HOFFMAN ESTATES, Ill.—Despite sales over the last several months that it admitted were "ntb" (not too bad), Sears, Roebuck and Co. has chosen to "btb" (bite the bullet) and close 53 under-performing National Tire & Battery (NTB) stores in 35 markets across the country.
The NTB outlets are among a total of 89 retail locations being shuttered by the Hoffman Estates company, including 30 hardware stores and four of Sears' "big box" full-line stores—two with Sears Auto Centers.
Although the company closed no NTBs last year, late in 1999 it shut down 33 unprofitable outlets in Michigan, New York and Florida. That sudden move eliminated the jobs of about 350 employees.
In this latest round, approximately 765 NTB employees were told Dec. 29 that they will be let go by the time the closures are completed during the first quarter, likely by March 1, said Peggy Palter, a Sears spokeswoman.
She was not sure what would happen to those workers, but said some may be placed in other Sears formats that have job openings, and all "eligible" employees will be given severance packages.
After the closings, NTB will have 223 outlets.
"NTB is a format that we've been looking at for quite some time," Ms. Palter told Tire Business. "Sears Chairman and CEO Alan J. Lacy has said we're looking at ways to improve the performance of this specific format."
The company has been trying to weed out its least-profitable NTBs, Ms. Palter continued, so it can "use those resources to try to make the chain more profitable overall."
At past analysts' meetings, she said Mr. Lacy "has identified NTB as an area where we do need to review the format."
However, "NTB stores have demonstrated improved sales and financial performance over the last several months," Ms. Palter said. "But we believe we need to continue to improve this format. The store closings really represent markets where we don't think we can effectively compete long-term."
How much will Sears save by the shutdowns?
The company isn't saying. But in a press release accompanying its fourth-quarter results, Mr. Lacy said that, despite a challenging environment that took a hit from dampened holiday sales—the company "posted solid sales in a number of leadership categories," and noted that Sears Tire Group showed a double-digit increase.
Mr. Lacy said Sears' latest actions "reflect our heightened focus on productivity and returns. We will continue to identify opportunities to more effectively deploy resources and enhance overall company profitability.
"By closing under-performing NTB and hardware stores, we will enhance the profitability of Sears' off-the-mall businesses."
Both Ms. Palter and Tom Nicholson, Sears' director of public relations, gave an emphatic "no" when asked if the company's recent moves mean it may be giving up on the NTB format, which Sears unfurled with much fanfare in 1997.
NTB was a stepchild of the company's highly successful Tire America and National Tire Warehouse (NTW) formats, which were converted to the newly designed, upscale-looking NTB outlets where, Sears vowed, educating customers on how to make an informed tire and service purchase was essential.
In the past year, NTB has "done a lot operationally and with marketing to improve" its performance, Mr. Nicholson told Tire Business. For example, the chain began to focus on "speed, expertise and customer service, and found that has made a big difference in the stores."
NTB also added what he described as "take-with" goods—such as windshield washer fluid, oil and wiper blades—and sales of those items have done well.
Mr. Nicholson was not aware of any new NTB ad campaign this year, but added that the store closings are primarily in small markets where the company had one or two outlets. "It's more difficult, if you're running a truck down to one city and one store," he explained. "It's a more expensive run than if you're delivering tires to 18 stores in the Chicago area.
"And the same is true for advertising. You can spread those costs over 18 stores whereas, if you have only one store in a market, you pick up the full burden of the advertising.
"So what we've really done is looked at underperforming markets and asked whether we have a realistic chance of making those stores profitable. And if not, let's close those and reinvest in markets where we feel we can grow the franchise."
In comparison, he said the Sears Auto Centers are "doing well—had a good year," while NTB's performance in the last six months has been "very encouraging, particularly in the markets we're now concentrating on."
In 2001, Sears plans to add up to a half-dozen of its big, full-line stores, up to 10 hardware stores, and Mr. Nicholson said NTB may launch "a couple" of new stores.
That's a far cry from 1997 when the company converted 275 stores to the NTB design, and predicted it would add 100 outlets per year until 2001. Early that same year it established 60 newly built NTB stores and was planning to add at least 50 more in that period.
Then in March 1999, when Penske Auto Centers Inc., the nation's largest independent tire dealership chain, closed 133 stores in 69 markets, NTB was waiting in the wings.
At that point NTB had 348 stores nationally, expected to open 30 more that year, and was eyeing the purchase of some of the closed Penske locations as a way to "grow the NTB format through store openings and acquisitions," an NTB executive said at the time.
Mr. Nicholson said the company has no plans to close other NTBs this year. The current slew of closings involve a mixture of leased and owned properties, but he did not know if any of the locations are for sale.
The shutdowns won't bring any tears to the eyes of Al Benoit, vice president of Baltimore-based Kimmel Automotive Inc. It operates 35 retail stores, a retread plant and two commercial centers in Maryland and Virginia.
The dealership competes head-to-head with NTB in what's called "Tidewater"—a population area of about 1.3 million encompassing Norfolk, Portsmouth and Virginia Beach, Va., and Maryland's Chesapeake Bay area.
Talk about surprised, Mr. Benoit had heard a rumor that NTB was closing some stores. As he left work one recent evening, the lights were on in the NTB store next door to a Kimmel Automotive outlet. When he arrived the next morning, the NTB was boarded up.
How tough a force is NTB in his market? "Any competitor is a competitor. They're very aggressive with their pricing and always have been. And they have some nice-looking stores," Mr. Benoit answered.
But while some store personnel simply type a size into a computer, then turn the screen toward a customer and ask, "What brand of tires do you want?" he said Kimmel is "still a traditional dealership. We go out, look at a customer's tires and make recommendations."
Sears closed two of four NTB stores in the Norfolk market. Mr. Benoit acknowledged that it's pretty expensive to run weekly advertisements for just two stores, and he has noticed that the frequency of NTB ads has been cut in half following the closings.
Still, he doesn't view NTB as "a real strong competitor. But they do move some tire units, so I'm glad they've closed."
As he spoke to TB, Kimmel tire techs had just finished mounting four Michelin X-One tires on a customer's vehicle. Mr. Benoit said he "walked out into the shop and said, `Hey, nice sale!'|" and an employee replied: "No, the guy brought in his own tires."
The customer claimed he "got a great deal on the tires at NTB."
So, Mr. Benoit mused, "we'll charge him to put 'em on and he'll pay—so maybe it wasn't such a great deal after all."