Sears Expected to Tap McGarryBowen as Lead Shop on $360 Million Account

Incumbent Y&R Likely to Keep Craftsman, Kenmore and Die Hard Brands

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After a review, Sears is poised to name Dentsu's McGarryBowen its new lead creative agency, according to multiple people familiar with the matter. The agency's arrival represents the first major change to Sears' roster of ad shops in several years. The struggling retailer is seeking a brand refresh and new tagline from the agency, which will likely also handle marketing for the retailer's appliance business.

The incumbent, WPP's Y&R in Chicago, Sears' longtime lead shop, is expected to hold onto the Craftsman, Kenmore and Die Hard brands, as well as some other Sears business units.

Still, the loss of business constitutes a serious blow to the agency's Chicago outpost. The bulk of Y&R Chicago's revenue comes from the Sears account, which it won in 1993. Creatively the office is led by Bob Winter, who was named to the post last October after the previous chief creative officer, Ken Erke, moved over to Interpublic Group of Cos.' R/GA to be an executive creative director.

More broadly, the loss for Y&R represents another setback for the WPP agency's North American operation, which in the past year has lost business from Dr Pepper Snapple Group, MetLife, Office Depot and Hilton Hotels. It is trying to stage a turnaround under new leadership, which includes new CEO David Sable; former Goodby creative Jim Elliott in New York; and new West Coast President Doug Sweeny, formerly a top marketer at Levi's.

McGarryBowen is understood to have beat Publicis Groupe 's Fallon and Interpublic's Hill Holliday in a final round of the review, which began in January. A spokeswoman for Sears would not confirm McGarryBowen's appointment, saying: "The decision is still with our senior leadership team." Agencies either could not be immediately reached or declined to comment.

Sears Holdings Corp. also owns Kmart, which was not part of this review. Kmart's lead agency is Interpublic's DraftFCB.

The Sears review has not been without controversy; the retailer came under fire after its non-disclosure agreement circulated in adland. The agreement sparked ire amongst would-be agencies with its demand that participants relinquish ownership of materials and ideas they presented during the review -- even if they don't win the business. Many invited agencies opted out of the pitch, though it's unclear whether the ones who wound up proceeding with the review were able to negotiate new terms of agreement with Sears.

Sears media duties are handled by Havas' MPG in Chicago and PR is handled by Havas' Euro RSCG PR, New York. Digital media is handled by Publicis' Digitas. For years, Sears has used the same stable of agencies. There had been some minor movement on the agency roster late last year, though, when Sears said it had tapped the now-defunct Boston indie Modernista to handle a digital initiative for the brand's fitness business.

The retailer ended a 43-year relationship with Ogilvy & Mather Worldwide in 2005, when it consolidated its account with Y&R. In 1996, after managing the Sears account between its Chicago and New York offices, Y&R consolidated the retailer's work in Chicago. Y&R's notable work for the brand includes the "Softer Side of Sears" campaign, which ran from late 1993 until 2000.

Sears Holdings has been struggling with keeping its Sears, Kmart and Lands' End brands relevant. During the all-important shopping month of December, Kmart reported that sales at stores open at least a year rose 2.3%, while Sears' domestic locations reported a 6% decline. For year-end 2010, Sears Holdings reported net income of $150 million, down sharply from $297 million in 2009. Domestic same-store sales rose 0.7% at Kmart and fell 3.6% in the Sears Domestic segment, which includes Lands' End, during the period.

In August, Sears Holdings tapped David Friedman as its new senior VP-president of marketing. Mr. Friedman hailed from Razorfish, where he was president-Americas. Mr. Friedman is the retailer's third head marketer since Edward Lampert took control of the company in 2005. Richard Gerstein, who moved on to be senior VP-strategy and worldwide marketing at Hewlett-Packard but has since left that post, and Maureen McGuire, who was personally recruited by Mr. Lampert, preceded him.

And after a three year search Sears Holdings finally appointed a new CEO in February. Lou D'Ambrosio, an executive with a background in technology but little retail experience, is now in charge of turning around the ailing retailer. Mr. D'Ambrosio has pledged to accomplish that task by relying on core brands such as Craftsman and Land's End, and improving marketing.

In 2010, Sears Holdings spent $360 million on measured media for the Sears brand, according to Kantar. It spent $365 million in 2009. For Kenmore, it spent $52 million in 2010, up from $39 million in 2009; $40 million on Craftsman in 2010, down from $48 million in 2009; and about $1.8 million on Die Hard in 2010, with negligible spending in 2009.

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Contributing: Natalie Zmuda and Rupal Parekh

UPDATE: A Sears spokeswoman confirmed that Kmart awarded Minneapolis-based Peterson Milla Hooks its apparel and home businesses after a review that was separate from the Sears brand. DraftFCB had worked on the apparel and home businesses, but Sears said it will remain the lead agency for the Kmart brand.

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