Faced with increasing competition and declining profits, Sears Roebuck and Co. yesterday announced it will close four regional offices and eliminate an entire layer of management to cut costs and tighten up management.
Sears said that by June 30 it would wipe out the territorial offices that serve as the administrative link between the company's Chicago headquarters and the 28 administrative offices directly responsible for running the 800 stores of the nation's largest retailer.
About 1,200 of the 1,800 employes in the four territorial offices will be affected by the reorganization, the company said; some employes will be offered early retirement or other positions within the Sears organization. The offices to be shut down are in St. Davids, Pa. (which oversees this area), Atlanta, Skokie, Ill., and Alhambra, Calif. Sears said the cost of the shutdowns will have a minimal impact on 1986 earnings.
"The new streamlined field organization will help speed decision-making and response to a fast-changing marketplace," said William I. Bass, chairman and chief executive of the merchandise group in a prepared statement. The Chicago headquarters will take over the functions of the territorial offices through a new 10-person field management office.
"In addition, by reducing administrative expense, it will help Sears maintain competitive prices at an acceptable profit margin," Bass added.
Wall Street, disappointed with Sears' recent earnings, immediately applauded the move, calling it a prerequisite for the chain's future financial health and predicting that it was the first of many centralization moves to come. The stock closed up 25 cents yesterday, at $46.67.
"This is very significant," said John S. Landschulz, financial analyst with Mesirow & Co. "Competition is extremely severe; it showed last year" when the company's merchandise division reported virtually no growth in sales and a 15 percent drop in profits -- from $905 million to $766 million.
"Changes are absolutely necessary if they are to be competitive. This move will save them money, but that is not the chief purpose. It will streamline their operations so they can have the right goods at the right time [in the stores]. They haven't been good enough," Landschulz added.
"This is probably step one in attacking their fundamental problem, that their cost structure is way out of line so their prices are not competitive," predicted Linda Kristiansen of Paine Webber Mitchell Hutchins.