Sears' Settecase: Playing Catch-Up On Store Count

By Alan Wolf On Jun 19 2006 - 6:00am

Sears Holdings' recently released first-quarter results were a mixed bag.

Chairman Edward Lampert touted gains in gross margin and operating income as the best barometer of improving health. But net sales at Sears' 864 full-line stores and 71 Sears Essentials and Grand stores still slipped 6.6 percent, while comp-store sales, the traditional metric for measuring retail performance, fell 8.4 percent for the four months, ended April 30.

Indeed, comp sales fell across all merchandise categories — save for major appliances. Thanks to increased promotions and the introduction of new high-efficiency models, white goods managed modest comp gains. But it still looks to be an uphill climb for Sears' majap business, VP and general manager Tina Settecase recently told TWICE, at least until the company can close the store gap with Lowe's and Home Depot.

“Our issue has been store count,” she stated. “We've been out-stored by the home improvement chains” — which have well over 3,000 locations between them. But Sears is addressing that she assured through its ace-in-the-hole Kmart, a mass-merchant sibling that represents nothing but upside when it comes to majap share.

Specifically, Sears has been busy introducing white goods to select Kmart stores, and has been converting other Kmart locations outright to Sears formats. To date, about 90 Kmart stores now carry a basic assortment of white goods, Settecase said, with another 100 slated to add the category this year.

The Kmart white-goods departments generally range from 2,500 square feet to 3,500 square feet, and offer all of the same brands found in Sears. However, “the Kmart customer is different than the Sears customer,” Settecase noted, “so in Kmart stores we show good and better products, compared to better and best products in Sears.”

At the same time, Sears has selected Sears Grand as the format it will employ going forward in its Kmart conversion plans. The blueprint appears to be the recently converted store in Summerville, S.C. Although smaller than the first freestanding Sears Grands, given Kmart's smaller footprint, the white-goods departments are “more fun, more lively,” Settecase said, thanks in part to homey vignette displays for laundry and kitchen products. Sears plans to have as many as 100 Sears Grand locations by year's end, including the approximately 14 stores that were converted last month alone.

Also driving business is Sears' drive for innovative exclusives under its private label Kenmore brand. The latest program, under the super premium Kenmore Elite label, is a Kenmore Pro kitchen line replete with analog gauges and heavy-duty control knobs. Sears has also recently introduced a new platform of Elite dishwashers with extra cleaning capacity; its first Elite line dish drawer dishwashers; a second, 36-inch induction cooktop; and an assortment of Kenmore cookware.