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Road to Restructuring: Retailers Drive Toward More Cutbacks

Even without the high drama of a Chapter 11, restructuring continues to be the order of the day across retailing.

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There have been rumors about Sears putting its hardware and automotive stores up for sale as the company tries to focus its business on the department stores and improving apparel sales. Sears declined to comment on the rumors about selling stores, though a spokesman did comment on the real estate team.

“Any changes that were made in the real estate organization would have been part of our top-to-bottom review of the company organization, which had the goal of increasing productivity and to maintain enterprise alignment with strategic priorities, but we don’t talk publicly about specifics.”

Sears does have money, after the sale of its credit operation and financial products to Citigroup for approximately $32 billion in July. While some of the funds may go toward further reducing its debt, Sears is said to be considering purchasing another apparel brand following last year’s bold acquisition of Lands’ End, and could buy back some of its stock, to try to lift the share price. Having sold off its credit operation, which had long been responsible for the bulk of Sears’ profits, there’s increased pressure to revive the full-line department stores.

So Sears has been pumping up its private labels, such as Covington and Canyon River Blues and is adding better visuals to highlight exclusive labels. But it still lacks sufficient pizzazz in its apparel departments. In the late Nineties, Sears executives were so disillusioned by their soft lines they considered trying to merge with Penney’s, as a way to get out of selling apparel and maximizing hard lines. Sears would sell hard lines and Penney’s soft lines. However, concerns about the Federal Trade Commission blocking the plan, since Sears and Penney’s occupy many of the same malls and the massiveness of reinventing the Sears floor discouraged talks with Penney’s.

Penney’s $200 million in expense cuts is “a combination of all kinds of issues — stores, central reorganizing, losing receiving and marking areas,“ Questrom said. Since the late Nineties, as the company moved from a decentralized organization to a centralized one and as new distribution centers and systems were developed, “we had extra people doing both the old way and the new way.” Questrom said the company “always had an expense structure outside acceptable levels to be competitive.”
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