Chief executive officer, Sears, Roebuck, and Company
Born: October 19, 1953, in Cleveland, Tennessee.
Education: Georgia Institute of Technology, BS, 1975; Emory University, MBA, 1977.
Family: Son of W. Jasper Lacy (business executive) and Mary Lou Leigh (homemaker); married Caron (maiden name unknown).
Career: Holiday Inns, 1977–1979, financial analyst; Dart and Kraft, 1980–1988, director of corporation finances; Minnetonka Corporation, 1988–1989, vice president; Kraft General Foods, 1989–1993, chief financial officer; Philip Morris, 1993–1994, chief financial officer; Sears, Roebuck, and Company, 1994–1995, senior vice president of finance; 1995–1997, chief financial officer; 1997–1998, president of credit; 1998–1999, chief financial officer; 1999–2000, president of services; 2000–, chief executive officer.
Address: Sears, Roebuck, and Company, 3333 Beverly Road, Hoffman Estates, Illinois 60179; http://www.sears.com.
■ Alan J. Lacy climbed the ranks at Sears, Roebuck, and Company in six years to become the chief executive officer (CEO) in 2000. During the late 1990s Sears began to struggle to maintain its hold in the world of department stores, fighting a troubled economy and negative press regarding its customer practices. Lacy's reputation within the company and industry were established with the growth of Sears's credit services while he served as the chief financial officer. Even though analysts noted his youth and lack of retail experience upon his appointment as CEO, Lacy soon established himself as a leader who made major changes, such as lowering costs by slashing jobs and eliminating unprofitable categories. Establishing a new brand for Sears eliminated at least eight apparel suppliers and purchasing the prestigious Lands' End clothing line brought a more affluent type of customer to Sears.
Lacy was born in Cleveland, Tennessee, a small city set against the backdrop of the foothills of the Smokey Mountains. His childhood in Cleveland gave him the background necessary to work long hours and succeed in business. His father was a vice president of finance at a local department store, and Lacy credited his father's and the town's beliefs in hard work and strong family values as major influences on his career.
After graduating from Cleveland High School in 1971, he went to Atlanta to study at the Georgia Institute of Technology. He hoped to become a chemical engineer, but he soon realized he leaned more toward business than a chemistry lab. In 1975 he earned a bachelor's degree in Industrial Management. He continued with graduate studies at Emory University, earning an MBA in 1977. His first job upon graduation was as a financial analyst with Holiday Inns in Memphis, Tennessee. He spent the next 17 years moving around the country serving in various financial positions with companies such as Kraft Foods and Phillip Morris before joining Sears in 1994 as the senior vice president of finance.
Lacy was named chief financial officer in 1995. Shortly thereafter the CEO of Sears, Arthur Martinez, called on Lacy to help solve a problem. According to Martinez's book The Hard Road to the Softer Side , a Sears customer testified in a Boston federal court in 1997 that he was having difficulty making payments after filing bankruptcy. The judge told him that by filing bankruptcy he had discharged his debts, but the customer said he had an agreement with Sears to pay them back in monthly installments. The judge chastised Sears in court, and Martinez and his top advisors, including Lacy, agreed to a $273 million settlement agreement with the 190,000 Sears credit-card holders who had been forced to repay their credit-card debt after declaring bankruptcy.
In 1997 Lacy was appointed to head of the credit division as Sears struggled with the losses associated with the lawsuit. In 1999 he was named president of services, including home services, direct responses, and e-commerce. By the time of his appointment as CEO in 2000, Lacy had made each of these divisions a profitable part of the Sears's team.
After Lacy's appointment as CEO, industry observers noted that he had always had the inside track for the top job because of his success in turning the credit department at Sears into the leading profit department within the company. Steven Kernkraut, a retail analyst at Bear Stearns, told Women's Wear Daily that Lacy's appointment was "a positive step. The appointment provides a follow-through with someone who has worked in the trenches and who has earned it" (September 12, 2000). Martinez claimed that after his retirement only Lacy and one other Sears employee were even considered for the position. The company did a nationwide search, but Lacy remained as the top selection. Insiders noted Lacy's relatively young age (46) but admitted that he had proven himself as a leader. They praised his expertise as a troubleshooter in the credit department, but noted that he did not have experience in merchandising.
