing is not looking at the building for what it is right now but looking at the building for what it could be," said Alexander Goldfarb, a real-estate analyst at Sandler O'Neill + Partners. "There's a lot more creativity going on with space."

The company plans to revamp the observation deck again, taking cues from the growing popularity of such decks, which experts attribute to rising tourism and changing cultural preferences. The king is the Empire State Building, which took in nearly 40% of the building's total revenue from 4.3 million visitors, totaling $82 million in income after expenses. Today, the Willis Tower gets more than $25 million from 1.6 million visitors, according to loan documents and people familiar with the matter, an amount that has been rising in recent years.

At the same time, Blackstone's bet is in part on the Chicago office market, which has been gradually improving and drawing tenants from the suburbs. The tower is roughly one-fifth vacant, giving it some room to grow.

Still, the Chicago market is known to be relatively stagnant over the long term.

"It's just a really tough market," said Mr. Goldfarb, adding that local developers are quick to put up buildings and lure tenants from others.

bloruleshort.gif (618 bytes)

Sears Annual Meeting
March 13, 2015

HOFFMAN ESTATES, Ill., Jan. 28, 2015 -- Sears Holdings Corporation (NASDAQ: SHLD) announced today that the 2015 annual meeting of stockholders will be held at the Company's headquarters in Hoffman Estates, Ill., on Wednesday, May 6, 2015.

In addition, the Company announced that March 9, 2015, has been fixed as the record date for determination of the stockholders of the Company entitled to notice of and to vote at the annual meeting of stockholders.

bloruleshort.gif (618 bytes)

Target has a new CEO: Will he re-energize the retailer?
By Phil Wahba
March 2, 2015

The Target executives were taken aback. They had just learned that their new CEO, Brian Cornell, had been out on his own with customers, incognito, exploring one of the company's stores. It was a big departure from the way the process-heavy discount retailer had always operated. Store visits, ostensibly intended as intelligence-gathering missions, were meticulously planned affairs, only slightly less formal than, say, a presidential visit. Every relevant national manager and local functionary would be notified in advance, each step choreographed, the "regular shoppers" handpicked and vetted. About the only thing missing was a brass band playing "Hail to the Chief."

But on a mid-October day, just two months after he took the helm, Cornell took an unannounced detour from a business trip to Dallas. A friend connected him with an assortment of seven local moms, each of them loyal Target customers. Unrecognized by store workers, Cornell deployed each member of his ad hoc focus group to the department she frequented most—clothing, housewares, or groceries, for example—then waited for their reports.

What Cornell sacrificed in pomp and circumstance, he made for up in candid opinions. The shoppers had a bevy of comments and complaints. Two Latina mothers criticized the bland colors and general drabness of Target's apparel. The younger moms told him that they buy only organic food for their babies; they wanted greater selection. By the end of his two hours in the store, Cornell had some germs of what only a few months later, as we'll see, are significant changes he is planning.

It may seem like a small step. But Cornell is the first Target CEO to be recruited from outside the company, and fittingly, he is already bringing a jolt of fresh energy to the country's third-largest retailer (behind only Wal-Mart and Costco). "I got such great, genuine feedback from them," Cornell says of the Dallas visit. As he puts it, providing advance warning ensures stores are "going to be beautiful—but it's not reality."

A firm grip on reality is only the beginning of what Target needs today. A company that became a national phenomenon with retail alchemy—a rare ability to attract millions with hip designer items at clear-out prices—has seen that delicate formula stifled by excessive caution and a strangling bureaucracy, even as competitors emulated Target's approach, and fast-fashion retailers like H&M, off-price chains such as T.J. Maxx, and dollar stores all muscled onto its turf.

Instead of cultivating its cachet as competition mounted and the economy struggled, Target instead emphasized low prices and unimaginative products. The doubly deadly result: The retailer is no longer winning on style or on price.

Target is drawing fewer shoppers. As of December, 37% of Americans had browsed in a Target store or its website in the preceding four weeks, according to data from Kantar Retail. In December 2007 the equivalent figure was 53%. That means millions of shoppers have abandoned Target. Despite the exodus, sales have ticked up during the past few years; Target is on track for $73 billion in 2014. What that means is that the company has become increasingly reliant on its core customers. It needs to attract fresh ones if it wants to reignite its growth.

Then there's the value equation. In December 2007, Target scored a 48.4 on a scale that measures shoppers' sense that they get their money's worth, as compiled by YouGov BrandIndex. As of January 2015, that number had plunged to 31, erasing the company's long-standing edge over rival Wal-Mart.

Those are the disconcerting trends for the long term. Then there were the company's straight-up whiffs. A massive hacking in 2013 enraged customers. The company's subpar web presence left it gasping to catch its rivals. And finally it bungled its expansion into Canada in disastrous fashion.

That array of woes has steadily chipped away at Target's profits. Earnings, which peaked at $3.2 billion a decade ago, are expected to be $1.5 billion for 2014. Net income as a percentage of sales has fallen from 4.5% to 2% during the same period, according to S&P Capital IQ, and gross profit margins have slipped.

That's the situation facing Cornell. A former senior PepsiCo executive and CEO of Sam's Club, he has made a name for himself in the retail world with a seemingly contradictory set of traits: He's a dyed-in-the-wool data guy who likes nothing more than nosing around a store and getting a feel for what's going on.

Since taking the reins in August, Cornell, 55, has moved quickly, seeking to speed up Target's metabolism. He aggressively squeezed Amazon and Wal-Mart by offering free shipping for online orders during the holidays. That decision was made in a matter of days rather than the months it would have taken in the past.

The new CEO's most dramatic step so far: He ripped the bandage off Target's Canadian wound, a failed 2013 initiative that left the company bleeding. Closing all its stores north of the border cost $5.4 billion, but it stanched a key source of losses and will help the company concentrate on its U.S. business. Cornell's decisiveness, along with a better-than-expected holiday-season increase in sales at the website and stores open for at least a year, has revived Target's stock: The shares have jumped 30% under the new CEO, to all-time highs.

Cornell knows the plight of retailers that can't adapt, and he's the first to acknowledge that Target has a lot of work ahead. A key element will be improving the company's focus, which is CEO-speak for exiting or paring back certain business lines. "The categories we're going to stand for," he says, "the ones I call our signature categories—they're the ones that can differentiate the brand going forward. So you'll see us elevate our focus around our style categories, apparel, home, beauty—critically important categories for our guest—and we think we can differentiate in that space." He also wants to "localize" Target's product mix. The company plans to follow its customers as they move back to cities, with new urban locations that are smaller than its 1,800 big boxes, and stop playing catch-up when it comes to digital.

Most of all, Target knows it needs to recapture its elusive ability to seduce. But as many a retailer (and many a teenager) has learned the hard way, wanting to be cool is a lot easier than actually being cool

When Cornell arrived at Target's headquarters in Minneapolis, he was installed in the newly redone CEO's corner suite on the 26th floor. Almost immediately he insisted he be moved to a smaller office down the hall that is only steps away from the company's global data nerve center.

That's the company's mission-control-style monitoring room, which it calls "guest central." There a team of 10 staffers scrutinizes live feeds from social media sites such as Pinterest, Facebook, and Twitter, along with television stations, on nine large TV screens high on the wall. They watch intently and use software to aggregate data to gauge by-the-second reactions to a product launch or news announcement or to respond quickly to, say, a customer fulminating on Twitter.

The social command center existed before Cornell became CEO. But he has beefed up its capabilities, and he's looking for creative ways to use the data. He drops in every morning and insists on two updates a day.

Analytics have long been a central part of Cornell's approach. When he headed Sam's Club, the $55-billion-a-year Wal-Mart division, from 2009 to 2012, he improved the unit's customer-insights system, according to Maggie Nation, a marketing executive at Sam's under Cornell. The effort yielded such good results that Wal-Mart had all of its insights teams report directly to Cornell.

Cornell had previously upgraded analytics at Safeway, where he was chief marketing officer from 2004 to 2007. That data helped him ramp up the grocer's successful Lifestyle stores and led him to add higher-end touches like softer lighting, hardwood floors, and sushi bars. Cornell also loved to walk around stores, says Stuart Aitken, who worked under him at two companies. Cornell would grill customers about such minutiae as store lighting and which signs were hard to read. He would often take the clues he gathered in those conversations and use the analytics to look for broader patterns that would reveal problems or opportunities.

Cornell's emphasis on analytics appealed to Target's board as it looked for a new CEO, according to the director who oversaw the search, Roxanne Austin, head of Austin Investment Advisors, a private investment and consulting firm. Cornell also boasted a track record of building private-label brands, a priority for Target, and had a reputation as a leader who could rally the troops and change a culture. All of that trumped his inexperience in three areas that will be crucial to determining whether Target can get its mojo back: home goods, e-commerce, and clothing. (Cornell is trying to catch up: He was the first Target CEO to hobnob at New York Fashion Week in September.) "No one else had this set of experiences," Austin says. "He was the perfect guy."

Brian Cornell's childhood was anything but perfect—or easy. His parents split up early, and Cornell was only 6 when he last saw his father, who died young. Cornell's mother suffered from heart disease through much of her life, and the two of them lived very modestly off her disability check in working-class White-stone, Queens. Eventually his mother's health declined to the point that Cornell's grandparents became his main caregivers. From the age that he could first make himself useful, Cornell says, he did odd jobs in his spare time: shoveling snow, mowing lawns, stacking bricks. "I always had to work to fill in the gaps," he says.

As a teenager he spent summers cleaning trucks at a Tropicana distribution center near his home. Other retail jobs, along with gigs coaching high school football, helped him pay his way through college at UCLA. (Among the few objects displayed in Cornell's spare, immaculate office is an autographed UCLA football helmet from fellow alum and Dallas Cowboys legend Troy Aikman inscribed "From one QB to another.")

"I had to scramble and scratch for everything I have," says Cornell. Even today, he says, "I probably still wake up every day wanting to make sure I don't end up battling some of those same things I did when I was a kid," and adds, "I'm still my toughest critic." Despite all that, Cornell is approachable and genial, though he listens with an intensity that is almost alarming.

"Intense" also applies to Cornell's workout regimen. It's not rare that a CEO would be found every morning at 7 a.m., as Cornell is, in the gym at company headquarters, on the treadmill as he fires off emails from his iPad. What's unusual is that on most days he returns to the gym for a second session after work. About 15 years ago Cornell attended the "corporate athlete program" at the Human Performance Institute, making him a zealot for optimizing performance not only with exercise but also with adequate sleep.

Cornell isn't the type who exalts the machismo of outlandish hours. Just the opposite. It's not unusual for him to inquire about a colleague's workout habits and make specific recommendations. Laxman Narasimhan, CEO of PepsiCo Latin America Foods, says his former boss would gently chide him to shoot for 200 minutes of exercise a week, extolling the sound mind he said stems from a sound body. He says Cornell encouraged him to take time for fitness on their business trips.

