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

Sears experienced downturn in its retail sales right from the 1970s. The problem aggravated in the early 1990s when Sears registered its biggest ever loss in the company's history in 1992 - $3.9 billion with the merchandise division reporting a loss of $2.98 billion. In the same year, Sears hired an outsider - Arthur Martinez (Martinez) to head its merchandise division. Martinez initiated drastic changes in the merchandise division, which resulted in the division recording profits in 1994. However by the mid 1990s, Sears was in trouble again, this time due to increasing credit card delinquencies. It also faced law suit for its credit card debt collection practices. Many analysts suggested that the company should divest its credit card business.

Soon after he took over as CEO, Lacy introduced new retailing formats in the company's full-line stores and exited from the cosmetics business. In October 2001, a three-year restructuring plan was announced to boost productivity and revenues of the company to achieve operating profits of $3 billion by 2004. In a surprise move in April 2003, Sears announced its intention to divest its credit card business. This decision attracted a lot of criticism from analysts. They were of the opinion that disposing the credit card business would increase pressure on the retail division and Lacy would be under tremendous pressure to show quick results. The question that was bothering analysts and Sears' top management alike was whether Sears would be able to turnaround its ailing merchandize division.