Some in the industry wondered if Lacy would be able to handle the rigors of running a $50 billion company—the third largest retailer in the United States by 2000, behind only Wal-Mart and Home Depot. In addition, Sears reigned as the leader in appliance sales, with its Kenmore brand as one of the most recognizable in the United States. Hal Reiter of Herbert Mines Associates, an executive search firm, said Lacy's lack of retail experience did not mean the apparel part of the business would suffer. "It's pretty clear that Lacy was the leading internal candidate," he told Women's Wear Daily (September 12, 2000). "But all signs indicate that he's a very capable leader and general manager, the traits necessary for any senior executive, particularly one with a huge company."
Reiter concluded that experience in running a store was not necessarily needed. Others agreed with him, noting that Martinez had a similar background in finance and operations rather than merchandising. Many watched carefully, however, as Lacy made his first moves as CEO. The apparel line at Sears had been revamped under Martinez in the 1990s, with questionable success. Lacy said that turning around that section of the company would lead his list of priorities. He announced that he would work to improve the quality of apparel while reducing the number of suppliers. He also emphasized his commitment to Sears.com, which had become one of the most successful Web sites run by a traditional retailer.
Lacy announced that he would streamline the company while boosting revenues. Sears's stock in 2000 needed help; it had fallen from $60 a share in 1998 to $35 a share. Lacy said that the key to success for Sears lay in doing "fewer things better." He stated that Sears would begin strengthening its customer relationships by learning more about who bought from Sears. He wanted the rest of the company to follow the example set by the appliance division, which had a 38 percent market share and $5 billion in sales in 2000.
The strongest operation within Sears when Lacy became CEO was the credit division, which accounted for half of Sears's profit in 2000. He grew this department through the issuance of credit cards that offered bonuses to frequent Sears shoppers. He also offered credit cards to customers who purchased big-ticket items but had not used a Sears credit card in the past. Analysts were generally pleased with Lacy's early performance, and they appreciated that he recognized that Sears's biggest challenge centered on its customers and understanding their needs.
After spending a year assessing the company and making only minor changes, in October 2001 Lacy met in Chicago with Wall Street analysts to unveil his major plans. The plans, which did not garner much excitement, involved making Sears more like a discount store than the traditional department store it had been for over one hundred years. Lacy explained that he intended to keep the strengths of the company intact, emphasizing appliance and tool sales and selling these items on credit. Within one year Sears began to resemble major discounters such as Target and Kohl's by centralizing cash registers in all of its 860 full-line stores. The checkouts did not resemble those found in stores such as Wal-Mart or Target with multilane exit cash registers. Within the self-service departments, registers were placed in the middle of the main aisle, rather than near the aisle as previously situated, giving customers a way to pay in a convenient, central location. Each of the self-service departments had its own full-service checkout, known in the industry as a cashwrap. Lacy also introduced a new look for Sears with simplified fixtures and signage.
As Lacy began to make changes, rumors surfaced that he was planning to eliminate apparel completely. Late in 2001 he announced the introduction of a casual brand of clothing for women, men, and children. One analyst told Chain Store Age that the new line resembled "yuppie weekend clothes" (December 2001). The Covington brand replaced eight brands previously sold by Sears, and it signaled Lacy's determination to introduce improved products into a customer-friendly shopping experience, which included widening the aisles. The plans called for the new brand to take over the space vacated by cosmetic counters, whose contracts all ended in 2002.
Convenient shopping ruled Lacy's decisions to increase profits for Sears. He announced in 2001 Sears's intention to keep departments with large merchandise, such as appliances and home electronics, fully staffed to help customers make their choices, while cutting service within the less complicated departments such as shoes and apparel. Industry analysts wondered if customers would be content with self-service and the lack of sales personnel. Lacy chose to concentrate on direct marketing, allowing Sears the ability to determine exactly who their customers were and to attract new consumers. He noted that while placing television and newspaper circulars appealed to existing customers, such advertisements did not provide the company with specific marketing information. Even as these changes went into effect, analysts admitted that Sears defied definition within the context of the traditional retail world. Offering appliances and hardware alongside apparel left the store in a category by itself.
Cost consciousness ruled many of the decisions made by Lacy at Sears, and Wall Street analysts felt comfortable with the strategies he employed. By the last quarter of 2001 profits began showing gains. Lacy's moves to turn Sears into more of a discount store began with lowering operating costs and developing more self-help departments, thus reducing sales personnel. Associates were stationed at cash registers rather than working on the floor helping customers find their purchases.
