Volume 17, Issue 2 Winter, 2015

The Holdings Saga Continues into the Holiday Season— Will a Grinch or a Santa Claus Be in Sears Future?

Sears Holdings has been in the Congress created REITs decades at least 90 percent as dividends. headlines more than usual dur- ago as a way to let ordinary Ameri- Companies have created REITs to ing the past month—some good cans buy shares in skyscrapers, lower taxes and boost returns to news, some not so good news. For shopping malls, and office build- their shareholders. example, there were headlines such The REIT spinoff would provide as: “ Considers REIT Sears with additional cash. Assum- to Raise Cash.” “Sears Stock Sky- ing an average of $56 a square foot, rockets on Real-Estate Potential,” analysts at Evercore ISI estimate “For Lampert, a Big Step to Tap the Sears REIT might be worth Sears Real Estate,” “Would a REIT $1.9 billion. And Sears might see Actually Help Sears?” “Sears Still $1.4 billion of that, which would Can’t Call Itself a Store of Value,” be enough to fund operations for “The Incredible Shrinking Sears,” another year at the rate it is burn- “Sears: The Death Spiral Contin- ing cash. But the REIT’s real worth ues,” “Department Stores Far from won’t be known until the stores are Dead Despite Sears’ Disaster,” graded and valued. “Sears Is in a Hole it Cannot Get Out Of.” Sears Stock Soars When Sears announced on Novem- The company has been closing ber 7 that it was considering selling stores, slashing inventory and upwards of 300 of its buildings to selling off assets to generate cash after nearly a decade of falling CEO Eddie Grinch This issue of STRAIGHT TALK: sales and dwindling margins. Last SHC Saga Continues p. 1 October Sears sold its full-line ings just as they could buy stock in Lowe’s Tops Sears? p. 4 store in Cupertino, California, for a company or mutual fund. Life Insurance Alert p. 5 $102.5 million. The basic rules are relatively sim- Syracuse Retiree Club p. 6 A lot has been written about Sears ple. REITs have to have most of Obituaries p. 8 Holdings wanting to set up a Real their assets and income tied to Chairman’s Page p. 9 Estate Investment Trust, or REIT, real estate, and they pay no tax on Former Great Merchants p.10 that will involve around 300 Sears income distributed to their share- SHC Gets Perfect Score p.12 stores. Exactly what is a REIT? holders as long as they pay out Esplanade at Aventura p.12

