(Adds analyst comments, byline; updates shares)
By Dhanya Skariachan
Jan 8 Shares of Sears Holdings Corp 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 Dec. 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 Dec. 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
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
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 Nov. 30, according to Thomson Reuters
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 and Target
Corp, 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
"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."
(Writing by Brad Dorfman and Dhanya Skariachan. Reporting by Dhanya Skariachan
in New York and Allison Martell in; Toronto. Additional reporting by Nivedita
Bhattacharjee in Chicago; editing by John Wallace)