Sears Holdings Corp. (SHLD:US) Chairman Edward Lampert’s selection of himself as the ailing retailer’s fifth chief executive officer in seven years shows the billionaire hedge-fund manager hasn’t taken his critics to heart.
Ever since he’s controlled the company, Lampert has avoided putting a seasoned retail executive in charge of the department- store chain. Instead, he’s handed the reins to executives from the supermarket, restaurant and telecommunications industries, and now himself.
“Eddie buys a once-great retailer but seems to be allergic to retailers,” Erik Gordon, a professor at the University of Michigan and Ross School of Business, said in an interview yesterday. “Eddie is a brilliant guy, but that doesn’t make him a retailer.”
Lampert, 50, will take over on Feb. 2, when Lou D’Ambrosio officially steps down because of a health matter in his family, Sears said in a Jan. 7 statement. D’Ambrosio, 48, will remain on the board until the company’s next shareholder meeting in May.
Sears fell (SHLD:US) 6.4 percent to $40.16 yesterday in New York. The shares gained 45 percent last year.
“We’re positioned to have a very smooth transition,” D’Ambrosio said yesterday in a telephone interview. “We have established momentum in the company,” he said, including six consecutive quarters of increased clothing sales, four quarters in a row of Ebitda growth, and a stronger balance sheet.
“Eddie and I have worked very closely together, and we’re very aligned on the strategy and vision for the company.”
A “strong bench” of talent including Chief Merchandising Officer Ron Boire will also ease the transition, he said. “The blend of skills that we have, with Eddie leading them, is the right solution for this company.”
Lampert formed Greenwich, Connecticut-based ESL Investments Inc. in 1988 after working on the merger arbitrage desk of Goldman Sachs Group Inc. under Robert Rubin, who would go on to become U.S. Treasury Secretary under former President Bill Clinton.
Lampert bought Kmart Holding Corp. out of bankruptcy in 2003, then put it together with Sears, Roebuck & Co. in March 2005. His first CEO was Alan Lacy, who led Sears, Roebuck before the merger and served at consumer-products giants such as Kraft Inc. before Sears. Six months later, Lampert replaced Lacy with Aylwin Lewis, whom he’d brought over to Kmart from the restaurant industry. Lampert at the time said he’d head marketing, merchandising and Internet sales.
Lampert ousted Lewis in January 2008 and reorganized the company into five units. W. Bruce Johnson succeeded Lewis as interim CEO for more than three years, until D’Ambrosio was named.
D’Ambrosio, who had no experience in retail, became CEO in February 2011 after leading telecommunications company Avaya Inc. and spending 16 years at International Business Machines Corp. (IBM:US)
At Sears, D’Ambrosio vowed to invest in stores and use data gathered from the company’s tens of millions of loyalty-program customers to boost sales. His background in technology made online sales a particular focus, and the company said that Sears domestic and Kmart Internet sales during the nine-week holiday period rose 20 percent from a year earlier.
Under D’Ambrosio, Sears gave salesmen in 450 of its stores more than 5,000 iPads and 11,000 iPod Touches to help them track inventory and customer orders, and added free wireless access.
The initiatives didn’t halt the sales decline (SHLD:US), and the retailer has been selling stores and other assets to generate cash. Sears last year completed the spinoff of its smaller- format Hometown, Hardware and Outlet stores. The move raised $346.5 million from a rights offering and a $100 million cash dividend from Sears Hometown.
Sears also completed the spinoff of a portion of Sears Canada (SCC) in November, reducing its stake to about 51 percent from 95 percent.
In addition to the spinoffs, the retailer has shuttered large U.S. stores and began leasing space to other chains. Sears began allowing other retailers such as Costco Wholesale (COST:US) Corp. and Ace Hardware to sell its popular Craftsman tools and worked to license its Kenmore and DieHard products.
In November, Sears said its third-quarter net loss widened to $498 million, or $4.70 a share, from a loss of $421 million, or $3.95, a year earlier. Sales dropped 5.8 percent to $8.86 billion, continuing a streak of declines that began in 2007.
Sears said in a separate statement Jan. 7 that its net loss for the current quarter will be between $280 million and $360 million, or between $2.64 and $3.40 a share. The quarter will include a $450 million non-cash charge for pension settlements and $42 million in pension expense. Excluding those costs, profit would be between $132 million and $212 million, or between $1.25 and $2 per share, Sears said.
Sears isn’t done finding ways to sell off assets, which is Lampert’s specialty, said Gary Balter, a managing director with Credit Suisse Group AG in New York.
“We don’t view Sears as a longer-term, successful operating company, so changing players within the operations of the company aren’t going to make it better,” Balter said in a telephone interview. He rates the shares underperform, the equivalent of a sell.
Lampert will be able to turn more of his attention to Sears after last month appointing Mike Mikan, who had served as Best Buy Co.’s interim CEO, as president of ESL.
“You don’t want a chairman and CEO who doesn’t have a singular focus on the organization,” said Matt McGinley, a managing director at International Strategy & Investment Group in New York. “This is a company where the perception for the past handful of years has been that they are a ship without a captain.”
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