—STRAIGHT TALK Winter 2015— 1 boost its liquidity and forming a man Lampert and ESL Investments Cerberus Capital Management, REIT that would hold the stores, since they are the largest share- Sun Capital Partners and Lubert- the company’s stock jumped more holders in the company. Adler. These three firms stripped than 31 percent. the 59-year retailer of its assets and Financial analyst Brian Sozzi, separated its real estate portfolio As reported in the Sun- calculated that Sears lost close to into a REIT. Times on November 10, “The another $500 million for the most company (Sears), which was once recent quarter. So, as a result of a On October 17, 2008, the company a staple of American shopping is REIT, is the solution to have Sears’ announced that it would liquidate facing pressure from nimbler ri- best store locations pay rent each its assets through a Chapter 7 vals such as Wal-Mart Stores and month? What that would do is to bankruptcy filing. Thirty thousand Home Depot. It’s also dealing with provide cash-strapped Sears with people were put out of work. broader industry issues, includ- significant cash injection in an Mervyns’ collapse reveals danger- ing a slow economic recovery and attempt to buy more time to turn ous flaws in the private equity shoppers who are taking their dol- things around. playbook. It shows how investors lars elsewhere.” Even a REIT comprised entirely of with risky business plans, unre- While Sears’ stock skyrocketed the best remaining 200 to 300 re- alistic financial assumptions and for one day, the company reported tail locations (under master lease competing agendas can deliver a that it expects third-quarter sales agreements with Sears) might not death blow to companies that oth- to dip 0.1 percent at established be popular on Wall Street due to erwise could have survived. locations. An expected 0.7 percent the company’s junk credit rating, Mervyns’ new owners were eager to decline at Sears stores offset a 0.5 declining sales and consistently turn the company’s real estate into percent increase at stores. huge losses. gold. When the acquisition closed, Last August, Sears reported its The lease payments from Sears they split the company into two ninth straight quarterly loss as Holdings to the REIT would most main pieces—the retail operation sales continued to slide. likely exacerbate the company’s and a much more valuable entity As The Wall Street Journal recently negative cash flow by the amount of that held the real estate. reported, while Sears’ “latest round contract rent on the master leases. Over time the owners would shut of imaginative financial engineer- In addition, the new REIT manage- down 90 underperforming stores ing (has offered the company) a ment and Sears Holdings would and close two of its four distribu- reprieve, (it) doesn’t solve its funda- likely have conflicting interests and tion centers in order to sell some of mental problems of unprofitability.” vision for the real estate assets. the land they owned. They also sold Would a REIT Help Sears? According to Benzinga, in the event the decades-old property leases on Maybe yes. Maybe no. Can a REIT of a Sears bankruptcy, all bets are many other stores to outside com- strategy really rescue Sears Hold- off, as a messy situation rife with panies—and then turned around ings or is this just another spike on potential conflicts of interest could and rented the property back at real-estate related news destined to unfold over several years. current market rates. The owners collapse under a pile of operating kept the proceeds from the land and Target and Mervyns losses, as reported by Benzinga’s lease sales for themselves. In 2008 hedge-fund manager Bill Stoller. (Benzinga is an inno- Bill Ackman urged Target Corp.’s The Mervyns demise offers a sad vative financial media outlet that shareholders to spin off the com- glimpse into the human suffering provides investors with unique pany’s real estate, valuing such a wrought by owners looking to turn content used by Wall Street’s move at $5.1 billion. Investors voted a quick profit above all else top traders.) down the proposal. Shareholder Advantages As a result of the one-day Sears Mervyns, the middle-scale de- As unattractive as a REIT may stock soar on November 7 that partment store chain based in sound, there could be some resulted in an increase in equity Hayward, California, and originally advantages for existing Sears capitalization of about $1.08 billion, owned by Target, was taken over by it was a very good day for Chair- three private equity titans in 2004: —STRAIGHT TALK Winter 2015— 2 shareholders. Benzinga suggests nication colocation properties. It Analysts at Credit Suisse said three such advantages: has a massive real estate portfolio. that Sears Holdings would likely put its best performing stores into 1. Assuming the leases are struc- In summary, the key to adding the REIT, which would need to be tured so the REIT would have tangible value for Sears’ sharehold- strong enough to stand on its own. taxable income, at least 90 per- ers from a REIT strategy can only Sears said it would lease the stores cent of it must be paid out in the come from a “block and tackle” ef- back from the REIT and continue form of dividends to sharehold- fort, and a vision to transform the to operate them. ers—not squandered on failing bottom 1,500 locations, not from retail operations monetizing the top 300, according Credit Suisse analyst Gary Bal- to Benzinga. ter said that by playing the REIT 2. There is a chance these real card, Sears is using what the bulls estate assets could be “walled Credit Ratings on the stock have long argued is off” from Sears’ creditors, in a At Sears, things are bad enough the real value in the company, its similar fashion to the U.S. rights that Fitch lowered its debt rating “real testate.” to valuable brands like , from CCC to CC last September. A Diehard and , which CC rating indicates highly vulner- Sears said that the REIT deal would are held in a separate entity. able, very speculative bonds. With produce substantial infusion of such a rating it is both difficult and cash. Analysts, however, are skepti- 3. The new REIT management may expensive for Sears to continue to cal that the company can continue be more focused and have more borrow money to pay its creditors to raise the funds it needs un- success in maximizing long-term less its operations turn property values around. Fitch Ratings than current concluded in an analy- stalled initia- sis earlier this year tives of Seritage that the company could and Ubiquity likely only raise enough Critical Envi- money to last through ronments. 2016 if it doesn’t stop You may recall bleeding cash. that Seritage is A spinoff would capital- Sears’ secret re- ize on the most valuable alty trust. It is asset remaining in described on its Sears’ portfolio—real home page as a estate—and reward nationwide devel- investors who have oper of commercial been pushing for such real estate. It was a move for years. While formed in 2012. CEO Its portfolio con- CEO Santa Lampert has previously tapped tains over 200 property holdings to properties located in 33 states and and maintain inventory shipments raise cash, the REIT would be by totals over 18 million square feet. from suppliers. far the largest. Their website conspicuously fails (Fitch Ratings is a global rating to mention the connection with Analyst Matt McGinley, with Ever- agency dedicated to providing value Sears Holdings. core ISI said about Sears real estate beyond the rating through objec- move: “It’s among the last things Ubiquity Critical Environments is tive and balanced credit opinions, that they would be able to do in another Sears-created business research and data. It is a jointly terms of monetizing the assets. that is a developer of datacenter, owned subsidiary of the Hearst There’s not a whole lot left.” business continuity and commu- Corporation and FIMALAC SA, a French holding company.) —STRAIGHT TALK Winter 2015— 3 While the REIT move would raise and its appliances could find a huge money, it also would bring addition- market online or through other Lowe’s al expenses. McGinley estimates retail outlets. that the company would pay about Top Appliance According to Daniel Jennings with $150 million in mall rents if it goes Market Madhouse, “The best an- Seller by 2016? through with the plan. swer is that Sears could survive According to Gary Balter, an ana- “It’s one additional burden on a under a different management lyst at Credit Suisse Group AG in company that’s burning over $1.5 team. The problem is that its CEO, New York, Sears Holdings may lose billion in free cash flow,” he said. Lampert, does not seem to be in- its title as America’s top appliance “This places Sears as a retailer in terested in running a department seller in about two years, as re- a more precarious predicament.” store, instead he’s only interested in ported by Bloomberg News. whatever cash he can wring out of Sears Response it now. The REIT is only the latest Sears had 28 percent of the major Sears said last month that it ex- maneuver to squeeze more money appliance market in the United pects its debt load to decline this out of Sears.” States in 2013, and that share year. The spinoffs, however, could could fall to 10 percent by the end reduce the margin of safety for Can Sears Survive? of 2016. If Lowe’s picks up a quarter creditors in an extreme hypotheti- Is Sears dead because management of the shares Sears loses, it would cal event in which the company is does not understand retail? How be the top appliance seller by the liquidated to pay its debts. does selling assets to raise cash end of 2016. return a retailer to profitability? Sears currently operates about Could Sears survive with a new Sears, which led the appliance 1,800 stores. If the company com- management team? market with a 42 percent share pletes a REIT deal, it may ultimately as of 2002, also has lost sales to own 400 to 500 stores and lease Or, do you believe what Chair- Best Buy, said Matt McGinley, an the remainder, Chief Financial Of- man Lampert said at Sears’ annual analyst at Evercore ISI in New York. ficer Rob Schriesheim said on the meeting last May that he has set However, McGinley doesn’t expect company’s blog. “We would realize in play a transformation vision for Sears appliance market share to substantial proceeds from such a the company. “Transformations are plunge as much as Balter does. sale, which would further enhance about innovations and iterations— our liquidity,” he said. new and often incremental versions “There is a customer who still val- of changes. We didn’t fully hit on ues the Kenmore brand, (and) that According to Chris Brathwaite, the importance of our Shop Your just tells you that they’re not com- Sears’ spokesman, “We believe we Way platform at first, but serving pletely irrelevant in this particular have financial flexibility, particu- our members, wherever, whenever, category,” McGinley said. larly as we enter the holiday season, and however they want to shop, is and we expect it will provide con- He estimates Sears’ appliance sales how we are transforming our com- fidence to our vendors and other share may be at a range of about pany today.” constituents that we can generate 17 to 21 percent in the next two the liquidity needed to invest in Editor’s Note: This article was years; depending on how many our business.” assembled from the following re- stores it closes. ports—Reuters, November 7, 2014; A Critic’s Response If Sears loses the top appliance Bloomberg News, November 7, 2014; After digesting all of the above seller title that it had held for de- The Wall Street Journal, November comments about Sears’ future, cades, it would be another casualty 8 & 9, 2014; Market Madhouse, some people will wonder if Sears of CEO Lampert’s plan to remake November 9, 2014 article by Dan- can be saved if a smaller, leaner his department store chain. iel Jennings; Chicago Sun-Times, Sears might be able to carve out November 10, 2014; Benzinga, Sears posted just one gain in a new retail niche. After all, there November 10, 2014 article by Bill quarterly same-store sales since are still lots of loyal Sears custom- Stoller; and Bloomberg Business- Lampert merged Sears and Kmart ers out there, and Sears’ iconic Week Magazine, November 25, 2008 nine years ago. brands, such as Craftsman tools, article by Emily Thorton. —STRAIGHT TALK Winter 2015— 4 LIFE INSURANCE ALERT!

