Sears' Seat

Last week Sears, Roebuck & Co. bought a seat on the New York Commodity Exchange. The No. 1 U. S. mail order house had no intention of speculating in rubber, silk, copper, hides, tin, lead, zinc, gasoline or crude oil. Indeed, the prime reason for buying the seat was to make it easier not to speculate in such commodities. According to Sears's Robert E. Wood, the seat was acquired to facilitate hedging operations.

During this year Sears will buy nearly $375,000,000 worth of merchandise. Many months may elapse between the ordering of the goods and the time they finally move from the shelves. Sears may, for instance, order $1,000,000 worth of shoes in February which will not be sold until September. Meanwhile the price of hides may decline, consequently depressing shoe prices so that for its February order of shoes Sears will get only $900,000. Contrariwise, hide (and hence shoe) prices may rise, in which case Sears will make an extra and unexpected profit. In any event, Sears is, in effect, speculating in hides. By hedging (selling hides short when the shoes are ordered, then buying in the hides as the shoes are sold) Sears is assured its retailing profit, no more, no less.

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