Even after 98 years, Sears, Roebuck & Co. isn't too old to change some of its spots.
It can't afford not to, according to William I. Bass, 59, the new chairman and chief executive of Sears Merchandise Group, the world's largest retail organization.
Retailing "is more competitive than I've seen in my 35 years," Bass said. "A lot of stores are struggling."
The changes under way at Sears include:
* More than 110 newly remodeled Sears' stores -- called Stores of the Future -- designed to transform the 98-year-old chain from a utilitarian retailer to a more fashionable merchandiser. Sears' Bethesda store is the only local one to be transformed thus far, but other local locations will be among the 240 more remodelings scheduled for the next two years.
* A specialty computer retailing chain of 100 Sears Business Systems Centers -- four in this area -- that sell a wide variety of personal computers and software.
* Four experimental paint-and-hardware stores, designed to imitate neighborhood hardware stores where consumers can go to pick up small tools and nails.
* A plan to enter the rural areas that Sears and other traditional retailers have ignored in favor of the most populated and profitable urban areas. The first of these new stores, scheduled to open this February, will be about one-sixth the size of the mall-size Sears, featuring Sears' strongest merchandise: appliances, hardware, paint and its catalogue departments.
The second store, to open this spring, will be about one-third the size of a mall store, focusing on apparel and home fashions such as linens and bedspreads, traditionally Sears' weaker lines.
Bass hopes that these various lines of activities will help lift Sears out of the doldrums it is now experiencing.
Like many other retailers across the country, Sears is not having the merriest of Christmas seasons this year. In November, its sales were up only 3.1 percent above last year's record-setting levels. This month, sales are not expected to be significantly better than last December's.
Retailers pin much of the blame for current lackluster sales on the weather. Warm weather cools off interest in coats, sweaters and other foul-weather gear that normally are mainstays this time of year. And it doesn't do much for sales of car batteries, snow tires and other automotive supplies that are considered part of Sears' primary business.
Yet, the struggle for shoppers' dollars would be tough even if the weather were good, because of the increased number of players in the retail industry, financial analysts note.
"The amount of choice and availability to consumers over what to buy and where to shop has never been higher," said Louis W. Stern, executive director of the nonprofit Marketing Science Institute.
Discount stores, especially those selling apparel, are among the newest players. Five years ago, these stores accounted for less than 1 percent of all clothing sales; today, they sell about 5 percent of all fashion merchandise, noted Daniel Barry, vice president of Kidder Peabody & Co. Inc.
Discount department stores such as Bradlees and Wal-Mart also are taking an increasing portion of the shoppers' dollars from the traditional retailers, as are specialty retailers such as Toys 'R' Us and Circuit City.
The increase in players comes at a time when the economy is growing very moderately, noted William Davidson, chariman of Management Horizons, a consulting firm that specializes in retailing. "Since retailers can't get any more money from a strongly expanding economy , they have to get it by taking money away from someone else. That makes the market-share battle like a war," Davidson said.
"Department stores have become very aggressive," Bass said. "Consequently, we as an industry will be hard pressed to maintain our gross margins," or profits.
"You already saw some of that in the third quarter," he noted in an interview last week in his Sears Tower office where he directs an operation with more than 800 stores and 721 catalogue outlets and oversees more than $25 billion in sales business a year.
Sears, for example, saw its profit margin drop from 3.3 percent in its second quarter to 2 1/2 percent in the third when the company earned $164 million on sales of $6.5 billion.
Faced with this increasing competition and declining profit margin, Bass plans to press ahead with the massive $1.7 billion Store of the Future remodeling program. "That will give us the opportunity to hopefully change the balance of sales" at the company's stores, he said.
By emphasizing apparel and home fashions such as linens and bedspreads, Sears hopes to lure traditional customers -- who come to Sears for hardware, tools and durable goods such as refrigerators, washing machines and air conditioners -- to buy their clothing and accessories at Sears as well. Bass said the hope is that the new business will offset a decline in housing tarts, which in turn reduces the demand for Sears' appliances.
"We are the durable retailer . We don't intend to lose that," he said. But, he added that he does intend to make Sears a more-well-rounded retailer.
So far, the new approach shows signs of success, Bass said. For the two months he has monitored the stores, sales at the remodeled stores were significantly above those at the older stores -- 11.4 percent greater the first month and 8.4 percent the second.
Although some analysts question whether that increase is sufficient, given the large amount of capital Sears is putting into its Store of the Future plan, Bass disagrees.
