In 1894, on the cover of one of its earliest catalogues, Sears, Roebuck & Co. proclaimed: "Our trade reaches around the world."
Today, 91 years later, the nation's largest retailer seems more determined than ever to make the slogan come true through its 3-year-old Washington-based subsidiary, Sears World Trade Inc.
Despite substantial start-up problems and great skepticism in the financial community, the so-far-unprofitable subsidiary appears committed to becoming a serious player in the increasingly competitive and risky international trading market.
The latest sign of that commitment came only a month ago, when the company announced it had agreed to buy an 80-year-old European and East Asian trading company, Hagemeyer N.V., for $25 million. As the distributor of consumer products worldwide, Hagemeyer gives Sears World the capability it has sorely lacked to reach foreign consumers directly. With that ability, company officials also hope comes the opportunity to become a full-fledged trading company.
The acquisition of Hagemeyer, with annual revenue last year of $840 million, "gives some indication that our commitment is there," said Richard Jones, vice chairman and president-elect of Sears, Roebuck.
Despite the more than $40 million in losses Sears World has incurred in the past three years, "we believe it's a viable concept, and we will continue to pursue it . . . . It's an important part of the family of companies in Sears, Roebuck," Jones said.
"We are quite confident we're on the right course," added Sears World chairman Frank Carlucci last week in a rare interview. Given Sears World's initial troubles -- which led to the resignation of its first chairman, Roderick M. Hills, 18 months ago -- Carlucci and other top executives have been reluctant to talk about the subsidiary and its future.
But now, confident that the Hagemeyer acquisition has put Sears World on a surer path to success, officials are beginning to speak out. Grand Plans Scaled Back
Initially, Sears World set out to be the American challenger to world domination by Japanese traders. It drew up intricate plans to become a full-fledged international trading company -- one that could arrange the financing, development, manufacturing and sale of a wide array goods, often through Sears, Roebuck and its subsidiaries.
For example, Sears World once envisioned helping Indonesia develop its forest resources. In exchange, Sears would have gained permission to export raw logs to China, South Korea and Japan. Sears World had planned to help China develop a pulp industry with the logs purchased from Indonesia. To accomplish this, the trading company would have sold China the pulp mill and the logs and then peddled the pulp produced there somewhere else.
But those grandiose plans have been dramatically scaled back. Now Sears World's goal, first and foremost, is to be a trader of the type of consumer goods for which Sears, Roebuck is known. "We were involved in too many activities and built a cost structure that couldn't be supported by revenues in the immediate foreseeable future," Carlucci said.
No longer a part of Sears World's plans are projects to import and export high-technology equipment, such as computers or components for computers. Also dropped was the goal of becoming a major international trader in health-care products, such as pharmaceuticals, chemicals and hospital supplies. Under this scenario, Sears World had planned, among other things, to equip foreign hospitals with U.S.-made goods.
"A number of these areas showed promise and were interesting, but we were engaged in too much; we needed to focus down on what we could do best," Carlucci said.
Similarly, the company has scaled back its global focus; now it is centering most of its attention on Europe, North America and Asia. Its interest in the Middle East, for example, has waned substantially. "We are not going to be everywhere, doing everything," as we had once thought, one Sears official said.
Today, Carlucci said, "we are a consumer-goods company. Once we have done that, we can move into other areas." Trading on Sears' Strengths
Carlucci is a longtime diplomat who was deputy secretary of Defense during the early days of the Reagan administration and deputy director of the Central Intelligence Agency under President Carter. Along with the subsidiary's president, Charles F. Moran -- a longtime Sears employe who has been instrumental in developing corporate strategy -- and Sears, Roebuck vice-chairman Jones, Carlucci has overseen the trading company's restructuring.
The subsidiary should trade on Sears' strengths, Carlucci said. Through its contracts with worldwide manufacturers to make products for Sears, the company "has a unique sourcing capability, a very large physical distribution system and an unparalleled skill in designing and developing a product," he said.
Carlucci bristled at the description of Sears World as a trading company. "It is a bit of a misnomer. It conjures up a bunch of people sitting around a table saying, 'I'll sell you this at $20.' 'No, I'll bid $22.' "
Rather, Carlucci said, "We're in the process of structuring long-term relationships between buyer and seller where we would bring our technical and physical skills to bear. That's very different than a traditional image of a trading company."