Lacy terminated several efforts begun under Martinez. He quit expanding home services and closed all of Sears's HomeLife stores by 2001. In addition, he closed eighty-nine Sears-operated National Tire & Battery stores during his first year as CEO, and he announced the end of Sears's involvement with cosmetics. He also sold a pest-control business operated by Sears and scaled back on expansion within the Great Indoors stores, a Sears's home decorating superstore chain developed by Martinez. Lacy eliminated 4,900 jobs, or 22 percent of Sears's salaried staff, over an 18-month period in 2001 and 2002, and he hoped to cut $600 million off of Sears's annual expenses by 2004. Even as analysts noted the measures to cut costs, they predicted that Lacy would need to do something to regain the market share Sears was losing as a result of the cutbacks.
Lacy had made decisions previously that signaled a change to a discount store in order to remain competitive with Kohl's and Target, two of the fastest growing discount stores in the industry. However, he announced in 2001 that he wanted Sears to be neither a department store nor a discount store but rather in a category by itself. By 2002 Lacy's changes had begun to show evidence in increased profits, and he announced that Sears had purchased the online and catalog apparel retailer Lands' End for $1.9 billion. Lands' End was noted for its upscale customer base, and the purchase signaled an attempt to bring a new type of customer into the newly revamped stores. Analysts worried that the cash purchase might negatively affect Sears's stock, but this fear did not last long as the stock price rose to $59 a share, the highest price since 1998.
When Sears increased the amount of money set aside to counter unpaid credit card charges in October 2002, the concern again came to the surface. The increase in the reserves gave investors cause to worry because it signaled higher than anticipated charge card write offs. Crain's Chicago Business reported that changes in executives, a rewriting of account statements, and the large amount of credit card debts sent stock plummeting below $20, the lowest point in a decade (December 16, 2002). Lacy reacted by putting a new management team in charge of the retail portion of Sears and hiring executives to run store operations so he could concentrate on the department he had once before saved.
In October 2002 Lacy fired Kevin Keleghan, president of credit and financial products, and the following month Keleghan sued Sears and Lacy for defamation. The lawsuit claimed that Lacy made public false statements about Keleghan, blaming him for the credit-card division's problems. Lacy startled industry insiders when he sold the credit-card business in 2003, which meant that the retail part of the business would now have to stand alone in increasing profits for Sears.
In 2002 Lacy told DSN Retailing Today that Sears was a "broadline retailer with outstanding credit and service capabilities." By the end of 2003, however, the bold strategies employed by Lacy had failed to meet expectations for earnings, and he was rebuked by Sears's board of directors, who slashed his bonus by 50 percent and voted not to give him a raise. According to Women's Wear Daily , "Lacy's 2003 target bonus was based on two factors: a pre-approved target level of improvement in the company's earnings per share and achievement of key strategic initiatives" (March 23, 2004). The article stated that although he had achieved the strategies established by the board, he had not met a pre-established and undisclosed target for earnings per share.
See also entry on Sears, Roebuck, and Co. in International Directory of Company Histories .
Baeb, Eddie, "Sears' New Chief Says, 'Charge It,'" Crain's Chicago Business , September 18, 2000, p. 1.
Clark, Ken, "A Softer, Slimmer Side of Sears: Will Layoffs Pay Off? Lacy Says, 'Yes,'" Chain Store Age , December 2001, pp. 76–77.
Flessner, Dave, "Lacy Embraces Change for Sears," Chattanooga Times Free Press , May 25, 2003.
Gallanis, Peter, "New CEO Outlines Lacy Side of Sears," DSN Retailing Today , November 20, 2000.
Heller, Laura, "Sears' Lacy Reaffirms Repositioning Strategy," DSN Retailing Today , May 20, 2002, p. 5.
Jones, Sandra, "2002 Year in Review: Management of Sears, Roebuck and Co.," Crain's Chicago Business , December 16, 2002, p. 22.
Karr, Arnold J., Thomas J. Ryan, and Vicki M. Young, "Wall St. Gives Nod to Sears' Lacy," Women's Wear Daily , September 12, 2000, p. 2.
Martinez, Arthur C., The Hard Road to the Softer Side, New York: Random House, 2001.
"No Increase for Lacy," Women's Wear Daily , March 23, 2004, p. 2.
Ryan, Thomas J., "Lacy: 2001 A Transition Year for Sears," Women's Wear Daily , November 9, 2000, p. 9.
"What We Want Is To Be Sears," MMR , November 12, 2001, p. 46.
—Patricia C. Behnke