Cornell was always ambitious. But from the outside, he looked like a corporate lifer, spending 20 years ascending inside Tropicana and then its subsequent owner, PepsiCo. But his impatience to land a major CEO position eventually set him in motion. He began hopscotching through a series of senior positions at different companies.

Cornell worked at Safeway from 2004 to 2007 as chief of marketing, as CEO of Michaels Stores from 2007 to 2009, then as CEO of Sam's Club. At each stop he expanded the chain's house brands. At Sam's Club, Cornell helped reverse a sales decline and made it the fastest-growing division of Wal-Mart. Cornell was briefly viewed as a contender to succeed Mike Duke but left in part because his wife never cottoned to life in Bentonville, Ark.  Cornell returned to PepsiCo in 2012 to head the Americas operations for Frito-Lay and other foods. He was whispered about as a potential PepsiCo CEO. But when Target called, he didn't hesitate. As he puts it, "It's a dream job.

Target's history turns on two well-timed decisions. The first was the realization by Dayton's department store that customers were flocking to the less expensive wares it was selling in its basement. That was the genesis of Target, in 1962, a year that also saw the birth of Wal-Mart, Kmart, and Kohl's. Wal-Mart in particular would cast a shadow over its smaller rival. By the late 1980s its low prices were squeezing Target. That led to the second crucial decision, in the mid-1990s. Target could set itself apart by offering something its rivals didn't: clothing and kitchenware with panache and low prices. (Excellent marketing didn't hurt either.)

By 1999, Target had attained a chic that was nearly inconceivable for a discounter. It launched the first of what have so far been 150 collaborations with leading designers, offering teakettles by renowned architect Michael Graves. Later collections, with Isaac Mizrahi in 2002 and Italian fashion house Missoni in 2011, were smashes, too, and established such offerings as Target's signature strategy.

The Great Recession threw the company off its stride. Being trendy seemed like an indulgence in a time of depressed wages and underemployment. Target's marketing began echoing Wal-Mart's dogma of frugal prices rather than fun and flair. Target cut back the shelf space it was devoting to unique, unproven merchandise—whether it was home goods or clothing—and reduced the quality of some of its apparel to keep costs down. Meanwhile, Macy's, Kohl's, and H&M were imitating the company with their own designer collaborations.

Target was standing out less and less. To generate visits the company added more groceries, but without any distinctive touch to set it apart. By 2013 food, a notoriously low-margin business, had grown to a fifth of its revenue. Target had concentrated too much on the "pay less" part of its mantra and not enough on the "expect more" part.

Then came two epic corporate wipe-outs. Target's move into Canada was a fiasco. Rather than launching new stores in carefully selected spots and building slowly, Target acquired 124 locations in 2013 in one fell swoop by buying all the outlets from a defunct discounter called Zellers. Never mind that one of the causes of Zellers' demise was the poor location of its stores. Or that the spaces were designed to enable a different strategy from Target's. Throw in supply-chain problems that yielded empty shelves and high prices, and it added up to an unmitigated disaster.

Then there was a second calamity. In the final days of the 2013 holiday shopping season, Target disclosed that hackers had obtained as many as 70 million customer records. Though such intrusions seem to occur almost daily today, at the time it was the worst retail hacking in history. Customers were livid. They punished Target, and business slowed well into 2014.

By that spring the pressure had built, and something had to give. As often happens, it was the chief executive who gave. In May 2014, Gregg Steinhafel, a superb merchandiser who'd been integral to Target's rise but stiff and cautious as CEO, resigned

While the confluence of the data breach, the Canadian disaster, and Steinhafel's departure was traumatic, it may have been the shock Target needed. CFO John Mulligan, who was named interim CEO, started a four-month corporate soul-searching effort. "The truth is, we haven't kept up," Mulligan told staff in an email on May 6, the day after Steinhafel left. "We've got to fight harder to give our guests what they want."

Target intensified efforts to improve its second-rate website. Its capabilities had fallen behind those of Wal-Mart, which had the capacity to use a big chunk of its stores to help fill online orders a year before Target did. The company rewrote three-quarters of the code for its website and has now caught up to, or even surpassed, some rivals. Target's Cartwheel coupon-tracking app is now considered an industry leader, downloaded 13 million times, and has generated $1 billion in sales so far.

Under Mulligan, Target took symbolic yet practical steps, such as consolidating its top executives on the 26th floor of its headquarters to make it easier to talk to one another. Target relaxed its dress code last March, elating the staff by leaving sartorial decisions largely to common sense. (Even in the company's most formal days, there was a standing exemption for any shirt in Target's signature red worn with khakis.)

Cornell has loosened the atmosphere in other ways. He eats in the company cafeteria, where he mingles with staff. He opened Target's annual fall meeting to the press for the first time. The company has set up a lounge on the executive floor where employees can check out what merchandise is in the pipeline and swap ideas in a relaxed environment. And the company, long populated by lifers, is redoubling efforts to recruit outsiders with fresh ideas.

"It's not that we became insular. We were insular," says Jeff Jones, Target's marketing boss. "If you need to go faster, you need people who've done it. We didn't have enough people who'd done it before."

Cornell certainly qualifies as an outsider, and his resolution of the Canada question showed the speed of his decision-making. The fate of the operations was sealed when the CEO made a solo journey to some Montreal-area stores the Saturday before Christmas, the busiest day of the season in retail. As Cornell wandered among the empty aisles, he peppered his CFO with texts. He concluded that painful as it was to admit, it would take too much time and treasure to fix the Canadian operation. Less than three weeks later Target announced it was shuttering all its stores there.

It's early February and Cornell is back in a Target again. As he strides through its outlet in northeast Minneapolis, which doubles as its "living lab," he points out how Target is displaying its kitchenware. Rather than plates, mats, and utensils stocked separately, they are presented together in realistic kitchen and table settings. The idea is to help customers imagine mixing and matching items in the way that countless retailers have been doing for decades.

It seems symbolic. The CEO is a whirl of ideas and initiatives, but most of them appear incremental and one or another of its rivals has some version of most of them. For example, Target is trying out a new "first impressions" area at the front of a few stores, looking to highlight choice items, such as an elegant soup bowl, in an appealing presentation. It would be a step up from the bins with $1 tchotchkes that currently welcome shoppers. And Target is taking electronics like iPads out of glass cases so that customers can try them out. (One plan that seems more unusual: Target is testing a service in which a brand-agnostic staffer will offer advice to parents of infants. The baby and maternity category is essential to capturing the next generation of shoppers, he says, and defines a group that visits Target stores most often.)

Cornell acknowledges that "there's nothing we're talking about where someone's going to say, 'Wow, I've never seen that before.'" But, he says, "from a Target standpoint, they've never seen us bundle these key initiatives." And, he argues, "they will add up to a very bold change for the brand and the business ... If we execute the plan over the next few years, you will say, 'Boy, Target made a huge transformation.'" He's giving himself and his team three years to deliver.

The CEO plans to focus on categories in which Target believes it can win and trim elsewhere. (In February, for example, he pulled the plug on Target's video-streaming service.) That means more store brands. Cornell's Safeway experience is instructive. Early to see the opportunity in organic foods, he was the architect of the grocer's O Organics brand, which took off. Today, mere months after the moms in the Dallas store told him they wanted more organic foods for their babies, Cornell has a goal: He wants organic items to account for 60% of the company's baby food sales within two years, up from 40% now. That would address a key challenge: to make Target's food selection more distinctive.

Cornell is likely to accelerate Target's roll out of its smaller outlets, such as its 100,000-square-foot CityTarget stores aimed at urban consumers. The company is also experimenting with highly customized 20,000-square-foot TargetExpress neighborhood mini-stores, the second of which will open next month in the Bay Area. Of course, Wal-Mart already has 700 small-format (primarily grocery) stores. Walgreens now sells fresh food in many stores, and even Family Dollar is improving its selection. And outside of the food aisles, other retailers and department stores are still on the hunt for the hip-and-cheap sweet spot.

So is Cornell. In November, Target collaborated with Story, a trendy boutique in New York City's Chelsea that creates a new theme every month and changes the look and merchandise accordingly. Just six weeks elapsed from the time Cornell first showed up at Story in September, introducing himself as "Brian from Target," to the opening. In the old days that would've taken many months. Story spotlighted Target brands like Archer Farms, as well as some exclusive products by TOMS and Nate Berkus. It was a way for Target, and Cornell, to keep a finger on the pulse of what's cool.

Should the CEO personally be leading the search for the next hit teakettle? Maybe not. The company may or may not succeed at luring new customers. But Cornell will surely be one of the first to know. He'll be in the aisles, finding out for himself.

This story is from the March 1, 2015 issue of Fortune.

bloruleshort.gif (618 bytes)

Shoppers Return to Chain Stores
By Suzanne Kapner
Wall Street Journal
February 27, 2015

J.C. Penney, Kohl's See More Visits, Higher Spending; Old Navy Gets a Lift

Shoppers are making a comeback especially to retailers catering to lower income Americans, a sign that a battered segment of consumers is on the mend.

Kohl's Corp. and J.C. Penney Co. on Thursday both said more shoppers visited their stores in the fourth quarter and spent more money on each trip compared with a year ago, echoing similar results from Wal-Mart Stores Inc. and Target Corp.

Penney's transactions increased around 5% for the period. Meanwhile, Kohl's said traffic rose 2% and shoppers spent 1.7% more on each transaction. That helped drive sales 3.7% higher, excluding newly opened and closed stores for the quarter ending Jan. 31, its highest quarterly level in four years.

"We're back," said Penney Chief Executive Myron "Mike" Ullman III. "We fully intend to build on this momentum and continue to significantly improve our business in 2015."

The return of shoppers is a relief for retailers that have been struggling with weak sales and anemic traffic as consumers have held back spending despite stronger housing prices and an improving job market. The results suggest that falling unemployment and improving wages were enough to prompt budget conscious shoppers to open their wallets.

"If retailers are seeing increases in traffic and pricing, that is a winning formula," said Oliver Chen, an analyst with Cowen and Co. "They're getting more people in the door and getting them to spend more."

Still, Mr. Chen warned that it wasn't time to celebrate citing in part the heavy reliance on discounts to lure shoppers into stores. "We're not in the clear," he said.

A stronger economy has also meant that retailers now must compete more to retain the workers they employ who in many cases represent a major portion of their own customers.

Wal-Mart came out with a blanket pay increase starting in April. TJX Cos., the parent of T.J. Maxx, Marshalls and HomeGoods, followed suit. Others like Kohl's and Target said they would stay competitive.