Back in 1997, then-Chairman Arthur Martinez ret- protected in bankruptcy. But the Pension Benefit roactively took the promised “paid-up” life insurance Guarantee Corporation, a government agency, secures from the retiree population, previously covered by this pensions up to a certain amount. But there is nothing life insurance. He did this by implementing a change, securing life insurance in a bankruptcy. effective January 1, 1998, under Sears Group Life Any Options? Insurance Plan that resulted in a reduction of the If the worst-case scenario occurs and Sears would Sears-provided retiree life insurance over a 10-year liquidate its assets, retirees will have very few options, period ending with the year 2007. if any, to replace their insurance. Various lawsuits were filed by retirees and were If you are an AARP member, you may have read about eventually consolidated in the U.S. District court in the $10,000 to $50,000 permanent coverage from New Chicago. N.A.R.S.E. supported these lawsuits but was York Life Insurance Company. The rates are based on not one of the plaintiffs. your age when coverage starts, so the younger you are This “paid-up” life insurance must be distinguished when you apply, the lower your monthly rate will be. Also, from the Group Universal Life (GUL) that many re- the rate is guaranteed and won’t go up for any reason. tirees purchased. The GUL is not subsidized by However, the applicant must be 80 or younger Sears and is strictly between the retiree and to apply, and the older you are, for many, the the insurance carrier, which is the Prudential rates could be prohibitive. Also, there is no Insurance Company of America. medical exam; just three health questions The “paid-up” life insurance that was sub- that will vary depending upon what state ject to the 1997 class action lawsuit was you reside in. If you feel this might be an settled in 2002. Based upon the settlement option for you, you can call New York agreement, Sears cannot reduce the final Life at 1-800-269-2016. insurance amount to less than $5,000. ALERT We would assume that most insurance When Sears announced the change carriers have similar age restrictions in the “paid-up” life insurance, the company offered and prohibitive premiums. So, realistically, there are retirees the opportunity to purchase replacement life no life insurance options if Sears declares bankruptcy. insurance that would restore the coverage that Sears Therefore, for many reasons, it is in our best interests was taking away. However, because of the substantial that Sears survives, especially so that our life insur- increase in the premiums over the years, many retirees ance remains intact. have dropped this replacement coverage. However, retirees can’t help but worry when they read All retirees entitled to this “paid-up” life insurance comments from a veteran retail sector financier How- should have received a statement from Sears stating ard Davidowitz of Davidowitz & Associates who says: the exact dollar amount of life insurance they have. “I don’t think Sears is viable. I don’t think they can If you have not received such information from Pru- survive in their current state. Too many things have dential, call the insurance carrier at 1-800-778-3827. gone off track. Too many customers have been lost, Now comes the ALERT! The insurance premium to and it’s too expensive to bring them back.” cover the cost of this retiree life insurance is paid by In short, under the management of Eddie Lampert, a Sears on an annual basis. As long as Sears exists, your lot of sins have been committed at Sears. Redemption insurance is secure. However, if Sears would liquidate may not be possible. “It’s too late. Something different its assets through a Chapter 7 bankruptcy filing, the has to happen to the company, and I honestly don’t premium payments by Sears would stop, and your life know what it can be,” says Davidowitz. insurance will be cancelled. Maybe the new motto for Sears retirees should be: Under the bankruptcy code, life insurance and pen- SHOP AT SEARS. SAVE Your LIFE INSURANCE! sions are considered “welfare benefits” and are not —STRAIGHT TALK Winter 2015— 5 Retiree Club Corner SYRACUSE, NEW YORK RETIREE CLUB

