Restructuring at Sears Roebuck & Co. (1992-03)|Business Strategy|Case Study|Case Studies

Restructuring at Sears Roebuck & Co. (1992-03)

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Case Details:

Case Code : BSTR105
Case Length : 27 Pages
Period : 1992 - 2004
Organization : Sears Roebuck & Co.
Pub Date : 2004
Teaching Note : Available
Countries : USA
Retail ing

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Sears Under Alan Lacy

Analysts opined that Lacy inherited a strong company with $1 billion surplus cash, which could be re-invested in the company.

However, they pointed out that the company faced problems related to stagnant growth and increasing competition in the retail industry. Analysts opined that stagnant growth rates increased uncertainty about the company's future prospects.

When Lacy took over the reins of Sears, he was under pressure to bring improvement in the company's performance.

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Turnaround Far From Complete

Though, Sears reported increased net income in 2002, analysts were quick to point out that the company's revenues from merchandise division were only $35.7 billion - a fall of 0.2% from 2001 revenues. Though Sears attributed fall in revenues to the restructuring of the full-line stores, analysts were skeptical about the company's restructuring plan. They further pointed out that most of the revenues came from the credit card division...

Will Sears Turnaround?

Most analysts were willing to give more time to Lacy to turnaround the merchandise business. They pointed out that the Citigroup deal freed $3 billion bad debt provision for the company, resulting in after tax profits of $4.5 billion.

The deal also saved around $200 million annually for the Sears retail division, as Citigroup would not be charging Sears for short-term 0% finance offers. Sears also spent around $1 billion for share buy back in the 2003-second quarter. Analysts pointed out that decreasing outstanding shares would increase Earnings-per-share (EPS).

Analysts predicted that Sears stock price might reach $50 by early 2004.

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Exhibit I: Profiles of SEARS' Competitors
Exhibit II: A Note on SEARS' Catalog Business
Exhibit III: Consolidated Income Statements (1994-1998)
Exhibit IV: SEARS Stock Movement During 1994-2003
Exhibit V: Consolidated Income Statements (1999-2002)
Exhibit VI: A Note on American Retailing Industry

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