Not all retailers are seeing a lift. Sears Holdings Corp. on Thursday posted a sharp drop in quarterly revenue and is moving ahead with plans to split off as many as 300 stores. Women's fashion chain Chico's FAS Inc. unveiled plans to accelerate store closures.

While Penney's results were good, they weren't good enough for investors. Shares of the retail chain fell more than 9% in after-hours trading after the company reported an unexpected loss for the fourth quarter and failed to show a meaningful improvement in free cash flow.

Mr. Ullman noted that Penney's operations generated more than $50 million in cash, representing a $2.8 billion improvement from the previous year. Traffic to the retailer improved through the year both in the mall and away from the mall, the company said.

Kohl's reported increases in both credit card and cash transactions, the first time since the fourth quarter in 2010. Chief Financial Officer Wes McDonald said the company needs to keep its cash transactions growing or at least flat "to be as successful as we would like to be."

Gap Inc. 's lower-priced Old Navy unit increased sales in the fourth quarter 11%, excluding newly opened and closed stores. For the year, Old Navy was the only one of Gap's brands to notch same-store sales gains.

Gap executives cautioned that the Gap brand's turnaround would take longer than originally expected. It hired Wendi Goldman, a former Limited Brands Inc. executive, to the newly created role of executive vice president of product design and development for the Gap brand.

Profit at Gap rose 3.9% for the quarter ended January to $319 million as total sales rose 2.9% to $4.7 billion.

Retailers are operating on leaner inventory, which is helping to facilitate more full-priced sales. At the same time, there are signs that shoppers are trading up to more expensive goods.

"Average retails were up across all of our categories, as guests were trading up within assortments and we saw strong regular price sell-throughs," Kathryn Tesija, Target's chief merchandising and supply chain officer said on a conference call this week.

Lower gas prices are putting more money into consumers' pockets, but it isn't clear they are spending the money on discretionary items like clothing or home goods.

Mr. Ullman, the Penney CEO, said he thinks consumers are using the extra money to pay down their credit card bills or buy necessities. Likewise, Home Depot Inc. said earlier this week that it has seen no correlation between lower gas prices and higher spending at its stores.

Retailers have taken a cautious approach to their guidance for fiscal 2015 over concerns that the strong dollar could continue to depress sales and profits. They also warned that it would take time to get products flowing in a more timely manner from the West Coast ports now that the labor dispute has been resolved, which could hurt first-quarter results.

bloruleshort.gif (618 bytes)

Sears Extends Dismantling of Company
By Michael Calia
Wall Street Journal
February 27, 2015

Struggling retailer updates plans to split off some stores amid more losses, declining sales

Sears Holdings Corp. said it would split off as many as 300 of its best stores into a separate company by June, advancing the dismantling of the struggling retailer by hedge-fund manager Eddie Lampert.

The move comes after Sears posted a loss of $159 million over the holidays as revenue plunged 24% to $8.1 billion. Mr. Lampert, Sears’s chief executive, said in a letter accompanying the company’s fourth-quarter earnings report on Thursday that he is focusing on profit, not sales growth, and is trying to create a new retailer built around customer loyalty regardless of how they shop.

In the process, Mr. Lampert has been spinning or selling off prime assets to Sears’s shareholders, including himself, as he effectively owns 49% of the company’s stock. Last year, he sold off the preppy brand Lands’ End and shares held by the company in Sears Canada . Those deals followed earlier sales of Sears Hometown & Outlet stores.

Sears plans to raise more than $2 billion by selling off 200 to 300 stores into a so-called real-estate investment trust by May or June. Sears will then rent those stores back from the REIT. Mr. Lampert said in the letter that Sears would hope to continue to occupy those stores but that they could be closed and rented to new tenants. The company had floated the idea in November.

Meanwhile, the core Sears and Kmart operations continue to deteriorate. For the quarter ended Jan. 31, comparable-store sales fell 2% at Kmart from a year earlier, and 7% at Sears. The company’s cash pile shrank by more than half, to $250 million. Sears closed about 234 stores, shrinking its store base to 1,725. The company’s full-year revenue, at $31.2 billion, was down from $49.1 billion in 2005, when Sears and Kmart were merged.

bloruleshort.gif (618 bytes)

4 Different Turnaround Tales at Retailers Sears, Kohl's, Gap and J.C. Penney
By Hiroko Tabuchi and Rachel Abrams
New York Times
February 27, 2015

Four retailers, four turnaround bids — and they could not be more different.

Sears, which has struggled to stem a perpetual slide in its sales, on Thursday reported its 11th straight quarter of net losses, and said up to 300 of its tores could be spun off in its new effort to raise much-needed cash.

Kohl's is faring much better. Its holiday season topped expectations, buoyed, like many of its peers, by a brightening economy, as well as by its decision to refocus on selling national brands like Nike and Disney.

J. C. Penney, which had been fighting back to profitability after a disastrous run under its previous chief executive, swung to a loss in the fourth quarter, despite reporting strong holiday numbers this month. Analysts attributed this to the steep promotions offered to draw shoppers back to Penney stores.

And Gap gave more details of its bid to revamp its ailing namesake label, appointing a new design leader, Wendi Goldman, a Limited Brands veteran, to head up the Gap brand. But it gave a cautious outlook for the year, saying a strong dollar and the lingering effects of the strikes at West Coast ports, could weigh on its bottom line.

"There are winners and there are losers," said Al Ferrara, retail partner at BDO, the global accounting firm. "But the economy is good, the stock market is up, people feel good about their 401(k)'s," he said. "For retailers, the rest is down to execution."

Kohl's gave the strongest indication that its turnaround is on track. Once a Wall Street darling, Kohl's suffered in recent years from its merchandising, especially an ill-advised shift away from national brands toward private labels like Sonoma and Croft & Barrow. The midmarket department store has also come under increasing pressure from retailers like Macy's on one hand, and discounters like Walmart on the other.

But Kohl's has since refocused on national brands that sell, as varied as Nike, Izod and Vera Wang, and it is on a rebound. The retailer reported a profit of $369 million, or $1.83 a share, for the quarter that ended Jan. 31, while revenue climbed 3.9 percent, to $6.34 billion. That narrowly beat expectations of analysts polled by Thomson Reuters, who had expected earnings per share of $1.80, and revenue of $6.33 billion.

In contrast, Sears Holdings continued on its downward trajectory, reporting a net loss of $159 million in its fourth quarter. Even as other retailers reported an uptick in a brightening economy, sales dropped 7 percent at Sears, and 2 percent at Kmart.

Sears's chief executive, the hedge fund manager Edward S. Lampert, nevertheless pointed to signs of progress at the company, including investments in technology and e-commerce that he said would bear fruit in an eventual turnaround. Mr. Lambert, who owns 49 percent of the company, engineered the merger of Kmart and Sears a decade ago, promising to transform the struggling retailers.

But failing to stop hemorrhaging sales, Mr. Lampert has turned instead to selling off the company's assets, including the Lands' End clothing brand and its shares in Sears Canada. On Thursday, Sears outlined its plans to spin off up to 300 of its locations into a real estate investment trust in a maneuver that it hoped would be $2 billion.

Gap said its fourth-quarter revenue grew by 3 percent, to $4.71 billion, as strong sales at its Old Navy label offset continued weakness at its Gap stores. Profits rose 4 percent year-over-year to $319 million, or 75 cents a share, narrowly beating analyst forecasts.

The retailer said it expected profit to decline in the just-started fiscal year because of the strong dollar, which can erode overseas earnings. Gap said lingering delays from the West Coast port dispute — resolved last week — would also hurt business. Still, its shares rose in after-hours trading, because of its announcement of a $1 billion share buyback program

"None of us are satisfied with the performance we're seeing at Gap," Art Peck, Gap's new chief executive, told analysts on a conference call. "I made a quick change with the senior leadership. It starts with righting the women's business," he said.

He promised more colors, prints and patterns this year, as well as a feminine look that he said had been missing from its lineup. Mr. Peck also said that Gap's denim business was "seeing signs of life." Gap's signature denim khakis have struggled to attract shoppers, who are increasingly flocking to buy yoga pants and other so-called athleisure wear. But Mr. Peck said that a trip to New York Fashion Week had convinced him that a denim revival was afoot.

"I'm encouraged there, though it's early days," Mr. Peck said.

"They do really well on denim, they do really well on basics," said John Morris, an analyst with BMO Capital Markets. "It's the fashion side of the equation" that is their biggest product challenge, he said.

Shares of J. C. Penney dropped more than 12 percent in after-hours trading, on news that the struggling department store chain missed expectations, reporting a loss of 19 cents a share.

Penney has been engaged in a large turnaround effort since ousting its chief executive, Ronald B. Johnson, in 2013. The retailer, critics said, had lost sight of its core cost-conscious shopper. Instead, J. C. Penney began marketing more expensive items and offering fewer promotions, a strategy that failed to attract customers and contributed to a huge decline in sales.

Now, it is back to heavy promotions, which analysts said weighed on its earnings. The retailer reported that net sales rose to $3.89 billion in the fourth quarter of 2014, up from $3.78 billion in the same period a year earlier, slightly beating average analyst estimates of $3.87 billion, according to analysts polled by Thomson Reuters.

Analysts had also expected earnings per share of 11 cents in the fourth quarter.

"They've had to basically unwind and reset everything that the prior management has done," said Neely Tamminga, a senior research analyst and managing director with Piper Jaffray, who had predicted that same-store sales would grow 4 percent.

Still, Mr. Ferrara of BDO said that J. C. Penney was following the right strategy in discounting heavily to lure shoppers.

"They made an investment in winning back the customer," he said. "I think they're about to turn the corner, and the company's here to stay," he said. "When you have some retailers filing for bankruptcy, that's pretty good."

bloruleshort.gif (618 bytes)

Sears plans $275 million contribution to pension funds
By Meaghan Kilroy
Pensions & Investments
February 26, 2015

Sears Holdings Corp., Hoffman Estates, Ill., expects to contribute $275 million to its U.S. pension fund in 2015, said a Sears spokesman. The company contributed $417 million to its U.S. pension fund in 2014, according to a transcript of the company's fourth-quarter earnings call released Thursday.

In 2014, Sears' unfunded pension obligation rose to $2.3 billion from $1.5 billion the liabilities by $300 million and $500 million, respectively, a company statement said. As of Jan. 1, the company's U.S. pension fund had $3.62 billion in assets and $5.88 billion in liabilities, for a funding ratio of 61.56%, said documents prepared for the earnings call.

As of Feb. 1, 2014, the plan had an asset allocation of 59% fixed income and other debt securities, 36% equity and 5% other, according to the company's most recent 10-K filing.

The U.S. pension plan was frozen for all employees on Jan. 1, 2006.