John Freeman is the The club has brunches president of the Syracuse (mini-meetings) 10 times Retiree Club. He retired a year at Denny’s on the from Sears in 2002. His first Thursday of each co-vice presidents are month. Usually 20 to 30 Ed Weinstein and Nancy members attend. These Bentz. Ed retired from meetings are primarily Sears in 1991 and Nancy social but also give the in 1998. members an opportunity to get information and John’s club has about have discussions. 140 members. He said, “We have our large meet- As part of these meetings, ing at the club’s annual each person contributes picnic every July. A small a dollar. There is then a group of the very active drawing, and the winner members meet weekly at gets his or her break- the Gardenview restau- fast free. The remaining rant just to keep up with money goes to the kitty. each other but to also This adds up throughout share information about the year and enables the club members. All meet- club to buy gift cards ings are very informal to add to donated gifts and comfortable.” at the Christmas party and the summer pic- The Syracuse, N.Y., Club nic. These meetings also closed out last year with Club President John Freeman and provide a drop off for a festive Christmas party. Vice President Nancy Bentz veteran donations. There were 83 attendees, which included 53 former em- Christmas cards, ployees. This was a great turnout writing paper, considering that a number of key etc. One club members passed away, including member at last John Gory, a store manager for year’s Christmas many of the members from the late party donated sixties through 1981. forty dollars’ worth of stamps. The Christmas party included a sit- down dinner, 50/50 raffle, Sears’ Vice President memorabilia and gift card prizes. Nancy Bentz and The party was also an opportunity Jessie Olin are to drop off donations for the vet- the key players erans at the Syracuse VA Medical in making the Center. John said that the club Christmas par- supports the veterans through- ties a success. out the year with donations such as clothes, toothpaste, toiletries, Everyone Smile!

