Sears Holdings Corp. abruptly announced the departure of president and chief executive Aylwin B. Lewis on Monday, leaving a management void at the top of the department store chain controlled by Chairman Edward S. Lampert as it tries a high-stakes restructuring to reconnect with customers and reinvigorate slumping sales.
Lewis was an executive at fast-food chain Yum Brands Inc. and had little retail experience when was hand-picked by Lampert in 2004 to run Kmart and later Sears. W. Bruce Johnson was named as interim CEO while the company looks for a permanent successor.
Monday’s announcement marked the latest chapter for the venerable retailer, which has seen its competitors snatch away customers since Lampert acquired Kmart in 2003 and Sears, Roebuck and Co. in 2005.
At the time, Lampert — a masterful hedge fund investor who controls all major decisions made at Sears Holdings — promised to reinvigorate the faded retail icons and “transform them into a great company.”
Nearly three years later, Lampert’s task has proven difficult, if not downright impossible, as customers continue to flee the company’s 3,800 tired stores in droves, taking their wallets them.
“He certainly has his work cut out for him,” said Morningstar analyst Kim Picciola. “Even the total organizational change is an indicator that it was a much greater challenge than what they realized.”
For the first three quarters of the year, Sears’ profit has fallen more than 40 percent. And earlier this month the company said it managed to post third-quarter earnings of just $2 million — down 99 percent from last year.
Adding to investors’ frustrations, was a warning that Sears would likely post fourth-quarter earnings well below Wall Street forecasts as eroding sales push its profit down as much as 57 percent.
The company said it expects to earn between $350 million and $470 million, or $2.59 to $3.48 per share, for the quarter ending Saturday — far less than the $4.43 per share sought by analysts surveyed by Thomson Financial. Sears earned $820 million in the fourth quarter a year earlier.
The string of bad news prompted Lampert, whose ESL Investments Inc. owns 42 percent of Sears’ common stock, to announce a reorganization for the Hoffman Estates-based company last week, structuring the company into five types of units: operating businesses, support businesses, brands, online and real estate.
“The board has determined that now is the right time to put in place new leadership to take the company forward,” Lampert said Monday in a statement.
But with its once-hefty war chest shrinking — cash and cash equivalents declined to $1.5 billion at the end of the third quarter, down from $4 billion in February — investors aren’t sure if how much money Lampert has to effectively fix Sears.
In addition to leaving as CEO, the 52-year-old Lewis will also resign from its board.
Monday’s news did little to the company’s stock price, which has fallen dramatically in the past year, and Standard & Poor’s said the news would have no affect on Sears’ credit outlook.
“Since its formation in 2005, Sears Holdings ... has made progress in cutting costs, but has not been able to show improvement in sales,” Standard & Poor credit analyst Gerald Hirschberg said in statement. “We continue to believe that top-line growth will be very challenging, despite the reorganization and change in management.”
Retail consultant Howard Davidowitz, who is chairman of Davidowitz & Associates, said he questions how Sears can embark on such an ambitious restoration plan without a full-time chief executive at the helm.
“This is further chaos at Sears,” said Davidowitz, who has long been skeptical of Lampert’s ability to successfully run a retailer. “The company is in free fall with an interim CEO and things look more chaotic than they did before and the worst is yet to come.”
The company gave no timeline for finding a full-time replacement for Lewis, who was one of the nation’s few black CEOs of a Fortune 500 company, but industry experts said Sears needs to tap an executive with retail experience if the company has any hopes of succeeding.
“It’s been an ongoing concern of ours that there hasn’t been anyone with merchandising experience at the helm,” Picciola said. “And given the weak competitive position and struggles on the merchandising front, we’re hopeful they’ll find someone with experience in this area.”
Johnson, an executive vice president of supply chain and operations, joined Kmart in 2003 after working at French retailer Carrefour SA and consumer products maker Colgate-Palmolive Co.
Meanwhile Monday, Sears disclosed in a regulatory filing that it may still be interested in acquiring trendy retro-themed retailer Restoration Hardware Inc., but for a lower price than its tentative $6.75-per-share November bid.
Sears, which owns 13.7 percent of Restoration Hardware, said it was evaluating the latest private equity offer for the Corte Madera, Calif.-based company “in order to understand the implications for any deal that Sears Holdings might contemplate.”
Last week, Catterton Partners lowered its bid for the home-furnishing store by more than $2 per share to $4.50 per share, or about $179 million, amid a weak housing market.
Sears shares, which reached a high of $195.18 in April, rose 92 cents to $99.92 in afternoon trading.