In 2012, Sears announced a lump-sum offer to about 86,000 eligible terminated vested U.S. pension fund participants, representing about $2 billion of the company's total qualified pension fund liabilities. About $1.5 billion total was paid to employees who accepted the offer in December 2012, according to the latest 10-K.

bloruleshort.gif (618 bytes)

Sears loses money again but CEO sees hope in smaller decline than 2013
By Alexia Elejalde-Ruiz
Chicago Tribune
February 26, 2015

Hoffman Estates-based Sears Holdings reported full year 2014 earnings Thursday as well as fourth-quarter results, important because they include its holiday performance.

The company continued to lose money, now for the 11th consecutive quarter, as revenues and same-store sales — a key metric that excludes the revenue drop resulting from ongoing store closures — continued to decline.

Here's how the quarter and year played out, and a bit of what's to come.

Net loss: The fourth-quarter loss was $159 million, an improvement over the loss of $358 million over the same period the prior year. Losses widened for the year, however, to $1.7 billion from $1.4 billion the year before.

Losses per share: Shareholders lost $1.50 per diluted share in the fourth quarter, compared to a loss of $3.58 a year earlier. For the year, losses per diluted share were $15.82, wider than the $12.87 loss in the prior fiscal year.

Revenue: Sales for the quarter dropped to $8.1 billion from $10.6 billion. For the year, revenues were down to $31.2 billion from $36.2 billion in 2013.Same-store sales: Sales at stores open at least a year declined 4.4 percent for the important holiday quarter. Sears stores suffered the worst declines, at 7 percent, driven by declines in consumer electronics, apparel and Sears Auto Centers. Kmart's same-store sales were down 2 percent, driven by declines in consumer electronics and grocery and household goods while toys, jewelry and apparel did well. For the year, same-store sales dropped 1.4 percent at Kmart and 2.1 percent at Sears

The. "why": Sears Holdings closed 234 stores last year as part of its ongoing efforts to shrink its asset base to transform from a traditional department store chain into a membership program called Shop Your Way. Revenue declines for the year also are attributable to the reduction of the company's stake in Sears Canada and the spin-off of Lands' End.

Quote you on that: "While we clearly believe that we can improve upon these results, we are pleased with the positive trend that started in the third quarter, and we currently expect this level of improvement to carry forward into our full year 2015 results," said Sears Holding chairman and CEO Eddie Lampert. "We believe that the changes we are making to focus on our best stores, reward our best members and pursue our best categories will help us continue to transform Sears Holdings into a leading integrated membership-focused company."

Highlights from the year: To ensure it could support operations and meet obligations as it head into the busy holiday shopping season, Sears Holdings raised $2.3 billion through various financial maneuverings, including a rights offering, the sale of most of its stake in Sears Canada and a loan from Lampert, who owns 48.5 percent of the company. It also discussed spinning off some of its real estate into a real estate investment trust (REIT), to manage properties as a pure real estate company. Meantime, credit agency Fitch Ratings reported that Sears Holdings would likely run out of cash in 2016.

What's next: Sears Holdings aims to spin 200 to 300 of its Sears and Kmart stores into a REIT by June, which it expects would generate $2 billion. The REIT would be funded by equity (raised through a rights offering) and debt.

bloruleshort.gif (618 bytes)

Wal-Mart Raising Wages as Market Gets Tighter
By Paul Ziobro and Eric Morath
Wall Street Journal
February 20, 2015

Retailer to increase associates' hourly pay to $9 in April, and $10 next year

Wal-Mart Stores Inc. plans to boost pay for its U.S. employees to at least $10 an hour by next year, well above the minimum wage, signaling a tightening labor market and rising competition for lower-paid workers.

The action could signal a turning point for what have been stubbornly stagnant wages since the recession ended almost six years ago, and it would amplify gains for low-wage workers across the nation if other companies follow the nation's largest private employer. The new rate is 38% higher than the current federal minimum hourly wage of $7.25.

"Wal-Mart's move to raise their employee pay base is a sign that the labor market has already tightened," said Joel Naroff, chief economist at Naroff Economic Advisors. "Their action could create a floor under wages and others may need to follow in order to retain and attract workers."

Employers are adding jobs at the best pace since the late 1990s. As result, the unemployment rate fell to 5.7% last month from 6.6% a year earlier, a sign of diminishing slack in the labor market.

Economists have been waiting for years for wage growth to kick in, and more signs of that are emerging. Companies say they are having to fight harder to attract and keep good employees. Starbucks Corp. raised its starting pay last month, and Aetna Inc. said it would begin paying its lowest-rung workers $16 an hour in April. Gap Inc. last year said it would raise starting pay to $10 an hour. Others such as Costco Wholesale, Hobby Lobby and IKEA Group tout that all their workers earn more than the minimum wage.

Mike Bufano, senior vice president for planning at Panera Bread Co. , told investors this month that the bakery-cafe chain is paying higher wages across the board, citing a war for talent.

Wal-Mart's plan affects about 500,000 employees at Wal-Mart and Sam's Club stores, or about a third of the company's 1.4 million U.S. workers. Minimum pay will rise to $9 an hour in April, before climbing to $10 an hour by February 2016.

The company's national presence, especially in rural and suburban areas where the cost of living is lower than it is in large cities, will ratchet up competition for workers nationwide.

The wage increases and other programs will cost the retailer about $1 billion. But the company hopes the higher pay, more consistent schedules and other minor changes like eliminating a one-day waiting period for paid sick leave will make employees happier and more attuned to shoppers' needs.

"We want associates that care about the company and are highly engaged about the business and leaning in," Chief Executive Doug McMillon, who just completed his first year in the top job, said Thursday during the company's earnings conference call. Other executives on the call acknowledged that this is one step of improving service at Wal-Mart's stores, including cleaner stores, well-stocked shelves and better communication with customers.

Wal-Mart says its wage and training initiatives will cost more than $1 billion in the current fiscal year. Photo: Bloomberg News For its quarter ended Jan. 31, Wal-Mart reported earnings of $4.97 billion, up from $4.43 billion a year earlier. Revenue rose 1.4% to $131.6 billion as customer traffic grew for the first time in more than two years, helped by lower gasoline prices, Mr. McMillon said.

The world's largest retailer has for years squeezed its employees as it sought to control costs and push down prices in its stores. Wal-Mart has rolled out sophisticated software to more precisely schedule the number of employees it needs in any given hour, and has cut back on benefits like health insurance, eliminating it in recent months for another 30,000 part-time workers and raising premiums for others, even as it has started covering domestic partners and added a vision plan.

Even after the raises, pay for the average full-time hourly Wal-Mart worker will be $13 an hour, below the retail industry average of $14.65 an hour, according to the Labor Department.

Because of that, some economists say the effect will be muted. The majority of retailers already pay more than Wal-Mart, "so this isn't going to move the needle much," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank.

Wal-Mart currently starts some of its workers at the minimum wage of $7.25 an hour, a rate that hasn't changed since 2009.

Many states have taken it upon themselves to boost wages. Seven--including California, Connecticut and Massachusetts--have pay floors at or above $9 an hour, after minimum-wage increases that took effect at the start of the year. Washington State has the highest minimum, at $9.47 an hour.

At least two more states--Minnesota and New York--plan to set $9 an hour minimum wages later this year. By 2018, at least six states will have rates of $10 or more.

Wal-Mart's pay plan may not be enough to satisfy critics. A group including some Wal-Mart workers had been pushing the retailer to institute a $15 minimum wage.

A Wal-Mart spokesman said, "Our average full time hourly wage is $13 an hour and associates have clearer career paths to move from an entry level position and wage to jobs with more responsibility paying $15 an hour and more. The doors of opportunity are open to any associate who wants to walk through them."

The economic gulf between the richest Americans and rank-and-file workers has grown into a central political issue for both parties as another presidential election cycle looms. Wal-Mart, with its low wages and stringent scheduling, has long been a flash point for that debate.

With Wal-Mart, it wasn't immediately clear what would happen to the other key variable in the income equation--hours--though the retailer is giving employees more control over when they work.

OUR Walmart, an organization of Wal-Mart employees that has been pushing for higher wages, said that without a guarantee of more hours the new pay scale falls short.

Anthony Rodriguez earns $9.40 an hour in a Southern California Wal-Mart assembling bikes. A member of OUR Walmart, Mr. Rodriguez said he regularly worked more than 40 hours a week before Christmas, but found himself scheduled for just 18 hours some weeks after the holidays ended.

"I kept having to fight it, because I wouldn't be able to afford my rent," Mr. Rodriguez said.

bloruleshort.gif (618 bytes)

Sears Holdings To Hold Fiscal 2014 Fourth Quarter And Full Year Financial Results
February 20, 2015

HOFFMAN ESTATES, Ill. -- Sears Holdings announced today that it expects to release its financial results for the Company's fiscal 2014 fourth quarter and full year before the market opens on Thursday, Feb. 26, 2015, and simultaneously post a pre-recorded conference call and audio webcast on its corporate website. It will feature prepared remarks from Edward S. Lampert, chairman and chief executive officer, and Robert A. Schriesheim, executive vice president and chief financial officer.

The pre-recorded conference call may be accessed by telephone at 844.826.0613 or 973.200.3092 (conference ID: 88559130), and on Sears Holdings' website at www.searsholdings.com/invest/ under "Events & Presentations." The accompanying presentation and transcript will be posted online in conjunction.

bloruleshort.gif (618 bytes)

Lois Brennan, wife of Edward A. Brennan, dies at 81
Chicago Tribune
February 16, 2015

Lois L. Brennan, age 81, at rest February 13, 2015. Beloved wife of the late Edward A. Brennan for 52 years; loving mother of Edward J. (Deborah S.) Brennan, Cindy B. (John) Walls, Sharon B. Lisnow, Donald A. (Kimberly M.) Brennan, John L. (Jean M.) Brennan and the late Linda B. Thode; dear sister of Joseph (Diana) Lyon, Robert (Ginny) Lyon and the late Jeanne Kearney, devoted grandmother of 19, great grandmother of 1.

Visitation Tuesday, Feb. 17 from 4 to 8 p.m. at Adolf Funeral Home & Cremation Services, Ltd., 7000 S. Madison St., Willowbrook. Family and friends will meet on Wednesday for Mass 10 a.m. at Old St. Patrick's Church, 700 W. Adams St., Chicago.

Private family interment services at Bronswood Cemetery, Oak Brook, IL. In lieu of flowers, memorials to Rush University Medical Center, 1700 West Van Buren, Suite 250, Chicago, IL 60612-3244 or www.rush.edu would be appreciated. Service information 630-325-2300 or www.adolfservices.com.

