Advertise with

US: Sears CEO's exit raises concerns about turnaround
US: Sears CEO's exit raises concerns about turnaround

US: Sears CEO's exit raises concerns about turnaround


Reuters - Jan 9th 2013, 10:22

(Reuters) - Shares of Sears Holdings Corp (SHLD.O) fell more than 5 percent on Tuesday after the retailer said Chief Executive Louis D'Ambrosio was leaving the company, raising concerns that the drive to improve its namesake stores could stall. 

Chairman Edward Lampert will take over as CEO in February from D'Ambrosio, who is stepping down due to a family member's health issue. D'Ambrosio, hired in February 2011, has been credited by some analysts for recent improvements in Sears' online business and customer loyalty program.

"While we acknowledge Mr. Lampert's insight and expertise when it comes to 'financial engineering,' we are concerned about his lack of merchandising experience at time when the retailer is struggling to turn around its core Sears and Kmart chains," said Evan Mann, senior high yield analyst at Gimme Credit, an independent research service on corporate bonds.

S&P analyst Jason Asaeda also saw D'Ambrosio's plan to step down at the end of the current fiscal year "adding to Sears' turnaround execution risk."

The operator of Sears department stores and the Kmart discount chain is in the middle of a turnaround after suffering from declining sales since 2005, when Lampert merged the two iconic U.S. retail chains in an $11 billion deal.

It company has been closing stores, tightly managing inventory, selling real estate and shedding assets to turn its business around.

The news of D'Ambrosio's departure came as Sears reported sales for the holiday shopping season that were not as bad as some analysts had feared. Sears' domestic comparable-store sales for the nine weeks ended December 29 fell 1.8 percent, the company said on Monday.

By contrast, Sears' third-quarter U.S. same-store sales fell 3.1 percent.

In the nine weeks ended December 29, same-store sales at U.S. Sears-branded stores rose 0.5 percent, while those at Kmart fell 3.8 percent. Sears Canada Inc (SCC.TO) saw a 5.8 percent decline.

In November, Sears Holdings trimmed its stake in the Canadian unit from about 95 percent to 51 percent, distributing the stock to Sears Holdings shareholders.

Sears shares were down $2.15 at $40.77 in Tuesday afternoon trade on Nasdaq, while Sears Canada shares were down 2.6 percent.

Lampert in charge

The biggest Sears shareholder is Lampert. On his own and through his ESL Investments hedge fund, he held 55.5 percent of the stock of the Hoffman Estates, Illinois-based company as of November 30, according to Thomson Reuters data.

So in some ways, the biggest change is just that Lampert will have the CEO title while he calls the shots, some observers said.

"No matter what the title said, Eddie Lampert is, was and will be the CEO there," said Craig Johnson, president of retail strategy and consulting firm Customer Growth Partners.

Whether he is called chairman or CEO - or both, as will be the case in February - Lampert is expected to continue a strategy of closing stores and selling off assets to raise cash, retail experts said.

Sears faces stiff competition from Wal-Mart Stores Inc (WMT.N) and Target Corp (TGT.N), especially in areas such as electronics. Target is also moving into Canada, which is expected to hurt the Sears Canada business.

Sears spun off its Orchard Supply Hardware Stores unit in December 2011. Last year, it announced plans to sell some prime real estate and spin off its Sears Hometown and Outlet businesses and certain hardware stores.

One problem that Lampert faces is that his options for what to sell now are somewhat limited.

"He's not going to sell anything off wholesale ... there's no buyer for Kmart," said Mark Cohen, former chief executive of Sears Canada and now a professor of marketing at Columbia University in New York.

"I would expect he will close a fair amount of Kmarts, but very few Kmarts would be attractive to real estate investors. My sense is he will continue to sell Sears assets, both in the U.S. and Canada." 

Related News

Canada's Hudson's Bay is fishing for young fashionistas
11/09/2019 - 10:39
When Sears Canada announced it was closing all of its stores in 2017, Hudson’s Bay Co (HBC) saw an opportunity: HBC’s Canadian department store chain would swoop in and snatch Sears’s customers. Managers gradually added mid-price apparel to stores from Nova Scotia to British Columbia and waited for sales to take off.

The retail apocalypse will claim 4,300 stores this year - Here's why mall giants aren't freaking out
05/03/2019 - 14:19
More than 4,300 department stores are set to close this year as the retail apocalypse rips through Payless ShoeSource, Gymboree, JCPenney, Gap, Victoria's Secret, and Sears. But one Wall Street analyst says mall giants should easily weather these closures.

Sports Direct snaps up struggling House of Fraser in £90m deal
14/08/2018 - 10:23
House of Fraser, the Chinese-owned UK department store chain, entered administration only to be swiftly snapped up by retailer Sports Direct for £90m.

Liberty and L2D’s Stuttafords hangover is nearly over — now for Edcon
30/05/2018 - 11:59
South African landlords have let most of the space vacated by the defunct department store, and Liberty and L2D are in talks with Edcon, which is ‘rationalising’ its leases.

Retailers face clear-cut choice for 2018: Embrace empathy or lose customers
26/01/2018 - 10:01
There's a lot of buzz about empathy when it comes to customer experience, primarily what it means, and why it's important. But, what is often overlooked is how to use it. In simple terms, it's all about predicting your customers' needs and staying two steps ahead of them. It's about connecting with your customers in a meaningful way by showing you care about them on an individual level.