Arthur C. Martinez: 1939—: Businessman

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Arthur C. Martinez is a businessman who is best known as the person who saved Sears, Roebuck, and Company (Co.). Prior to joining Sears Martinez worked for several companies, including RCA Records. He entered the retail business in 1980 when he became the chief financial officer for Saks Fifth Avenue. In 1992 Martinez became the head of the Sears Merchandise Group and three years later he became the chief executive officer of Sears, Roe-buck, and Company. During his eight year tenure at Sears, Martinez initiated a major overhaul of the company's operations and made the company profitable again. He is best known for changing the company's marketing strategy to focus on women as well as men. Martinez retired in 2000, although he continues to serve on the boards of directors for several businesses.

Learned Value of Money From Parents

Arthur C. Martinez was the only child of Arthur F. Martinez and Agnes Caulfield Martinez. He was born on September 25, 1939, in New York, New York. His mother was an Irish immigrant who worked part-time as a department store clerk. His father, who had some Spanish ancestry, worked as a fish wholesaler. Martinez was raised in Brooklyn and attended Catholic schools. He had a modest upbringing and learned important life lessons, especially the value of money, from his parents. "My mom and dad instilled in me their social convictions and a sense of community while I was still very young," Martinez told Janet L. McCoy of the Auburn University News in December of 1999.

As a teenager Martinez worked as a stock boy. He was a math prodigy who graduated from high school at the age of 16. He then attended the Polytechnic University and earned a B.S. in 1960. He financed his education with help from the ROTC. Upon graduation he served as a lieutenant in the army for two years. "I still think the army is the world's greatest diversity training ground," Martinez reminisced in his 2001 autobiography called The Hard Road to the Softer Side. "I was surrounded by soldiers of all races: whites, blacks, Hispanics, Native Americans, Asian Americans. There were straight arrows, drunks, geniuses, fools—every description you can think of."

At a Glance . . .

Born Arthur C. Martinez on September 25, 1939, in New York, NY; son of Arthur F. Martinez and Agnes Caulfield Martinez; married Elizabeth Rusch on July 30, 1966; two children. Education: Polytechnic University, BS, 1960; Harvard Business School, MBA, 1965. Military Service: U.S. Army, 1961-1963.

Career: Enjay Chemical, 1965-66; International Paper Company, director of planning, 1967-69; Talley Industries, assistant to president, 1969-70; RCA Corporation, director of finance, 1970-73, vice president, 1973-80; Saks Fifth Avenue, CFO, 1980-84, exec. vice president, 1984-87, vice chairman, 1990-92; BATUS, Inc, senior vice president and CEO, 1987-90; Sears Merchandise Group, CEO, 1992-95; Sears, Roebuck, and Co., CEO, 1995-00; author, 2001.

Selected memberships: Board of directors: Liz Clai-borne, Martha Stewart Living Omnimedia, National Urban League, and PepsiCo; chair: Chicago Urban League Business Advisory Council, Executives Club of Chicago, National Retail Federation board of directors; deputy chair, Federal Reserve Bank of Chicago.

Selected awards: International Quality of Life Award, Auburn University, 1999; Gold Medal for Excelling in Retail, National Retail Federation, 1998; Business Statesman of the Year, Harvard Business School, 1997; CEO of the Year Award, Financial World, 1996; honorary JD, University of Notre Dame, 1997.

Address: Office— Sears, Roebuck, and Co., 3333 Beverly Rd, Hoffman Estates, IL, 60179.

In 1963 Martinez enrolled in the Harvard Business School and earned an M.B.A. in 1965. The lessons he learned at Harvard were vital to his later work experiences. In particular, Martinez recalled in his autobiography that the most important lesson was that "myopia is fatal. Think boldly about what business you are in, think carefully about what customers you are serving now and how you will meet the needs of the customers of the next generation." While in school Martinez and a friend also published a small magazine to support themselves. In 1966 Martinez married Elizabeth Rusch and the couple later had a son and a daughter together.

Gained Corporate Experience

Martinez's first job after Harvard was for Enjay Chemical, which later became Exxon. After learning that career advancement in the chemical industry would be slow, Martinez became the director of planning for new ventures for International Paper in New York City in 1967. Two years later he moved to the mergers and acquisitions division of Talley Industries in Arizona. In 1970 Martinez accepted an offer as a director of business planning for RCA record company in New York City. Four years later Martinez was promoted to head the international division of RCA.