Published in Chicago Tribune Media Group Publication from Feb. 15 to Feb. 16, 2015

bloruleshort.gif (618 bytes)

J.C. Penney zeros in on hair salons as a key to recovery
By Associated Press
Chicago Tribune
February 6, 2015

J.C. Penney is giving its hair salons a makeover in a bid to lure younger customers who it hopes will then stay in the stores to shop.

The retailer, which is one of the nation's largest operators of salons sharing the same brand name, is collaborating with the editors of InStyle magazine in a licensing partnership that will change the name and lookies; of its salons in Chicago and three other cities;

All 850 JCP Salons will be called The Salon by InStyle by 2016. And starting in July, Penney plans to test in 15 of its salons a new look that includes a widened entry so customers shopping the store can see the salon reception area, new furniture and sleek graphics on the walls. The other markets are Miami, Dallas and Los Angeles.

Two of the locations -- one located in Dallas, the other in Los Angeles -- will get a total renovation that will have a loft feel and include new salon equipment like hair dryers and sinks. The revamped salons will feature accents of golds and browns and have areas like "hair coloring" bars where customers can have consultations with experts. Later, Penney will announce more salons that will get total makeovers. All salons will get at least some updates starting in 2016.

The company declined to say on how much it's spending to makeover the salons, but executives say the salons are a key part of Penney's overall plan to transform its struggling business. The salons, which cater to the over 50-group, are either little known or perceived as dowdy.

But they're important. The salons employ more than 13,500 stylists and assistants, who serve three million clients and offer over 10 million services a year. Salons account for most of the company's services business, which makes up five percent of the company's total annual sales. And a salon customer comes to the store eight times a year and spends twice as much as the average customer, says Amiee Thomas, vice president of Penney's salon services.

Over the past two years, Penney has been hiring stylists and investing in a team of more than 50 artistic design leaders, who rolled out training to stylists in every salon. Under the new deal, InStyle editors will be working with Penney's stylists to identify key trends and will promote them in the salon's styling books. InStyle will market the salon to its 21 million fans including magazine subscribers and social media followers, says Ariel Foxman, editor-in-chief of InStyle.

"We believe the salons are our best kept secrets," Thomas said.

bloruleshort.gif (618 bytes)

With Sears spinoff complete, Lands' End CEO Huber resigns; Marchionni named successor
Associated Press
February 2, 2015

DODGEVILLE, Wis. -- Lands' End CEO Edgar Huber is resigning, the company said Monday.

Lands' End was spun off by Sears last year after it struggled to thrive. The company's origins go back to 1963 when it was a sailboat hardware and equipment catalog. Sears bought it in 2002 for nearly $2 billion.

Huber will be succeeded by Federica Marchionni, the one-time president of Dolce & Gabbana USA Inc.

"With the successful completion of the spin-off of Lands' End from Sears Holdings Corp., I have accomplished what I came to achieve at Lands' End and I look forward to the company's success in the future," Huber said in a printed statement.

Marchionni will take over as CEO and will take a seat on the board at Lands' End Inc. on Feb. 17. Huber will stay on to assist with the transition.

bloruleshort.gif (618 bytes)

The Aging of Abercrombie & Fitch
Business Week
January 30, 2015

On Sunday morning, Dec. 7, Michael Jeffries called some of the senior executives at Abercrombie & Fitch to discuss the holiday season. That was typical Jeffries. He was the creator and chief executive officer of the modern-day Abercrombie and had controlled virtually every aspect of the company for the past 22 years. He approved every piece of clothing and for a while every employee, too, including the clone army of beautiful young men who stood shirtless at store entrances. He instructed staff on how to present themselves, down to the length of their fingernails. He obsessed over the publication of catalogs filled with cavorting boys and girls that many called pornographic. For years it was sold sealed in plastic, and one had to be 18 years old to buy it. He had built an empire of cool based on preppy, well-made, expensive clothes, worn low and tight.

Jeffries, who is 70, tried to keep up appearances. He lifted weights, barefoot, in the company gym most mornings. He dyed his hair blond and regularly visited his plastic surgeon, according to former executives who spoke on the condition of anonymity. He wore torn Abercrombie jeans and flip-flops around the woodsy campus outside of Columbus, Ohio, though he used to put on his lucky Tod's loafers to review the numbers every day.

The loafers had stopped working. Sales at established stores had fallen in five of the past seven years, and 2014 wasn't looking good, either. Profits were expected to be about $106 million, less than half of what they had been in 2012. Jeffries's pay had been cut by about 70 percent, he had lost his position as chairman of the board, and his employment contract was expiring in February 2015.

On Monday, Dec. 8, Jeffries didn't arrive at work in his black Range Rover. He never showed up. Early the next morning, Arthur Martinez, the former CEO of Sears and the chairman of the Abercrombie board since early 2014, called the senior executives into a meeting. He told them that Jeffries was leaving and the company was looking for a new chief executive.

Abercrombie released an awkward final comment from Jeffries. The employee handbook conveys more emotion. "It has been an honor to lead this extraordinarily talented group of people," Jeffries wrote. "I am extremely proud of your accomplishments. I believe now is the right time for new leadership to take the company forward in the next phase of its development." No one saw Jeffries in the office again, and he couldn't be reached for comment.

Martinez, along with the chief operating officer and two senior executives recently brought on, is in charge until the board selects Jeffries's successor. "The feeling was that it would be difficult, socially and interpersonally, to choose a new CEO with Mike in the chair," says Martinez. "He was the seminal person, he invested his whole life in the company, but he had to step aside. There is a certain sadness about it. It is the end of an era."

Robin Lewis, a retail consultant who's observed Jeffries for years, says Jeffries couldn't make significant changes to Abercrombie. "Mike indelibly linked his entire persona, his soul, to this brand's image. He even tried to make himself look like his customers. He used to run around in ripped jeans and a T-shirt. He had plastic surgery," says Lewis. "For him to change the brand would have taken the greatest psychologist in the world."

Abercrombie is a $4 billion company with three brands and about a thousand stores in 19 countries. A&F is for college-age men and women, Hollister is for 12- to 18-year-olds, and abercrombie—with a little "a"—is for those under 12. The Abercrombie look across the brands remained almost unchanged since Jeffries first defined it in the mid-1990s: sweatshirts and sweatpants and hoodies—until recently with huge A&F and moose logos—as well as graphic T-shirts, polo shirts, jeans, shorts, and flip-flops. Jeffries has called the style the "essence of privilege and casual luxury." The A&F stores, mostly in malls, had dark wood shutters and played loud dance music. Black-and-white photos of young men and their abs adorned the walls and the shopping bags.

The attitude—conformist, sexy, exclusive—hadn't evolved much, either. But teens have. They are shopping at fast-fashion chains such as Forever 21 and H&M, which are dirt cheap. Jeffries didn't think A&F should discount. He wouldn't sell clothes bigger than women's size 10 until about a year ago. It wasn't until last spring that he allowed the lights to be turned up in the Hollister mall stores and the shutters taken off the A&F ones. He lowered the music and reduced the amount of cologne sprayed in the stores by exactly 25 percent. And he agreed that the logos had to become less prominent, too.

When asked if Abercrombie could ever have the impact on teens it once did, Martinez is almost philosophical, saying, "The wonderful and terrible thing about retail is that occupying the peak is very perilous. Aspiring to and reaching that position puts you in a very vulnerable position. The world moved on, and the company has to move on."

Abercrombie's $130 million headquarters is about 15 miles from downtown Columbus in New Albany. There are 12 buildings spread across 300 wooded acres. The guards at the gatehouse wear Abercrombie denim shirts and jeans. Visitors enter through the main building, past a black-and-white photo of a seminude couple making out. Employees get around on scooters. There's an outdoor area with benches for meetings and a pit for bonfires. A fitness center takes up the floor below the cafeteria, which serves three meals a day. There's a campus dog.

Jeffries has been reclusive for years. He never really joined retail groups or attended fashion shows, and he isn't known for philanthropy. He sometimes skipped the company holiday party, and he rarely speaks with journalists. In late April, he agreed to a 15-minute interview on the campus to show how the company was evolving. It was his first face-to-face interview since 2006. Jeffries wouldn't allow tape recorders or cameras, and his public-relations representative warned that he wouldn't answer questions about any controversial matters.

Jeffries didn't really keep an office. He spent most of his time looking over clothes in a room designed to look like a college lecture hall or in a nearby conference room. He sat there, wearing his usual cuffed jeans with a blue-and-white striped oxford shirt and brown flip-flops. Jeffries described the changes he was making in a way that seemed rehearsed: Abercrombie was introducing more fashionable clothes more quickly, taking away some of its logos, and collaborating with Keds on a collection of sneakers. He talked about having faux-fur salons in A&F stores this winter: "I so love that. Isn't that cool?" (There are no faux-fur salons this winter.) He noted that Hollister dresses could be sold for less. "We feel we put a little more make into the garments than a 16-year-old would appreciate. Does a Hollister dress need to be lined? Probably not."

When asked about his possible retirement, he said: "Succession planning is a big deal." Then the 15 minutes were over. He stood up, offered a quick squeeze of the shoulder, and left.

Abercrombie & Fitch was a century old when Jeffries joined in 1992. It had been a sporting goods emporium for adventurers and the elite: It outfitted Teddy Roosevelt, Admiral Byrd, and Charles Lindbergh. Ernest Hemingway shopped there. After falling on hard times, it was bought by the Limited in 1988 for $47 million. A first attempt at reviving the brand failed, leaving Abercrombie to sell croquet sets and long skirts with whale appliqués. Les Wexner, the head of the Limited, hired Jeffries to start over.

Jeffries, then 48, had been at Federated Department Stores before opening Alcott & Andrews, a company aiming to be the Brooks Brothers for women. After six years it went bankrupt. He moved to Paul Harris, another women's clothing line, which in 1991 also filed for bankruptcy.

When Jeffries arrived at Abercrombie, he wore khakis, oxford shirts, and loafers. He had been married and had a son, but at some point he separated from his wife and quietly came out. His partner, Matthew Smith, was around on social occasions. Leslee Herro, an executive who had been with Abercrombie before Jeffries joined, later recalled Jeffries's first appearance at a Limited annual meeting: "It was kind of like a pep rally. We were all wearing our cargo shorts and plaid shirts. And all 15, 20 of us in the whole company we're cheering. I will never forget the image of Mike in my mind, with his arms up in the air, saying, 'We will be a world-known, fun, spirited brand!' "

Abercrombie & Fitch went public in 1996. It had about 125 stores, sales of $335 million, and profits of almost $25 million. Jeffries wrote a 29-page "Look Book" for the sales staff. Women weren't allowed to wear makeup or colored nail polish. Most jewelry was forbidden. So were tattoos. Hair had to be natural and preferably long. Men couldn't have beards or mustaches. The only greeting allowed was: "Hey, what's going on?" Store managers spent one day a week at their local college campus recruiting kids with the right look. They started with the fraternities, sororities, and sports teams. Managers forwarded photos of potential employees to headquarters for approval.

