Restructuring at Sears Roebuck & Co. (1992-03)

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Case Details:

Case Code : BSTR105
Case Length : 27 Pages
Period : 1992 - 2004
Organization : Sears Roebuck & Co.
Pub Date : 2004
Teaching Note : Available
Countries : USA
Retail ing

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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EXCERPTS

Sears Under Arthur Martinez

When Martinez took over as the head of Sears' merchandising group, he observed that employee morale was low and the company lost track of changes taking place in the external environment and how its competitors were managing their businesses. He also observed that Sears lost focus of its customers.

Commenting on the situation in Sears, he said, "We lacked peripheral vision. We had no grand view of the world beyond us.

We were suffering from cultural insularity, which prevented us from understanding what other people do to solve their business problems." After taking over as the head of the merchandising group, Martinez along with top managers of the group analyzed the group's business.

He found that though the retail stores were facing a lot of problems, they enjoyed 3 core strengths on which Sears could turn its business profitable again...

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Troubled Credit Card Business

According to reports, by November 1997, the outstanding payments on credit-cards were around $393 million, which was 44.6% increase over the 1996 figures. In addition to the credit card outstanding payments, Sears also faced lawsuit for adopting aggressive credit card debt-collection methods, violating US bankruptcy laws.

It was also reported that Sears had provided around $475 million as compensation to customers who sued the company for its aggressive credit-card debt-collection practices. Many analysts pointed out that most of the purchases at Sears were done through its credit card.

They also pointed out that while retailers such as J.C. Penney were implementing stringent rules while issuing new credit cards, Sears' rules were not stringent.

Analysts felt that increasing purchases on the Sears credit card made the company vulnerable to the interest swings and increasing personal bankruptcies...

Troubled Retail Businesses

Analysts pointed out that in addition to problems in the credit card business, Sears had other problems too. The apparel line of Sears was not attracting customers and it failed to keep up sales though its initial sales were promising. Commenting on the company's performance in 1998, Martinez said, "As a company, we had many things to be proud of last year. But frankly, [it] was not as good as we had come to expect." Analysts also attributed the slow down in Sears' sales to increasing competition from discounters and other retail stores...

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