Halo Effect

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The bull market at Sears

When Sears Roebuck & Co. acquired the brokerage house of Dean Witter Reynolds 13 months ago, the jeers from Wall Street could be heard as far away as Sears' Chicago headquarters. Old-line stockbrokers sniffed that well-heeled clients would not want to invest their savings with the same company that sold Craftsman power tools and Kenmore automatic washers. The giant retailer figured differently, and last July it opened Sears Financial Network outlets in eight of its 829 U.S. department stores to test the concept of selling "stocks and socks."

Though nobody is willing to pronounce the experiment a runaway success, the initial returns have been so bullish that Sears will open seven more financial branches this week in cities from Tacoma, Wash., to Tallahassee, Fla., and 18 more in May. The encouraging results added a glow to Sears' announcement last week that its overall profits rose 33% in 1982, to $861.2 million, on revenues of $30 billion.

To twit competitors, Sears officials delight in telling tales about high rollers who have sought out the financial centers, which also sell real estate and Allstate insurance. In Cupertino, Calif., a man walked into Sears and bought $3 million worth of securities. A Jacksonville, Fla., woman who received a Dean Witter flyer with her Sears charge-account statement responded with a $1 million check. Far more significant has been the amount of traffic attracted to the outlets, which, with potted plants and walnut desks, resemble suburban bank branches. The average broker has lured three times as many new accounts and booked triple the sales of his pinstriped counterpart in one of the 325 freestanding Dean Witter offices.

One reason business is good is that the store outlets are open nights and weekends, while conventional brokerage offices keep hours more akin to bankers'. The in-store units also seem to benefit from the "halo" effect of Sears' consumer reputation. Sears is trying to capitalize on this sturdy image with a new television advertising campaign for its financial centers that features Actor Hal Holbrook intoning, "Trust us to make it work for you." (Holbrook is also advertising for a Toledo bank, and last week it sued him and Sears for violating what it said was an exclusive contract in the Toledo area.)

Some dissenters believe it is too early to tell whether Sears' expertise in merchandising staples to Middle America can be transferred to Individual Retirement Accounts and commodity straddles. Still, other brokers are watching their local Sears stores and wondering how long it will be before the potted plants and walnut desks appear.