Jeffries sent a weekly "time line" to each store, listing each task, including exactly how to arrange the clothes. One button had to be left undone if a blouse were hung, two if it were folded. Representatives from headquarters conducted what they called blitzes to make sure standards were met. Rehab teams were sent in if they weren't. "This is very much a military operation," Jeffries told the Wall Street Journal in 1997. "It is very disciplined and very controlled." When Jeffries visited stores, he didn't challenge managers about payroll or theft, says a former executive—he cared only that the stage was set properly and the staff looked the way he wanted.

In 1997, Jeffries started the A&F Quarterly, a magazine and catalog that sold for $6. Sales staff went on casting calls for the shoots with photographer Bruce Weber. Taylor Swift, Jennifer Lawrence, and Channing Tatum modeled. There were guides to group sex, getting it on in movie theaters, and drinking games. Abercrombie eventually agreed to check the age of potential buyers. When Jeffries shut down the magazine in 2003, he said it was because it was getting boring.

Alisa Durando joined the company in 1996 as a designer. "We could influence Mike about product but not marketing," she says. "He was phenomenal. He was always creating the movie, the lifestyle story he wanted to project."

Jeffries's home looked like an Abercrombie store, with dark wood floors and arty skin pictures. Male models helped out around the house. Jeffries and Smith hosted parties for executives at bonus time or to celebrate a good quarter. Mostly, though, Jeffries worked. He once conducted an earnings call while he was recovering from plastic surgery, his voice hoarse, according to a former executive and an analyst on the call. He would return to work with his face still swollen from a procedure, former executives say. When he traveled, he sent an advance team to make sure his car and hotel looked and smelled the way he wanted. On West Coast trips, he'd call meetings in his hotel room at 5 a.m. Models in Abercrombie outfits were there serving coffee.

He created a fantasy world, and plenty of teens wanted to be part of it. For a decade straight, Abercrombie's profit increased every year as it expanded to 600 stores. During the 2001 recession, Abercrombie's sales started slowing, but Jeffries didn't lower prices. He often waded into controversy. Abercrombie stocked T-shirts that said, "Wong Brothers Laundry Service: Two Wongs Can Make It White." After Asian American students organized a boycott in 2002, the company pulled the shirts from its shelves. A month later, it introduced thongs for preteen girls printed with "Eye Candy" and "Wink Wink." Parents protested, and Abercrombie stopped selling those as well.

At the end of 2002, an analyst asked Jeffries if the chain's tight shirts and low-riding jeans might be unnecessarily excluding some teens from shopping there. "Does it exclude people? Absolutely. We are the cool brand," Jeffries replied.

"There was a brand filter that said everything needed to be cute and sexy," says Durando. "It didn't matter that we were becoming more narrow in terms of who was able to wear our clothes."

Abercrombie sometimes seemed like code for something else. Asian American, African American, and Hispanic college students in California sued Abercrombie in 2003 for racial discrimination in its hiring practices. The U.S. Equal Employment Opportunity Commission joined the case. The suits alleged that minorities were turned down for sales positions, shunted to stockrooms, and had their hours reduced, sometimes to zero, after managers got word that their staff didn't look Abercrombie enough. The company said it didn't tolerate discrimination and settled the suits for $50 million without admitting wrongdoing. As part of the deal, Abercrombie was subject to a consent decree that required it to hire a diversity officer and give progress reports to the district court. (This summer the diversity officer left, and Abercrombie gave the responsibilities to another executive.)

In the autumn of 2004, Jeffries introduced Ruehl No.925, a line of clothes for men and women in their mid- to late 20s. He described potential customers as having graduated from college in Indiana and moved to New York City. The Ruehl stores—located in malls—had real brick facades, wrought-iron fences, and antiqued windows to suggest a Greenwich Village town house owned by the fictitious Ruehl family. Ruehl was the only brand in the A&F portfolio allowed to sell black clothes. "He had such high standards. It was inspiring," says Durando, who led the women's design team for Ruehl.

Senior executives came and went, none able to exert any influence over Jeffries. If they had ideas different from his, it didn't turn out well, says a former executive who worked on the business side. Jeffries talked of retiring one day but pushed out potential successors. The board of directors, composed mostly of local businesspeople, deferred to him in this matter, and most others.

In 2005, Jeffries opened a grand A&F store on Fifth Avenue, near Prada and Gucci. The shirtless models at the entrance were held to high standards: Amy Zehrer, the executive in charge of stores, later told investors that managers checked on each guy every 30 minutes to find out "how many photos are being taken with him and to see if it's on track."

When Abercrombie opened a store in 2007 around the corner from London's Savile Row, Jeffries was filmed by the BBC walking down the street in flip-flops. "I believe we are going to be here 200 years from now, living in harmony with these businesses," he said.

Jeffries introduced a lingerie brand, Gilly Hicks, in 2008. It had an elaborate back story about a woman named Gilly Hicks and her granddaughter who lived in a manor house in Australia. When Beverly House joined Abercrombie to develop Gilly Hicks, she visited Sydney to see what a manor house looked like. "At one point we tried a floor with antique Parisian stone, and it became too bulky," she says. "So we jackhammered it up. We went way over budget, but that was Mike's world."

House says Jeffries hated the way hanging bras looked, so she put most in drawers. "He thought all those bras, with those two big mounds of foam coming at you, was offensive."

In 2009, Abercrombie closed all 29 Ruehl stores. The brand had lost $58 million the year before. The Gilly Hicks stores survived until 2013; the underwear and bras are still available in Hollister stores and online.

Abercrombie's same-store sales dropped 13 percent in 2008 and 23 percent in 2009, and though the company remained profitable, signs began to emerge that Jeffries's personality might overwhelm the business, especially if it wasn't growing. In 2010 the board limited his use of the company's Gulfstream G550 to $200,000 annually, although it also gave him a $4 million travel stipend.

In 2010, Michael Bustin, 53, a pilot who flew the Abercrombie plane, filed an age discrimination lawsuit against the company. Abercrombie's general counsel said the suit was without merit. The complaint included a 40-page "Aircraft Standards" manual. As Bustin put it in his deposition, "Every single aspect that you can imagine that affected the airplane or our behavior in it was controlled by Abercrombie & Fitch, specifically, Michael Jeffries and Matthew Smith." The four male crew members (models provided to Abercrombie) had to wear jeans, boxers, polo shirts, and flip-flops. The manual specified the seating arrangements for Jeffries's three dogs, the length of the spoon Smith required for his tea, and the proper way to respond to requests ("No problem"), fold washcloths, vacuum, dust, and present magazines. When Jeffries was called to give a second deposition in the winter of 2012, Abercrombie settled the case without admitting wrongdoing. The details weren't made public.

In August 2014 a pension fund in Florida claimed the board breached its fiduciary duties by overpaying Jeffries and noted his partner was allowed to act like an executive. Lawyers obtained internal documents that showed Smith, who had no official role at Abercrombie, had made 170 unannounced visits to stores from August 2011 to November 2013, "providing reports on stores' appearance, staffs, and atmosphere," according to the complaint. He had a "direct role" in assessing store openings and closings outside the U.S. On the jet, he received sales reports. (Smith couldn't be reached for comment.) Earlier this month, the company settled without admitting wrongdoing. In court filings, lawyers for the pension fund said Abercrombie had already improved its corporate governance and had agreed to appoint a chief ethics and compliance officer.

In the spring of 2013, Lewis, the retail expert, noted that the A&F brand didn't carry large sizes because Jeffries wanted only thin, beautiful people to shop there. Comments to that effect he made in 2006 went viral. That caused new outrage. Soon people were spoofing A&F's ads and protesting its standards. This time potential customers were complaining, not their parents. Jeffries issued an apology on Facebook. Benjamin O'Keefe, an 18-year-old, started a petition demanding A&F carry bigger sizes. Executives invited him to visit headquarters in May. "I think they realized what was happening, that A&F wasn't speaking to its customers the right way. But they were afraid of Mike," says O'Keefe. "My sense was they were like, 'We appreciate you being here. We hear you. We wish there was something we could do.'" He didn't think anything would come of the conversation. Six months later, A&F announced it would begin selling larger sizes, primarily online.

A Piper Jaffray survey in fall 2013 asked teen girls what brands they no longer wear: A&F and Hollister ranked second and third. (Aéropostale was first.) By the end of 2013, a year in which same-store sales dropped 11 percent at Abercrombie, the company had closed at least 220 mall stores. Another 120 stores in the U.S. would be gone within two years, it said.

"Does it exclude people? Absolutely. We are the cool brand."

Engaged Capital, a hedge fund that owns a small stake in Abercrombie, issued a public letter in December 2013 calling for Jeffries's resignation and for the company to consider putting itself up for sale. Glenn Welling, the fund's founder, noted that Jeffries's total compensation since 2008 was $140 million, second only in his peer group to Ralph Lauren. Abercrombie's total return to shareholders was far behind its peers', though. Under pressure from shareholders, Abercrombie restructured Jeffries's contract to tie his bonus to the company's performance. The contract was for just one year. In January 2014 the board stripped Jeffries of his role as chairman and brought in four independent board members, including Martinez.

"It took a very dominant, controlling, detail-oriented visionary to build Abercrombie," says Richard Jaffe, an analyst at Stifel Financial. "And those very same traits undermined the company, kept it from evolving."

Martinez, who's 75 and spoke by phone from New Albany, says that the Abercrombie campus will remain the same. But he will wear regular shoes. "I wear flip-flops at the beach," he says. The Gulfstream has been grounded. The conference room that Jeffries had used as his office is now just a conference room. Martinez sits elsewhere.

He says the first changes will be to the stores. "Mike was very focused on the stagecraft of our stores," he says. "I would say an inordinate amount of time was spent on shop keeping. We want customers to be first. We don't have to turn the company and brands on their heads to do that." The shirtless men are mostly gone, or at least wearing shirts now. The company wouldn't say if it will continue to enforce the "Look Book." The store closings in the U.S. will continue as planned. Martinez says that online revenue could account for as much as 40 percent of total sales in three years.

Then there's the logos. Martinez says Jeffries went too far, so he will add some back, especially internationally, where Abercrombie gets about one-third of its revenue. Beyond that, Martinez can't say what Abercrombie will look like without Jeffries. That's for Christos Angelides and Fran Horowitz, the presidents of A&F and Hollister, respectively, and the new CEO to determine. Martinez wouldn't give any indication of how the search is proceeding. But he did say that Angelides and Horowitz, as well as Jonathan Ramsden, the chief operating officer, are candidates.