Carlucci declined to name the specific companies doing business with Sears World. But he willingly gave examples of the types of projects under way.
For the past three years, for instance, Sears World has been handling all of the imports for a U.S. company that sells athletic footwear. Venture capital for the same company was provided by Sears World's sister firms, Allstate Insurance Co. and Dean Witter Financial Services Group. The trading arm then supplied a letter of credit for financing and import services, including cargo management, document handling, custom clearance and warehousing. Sears says this is now one of the fastest-growing shoe companies in the country.
In another example,, a Sears World electronics engineer, observing that Japan would make a good market for computer software, translated some programs into Japanese; the trading company's Tokyo office began distributing the product.
"The business, while currently small, is quickly growing," said a corporate memo detailing some case histories.
Meanwhile, Sears World has been buying microwave ovens in Japan and distributing them in England through a retailer. Sears World provides the retailer "with the selling expertise accumulated by Sears, who is the No. 1 volume seller of microwave ovens in the U.S.," the memo said.
In a counter-trade agreement with Brazil, Sears has been exporting home furnishings products from Brazil, earning export credits that it is passing on, in turn, to a separate company that is importing telecommunications equipment into Brazil.
Although Sears World is focusing most of its attention on consumer goods, it also has been looking at other areas.
One of those areas involves trading light industrial goods, such as electrical and plumbing components and electronics. For example, Sears World has bought radio speakers for a large automotive company in the United States.
"We can do it more readily than they can," Carlucci said, noting Sears, Roebuck's already-large purchases of radio speakers.
Sears World is also experimenting with importing processed food, such as tomato paste, canned tuna and pineapple, and selling it to food brokers in the United States under a Sears World label. "There are a lot of small brokers out there," Carlucci said. As more food is purchased from abroad, "there will be a need for someone to provide economies of scale, so we would expect that area to grow."
Despite its reduction in scope, Sears World is not yet profitable, having lost $4.9 million on revenue of $105 million during the first half of 1985. Although this year's loss was less than half the $10.1 million loss incurred during the first six months of 1984, many financial analysts -- especially those who follow retailing companies -- are still very skeptical of Sears World.
"I think they're klutzes," said Edward Weller of E. F. Hutton Group Inc. "I don't know why they want to be in the business."
"I hope it's going to go away," said Walter F. Loeb of Morgan Stanley & Co. "It should be an adjunct to the merchandising group, not a separate entity . . . which is fraught with a lot of politics. I'm not sure that politics is what Sears understands."
International trade experts, on the other hand, praise Sears for its ambitious efforts.
"This is one of the first real trading companies this country has," said Ray A. Goldberg, a professor of agriculture and business at Harvard Graduate School of Business. "This is good for Sears and the country as a whole. . . . Despite their losses, it's not too optimistic to expect them to be in the black next year," he predicted.
"Sears is doing something very difficult," said David Fredericks, a principal and U.S. managing director for Fredericks, Michael & Co., a New York consulting and merchant banking firm for traders.
"I applaud them for trying to enter the toughest business in the world. It is rapidly building a trading organization from scratch so it can be an influential trading company in the international world of trade. It is a bold task. If anybody can succeed, they can. They have the financial muscle and a great sourcing operation -- Sears sources probably more than any other operation in the world." Hagemeyer Deal Is Critical
The Hagemeyer acquisition is critical to the company's future, Fredericks added. "It enables them to learn to distribute outside of United States and learn about commodities trading slowly."
Not only is Hagemeyer a large distributor of consumer goods; it is also the third-largest distributor of coffee in the world.
According to Carlucci, that fact is coincidental to the acquisition, which should be completed at the end of the year. "We're not ready yet to get into the commodity business," he said.
Despite his praise for Sears World, Fredericks faults Sears for locating the trading subsidiary in Washington. "No trader of any consequence is in Washington. They are located in New York or Chicago.'
Carlucci has heard that criticism before. Nonetheless, he is adamant that the company stay in Washington. "We have a decided advantage here," he said, citing the proximity of embassies, the State Department and numerous international organizations. And, he adds, "on a nice day, you can get into New York faster than most commuters."