His reason: The profit margin at these stores has shown "a perceptible improvement," increasing by 0.3 percent the first month over the other stores and by 0.4 percent the second month. "I think it's a very strong showing," the soft-spoken Bass said.
The work on the Store of the Future was begun by Bass' predecessor, Edward A. Brennan, who was named president and chief operating officer of the entire Sears company last August.
Bass, who has held numerous executive positions at Sears -- including general manger of the chain's stores in the Washington metropolitan area -- was Brennan's logical successor because he was responsible for the implementation of the Store of the Future program, company officials say.
As one financial analyst noted, "Brennan was the inspiration; Bass, the perspiration" -- a description Bass chuckled at approvingly.
Bass also is looking at other corporate strategies to make sure Sears maintains its edge as the nation's largest retailer. To meet this goal, Sears -- like other national retailers -- is looking more and more seriously at specialty retailing.
Sears is already a large specialty player in the burgeoning personal computer business, with its 100 Sears Business Systems Centers open around the country. The centers sell a wide variety of personal computers, including the rival IBM and Apple Computer desktop machines, as well as software.
The computer retailing industry "is going through a transition. We will be one of the players," Bass said confidently. He added that he plans to "open a few more stores in January and then we'll play it by ear."
Sears also is exploring a nationwide chain of small paint and hardware stores to carry some of the company's best selling merchandise.
In the experimental stage for two years, these four stores have been rather disappointing for the company, according to industry experts, who say Sears had planned to roll out 100 of these stores.
"Their selection was very limited so there was not enough reason for enough people to shop there," said Wyatt Kash, editor of the National Home Center News, a trade publication that oversees the do-it-yourself retailing industry. "You couldn't get everything you needed."
However, Sears has revised its line of goods to include smaller electrical and plumbing items to make it more like a full-scale neighborhood hardware store. "We are changing it to more of a convenience hardware store for the neighborhood where you can run down the street for screws and tools," Bass said.
"I am comfortable with them" now, he commented, adding that he plans to open about six more in the Chicago area next year to test the concept before the company goes further.
At the same time, Bass plans to open smaller Sears stores in rural locations that Sears and other large retailers traditionally bypassed for the larger -- and more profitable -- cities. "This is an opportunity to build volume and market share because we have not been as strong in some of the smaller towns as we feel we should be," he said.
So this February, Bass will open his first small Sears store in Michigan. He said that he will not name the exact location because "I haven't told my employes yet."
The store will carry Sears' traditional strong lines -- appliances, hardware, paint and a catalogue department.
Meanwhile, Bass is working on another specialty store program in rural areas. This one will concentrate on some of Sears' weaker lines: apparel and home fashions. "It might not have the full range of wearing apparel . . . sports coats and slacks but not suits," perhaps, he commented.
Bass intends to open one this spring and experiment with both of these new concepts slowly. "We're not anxious even to publicize them, rather to work with them and to learn, and then we'll be in a position to make a decision as to how many and where they go," he said.
Some analysts questions Sears' increasing emphasis on apparel. "That's an area that has become very saturated with competitors," Kidder Peabody's Barry noted. "Supply is increasing faster than demand, and unless the laws of supply and demand have been outlawed, there will be permanent pricing pressures" for all apparel retailers.
Even so, Barry and other analysts note that Sears may have no other choice. For one thing, they note that Sears already is preeminent in its sales of appliances and hardware equipment.
"They are not going to gain more of a market share of the drill-press business," said Edward Weller of E. F. Hutton Group Inc. "How many more table top saws, electric drills and 'Die-Hard' batteries can Sears sell? They already own the market there."
On the other hand, Weller noted that Sears sells about 1 percent of all clothing in the United States, and "clearly they can go further."
Barry added that Sears needs to go further, because more and more consumers are buying their appliances outside the suburban shopping malls, in specialty appliance stores and do-it-yourself home centers. "Malls are increasingly the place to shop for fashion and impulse goods and less and less a place to shop for durables," Barry noted.
Yet, given the increased competition, the strategy will not be easy for Sears, he said.
Nor will its plan to enter the rural area, because all retailers are setting their sights there now that there are fewer areas available for new suburban malls.
"Everyone is looking at small towns, so overstoring will show up real fast," said one analyst who declined to be identified.
In the long run, analysts believe Sears will still be the preeminent supplier of appliances to Mr. and Mrs. America -- no matter what the retailer's diversification plans. "Sears will be the dominant retailer of hard goods in the United States," Monroe H. Greenstein of Bear, Stearns & Co. predicted. "That will be their niche in life."