—STRAIGHT TALK Winter 2015— 6 Annual Family Picnic The club picnic is held every July at Onondaga Lake Park. The club supplies the meats, breads and bottled water. Everyone brings his or her own favorite dish to share. Volunteers set up the area, man the three grills, handle the 50/50 raffle, etc.

The picnic is also used as an open forum, for those that do not attend the monthly brunches, to ask any questions. However, John Free- man, Ed Weinstein, and Nancy Bentz are available throughout the year via phone to respond to any retirees’ questions.

Freeman said “good and per- sonal communication is the key to our club’s success. The glue that keeps our club together is Christmas Party Nancy Bentz. She puts out all e- Every organization has someone John’s e-mail address is: mails, mails the Christmas and who is indispensable; Nancy is [email protected]. He picnic letters to those that do not that person for the Syracuse Re- can be reached by phone at 1-315- use e-mail and buys supplies. tiree Club!” 652-5241.

—STRAIGHT TALK Winter 2015— 7 In October of 1995 he was ap- lege in Pennsylvania, where he David W. Raymond pointed by then Illinois Governor had earned his bachelor’s degree Dave, who Jim Edgar as an original member in political science in 1967. He w a s v i c e of the Northern Illinois University earned his law degree from Temple president (NIU) Board of Trustees. He served University in 1970. on the board from January 1,1996, and general Since May, 2004, Dave adminis- until September of 1998. counsel of tered academic award programs Sears, died “Dave came to this board with for student members of the fra- s u d d e n l y a keen interest in higher educa- ternity and maintained relations June 21 at tion, but without much specific with key staff members and the the age of 68, knowledge of NIU. That changed college and the fraternity’s na- after a brief quickly,” trustee Bob Boey said on tional headquarters. battle with chronic lymphocytic the day of Raymond’s final meet- In addition to his many activities, leukemia. He had just celebrated ing nearly 16 years ago. his 40th anniversary with his wife he volunteered at Ford’s Theatre Margaret (Peggy) in the Bahamas. “Dave took his role on this board very in Washington, D.C., every Thurs- seriously and spent many hours fa- day, said his wife. He had so many Dave worked in the governmen- miliarizing himself with the campus, projects that he set up three desks tal affairs and law departments its students and staff and its mis- … one for travel plans, one for of Sears from 1970 to 1986 and sion,” Boey added. “In the process, genealogy, and one for civil war in its corporate planning depart- David Raymond the trustee became letters, she added. ment from 1986 to 1990. He then David Raymond the loyal supporter.” returned to the law department Ron Olbrysh, who worked with, in the Sears Merchandise Group His support took on tangible form and for Dave during the pe- and, in 1993 was elected its vice in April of 1998, when he donated riod of 1986 to 1995 said that president and general counsel. $25,000 to the NIU Foundation he was an outstanding, com- to fund faculty innovations in passionate attorney and great He left Sears in 1995 for the computer-aided teaching. friend who will be missed. Washington, D.C., offices of Win- ston & Strawn LLP, where he In 2004 Dave became president Besides his wife Peggy, his son provided legal advice and counsel of the Alpha Tau Omega Chapter Russell and daughter, Pamela to the law firm’s business clients. House Corp. of Gettysburg Col- Weber, survive him.

