How are you addressing competition from big-box retailers entering your markets?
Big-box retailers have an impact when they enter a market, but remember, our hardware stores are targeting the customer who is on a different shopping mission. Our research shows that customers go to the big boxes for big projects, but when they have small maintenance projects to do at home - repair a leaky faucet, repaint a weathered door or replace a broken screen - they prefer a local hardware store. We have a broad assortment, are competitively priced and have the Craftsman brand, which is not available from our competitors. We also have a higher level of service in our stores. So while we don't ignore the big boxes, we're serving a different shopping occasion.

How are Sears dealer stores doing?
The dealer stores have performed well from the time we launched the format in 1993, and they've been getting hotter ever since. We describe this format as the superstore for appliances, electronics, and lawn and garden equipment in smaller communities - those with a population of fewer than 20,000. We have more than 650 units open currently. Before long, we'll have 800 and ultimately 1,000 stores. The key issue is finding sites and qualified owners in those communities. Almost all of the stores are run by families that are very entrepreneurial and committed.

Given the early success of The Great Indoors, what are your expansion plans?
Our second store will open in Phoenix later this year, and we're planning for two more sites in the third quarter of 2000. That will give us enough locations, in markets with different demographics and weather patterns, to give us a sense of the concept's breadth of appeal.

Automotive had a tough year in 1998. What are you doing to improve the business in 1999?
For the last two years, we have been repositioning Sears Automotive Group to grow our industry-leading position. We created and launched the NTB brand, opened more than 100 new stores and developed state-of-the-art systems and logistics dedicated to the tire and battery business. These changes deflected our focus on sales generation. Now, we are ready to focus 100 percent of our attention on our customer, offering a compelling assortment, highly trained personnel, strong leadership and flawless execution. We are confident the pieces are now in place for us to strengthen our position as the leading tire and battery retailer in our industry.

How important are Sears Auto Centers to Sears automotive business?
They are the backbone of our automotive business today. Through Sears Auto Centers we serve the loyal Sears customer, and also provide multiple opportunities to capture value for the company by maximizing our strong brands, especially DieHard and Sears Card. We will attract new customers through broader marketing while we continue to target the Sears customer who may not be using the Sears Auto Center today.

What differentiates NTB from Sears Auto Centers?
Because Sears Auto Centers are already in the best malls in the country, NTB clearly offers the most growth potential. NTB's competitors are regionally or locally based, and therefore do not always have the assortments, pricing and services the customer desires. We believe with NTB we can leverage our reputation for expertise and strong brand and vendor relationships, and effectively compete against local and regional players. Moreover, NTB attracts customers who might not think of Sears first for their automotive needs.