MARTINEZ DEFENDS HIS RECORD AT SEARS’ ANNUAL MEETING
Byline: Nancy Brumback
HOFFMAN ESTATES, Ill. — In an emotional shareholders meeting Thursday here, outgoing Sears chairman and chief executive officer Arthur C. Martinez defended his eight-year tenure, expressed optimism for the second half and a strong Christmas and said Sears sees no real signs of a consumer slowdown.
Martinez, who is retiring at the end of the year, also said all Sears stores will have shopping carts by the fourth quarter, after tests showed a 1 to 2 percent sales gain in stores experimenting with the carts, and he announced plans for expanding the free-standing Great Indoors home stores.
He reiterated plans to drop a total of 15 to 20 percent of its apparel vendors to reduce clutter, scheduling another round of cuts this fall on top of earlier eliminations last fall and this spring.
The meeting at the company’s headquarters was about half as crowded as past meetings, which had been held at the Art Institute in downtown Chicago and drew several hundred shareholders. It also had none of the frills of the past, such as the breakfast spreads and huge video screens behind the podium. Martinez said the switch in venue saved the company $250,000.
Those who did attend were greeted by two planes with banners proclaiming “Sears Unfair to Retirees” and “Restore Promised Benefits” and Sears retirees in yellow T-shirts emblazoned with the unfair message, picketing at the entrance and protesting Sears’ cuts in retiree life insurance, the lack of a cost-of-living adjustment clause and reduced health care benefits. One sign challenged Martinez, who plans to leave by the end of the year: “Tell us about your retirement benefits.”
Members of The National Association of Retired Sears Employees, including Ev Buckardt, head of the group and a former president of Sears’ defunct catalog division, criticized the Martinez administration during the question and answer period.
At a press briefing after the annual meeting, Martinez said Sears expects no slowdown in consumer spending. “We plan for a solid second half. Nothing we see in consumer sentiment or spirit would give us any pause right now. Thus far, the market and the consumer have absorbed these [interest] rate increases. I expect a good Christmas, and we have a lot of business to do before we get to Christmas,” Martinez said.
In his remarks to shareholders, Martinez cited an “excellent” 1999 and strong first quarter, pointing out that Sears’ return on equity is “higher than Home Depot’s” and return on invested capital is “higher than Nordstrom’s,” even though the company’s stock price does not reflect that performance.
In the past year Sears has put into place initiatives such as value pricing “that will make the competition’s heads spin,” he said.
As for a successor, Martinez told shareholders the board was considering both inside and external candidates, but did not identify any of them.
When asked at the press briefing to assess his term in office, Martinez replied, “I’m very happy the company is as healthy as it is today. It was a far different picture when I joined in 1992. We have rebuilt a very healthy and successful brand, with great earnings power, great cash flow and great economic return.”
Apparel sales doubled in the last seven years to $9 billion.
“I believe we have an untapped opportunity in apparel if we improve our execution,” he added, arguing that the chain has not bought with “conviction and depth” to support apparel, particularly in promotions.
Despite the vendor cuts, Sears is seeking a couple of apparel brands, Martinez said, declining to name them. “The brands that we don’t have would be nice, but they are not necessary.
“Nike was one we worked hard for over the past several years, because it provided authority to our athletic footwear business.”
He was enthusiastic about the sales gains in stores where shopping carts have been tested. “It sure sounds big time to me when you do it across the whole chain.”
Sears will also try customer service centers in the middle of the store with information, bill paying and Internet access, in 13 stores that are being remodeled this summer, in Indianapolis, Milwaukee and Cincinnati.
Few new full-line Sears stores are planned, but the chain will commit to 35 locations for its Great Indoors home remodeling and decorating chain this year and another 30 next year, Martinez told shareholders. Currently there are two Great Indoors stores, in a Denver suburb and in Scottsdale, Ariz.
Sears is also considering free-standing major appliance and consumer electronics stores under the Brand Central name.
Sears.com offers major appliances, Craftsman tools, and lawn and garden items, with consumer electronics to be added next.
Sears recently launched the Global Net Exchange business-to-business Internet cooperative Sears with French retailer Carrefour. Commenting on the competition — the Worldwide Retail Exchange — Martinez said, “At the end of the day, there needs to be only one exchange serving the retail industry. We have made overtures to that (Worldwide) group to see how we can work together for a single solution.”