Sears canada gift registry

TORONTO -- Successive years of double-digit growth are a thing of the past for Sears Canada as it looks for ways to cut $100 million (US$65.8 million) in spending, mainly at its new Eatons stores.

The cutbacks--to be largely achieved through fine tuning its upstart Eatons chain--will be made so that customers "will not be able to see it," said Sears Canada chairman and ceo Mark Cohen.

Taking direct aim at the seven fledgling upscale Eatons stores Sears re-launched late last year, the company began by cutting back a 100-page spring catalog "while merchandise strategies are further re fined," he said. The first pre-Christmas catalog had numerous big-ticket items, but it failed to generate enough sales to warrant its publishing. In addition, Cohen said the Eatons Web site will be revamped to feature consumer information, the store gift registry and Brand Central major appliances. Sales of other merchandise on the site will be deferred.

Eatons marketing budget is also being slashed and be redirected to in-store promotions and less print, television and radio advertising. At the same time, Cohen is cutting marketing expenses at Sears and deferring other spending, including store renovations.

After recording a record profit of $228 million (US$ 150.1 million) last year on sales of $6.36 billion (US$4.36 billion), it had a first quarter loss of $11.2 million (US$7.3 million) compared with a $23.5 million (US$15.5 million) profit a year earlier. Same store sales were down by 0.6% in the quarter, while sales rose overall by 7.4% to $1.42 billion (US$934.7 million). This is a result of Sears adding 3.3 million sq. ft. of retailing space, an increase of 32%, last year.

Also included in this year's first quarter was a pre-tax pay-out of $6.4 million (US$4.2 million) to former chief executive Paul Walters, whose sudden departure in January rattled investors and analysts. He led the company through four years of record growth and guided the launch of Eatons with choice locations picked from the bankrupt Canadian retailing icon.

There were reports executives of Sears Canada's parent, were upset with cost overruns for the Eatons renovations, originally set at $130 million (US$85.6 million), but topping $200 million (US$131.6 million), and the lateness in opening the stores, which affected key Christmas sales.

Commenting on the quarter, Cohen said "weak sales and gross margins negatively affected earnings." The quarter was also impacted by the "extraordinary amount" of additional store square footage added by the company last year through the acquisition of Eatons. Also costly were extra markdowns to clear accumulated merchandise due to slower sales and the lateness of the Eatons openings.

Sears has "taken actions to reduce expense and investment levels," Cohen said, noting that inventories are in line with planned levels and continue to be managed in light of the ongoing uncertainty in the economy.

Cost efficiencies will also result from two newly opened state-of-the-art distribution facilities totaling 1.3 million sq. ft. in the Toronto area and Calgary to replace five older facilities. The company has also implemented streamlined procurement processes.

Sears Canada has 117 department stores, seven urban Eatons department stores, 33 furniture and appliances stores, more than 2,100 catalog locations, 131 dealer stores, 15 out let stores, 34 floor covering centers, 66 auto centers, 108 Sears Travel branches and on-line shopping sites.

Sears is still committed to continuing with Eatons, Cohen said at the annual meeting, noting it's a work in progress. "Our focus will be on the seven stores, on building each store's personality, concentrating on fine-tuning and enhancing merchandise content, presentation and service," he said.

"Consumer response to the service levels we introduced to differentiate Eatons from our competition has been exceptional and we will continue to invest in this high level of personalized service," he added.