Sears Eyes Quick Rollout of Small Stores if Test Is SuccessfulThe move comes as Sears tries to bounce back from a five-year stretch during which it lost more than $8 billion as it closed hundreds of stores and sales dropped sharply.

Sears Holdings Corp. could quickly expand a new, smaller-store format that is less than a tenth the size of its average department store if a pilot project delivers strong results, a senior executive at the retailer toldReuters.

Leena Munjal said Sears planned to test the small format with a handful of openings this year, offering new details of a strategy that was first outlined at the company's annual shareholders' meeting on Wednesday.

The move comes as Sears tries to bounce back from a five-year stretch during which it lost more than $8 billion as it closed hundreds of stores and sales dropped sharply. The initial pilot store -- due to open next week in Colorado -- will be its first non-specialty store opening since 2005.

"Obviously we want to move the needle," Munjal, Senior Vice President, Customer Experience and Integrated Retail, said in an interview, referring to the potential for expansion. "This is very much a quick, scalable model."

The first location will be a 10,000 square-foot store specializing in refrigerators, ovens and other home appliances at a redeveloped mall in Fort Collins, Colorado. The average Sears store is 138,000 square feet.

Appliances are a relative strength for Sears, making it a natural choice for the first small store. However, Munjal said when it rolls out other small format locations they may focus on different categories. She did not elaborate.

Sears said the new Colorado store will carry the same assortment of appliances as in a typical Sears department store, including the top 10 brands of refrigerators, dishwashers and other products. It will also feature a 122-inch interactive display which customers can use to see how appliances would appear in various kitchen layouts.

For years Sears has slashed costs and sold off assets in an attempt to establish a profitable business model centred on fewer stores, innovative online services and a data-driven loyalty program. So far those efforts have not succeeded.

The smaller stores mark the latest attempt by Sears to rationalize floor space as shopping increasingly shifts online. In addition to accelerating store closings, it has been leasing out unproductive space in its stores to other retailers.

Sears said the Colorado location would offer a service where customers can book an appointment with an appliance expert in the store, and in-vehicle pickup in which customers can have online purchases delivered to their car.

(Reporting by Nathan Layne in Chicago; Editing by Muralikumar Anantharaman)