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Sears Accelerates Off-Mall Strategy

7/09/2004 12:42:00 PM Eastern

Hoffman Estates, Ill. — Sears’ plans to goose growth by expanding its off-the-mall presence received a major boost last month with the company’s announced acquisition and leasing of some 54 Kmart and seven Wal-Mart stores for about $620 million in cash.

The move dovetailed with word that the company will also open some 30 new strip mall-based outlet stores over the next two years, in addition to the current 45. The discount chain, which carries returned, discontinued, overstocked and special purchase majaps, CE and garden products, will be renamed Sears Appliance Outlet in an effort to counter market share gains in white goods by home improvement centers.

The retailer is also adding majaps to each of its 163 freestanding hardware stores this year, which are similarly being redubbed Sears Appliance and Hardware (see TWICE, March 8, p. 39).

Sears said that most of the Kmart and Wal-Mart stores would be converted by the fourth quarter of 2005 to a new midsize format modeled on Sears Grand, an off-mall prototype with an open-racetrack design and traffic-driving merchandise like convenience foods and CDs. The Kmart stores are largely located in large urban areas while the seven Wal-Mart units are situated in midsize markets.

“The acquisitions will allow us to quickly open more stores and significantly boost our off-mall retail presence in priority markets,” said chairman/CEO Alan Lacy. While he described Sears’ mall-based portfolio as “very profitable” and the new stores as merely “supplementing” the mall locations, traditional enclosed shopping malls have lost their luster with many shoppers who prefer the convenience and better accessibility of freestanding or strip mall-based stores — as Best Buy learned in its failed acquisition of the largely mall-based Musicland chain.

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