He joined the Navy in 1942 and 33 years, where he received vari- John C. Hoffman left January 1946. He served ous awards including the Order One year ago on the U.S.S. Sangamon during of the Arrow, and in 1978 he was in Straight World War II in both the Atlantic awarded the Silver Beaver award Talk we had and Pacific. from the Atlanta Group of Scouts. The Silver Beaver is the highest an article During his career at Sears, he award given to volunteers. about John worked at the Gordon Street and a pic- store in the plumbing depart- Many of his pallbearers were ture with his ment; was the West End manager Scouts who stayed with his wife Fran- of the garden shop; and in the wife Francis at the funeral c i s . T h e y furniture department at the home during the wake. John were mar- Shannon Mall. had many friends, and the At- ried 46 years. He was a member of lanta Big Club will miss his John was a volunteer with the the Sears Atlanta Big Club. He died presence at their meetings. November 15, 2014, at the age of 94. Boy Scouts of America for over

—STRAIGHT TALK Winter 2015— 8 Chairman’s Page Renew Your Membership in N.A.R.S.E. Today for 2015!

We again thank you for your plication form to someone who could benefit from past and present support for membership in our organization. If you have any com- our retiree organization, which ments, suggestions or questions, you may contact me. has been in existence for the We need your support to continue our mission of com- past 17 years. Our purpose municating with retirees, Sears’s officials, legislators, for existence is to keep you regulators, the media and the general public about all informed on issues important of our retiree concerns. to retirees and to be your inde- pendent voice to our company, We are here to serve you, so please let us know what we can Sears, Roebuck and Co., now do for you. You may contact me at [email protected]. known as Sears Holdings. If you didn’t know what a REIT was before reading this Your continuing financial sup- Ron Olbrysh, issue, you should know now. Is Sears Holdings having port keeps us going strong. N.A.R.S.E. Chairman problems because management does not understand Straight Talk, with informative articles about Sears retail? Time will tell. Holdings and other articles of general interest for our We read a comment recently from an anonymous retirees, could not be printed and mailed without your source that said: “How does selling assets to raise cash support and the support of many others. In addition, return a retailer to profitability? They are spending all our web site, www.narse.org would not exist without of their time and effort raising cash to cover the losses your financial contributions. the stores are incurring. N.A.R.S.E. is your independent voice, so please contact “So what happens after all the hard assets are sold? us with any concerns you may have about Sears Hold- The brands are really not all that strong anymore. ings, your benefits or any other matters of a general Kenmore and Craftsman are not all that valuable as interest to the retiree population. evidence by the rise of Home Depot and Lowes over- Renew Now taking Sears in appliance and tool sales. If you have not already done so, I am asking you to “You would have to have rocks in your head to buy into renew your N.A.R.S.E. membership now for 2015. a REIT that will be completely reliant on Kmart and Enclosed is a membership/renewal application form Sears staying in business and paying rent.” and mailing envelope. Have a very Merry Christmas, Happy Holidays, Happy New If you have already renewed, Year, and the best wishes for Sears and all of us in 2015. then please pass the ap- Wishing Sears Holdings a Prosperous Holiday Season Filled with Increased Sales … and a New Year Blessed with Profits.

—STRAIGHT TALK Winter 2015— 9 Sears, Where Great Merchants Used to Reside

With all of the recent news about opment. First, there was Richard Then, Roebuck’s place was taken by SHC, including REITS, selling off Warren Sears, the founder, who , also known as hundreds of stores, years of fall- was a “swashbuckling salesman.” “J.R.,” a man whose administrative ing sales and dwindling profits, As one of his colleagues said, “He and business skills struck the proper we thought looking back at the could probably sell a breath of air.” counterbalance to Sears’ dynamism. great merchants that created Sears His boldness made the company. Under Rosenwald, Sears became a would be enlightening. He worked day and night creating the catalog empire. The network of fac- The strengths and weaknesses of prose for his big, illustrated catalogs tories selling products to Sears and Sears are almost the same as those that became for significant segments the means of financing and moving of the United States itself. But de- of the population one of the only two goods became so large and complex pending upon who is in charge, the books they ever read. These big books that the company became a full- results can be radically different. promised “free trial offers” and fledged working economy unto itself. unheard-of “money back guarantees.” Sears Beginning The third of the Sears greats was As author Donald R. Katz set forth in Richard Sears’ description of items General Robert Wood, who took the The Big Store, the company began in 1886 “at a terminal alongside a rail- way track in the middle of nowhere, when a 23-year old man came upon a means of selling gold-filled watches to rural folks who previously marked their lives by the movement of the sun.

