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Sears Holdings Reorganizing By Product Category

1/28/2008 02:00:00 AM Eastern

Sears Holdings confirmed it is restructuring its Sears and Kmart businesses along key product category lines.

Going forward, the company will be organized around five core operating business units, including consumer electronics, major appliances and apparel.

Each of the units will be assisted by support units that provide operational and administrative functions, such as marketing, store operations, customer strategy and finance.

In addition, separate brand units will be responsible for growing the value of Sears Holdings brand portfolio, while a real estate business unit and an online business unit will focus on increasing the sales productivity of the company's physical and virtual real estate.

Each business unit will have a designated leader and an advisory group comprised of senior Sears Holdings executives who will provide direction and oversee the business unit's performance, the company said. The leadership of each unit will have a separate, internal profit and loss statement to allow greater focus on managing the profitability of the unit, and rapid decision making to capitalize on opportunities and mitigate risks.

The changes, which will be implemented in phases, were designed to simplify the way the retailer's business lines are managed and to create "greater autonomy and focus for the business unit management teams," Sears said.

"We are convinced that our businesses can operate more efficiently and effectively and we continue to look for ways to make that happen," said Edward Lampert, Sears Holdings' chairman. "By creating smaller focused teams that are clearly responsible for their units, we increase autonomy and accountability, create greater ownership and enable faster, better decisions. Our board of directors, our senior leadership team and I believe this will make Sears Holdings a more responsive and competitive company in the future."

Lampert said that the merger of Sears and Kmart initially required a centrally managed structure to control costs and focus on integrating the two companies. Now, he said, "it's time to empower individual businesses and teams to focus on the customer experience and performance. Stronger business units will be better able to support each other, build a stronger company, and be more attractive to partners and talent."

He added, "We are not doing this overnight."

News of a restructuring first surfaced during the weekend of Jan. 19-20, leading to speculation that Lampert is positioning the company for the ready sale of individual assets, such as its Lands' End apparel line.

During its most recent reporting period, the company showed a $223 million decline in gross margin, a $400 million drop in total revenues, and a 4.6 percent decline in same-store sales for the three months ending Nov. 3.