In ready-to-wear, for instance, there will be more outfits presented in a way that enables the customer to see the products as she'd like to wear them. "Exciting," "new," "idea-driven" and "focused" are words that describe our approach to the ready-to-wear business.

We're editing hardgoods selections as well, and redesigning some of those businesses. Take sporting goods. We're exiting certain team sports items and concentrating on exercise and camping equipment. Further, it will be scaled down to provide space and opportunities for new businesses to be part of our mix.

Across all our businesses, we'll be a lot more aggressive in presenting relevant new products to our target customer. We are going to be just as aggressive in providing the best value to our customer. This means selling our merchandise at the right price, which our customer easily understands.

We'll run a business that is driven by both private and national brands. For example, Vanity Fair, Trifari and Maytag all were introduced last year. The addition of these major brands to our selection - brands that our customers trust and respect - is an important part of our strategy.

What is merchandising's role in making Sears a fun place to shop?
Merchandising is at the heart of what we do. The customer describes fun as finding a great price on merchandise she can buy quickly so she can get on with the rest of her day. It's all about interesting-looking merchandise that the customer finds, buys and takes out of the store, leaving happy and satisfied.

Especially in apparel, we've got to make it easy for her to see the merchandise and visualize herself in the outfit, as well as offer it at the right price. The winners in this business are going to be retailers that really understand what drives customer behavior: How often does she shop? What drives her perception of value? What is she looking for?

What avenues do you have to understand the customer?
We have the largest consumer information database of any retailer in the country. This customer information allows us to get a better handle on when and how our customers shop and the kinds of things they need and want. It also allows us to understand cross-shopping behavior, an important generator of increased sales.

What are your plans for serving the urban market?
We're emboldened by the productivity we're experiencing in New York City, Los Angeles, San Juan, Chicago and Boston. The great cities in our country are experiencing a renaissance - and where people are establishing households and revitalizing neighborhoods, we're enjoying success. We think these markets are being rediscovered by retailers - but, generally, these good customers have been underserved. We want to be aggressive in serving these markets.

Are you opening smaller stores?
We have opened approximately 10 small-market prototypes averaging about 60,000 selling square feet in smaller malls and strip centers. We like our first year results, but will continue to adjust our assortments and marketing. On balance, we think we have it more right than wrong. We'll evaluate our work in about six months and define our small-market store strategy at that time.

What are your 1999 plans for marketing?
Our ultimate objective, of course, is to drive sales every day through each and every marketing program we do. The issue is how best to communicate Sears value messages to our customer. We need to take the successes and failures of the recent past and act upon them to begin improving our performance right now.

A major objective in our short-term plan is to improve our weekly pre-prints - the advertising supplements inserted into newspapers reaching 60 million homes each week. It is an important weekly sales driver and the biggest, most visible and most comprehensive presence we have in the customer's view. Though there certainly are other ways we reach customers via direct mail, television, radio and the Internet - the fact is that the pre-print is the main channel.

We will continue to focus on promotional events, because recognizable value is important to our customers. Increasingly, we must tell a whole-store story about our promotions.

Is Sears current marketing program still relevant?
Our $1 billion-plus marketing program is significant and provides an enormous competitive advantage. Our overall strategy of celebrating the "many sides of Sears," while creating a focus on apparel as a counterpoint to our hardgoods businesses, has worked very well. It's been extraordinarily well received and very productive up until recently. Right now, we are in an extraordinarily competitive arena, where change is the only constant, and our marketing program has to keep pace. So we are reviewing everything to make sure we remain focused on driving sales growth.

Is Sears still on target with its core customer? Is she still the woman of the American household?
Our core customer remains the middle-income female, age 25 to 54 and head of her household. But we're disappointed with the level of business she's doing with us. We need to reenergize our efforts to appeal to her as a relevant retail resource while also becoming more relevant to a younger, but often less loyal, customer within our target. At the same time, we have to meet the needs of the Baby Boomers, who are requiring more services - such as home services - as they mature.

How do you make Sears a more compelling place to work?
We must create an environment where our associates say "I must do something" rather than "something must be done." Then we have a company where people are truly unshackled, balanced by our historic cultural characteristics such as pride, integrity, work ethic, dedication and compassion. If our people grow every day and are fairly compensated with pay and benefits for the contributions they make to our customers, we'll make progress on being a compelling place to work.

Research shows that training and development programs can be key drivers of associate satisfaction and business performance.

How does Sears differentiate itself in these areas?
Sears University continues to be our primary vehicle for delivering executive and management development programs, as well as learning opportunities for all Sears associates. It has achieved national and international distinction for its work. In 1998, more than 15,000 managers participated in Sears University courses and more than 150,000 associates took advantage of our correspondence courses, audio and video cassette library and online learning opportunities. Training and education have focused heavily on ways to create customer satisfaction, on business and financial literacy, and on diversity learning methodology, including digital satellite and intranet-based programs, to create an anytime, anywhere learning environment.