By  on February 6, 2006

NEW YORK - Sears Holdings Corp. is opening a design office here around mid-March as part of a drive to increase the margins and appeal of its private label apparel and accessories, lower costs and attract talent.

The Sears division specifically wants to bridge the gap between its hard and soft goods, and encourage cross-shopping. Some proprietary brands are being introduced, some are being dropped, and femininity and details are being injected into third- and fourth-quarter collections for the Apostrophe, Covington and Classic Elements in-house apparel brands, among others.

The Canyon River Blues name is returning this fall after being sold as CRB and losing some recognition. Toughskins, a former Sears brand, is being revived for kids aged two to seven by next holiday. Belongings, a Liz Claiborne-supplied brand, will be gone after the spring, as will Parallel, another in-house brand. Craftsman stain-resistant workwear for men was introduced last fall, and prototype Lands' End shops, some that house all categories together, are being tested in a handful of locations, including units in White Plains and Yonkers, N.Y.

The strategy is led by Lisa Schultz, executive vice president of Sears Holdings Apparel Design. She oversees all Sears and Kmart apparel design teams, which are being integrated at the new office at 75 Varick Street in SoHo. "I am interested in adding new brands," she said in an interview. "I would like to see more activewear, which could include Lands' End. As you know, Sears sells a lot of treadmills....And in dresses and special sizes, things are in the works.

"By the end of the year, you will see a different way of merchandising, a different way of flowing goods and less confusion" on the selling floors. "There will be longer periods in between changes so stores can execute more clearly and the shopping experience is easier."

She acknowledged there had been too much clutter on the selling floors, and that the company was "running lots of tests and experiments" with Lands' End and other programs. Last quarter, apparel sales dragged at Sears, but posted comp gains at Kmart, the sister division at Sears Holdings.

Even though the stores dropped Belongings, Schultz said there was still a "strong partnership with Liz Claiborne" through Claiborne's First Issue brand, sold exclusively at Sears, as well as with Jones Apparel Group, which supplies the Rena Rowan line to Sears. "We are focusing on those brands that have a history and are recognized by our customers."Schultz reports to Edward S. Lampert, chairman of Sears Holdings, who is viewed with some skepticism in the apparel industry, and works with Aylwin Lewis, president and chief executive. Many think Lampert, the major shareholder, is primarily focused on selling assets rather than building the Sears-Kmart offerings and investing in fashion. He has lashed out at the critics, saying most pundits missed the turnarounds at Google and J.C. Penney, as well as the "resurrection of Kmart, until it was abundantly clear those companies succeeded."

Contending there really is a revival happening on the merchandise side at Sears, Schultz said she was building her design team to improve Sears' offerings, and holding a job fair today and Tuesday, 9 a.m. to 6 p.m., at the Varick Street office to attract designers, CAD operators, graphics personnel and others involved in apparel, accessories, shoes and intimate apparel for Sears Holdings. The new facility ultimately will have 45,000 square feet, and a team of 200, and will replace the 3,500-square-foot office used just by Kmart at 111 Eighth Avenue. That office had about half as many workers. There is also a team at Sears Holdings headquarters in Hoffman Estates, Ill., principally packaging and product managers, and technical design staff; the core apparel design team is here.

Until November, Schultz was senior vice president of design for Kmart, where she reengineered Kmart's proprietary fashion and home businesses, applying to the mass channel what she learned during 14 years at Gap Inc.

"The process we developed at Kmart is really working well and the company is really supporting it. That is what we are doing at Sears, as well. It's a team in formation," said Schultz.

Kmart apparel was refocused with products with better values and easier care, as well as an emphasis on key items, denim and programs for knits and fleece. The chain adopted a vertical approach to product development that was new for Kmart, though similar to the way Gap, Limited Brands and other specialty chains have been operating for years. This approach involves sourcing and designing in-house, bypassing the domestic market for production, much more direct importing and having merchants function as general managers rather than selecting goods - all to exert tighter control over designs, pricing and quality.Sears Holdings is also said to be seeking a new chief merchant. Asked about that, Schultz replied, "We are looking for all levels of merchants."

Schultz sees the assortment building up "great basics and great classic clothing....Our customers love classic clothing and a little femininity. Everything should have a feminine twist, including a fleece sweatshirt with a little embroidery in Apostrophe. In a suit, it could be the way it fits. With a blouse, it's the way it drapes, and in a knit, it's the embellishment. I don't think it's been thought about so much before. We are creating a real point of view in each of our brands."

With Schultz heading and integrating the Sears and Kmart design initiatives in SoHo, there has been some speculation that the two chains might share private labels. For instance, Kmart has begun selling Sears' Craftsman and other hard goods.

"I wouldn't say I wouldn't ever do that, but it's not what I am working on," Schultz said. "You may see a couple of examples, but there is no need to confuse the customer. For the most part, we will keep our brands separate. The real synergies are behind the scenes, with fabrics and factories.

"By the third and fourth quarters of this year, you will see better definition between brands, more focused brands, more focused assortments," she added. "We will still have multibrands, but we are starting to cull them down."

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