It could be too late for Abercrombie to fully revive itself, though. "Getting around a tainted brand is the exception, not the rule," says Jaffe. "Brands can be left standing for something that means nothing."

bloruleshort.gif (618 bytes)

Sears slashes 100 jobs at headquarters
By Brigid Sweeney
Crain's Chicago Business
January , 2015

Sears Holdings laid off 115 corporate employees today, the company confirmed, with 100 cuts taking place at its Hoffman Estates headquarters.

The company axed 15 other positions at "corporate support" locations around the country.

The cuts affected most of Sears' 30 business units, from tools and appliances to the legal department. Some units escaped job cuts by reducing their budgets through other means and by eliminating open jobs.

Sources close to the company say most of the people responsible for buying consumer electronics have been let go. Chris Brathwaite, a Sears spokesman, disputed that claim.

Sears has blamed lagging electronics sales for its lackluster performance in recent quarters.

"These decisions are never taken lightly, but they are a necessary part of our efforts to transform the company and return it to profitability," the company said in a statement.

Eligible employees will receive outplacement services and severance, according to Sears. The retailer employs about 5,000 people at its headquarters.

The long-struggling retailer announced its 10th straight quarterly loss in December, as sales continued to slump. Analysts estimate the company burned almost $2 billion in cash in 2014.

Sears is trying to revive itself by shrinking its store base, spinning off assets and slashing inventory.

The company closed 235 Sears and Kmart stores last year as part of CEO Edward Lampert's attempt to transform Sears from a cash-burning bricks-and-mortar retailer into a more profitable omnichannel shopping enterprise. Lampert continues to shift focus to online sales and Shop Your Way, Sears' digitally driven loyalty program that tracks shopper spending and sends customers individualized coupons.

Sears will report its fourth-quarter and full-year results at the end of February.

bloruleshort.gif (618 bytes)

Sears lays off 100 workers at Hoffman Estates headquarters
Chicago Sun-Times
January 28, 2015

Sears announced Tuesday it was laying off 100 corporate workers at the company's Hoffman Estates headquarters.

"These decisions are never taken lightly, but they are a necessary part of our efforts to transform the company and return it to profitability," company spokesman Howard Riefs said in an emailed statement.

"We are committed to treating these associates with respect and compassion during this process."

In addition to the local layoffs, which were spread out across various departments, the company also will cut an additional 15 positions at other Sears' offices.

The news comes after Sears, which also owns Kmart, announced in December that third-quarter revenue was down by more than $1 billion, when compared to the previous year. During that period the company also lost $548 million, or $5.15 loss per diluted share.

Workers laid off on Tuesday will be given a severance and outplacement services.

bloruleshort.gif (618 bytes)

Former home of Sears Loop store for sale
By Alexia Elejalde-Ruiz
Chicago Tribune
January 23, 2015

A real deal? Owner shops former Sears State Street building.

A New York investment group is making a run at selling the iconic Loop building that housed Sears' flagship State Street store as the downtown office market gears up for another active year.

Investors have been invited to submit offers for the building at 1 N. Dearborn St., which included the Sears store on State Street, according to marketing materials. The documents also list the landmark office tower at 1 N. LaSalle St. for sale.

Both buildings are owned by New York-based Chetrit Group, which also is an investor in the Willis Tower. The firm did not respond to a request for comment.

It is not clear if the November request for bids has yielded a buyer. Eastdil Secured, a real estate investment banking firm handling the offering, did not respond to requests for comment. No pricing information was available.

Chetrit Group bought the buildings, along with 360 N. Michigan Ave., for about $118 million in 2002.

The 17-story, 940,341-square-foot building at 1 N. Dearborn St. includes 45,232 square feet of retail space and "is perfectly positioned for a new owner to lease its prime State Street availability to one of many nationally recognized retailers vying for a critical presence on the flourishing retail corridor," the materials said. The building, whose tenants have an average lease term of 8-1/2 years, includes technology, law, government, education and marketing tenants, according to the materials.

One North Dearborn, built in 1905 and renovated in 2000, is 93.4 percent leased, according to CoStar Group, a real estate information service. About 32,697 square feet available on the first floor is configured as retail.

Sears Holdings, which closed its five-floor Loop flagship in April, continues to operate online and information technology units on the fourth floor of the building. Chicago Public Schools moved its headquarters into much of the former Sears space last month, taking over the basement and second and third floors, plus parts of the first and ninth floors, for a total of 182,002 square feet, according to CoStar.

But the prime first-floor storefront at State and Madison streets remains unleased.

"That is the best location on State Street today," said David Stone, founder and principal at Stone Real Estate, which is not involved with the building. "Probably the only reason it hasn't been leased yet is because it is quite large. It will likely be divided." He said that prime retail corner offers about 24,000 square feet.

The broker with MB Real Estate who is handling the leasing of the space did not respond to requests for comment.

Chicago's downtown office market has had a sturdy recovery since the recession, when building sales dropped from a high of $5.3 billion in 2006 to $60 million in 2009, according to commercial real estate brokerage Jones Lang LaSalle. Last year, 16 downtown buildings sold for a total of $3.95 billion, the most since 2007, according to the firm.

Several factors have made the downtown business district attractive to investors, including a reduction in new construction and stronger tenant demand, which has reduced vacancies and helped push up rents, said Bruce Miller of Jones Lang LaSalle. Sales are expected to increase this year.

"The supply and demand characteristics show no sign of slowing down," said Miller, who completed the sale of six downtown office buildings in 2014.

One North Dearborn and One North LaSalle, which together are referred to as "The Central Loop Collection," are being sold together or individually and "will be transferred free and clear of any debt," the marketing materials said. The LaSalle street office building has 47 stories and 493,738 square feet.

bloruleshort.gif (618 bytes)

Catalog Makes a Comeback at Penney
By Suzanne Kapner
Wall Street Journal
January 20, 2015

A half-decade after killing off its hefty catalog to focus on the Web, J.C. Penney Co. is bringing it back, armed with data showing that many of its online sales came from shoppers inspired by what they saw in print.

The new, 120-page book will feature items from Penney's home department and will be sent to select customers in March, the first time the struggling department-store chain has sent out a catalog since 2010.

The move highlights an oddity of the digital age. While shoppers are increasingly buying everything from shoes to sofas to cars over the Internet, they still like browsing through the decidedly low-tech artifacts of page and ink.

Catalog mailings are down considerably from 2007, when they peaked at 19.6 billion, according to the Direct Marketing Association. But in a sign the decline might have bottomed out, mailings grew in 2013 for the first time in six years to 11.9 billion.

The call to bring back the catalog was made by Chief Executive Myron "Mike" Ullman, who is trying to return the retailer to health after a disastrous overhaul under former Apple Inc. executive Ron Johnson.

It also was Mr. Ullman who decided during his first turn as Penney's chief to stop publishing the catalog. In an interview, he said he thought at the time that catalog shoppers would migrate online.

But the company eventually learned that a lot of what they thought were online sales were actually catalog shoppers using the website to place their orders.

"We lost a lot of customers," Mr. Ullman said.

Penney launched its catalog in 1963 and enthusiastically embraced the medium.

The company published three "Big Books" each year, some topping 1,000 pages, and supplemented them with dozens of smaller catalogs dedicated to niche areas such as school uniforms, kitchen products and window coverings. After Sears stopped publishing its main catalog in 1993, Penney was left as one of the largest catalog retailers in the country.

The Internet then took its toll, as did the recession. Catalogs can be expensive to produce and distribute, making them a target for cost cutters. They can also be annoying. Some 44% of consumers say they want to get fewer of them in the mail, according to retail consultancy Kurt Salmon.

Penney stopped mailing the Big Book in 2009 and phased out distribution of 70 smaller catalogs a year later.

Now, retailers are rediscovering the books as a branding tool that can drive sales. According to Kurt Salmon, 31% of shoppers have a catalog with them when they make an online purchase.

J. Crew Group Inc., Williams-Sonoma Inc., Bloomingdale's, and Saks Fifth Avenue are ardent mailers. Even retailers grounded in the digital world are taking part. Bonobos, a men's retailer with roots in the Web, mailed its first catalog in March 2013.

"At the time, everyone said digital was the future and catalogs were old time," said Craig Elbert, Bonobos's vice president of marketing. "We found that the catalog allowed us to tell a fuller narrative about the brand and our products in a way that we were struggling to do online."

The catalog delivered another benefit: It ferreted out its best customers. "Our catalog customers tend to spend more," Mr. Elbert said. "And our catalog customers who make purchases at our brick-and-mortar stores are our best customers overall."

Bonobos plans to mail 10 catalogs in 2015, up from eight last year.

The catalog format has changed from the old-style yearbook of products into lifestyle magazines that allow retailers to showcase their wares and build their brands. A case in point: The books that Restoration Hardware Holdings Inc. mailed to customers this spring featuring glossy interiors and profiles of designers and craftsmen.

The mailing was also a reminder that retailers can go too far. Restoration Hardware's direct-mail onslaught included 13 different catalogs—as thick as a phone book in total and spanning a cumulative 3,300 pages—overwhelming shoppers' mailboxes and spawning a Facebook page devoted to stopping the mailings.

Restoration Hardware declined to comment.

Penney hasn't yet reported fourth-quarter results, but earlier this month it said a better-than-expected holiday meant sales growth should come in at the high end of a forecast range of 2% to 4% from a year ago. The company continues to claw its way back from the devastating sales decline that followed Mr. Johnson's experiments in marketing and merchandising. Sales in Penny's last full year, ended Feb.1, 2014, totaled $11.86 billion. By comparison, they totaled $17.76 billion for the fiscal year ended Jan. 29, 2011.

Home goods have historically been among the top-selling items in Penney's catalogs—one reason Penney is dedicating its new catalog to that area.

Rather than blanketing America with the new books, Penney plans a targeted mailing of its former home shoppers.

"We are trying to get back those lapsed customers," Mr. Ullman said.

bloruleshort.gif (618 bytes)

Clif Hooks, retired Sears executive VP, dies at 79
January 9, 2015

Clifton Finley "Clif" Hooks, age 79, of Richland, MI, died Wednesday afternoon, January 7, 2015, at his residence following a lengthy illness and with his loving family by his side.

Clif, the son of Clayton Hershel and Mary Ella (Lea) Hooks, was born on May 16, 1935 in Overland, MO, and was united in marriage to the former Betty Joann "BJ." Frisby on August 11, 1956 in Mt. Vernon, IL. After many corporate moves, Clif and BJ purchased their first Gull Lake home in 1986, moving to the lake permanently in 1992. Clif was a graduate of Southern Illinois University and the Wharton School of Finance at Northwestern University of Evanston, IL. Clif retired in 1992 as an Executive Vice President for Sears, Roebuck Company after 37.5 years of service. He was a member of the First Presbyterian Church of Richland, Gull Lake Country Club where he enjoyed many rounds of golf, a former member of the Gull Lake Area Rotary Club, and a board member of various corporations in the Chicago area. Clif worked with Habitat for Humanity and was a volunteer driver for the American Red Cross.

