Inside Sears’ glossy annual report, between the six-figure sales figures and the pictures of employees happily discussing consolidated profit and loss accounts, is the group’s mission statement.
Sears, it says, will be an outstanding retailer by “building long-term relationships with our customers and by successfully supporting our staff”.
But in one fell swoop, chief executive Liam Strong has cast doubt on both customer relationships and “supporting” staff as the group drops its Saxone and Curtess footwear outlets.
Unless a buyer is found, and there are several waiting in the wings, both chains will close, putting 3,400 employees out of work. Strong is shedding the chains after they took the blame for pulling the group’s pre-tax profit down by 1.9 per cent in sales during the second half of 1995, compared with the same period in 1994.
Some question the former British Airways man’s four-year attempt to plug the leaking holes in the shoes-to-womenswear empire. Since his arrival, the group has trimmed off 20 brands to comprise just ten today. His sceptics are wondering when the group will start to look healthier.
In the past three years, pre-tax profits have been boosted by disposal of assets, which converted a 97m loss in 1992 to a profit of 53.8m by 1993-94. This then fell to 29.9m by 1994-95.
The British Shoe Corporation is the biggest culprit. The value of sales dropped by nearly 11 per cent in the second half of 1995 despite a good 1994, when sales grew by 8.8 per cent to 618m.
Strong blames the BSC’s decline on a “weak” shoe market, as well as merchandising systems being unable to cope with complex stock allocation.”Our priority for 1996 is the performance of BSC and we will be accelerating the restructuring of the footwear business around our core brands,” he says.
Restructuring Sears’ shoe business is Strong’s priority. It represents the company’s roots – it started in 1912 as J Sears & Co before amalgamating with the True Form Boot Company in 1955.
But last August Strong dropped the weak link in the Sears group, disposing of the failing Freeman Hardy Willis, Trueform and Manfield shoe shops by selling them to Sheffield entrepreneur Stephen Hinchliffe’s group Facia.
The sale, for an undisclosed sum, believed to have cost the company 16m, was offset by the 20m sale of freehold and leasehold properties. The disposal of Freeman Hardy Willis cleared the way for Strong to focus on more successful brands such as Shoe Express, Hush Puppies and Shoe City.
“The BSC operation has grown too big – it’s very bureaucratic,” says one retail observer. He believes that retail groups such as Facia, as well as shoe chains including Oliver Shoes and Stead & Simpson, are interested in buying Saxone and Curtess because it would be easier for them to shed staff and slim both businesses.
“That the shoe business is tough is part of the problem, but also part of the solution. BSC dominates the shoe market in the UK and consumers see a lot of the same shoes in the same shops – there’s a lack of flair,” says the retail source. Sears’ decision to rationalise its shoe brands could free the new owner to increase the variety on the high street.
Facia has been linked with Sears since it bought Freeman Hardy Willis. Following the sale to Hinchliffe, speculation was rife that the Facia group would again return to Sears – this time to execute a bargain basement purchase of a middle-market womenswear chain.
Facia’s group marketing director, Trevor Bell, says it would be interested in a womenswear chain to complete the group, which has in less than two years managed to combine Red or Dead, Sock Shop and lingerie specialist Contessa.
It is in no rush and Hinchliffe is believed to be back at Sears to talk shoes again. But Strong is quick to deny rumours, saying: “We are committed to investing in the brands that are capable of getting bigger.”
However, there are still cracks in the Sears empire. In November, the group’s sports chain Olympus – carrying a 1995 first-half loss of 5.8m – was sold to Mayfind, the group headed by former Amber Day chairman Philip Green.
Along with last week’s shoe announcement came the news that Sears is dropping leisure chain Millets, with 170 stores, and the 250-strong Dutch chain Sears Retail Group. Sears declined to comment on whether it will be putting sale tags on any other parts of its business.
But City analysts are adamant Strong is not finished. “There could be further sell-offs – we might see as part of that slimming a womenswear chain up for offer,” says one source.
Strong’s hopes rest with the group’s flagship chain, Selfridges. Unaudited figures show sales increased in value by 12.5 per cent over the past year. And there are plans to launch a northern Selfridges to follow on from the new store at Heathrow’s Terminal One, which opened last September.
Whatever Strong has in mind it may be too late, according to one analyst. “Sears has grown too big. Turning it around is a ten-year job – but the City will only give him another 18 months maximum.”
Saxone and Curtess have come to the end of their road at Sears. But time is also running out for Strong.