When Martinez was in business school he did not plan to build a career in the retail industry. However, in 1980 he received an offer to become senior vice president and chief financial officer for Saks Fifth Avenue. Martinez was interested in trying out retail as a new experience. While at Saks Martinez learned that store personality was an important aspect of the business. "Carving out that personality and making sure it was distinctive was crucial. You had to understand that philosophy, stay consistent with it, and not vacillate," Martinez explained in his autobiography.

In 1986 Martinez accepted a promotion to senior vice president and group chief executive for BATUS, Inc., the parent company of Saks Fifth Avenue. For nearly four years Martinez worked in Louisville, Kentucky, running the retail businesses of Saks, Marshall Field's, Ivey's Department Stores, and Breuners. Saks was eventually sold to Investcorp and Martinez was invited to return to Saks in New York City in 1990 as a vice chairman. Martinez became unhappy with the intrusive management style of Investcorp so he eventually left Saks in 1992.

Martinez had lined up a new job with Swiss company P.A. Bergner, which owned Bergner's in Milwaukee and Carson Pirie Scott in Chicago. He was going to help Bergner out of bankruptcy when he got a call from Herb Mines, an executive headhunter, while vacationing in Maine. Mines informed Martinez that Sears, Roebuck, and Co. wanted to talk with him about helping their flailing company. Martinez was reluctant to consider the offer with Sears because he already had a verbal agreement to join Bergner. However, after a visit from Sears CEO Ed Brennan, who assured Martinez that he would have the authority and money to make major changes at Sears, Martinez accepted the challenge to reinvent one of America's best known department stores. "There were only two reasons not to take the job," Martinez told John McCormick of Newsweek. "Either it couldn't be done or I couldn't do it."

Revamped Sears

In 1992 Martinez became the chairman and CEO of the Sears Merchandise Group. Sears started as a watch company in 1887, founded by Richard W. Sears and Alvah Curtis Roebuck, which quickly grew into a business supplying a wide variety of products. The core of the company was the Sears catalog that targeted rural America, which did most of its shopping by mail. In the 1920s Sears became a retail store under the leadership of Robert Elkington Wood. For the next several decades, Sears adapted to changes in American life, such as the growth of cities and the spread of automobiles, and to changes in the American consumer, and the company flourished. According to Martinez in The Hard Road to the Softer Side, "Sears became the business model for big-store retailing. It was offering the right products in the right places at the right prices."

However, in the 1970s and 1980s, Sears began to suffer financially. The company had begun selling banking services, insurance, real estate, and stocks instead of focusing on what it did best, which was selling merchandise. The company made two mistakes which were nearly fatal. First and foremost, Sears had ignored its customers. The company that was built around the idea of being in touch with its customers had abandoned them. Second, Sears lost track of its competition. Discount stores, such as Kmart and Wal-Mart, as well as specialty stores, such as Home Depot and Circuit City, were luring customers away from traditional department stores like Sears.

In the year that Martinez joined Sears, the company had lost $3.9 billion and $3 billion of that amount came from the merchandising department. "It would be presumptuous to say I knew exactly what I was going to do when I walked in the door, but it was pretty clear that dramatic action was called for. It was not a situation where incremental improvement was going to be sufficient," Martinez told Terry Savage of the Chicago Sun-Times about the state of Sears when he joined the company. Within the first one hundred days in his new position, Martinez made some dramatic changes at Sears. The company had already sold many of its other businesses, such as banking and real estate, which allowed Martinez to focus on retail. His first decision was to end the venerable Sears catalog, which had been in circulation for over 100 years. While it was a sentimental favorite among the Sears employees, the catalog was losing $1.5 billion annually. Additionally, Martinez closed 113 stores and laid off 50,000 people. Martinez was quickly dubbed "the man who killed the catalog" and "the ax from Saks," but he was convinced that these tough decisions were necessary to save the company.

Martinez also focused on changing the corporate culture at Sears, which had contributed to the company's poor performance. Martinez aimed to make managers accountable for how well their particular areas performed. He replaced the 29,000 page Sears rule book with a new and simpler mission. "We wanted Sears to be compelling to work for, to shop at, and to invest in," Martinez explained in his autobiography. He also invested in improving the company's infrastructure, particularly with respect to communications and computers.

Found the Softer Side of Sears

The most important aspect of Martinez's restructuring plan was returning the company's attention to the customer. Martinez analyzed data about Sears' customers and their lifestyles. While Sears had traditionally been considered a man's store that sold tools, car batteries, and lawn mowers, Martinez discovered that most of Sears' customers were actually women. "If women were making all of those buying decisions, if they had indeed become the chief financial officers of the American family, why were we continuing to ignore their needs, their desires, and their dreams? My own suspicion was that we just didn't know how to talk to them and had not created a store that was warming or at all intriguing for them," Martinez explained in his autobiography. In response to this revelation, Martinez hired the advertising firm of Young and Rubicam to target women as Sears' customers. They developed the slogan "the softer side of Sears" and the accompanying advertisements to appeal to female customers.

