* Decision influenced by family illness - source
* D'Ambrosio steps down after two years at the helm
* Quarter-to-date same-store sales down 1.8 percent
* Kmart same-store sales down 3.8 percent
* Chief merchandising officer Boire seen as next CEO-analyst
By Dhanya Skariachan and Sakthi Prasad
Jan 8 (Reuters) - Sears Holdings Corp said late on Monday Chief Executive Louis D'Ambrosio will step down for family health reasons after the U.S. retailer reported a 1.8 percent decline in quarter-to-date sales at stores open at least a year.
Edward Lampert will assume the role of Sears CEO in addition to his current role as chairman, Sears said in a statement late on Monday. Lampert's hedge fund, ESL Investments, had a 34.14 percent stake in Sears Holdings as of Nov. 30, according to Thomson Reuters data.
A person close to the situation told Reuters that D'Ambrosio's decision was influenced by a close family member's medical situation.
"In light of Lou's decision to step down, the board feels it is important that there is continuity of leadership during this important period of transformation and improvement at Sears Holdings," Lampert said.
Sears spokesman Chris Brathwaite told Reuters that Lampert's decision to take over as CEO rather than pick an outsider was mainly at the request of the retailer's board.
Brathwaite said the board wanted to make sure the operator of the namesake department stores and the Kmart discount chain did not lose the recent momentum it has had in its turnaround.
Sears faces stiff competition from Wal-Mart Stores Inc and Target Corp, especially in areas like electronics. While Kmart has managed to keep some budget-conscious U.S. shoppers, the Sears chain has been losing market share in appliances and apparel.
D'Ambrosio was hired in February 2011. He replaced Bruce Johnson, who had operated as interim CEO since 2008. Prior to joining Avaya in 2002, D'Ambrosio spent 16 years at International Business Machines.
In a statement issued to Reuters, D'Ambrosio said "2012 was a turnaround year for Sears Holdings. We were clear about areas that we would focus on and we delivered."
While the former Avaya CEO was seen as having technology experience to help Sears' online business, his lack of retail experience raised questions about his ability to turn Sears around.
"D'Ambrosio was good for online, but not the transformational CEO Sears needed," analyst Paul Swinand of Morningstar told Reuters. Swinand added that Sears' online business was a "bright spot" and that D'Ambrosio should get some credit for that.
Swinand said he expects Lampert to stay on for one to two years, but that Ronald Boire, chief merchandising officer, is a top candidate to be CEO later. Prior to joining Sears, Boire was the chief executive of specialty retailer Brookstone.
"D'Ambrosio helped champion a strategy that helped move Sears' transformation in the right direction," Brathwaite said, citing the improvement in the retailer's financial health, apparel business, online segment and customer loyalty program during his tenure.
Total domestic comparable store sales for the nine-week period declined 1.8 percent largely due to sales declines in the consumer electronics category at both Sears and affiliate Kmart, the company said.
Kmart recorded a 3.8 percent fall in comparable store sales for the nine-week period. Kmart's quarter-to-date comparable store sales decline reflects a significant decline in consumer electronics, besides weak sales in the pharmacy, grocery & household and drug categories.
The growing popularity of smartphones as a multi-purpose device is eating into the sales of other best-selling electronic items such as digital cameras, MP3 players and camcorders, leading to a fall in their prices.
Reported net loss attributable to Sears Holdings' shareholders for the quarter ending Feb. 2, 2013 will be between $280 million and $360 million, or between $2.64 and $3.40 loss per share, the company said.
Excluding items, net income is expected to be between $132 million and $212 million, or between $1.25 and $2 per share.
"Over the past 12 months the company increased liquidity by $1.8 billion, showed EBIDTA growth each quarter and lowered net debt by $400 million," D'Ambrosio said.
Sears has been closing stores, tightly managing inventory, selling some real estate and shedding assets to turn its business around.
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.
In November, Sears completed its previously announced spin-off of a portion of its interest in Sears Canada Inc .