enhancing valued relationships
Sears retail credit card portfolio is the largest in the nation, larger than the combined total of its 10 biggest competitors. It is the sixth largest portfolio overall when compared with bank card issuers. At the end of 1998, Sears had 30 million active Sears Card accounts and managed credit card receivables totaling $28 billion.

Sears Card's real value stems not from the size of its overall portfolio, but from its ability to attract and retain Sears customers and deepen the company's relationship with them. In fact, credit facilitates the bond between Sears and its customers by helping families acquire needed products and services - particularly big-ticket items such as appliances and electronics. In addition to convenience, cardholder benefits include eligibility for special sales events and promotions such as zero percent financing and free delivery of major appliances, as well as a club that rewards frequent Sears Card use. Furthermore, each time a customer uses Sears Card, the transaction becomes part of the company's extensive information database that enables Sears to develop even more relevant products and services.

Do shoppers find Sears Card valuable? So much so that nearly half of all purchases made at Sears retail stores in 1998 were made with Sears Card - even though customers may use cash, checks and other major cards.

Credit performance rebounds
Beginning in 1997 and continuing into early 1998, Sears experienced higher account delinquencies as well as more consumer bankruptcies and greater uncollectible expenses within its credit card portfolio. This trend adversely affected Sears financial results in 1997, but significant improvement was achieved in 1998 with credit generating more than $1 billion in pretax profit.

The improving quality of the Sears Card portfolio resulted from a series of management initiatives that included better underwriting of new accounts, new credit authorization models and more conservative management of credit lines. Particularly important were the efforts in the collections area to increase the number of collectors and to improve their productivity through specialized training and stronger technological support.

Growth opportunities expanded through new technology
Though Sears Card is a highly successful financial vehicle, internal systems limitations have slowed the development of new products that would appeal to more customers. As a result, the company began an ambitious project in 1998 to convert the Sears Card portfolio to a more flexible computer operating system. Once the conversion is completed in mid-1999, this system will allow new and targeted credit product offerings, such as tailored promotional and rewards programs that reflect an individual customer's card usage and purchase behavior. Perhaps more importantly, these new programs will provide customers with better access to the best values from Sears retail and service operations.

The new system also will help Sears better manage uncollectible expenses by identifying delinquent accounts earlier for collection efforts. The conversion to the new system has required a high degree of teamwork among Sears associates at corporate headquarters, nine regional credit card operating centers, six specialty processing centers and Total System Services, Inc., Sears technology partner.

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