“By the time moved his budding business from Minnesota to Chicago and teamed up with a quiet watchmaker named , it was clear that the kid was possessed of a Richard Warren Sears Julius Rosenwald peculiar strain of genius that ren- dered him capable of convincing otherwise skeptical individuals to taught the common folks about firm from into retail sales. buy things they’d never even heard cream separators, bicycles and even of from a man in Chicago, Illinois, While all three were obviously su- machines that sewed clothes. He even who they’d never even seen.” perb businessmen, Rosenwald, was offered to send out sure-fire bottled exceptional because he was also a In addition to Katz’ book, an earlier cures for consumption, drug addiction, moralist. He set standards for deal- book about the company is Gordon stammering, deafness and stupidity. ing with the public that dictated L. Weil’s 1977 Sears, Roebuck, U.S.A. Sears new partner, Julius Rosen- that the company would not cut cor- Rather than “reinventing the wheel” wald, became determined to rein ners and would keep its promises. we have taken passages from these in Richard Sears’ more tendentious books about the company’s history Richard Sears succeeded because he salesmanship. Finally, in 1908 and comments about the three corpo- knew his customers. The catalog was Sears decided to quit the company. rate giants of Sears, Roebuck and Co. in them, waiting to be pulled out and Systems were replacing his literary put in print. But it would never have Profile of a Corporation talents, and it seemed that he was kept selling over the decades if a man Like many other corporate giants, out of place in his own company. called Julius Rosenwald had not Sears bears the imprint of just a He sold his stock in 1913 and died few people who shaped its devel- during the following autumn. —STRAIGHT TALK Winter 2015— 10 been around to turn the fantasy of adopted later by the government phases of the retail business are the catalog into commercial reality. as public policy—the county farm- linked. But it all begins with real agent program and decent schooling estate—where to build the stores Rosenwald’s obvious skill, as presi- for blacks, among them. and what kind of stores to build. dent of Sears, was in attracting and retaining inventive and dynamic peo- At the time that Rosenwald passed To translate Wood’s vision into ple and then letting them get on with the management of Sears to General commercial reality, a real estate the job. Without Rosenwald’s ability to Robert Wood, the Golden Age of the department was created. It quickly solve the problems of such transfor- American catalog was already in became one of the most important mation, it is likely that Sears, Roebuck decline. The big books had thrived at departments in the company. would not have been able to survive. a time when over half of the popula- Today’s Profile tion lived in rural areas. When Wood Rosenwald was the model of modern What seems to be lacking in the arrived at Sears in 1922, he said the corporate manager. He believed that transformation of Sears Holdings future could be seen in the Model fair management of a private compa- today is the dash, the flair and the Ts, and the growth of large cities. ny could bring benefit to society as a retail expertise of the earlier days. whole. He realized that business was The General dreamed of a company so Sears, Roebuck, for all of its size, not everything in life and devoted him- deeply entwined in the life of the nation was a company created by its three self to an extraordinary philanthropy that it could call itself “the purchas- “greats”: Sears, Rosenwald and Wood. ing agent for the American people.” Because the company had relied Wood decided to use the regional so heavily on people brought up mail-order plants Rosenwald and through the ranks, the heads of the his catalog men had built as sup- company who succeeded the “greats” ply bases for a sprawling network of embodied the same values and the stores. By 1928 there were 27 stores, same way of looking at the business. and by the end of 1929 there were Yes, today merchandising is certain- 324 of them. In 1932 the volume ly different than it was during the of the General’s retail store sales time of Sears, Rosenwald and Wood. surpassed those of the catalog. How would these merchants have Wherever people moved to build new responded to the digital age, social homes it seemed that a well-stocked media, Amazon.com, etc.? The es- General Robert E. Wood Sears’ retail store was located sence of their lasting contribution nearby. The General became world- was in making Sears an integral part famous for his prescience, and Sears of American life, a commercial re- with as much zeal as he ran Sears. became one of the most powerful flection of solid, middle-class values. organizations of all time by virtue Above all, Julius Rosenwald saw In the days gone-by, Sears had of the business system he built himself as a trustee. He had an obli- an extraordinary track record in upon the franchise of trust and loy- gation to less fortunate people. And he reprogramming itself to adapt to alty he’d inherited from the catalog had an obligation to Sears, Roebuck. change. Would these “giants” have As a result, Sears’ entry into the let Sears falter today and lose its Rosenwald decided to pass the busi- retail business is remembered as premier retail status? ness on to yet another visionary General Robert Wood’s greatest executive during the 1920s. He said One Sears, Roebuck executive used accomplishment. He established he wanted to stop running Sears in to keep four picture frames on his new relationships with suppliers, order to dedicate the rest of his life office wall. Three held the portraits expanded credit operations, turned to what became a legendary effort of the “greats.” The fourth was kept to foreign markets and created the to give much of his money away. empty—a constant challenge to Insurance Company. each succeeding chairman to join Rosenwald went on to create and Perhaps the retail development that the pantheon. support social programs through- bears the clearest imprint of the out the country that were often General’s will was real estate. All —STRAIGHT TALK Winter 2015— 11 SHC Gets Perfect Score

