HOFFMAN ESTATES, Ill. — Even as Sears Holdings Corp. aims to lure back apparel shoppers, the retail behemoth wants to scale back the space devoted to the category.

This story first appeared in the May 4, 2011 issue of WWD. Subscribe Today.

“We have, in my opinion, way too much space for the amount of apparel business we do,” Sears chairman Edward S. Lampert told shareholders Tuesday at the firm’s annual general meeting at its headquarters here. “We have a lot of space dedicated to apparel that’s been underutilized for too long. No matter how good our apparel people do, we cannot get to the level of productivity we should be at simply by working harder. It is incumbent on us to repurpose that space.

“We are in the best malls in the U.S.,” he added. “If we want our customers and the community to shop at our end of the mall, then we need to have the brands they want to shop for. If they don’t want to buy what we sell, or buy enough of what we sell and there are other companies that can fit in and do it better, why shouldn’t we partner with them (on leases). We think we can partner with a whole lot of companies.”

Recognizing it strayed from traditional apparel shoppers “too quickly” last year, according to president and chief executive officer Lou D’Ambrosio, Sears is aiming to win them back and broaden its base with new brands in the year ahead.

The Kardashian Kollection, due in Sears stores this August, will appeal to a “whole new audience,” D’Ambrosio told shareholders. He said the social media force of celebrity sisters Kim, Kourtney and Khloé will inform the chain about new ways to engage shoppers.

The ceo, who joined Sears on Feb. 23, conceded that there had been some “hiccups along the way” as the company assembled its apparel team in San Francisco under John Goodman, executive vice president of apparel and home. Now, with the group in place, “we have very high expectations for what that business is going to generate for this company,” he added.

Specific apparel missteps D’Ambrosio cited at a briefing that followed the two-and-a-half-hour meeting included the neglect of traditional brands, failure to take markdowns in a timely fashion and too much inventory in Kmart stores. Merchandise inventories rose to $9.1 billion for the year ended Jan. 29, up from $8.7 billion a year earlier.

“We became too focused on the new buyer with the new lines,” such as Kardashian Kollection, aimed at 17- to 35-year-old women, and the edgy UK Style by French Connection launched in March, D’Ambrosio said. Sears will be reinvesting in its traditional Laura Scott apparel brand for working women, he added.

Sears has lease agreements with Forever 21, expected to move soon into Sears’ 43,000-square-foot space at South Coast Plaza in Costa Mesa, Calif., and an agreement with Whole Foods, which will take over 34,000 square feet of space in Greensboro, N.C., next year.