Martinez's strategies for restructuring Sears were successful. From 1992 to 1995 Sears sales increased 13 percent and earnings nearly tripled. "Sears' downsizing caused a lot of pain and suffering, but the $35 billion retailer is on firmer footing today," wrote Scott McMurray of U.S. News & World Report in May of 1996. Martinez was credited for Sears' turnaround and he became CEO of Sears, Roebuck, and Co. in 1995 after Ed Brennan retired.

In 1996 Martinez was given the CEO of the Year Award by Financial World magazine. While Martinez enjoyed his successes at Sears, he also recognized that the restructuring job was not over yet. "Our situation is not unlike building the first half of a bridge," Martinez explained to Barry L. Rupp of Financial World in April of 1996. "When you're over the deepest part of the river, it's no time to take momentum for granted." Martinez planned to turn Sears into a consumer-brands and services company. He wanted to focus on Sears name brands, such as Craftsman, Kenmore, and Die Hard. He also initiated a move away from big malls to building smaller Sears specialty stores. In 1997 he introduced Sears Home Central as a single source for all household services, such as appliance repairs and pest control.

Faced More Challenges Before Retirement

The turnaround of Sears was not a straight road to success. Along the way the company suffered some financial setbacks. However, by the end of the 1990s, it was clear that Sears was better off than it had been at the beginning of the decade. In 1998 and 1999 the company faced a new round of challenges as apparel sales declined. The company also experienced problems with credit card delinquencies, and more employees were laid off. Martinez had a new strategy to turn sales around. Recognizing the growing business of internet shopping, the company launched Sears.com to meet the needs of a new type of customer. Sears also opened up the Great Indoors chain, offering upscale home decor and remodeling.

In 2000 Martinez announced his plans to retire from Sears. Although he enjoyed his work at Sears and the company still needed to work on staying competitive and profitable, Martinez wanted to retire at the age of 60 so that he could enjoy his retirement while he was still in good health and so he could spend time with his grandchildren. Martinez was replaced by Alan Lacy, president of services at Sears. Since his retirement Martinez has continued to serve on the board of directors of several companies, including Martha Stewart Living and Liz Claiborne.

Martinez spent eight years at Sears overhauling the company's corporate culture, infrastructure, marketing, and merchandising. He redefined the role of the traditional department store for the 1990s and made Sears a profitable company after nearly two decades of decline. When asked about his secret to success by Terry Savage of the Chicago Sun-Times in April of 2001, Martinez explained that "success will not be driven by your board scores and your grade point average coming out of school. They'll be driven by your character and your intensity, and by your willingness and ability to continue to learn."

Selected writings

(With Charles Madigan) The Hard Road to the Softer

Side: Lessons from the Transformation of Sears, Crown Business, 2001.

Sources

Books

The Complete Marquis Who's Who, Marquis Who's Who, 2003.

Periodicals

Business and Management Practices, November 4, 2002, p. 10.

Chicago Sun-Times, April 29, 2001.

Financial World, March 25, 1996, p. 48; April 8, 1996, p. 10.

Fortune, October 16, 1995, p. 96; April 28, 1997, p. 106.

Industry Standard, November 22, 1999.

National Home Center News, April 17, 2000, p. 4.

Newsweek, November 1, 1993, p. 42.

Plain Dealer, December 25, 1994, p. 5H.

PR Newswire, March 25, 1999; June 22, 1999;

September 10, 2000; December 7, 2000; January 3, 2001.

Time, December 23, 1996, p. 52.

U.S. News & World Report, May 13, 1996, p. 61.

On-line

"Alan Lacy Chosen as Successor to Arthur Martinez at Sears, Roebuck, and Co.," Sears, Roebuck, and Co. Investor Relations, www.corporate-ir.net (May 26, 2003).

"Arthur C. Martinez," Biography Resource Center, www.galenet.com/servlet/BioRC (May 14, 2003).

"Remodeling Sears," Cio, www.cio.com/archive/120196/sears.html (May 26, 2003).

Sears, www.sears.com (May 26, 2003).

"Sears Chairman Receives International Quality of Life Award," Auburn University News, www.auburn. edu/administration/univrel/news/archive/12_99 news/12_99martinez.html (May 26, 2003).

—Janet P. Stamatel