On November 20, 2014, Sears Hold- ings Corporation announced that it received a perfect score on the 2015 Human Rights Campaign Founda- tion’s Corporate Equality Index (CEI) for the 10th year in a row.

The CEI evaluates top companies based on their policies toward les- bian, gay, bisexual and transgender (LGBT) employees. Sears Holdings is one 366 major U.S. businesses, including only five Fortune 100 re- tailers, to attain a perfect CEI score and earn the Campaign’s “Best Places to Work” distinction.

The Human Rights Campaign Esplanade at Aventura — New Strategy? Foundation provides research, What Sears is doing in South Florida estate holdings. The company has advocacy and education for the Hu- may provide a glimpse of where the been leasing space in some of its stores man Rights Campaign, America’s company plans on going in the future. to other retailers, the most recent being largest civil rights organization. U.K.’s Primark budget-clothing chain. They work to achieve lesbian, gay, Sears Holdings announced in bisexual and transgender (LGBT) November that it will convert its lo- Primark stores are known as “traffic equality at home, work and in cation in Aventura, Florida, into an drivers,” said Matt McGinley, managing the community. open-air development that includes director at New York-based Internation- dining, other retailers and a scaled- al Strategy & Investment Group. “That “Sears Holdings’ culture values down Sears store. The project is could help the Sears stores,” he said. and celebrates the diversity of called Esplanade at Aventura. our employee population and the With the Aventura Mall project, commitment to equality and inclu- The Aventura Mall that opened in Sears would modify the site’s siveness,” said Dean Carter, chief 1963 is an upscale super-regional parking lot, auto center and de- human resources officer, Sears shopping mall in a northern suburb partment store into a more inviting Holdings. “It’s an honor to be rec- of Miami. It is the largest conventional property. The plan calls for about ognized by the CEI as a leader in shopping mall in Florida, having a cur- 250,000 square feet of restau- this space for the 10th consecu- rent gross leasable area of 2,700,000 rants and retail. That includes a tive year.” square feet, and is the third largest 20,000-square-foot Sears store and shopping center in the United States. about 45,000 square feet of office The 2015 CEI rated 781 businesses space, parking and a hotel. in the report, which evaluates The mall has three floors of retail LGBT-related policies and practices space, comprising more than 300 “Our owned real estate adjacent to including non-discrimination work- retailers. In addition, there is a food Aventura Mall, one of the largest and place protections, domestic partner court with 18 fast food eateries, as most successful malls in the coun- benefits, transgender-inclusive well as several chains and other try, provides a significant platform health care benefits, competency restaurants at the mall’s entrance. for shareholder value creation,” ac- programs and public engagement cording to S. Jeffrey Stollenwerck, What Sears is doing at the Adventura with the LGBT community. also known as Jeff, president, Sears Mall fits in with its strategy of squeez- Real Estate Business and SVP. ing more value out of its extensive real