Sears Holdings (SHLD) Majority Shareholder Eddie Lampert Crowns Himself CEO

This week, Sears Holdings (SHLD: Charts, News) announced the resignation of CEO Lou D'Ambrosio, who has led the company for the past two years. During his term, Sears stock slid 46%, continuing its five consecutive years of declining revenue.

D'Ambrosio cited his premature departure was based on family reasons, but many analysts believe that he was forced out by hedge fund manager Eddie Lampert, who will succeed him as CEO. Daily Chart
Lampert and his hedge fund, ESL Investments, currently own approximately half of Sears Holdings. Lampert's investment in Sears started with his purchase of the bankrupt Kmart Holding Corp .in 2003, which he combined with Sears, Roebuck & Co. in March 2005 to create the modern Sears Holdings. Last year, Lampert liquidated the majority of Sears' Kmart stores after poor sales performance last Christmas. Prior to his exit, Lou D'Ambrosio touted the strengths of Sears. "We have established momentum in the company," he stated, "including six consecutive quarters of increased clothing sales, four quarters in a row of EBITDA growth, and a stronger balance sheet." D'Ambrosio, who had previously worked at telecommunications company Avaya and International Business Machines (IBM: Charts, News), was chosen by Lampert to spearhead the company's e-commerce initiatives. Sears reported that e-commerce sales from 20% from the prior year during the holiday season. D'Ambrosio also provided salesmen in 450 locations with approximately 5,000 iPads and 11,000 iPod Touches to keep track of inventory and customer orders wirelessly. To achieve this, he had to add wireless networks to the department stores. Although these initiatives garnered some positive PR for the company, which had been increasingly viewed as a stodgy icon of the past, they did little to slow Sears' rapid decline. Sears and its closest competitor, JCPenney (JCP: Charts, News), have both suffered immensely at the hands of online giant Amazon (AMZN: Charts, News), which has turned many brick and mortar competitors into window shopping showrooms. Meanwhile, Wal-Mart (WMT: Charts, News) and Target (TGT: Charts, News) have squeezed Sears out of the former brick and mortar triumvirate of discount shopping. Over the past twenty years, department stores such as Sears and JCPenney have lost half of their market share of the retail industry's core "general merchandise, apparel, accessories, furniture and other" category to these new challengers. Sears' current predicament closely resembles the fall of JCPenney, when hedge fund manager Bill Ackman acquired a 20% stake in the company to replace its CEO with his pick - Apple (AAPL: Charts, News) retail operations president Ron Johnson. While Johnson managed to improve comparable sales figures by converting several departments into "shop formats," the non-converted departments of the store performed 20% worse, leading to a 26% plunge in third quarter revenue. Analysts were not impressed with Johnson's need to cannibalize parts of the store to generate gains in a combined area. If even Johnson's plan, which came from years of experience at Apple and Target, failed to revive JCPenney, then would Lampert be able to save Sears? Lampert's mass liquidation of stores throughout 2012 should indicate that he is running out of ideas for the company that he has spent seven years trying to help turn around. Lampert has also been criticized for refusing to appoint a true retail executive to the CEO post. In seven years, Sears has gone through five chief executives, from the supermarket, restaurant, telecommunications and computer industries. University of Michigan business professor Erik Gordon lamented, "Eddie buys a once-great retailer but seems to be allergic to retailers." To stay afloat, Sears spun off its Hometown, Hardware and Outlet stores to generate $364.5 million from a rights offering and a $100 million cash dividend from the new company. The company has also allowed Costco (COST: Charts, News) and Ace Hardware to sell its Craftsman tools, and is currently trying to license its Kenmore and Diehard products. It also spun off a large portion of its poorly performing Sears Canada subsidiary, reducing its stake from 95% to 51%. The company also liquidated a large number of its KMart and Sears stores and leased out the space to other chains. Lampert has his work cut out for him before Sears can return to profitability. In November, the company reported a third quarter loss of $4.70 per share, down from $3.95 in the prior year quarter. Revenue also slumped 5.8% to $8.86 billion, continuing its five-year long losing streak. Other News About SHLD Lampert Takes Over as Sears CEO: He's Waiting to Slice and Dice It, Says Macke Will Lampert save or sacrifice Sears Holdings? Sears, JCPenney Aim to Revolutionize Retail Can these two aging giants catch up to Amazon, Wal-Mart and Target? Other Stocks in the News Three Simple Reasons to Buy This Retailer Can Gap continue its 2012 rally? Wet Seal Appoints New CEO Another retailer replaces its CEO. Copyright 2013 by, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA, Inc.) or its employees responsible.

Published on Jan 10, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

Copyrighted 2016. Content published with author's permission.

Posted in ...