Surviving is his wife of 58+ years, BJ; two daughters, Gail Marie (Dr. Robert) White of Chagrin Falls, OH and Donna Kay (Dan) Weaver of Chicago, IL; his son, Clifton Alan (Laura MacVicar) Hooks of Mequon, WI; seven grandchildren; three great grandchildren; four sisters, Katie Hobbs of Nashville, TN, Betty Dix of Collinsville, IL, Jackie (Bill) Nicol of Starke, FL and Billie Jean (Tom) Allen of Annville, PA and a brother John (Karen) Hooks of Tuscaloosa, AL. Clif was preceded in death by his parents; two sisters, Genea Dugger and Mary Zimmer and two brothers, Bob and Dale Hooks.

A Memorial Service will be held on May 29th at 4:00PM at the First Presbyterian Church of Richland, 8047 Church Street with Rev. Dr. Mark W. Jennings, Pastor, officiating. Family and friends will continue with a celebration of Clif’s life at the Gull Lake Country Club, 9725 W. Gull Lake Drive, Richland immediately following the Service. In lieu of flowers, please make a donation in memory of Clif Hooks to the University of Chicago Medicine. Checks should be made payable to the "University of Chicago Medicine" and sent to the following address: University of Chicago Gift and Record Services, Clif Hooks Memorial, 5235 S. Harper Ct., Chicago, IL 60615.

Personal messages for the family and/or favorite memories of Clif may be placed at www.farleyestesdowdle.com.

bloruleshort.gif (618 bytes)

J.C. Penney, Macy's to shut stores, lay off scores
By Gary Strauss
January 9, 2015

After posting holiday shopping sales on the high end of muted expectations,department store chains J.C. Penney and Macy's head into 2015 with a focus on smaller operations and fewer employees.

J.C. Penney JCP is shuttering 39 underperforming stores and laying off 2,250 workers, while Macy's announced a restructuring that will shift workers from 830 Macy's and Bloomingdale's stores and close 14 Macy's stores. The moves could cut up to 2,200 employees as the company adapts to shifting consumer tastes and shopping patterns.

"Our business is rapidly evolving in response to changes in the way customers are shopping across stores, desktops, tablets and smartphones. We must continue to invest in our business to focus on where the customer is headed – to prepare for what's next," Macy's CEO Terry Lundgren said. His comments came the same day the retailer reported a 2.7% rise in same-store November/December sales.

Macy's also announced a new 2016 Macy's store in Los Angeles and a new Blomingdale's store to open in San Jose by late 2017. The moves come nearly a year after Lundgren announced 2,500 layoffs and five store closures in January 2014.

Shares of Macy's fell 2.7% to $65.95 in after-hours trading after hitting a new closing high of $68.30 Thursday as Wall Street extended Wednesday's broad rally.

Penney said mall-based stores in 19 states will close by early April. Word of the store closures – which represent about 4% of the middle-market chain's stores – came just days after Penney said holiday sales rose 3.7%.

"We continually evaluate our store portfolio to determine whether there's a need to close or relocate underperforming stores,'' said company media relations manager Sarah Holland. "Reviews such as these are essential in meeting our long-term goals for future company growth. While it's never an easy decision to close stores, especially due to the impact on our valued associates and customers, we feel this is a necessary business decision."

Penney shares closed up 0.8% at $7.95 Thursday.

Consumer psychologist Kit Yarrow, author of Decoding the New Consumer Mind, says, "Retail is in a massive transformation period. Consumers have lost their enthusiasm for trolling through massive stores hunting for a bargain. They can do that online.

"The only big department stores that will remain relevant to consumers are those that incorporate tricks and treats into the shopping mix – like product offerings you can't find online, special demonstration or sampling, cushy or fun relaxation areas."

J.C. Penney "is bloated with deteriorating real estate at a time when people want smaller, easier to navigate, technology-enhanced shopping experiences,'' Yarrow says.

"Poor Penney. I bet I'm not the only Boomer that really, really wants to shop there for the sake of their heritage, but can't," Yarrow says.

Contributing: Nanci Hellmich

Penney stores facing closure:

Dalton: Walnut Square Mall
Duluth: Gwinnett Place Mall
Lagrange: Lagrange Mall

Mason City: Southbridge Mall
West Burlington: Westland Mall
Waterloo: Crossroads Shopping Center

DeKalb: Northland Plaza
Quincy: Quincy Mall

Michigan City: Marquette Mall

Hanover: Hanover Mall
Taunton: Silver City Galleria

Adrian: Adrian South Mall

North Carolina
Asheboro: Randolph Mall
Elizabeth City: Southgate Mall
Statesville: Signal Hill Mall
Wilson: Parkwood Mall

New Jersey
Vineland: Cumberland Mall

New York
Kingston: Hudson Valley Mall

Columbus: Eastland Mall
Greenville: North Towne Plaza
Springfield: Upper Valley Mall

North Bend: Pony Village Mall

Chambersburg: Chambersburg Mall
Hummels Wharf: Susquehanna Valley Mall
Media: Granite Run Mall
State College: Nittany Mall
York: York Galleria

Rhode Island
Providence: Providence Place Mall

South Carolina
Aiken: Aiken Mall
Murrells Inlet: Inlet Square Mall

South Dakota
Aberdeen: Lakewood Mall

Brenham: Market Square Mall

Manassas: Manassas Mall
Williamsburg: The Marquis

Rutland: Diamond Run Mall
St.Albans: St.Albans Shopping Center

Oshkosh: Aviation Plaza
Racine: Regency Mall
Shawano, Shawano Plaza

Macy's stores facing closure:

Phoenix: Metro Center

Cupertino: Cupertino Square Mall
Woodland Hills: Promenade
Woodland Hills (furniture gallery)

Port Richey: Gulf View Square

Southfield: Northland Center

North Carolina
Greensboro: Wendover

New Jersey Ledgewood: Ledgewood Mall

New York
DeWitt: ShoppingTown Mall
Schenectady: Rotterdam Square

Columbus: Kingsdale Shopping Center
Richmond Heights: Richmond Town Square
Springfield: Upper Valley Mall

Memphis: Southland Mall

bloruleshort.gif (618 bytes)

Macy's weighs off-price version of namesake stores
By Suzanne Kapner
The Wall Street Journal
January 9, 2015

Big retailer sets up team to explore options for new sales format

Macy's Inc. is thinking about starting an off-price business for its namesake brand, a reminder that Americans remain value-conscious even though the recent holiday-sales season is on track to be the strongest in three years.

The big retailer, which already operates outlet stores for its Bloomingdale's chain, said Thursday that it was forming a team to explore options for creating a cut-price version of its Macy's stores.

Retailers have been racing to open outlet stores, seeking to attract budget-minded consumers as traffic at many full-price stores has stalled. Saks Fifth Avenue and Nordstrom Inc. are opening far more outlet stores than regular department stores, and have joined companies including Gap Inc. and Neiman Marcus Group in locating outlets closer to their mainline counterparts.

A true off-price format for Macy's would highlight that shift because Macy's stores already are known for frequent sales and a steady stream of promotions.

The company has flirted with the outlet business before. In 2013, it opened a Macy's to anchor a wing of full-price stores at an outlet mall in Gurnee, Ill. Macy's Chief Financial Officer Karen Hoguet has said the retailer would consider opening more such locations.

Meanwhile, about a dozen retailers reported holiday sales that exceeded Wall Street's modest growth forecasts, a sign that sharply lower gasoline prices, declining joblessness and a stronger economy are encouraging consumers to shop. That trend could continue into 2015, analysts said.

A handful of those retailers raised their financial forecasts for the current quarter, including American Eagle Outfitters Inc. and Aeropostale Inc., teen retailers that have been struggling to reinvent themselves. None of the retailers lowered their forecasts, according to Retail Metrics.

Several retailers said traffic improved. Aeropostale and The Children's Place Inc. said they finished the period with lean inventories, setting them up for a fresh start to the New Year.

Overall, December sales excluding newly opened or closed stores rose 5%, more than the 3.8% that Retail Metrics had forecast. Much of that growth came from the strong performance of drugstore operators Rite Aid Corp. and Walgreen Boots Alliance Inc. Still, all but two chains did better than expected for the period, according to Ken Perkins, a Retail Metrics research analyst.

The exceptions were Costco Wholesale Corp., which sells gasoline and has been hurt by falling prices, and Fred's, a dollar store that has been struggling for several quarters.

The upbeat early reading on holiday sales contrasts with the year-earlier period, when sales fell short for many retailers, forcing them to lower financial forecasts and leaving them awash in unsold goods.

Although business has improved from a year ago, when a lackluster economy and severe winter weather combined to keep shoppers home, consumers remain cautious in their spending, particularly at the lower to middle end of the market.

At Macy's, sales excluding newly opened or closed locations rose 2.1% in the combined November and December period, at the lower end of the retailer's projections.

Gap said sales at established stores rose 3% in the combined period, though much of that gain came early in the season. In December, sales rose 1%, driven by an 8% gain at the Old Navy chain. Same-store sales fell 5% at Gap's namesake chain.

Many retailers continue to face serious challenges as they try to adapt to a world in which shoppers are buying more online and browsing less in stores. J.C. Penney Co., for instance, said it would close 40 stores in 2015, or about 4% of its total. Earlier this week the department-store chain reported a 3.7% increase in holiday sales.

Family Dollar said profit for the three months ended Nov. 29 fell 46%, because shoppers mainly came in to buy staples like groceries and tobacco, both of which have thin profit margins. Sales at established stores slipped 0.4%

Sales and traffic at the retailer rebounded in December, culminating in a rush of customers on Christmas Eve, the busiest single day in the company's 55-year history.

Family Dollar's same-store sales rose 1.2% in December while traffic increased more than 2%, the strongest gain in more than two years, said Chief Executive Howard Levine.

But some of the industry's sales gains came at the expense of margins because of heavy discounting that started early in the season.

Richard Hayne, the chief executive of Urban Outfitters Inc., said the "holiday environment in the fashion apparel industry was more promotional than any I can recall."

– Paul Ziobro contributed to this article.

bloruleshort.gif (618 bytes)

Join Search Suggestions Rules
Questions regarding NARSE should be directed to
Copyright © National Association of Retired Sears Employees
8700 West Bryn Mawr, S-1300 South, Chicago, IL 60631-3507