Analysts Lambaste Eddie Lampert for Being a 'Control Freak'

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COLUMBUS, Ohio ( -- Sears Holdings Corp. Chairman Eddie Lampert has demoted Sears CEO Alan Lacy, replacing him with former Kmart CEO Aylwin Lewis, while expanding his own role in day-to-day merchandising and marketing duties.
Sears Holding Corp. Chairman Eddie Lampert is personally taking over Sears' marketing.

The announcement, made by Mr. Lampert in a letter to shareholders, came as Sears reported sales plummeted 7.4% at stores open at least one year and Kmart reported comparable-store sales of just 0.3%.

Mr. Lewis' appointment is effective Sept. 30; Mr. Lacy will continue to serve as vice chairman and director of Sears.

Strong criticism
Analysts and industry watchers lambasted Mr. Lampert’s move to take a more active role in merging marketing at Sears and Kmart, saying the hedge-fund manager and financier, whose company ESL Investments orchestrated the Sears/Kmart merger, should stick to what he knows best.

An request for an interview with Mr. Lampert was denied.

“Lampert is a smart guy, but what makes him think he is qualified to do this?” asked George Whalin of Retail Management Consultants of San Diego. “I think this is about Lampert being a control freak. The competence of the retailers he’s competing against -- Wal-Mart and Target -- all have highly experienced people handling merchandising and marketing right now. This is clearly not for people who don’t know what they are doing.”

Paralyze top-ranking execs?
Other analysts warned that Mr. Lampert’s decision to take on a more day-to-day role in marketing and merchandising could rile the egos and even paralyze the top-ranking marketing brass at Sears, which includes Luis Padilla, the executive vice president of marketing and merchandising, and Joan Chow, the recently named chief marketing officer.

Mr. Padilla joined Sears following 22 years with Target, most recently as executive vice president of merchandising for Target's Marshall Field's division. From 1994 to 2001, he was senior vice president for softlines merchandising for Target Stores.

Likely, Mr. Padilla and Ms. Chow have already had to defer to Mr. Lampert’s vision. After all, consider the recent end to the retailer’s 43-year relationship with advertising agency Ogilvy & Mather. The consolidation of Sears’ $640 million advertising account with Young & Rubicam was widely viewed as a move orchestrated and negotiated directly by Mr. Lampert with WPP Group, the holding company for both agencies.

Deter talent?
Additionally, could Mr. Lampert’s day-to-day involvement deter great retail marketing talent from even considering a top spot at Sears?

“Anyone who takes a marketing job at Sears at this point will have to answer to Lampert, and unless they bring experience to deal with that they are going to essentially become a ‘yes man,’” Mr. Whalin added.

Howard Davidowitz, chairman of Davidowitz & Associates, a New York-based national retail consulting and investment banking firm, agreed. “If you are a talented executive at Target, is Sears where you are going to want to go?” he said. “I don’t think so.”

Mr. Davidowitz pointed to the recent successes at J.C. Penney, a rebound largely credited to great leadership expertise, adding that Mr. Lampert should be looking to recruit great talent rather than run the show.

'A great hedge fund manager'
“You have to distinguish here -- this is a great hedge fund manager,” Mr. Davidowitz added. “He is not a fool, but a genius. I am not underestimating him. But he should not be running a retail company.”

In that vein, Mr. Davidowitz also criticized the promotion of Mr. Lewis to CEO, formerly an executive at restaurant group at Yum Brands, which operates 34,000 restaurants under multiple brand banners, including KFC, Pizza Hut and Taco Bell.

“This man does not have one day general merchandise experience,” Mr. Davidowitz said. “He was hired from a fast-food business. What relationship does pizza have to Sears?”

Gary Ruffing, a retail consultant with BBK Ltd. in Southfield, and former Kmart executive who watched Mr. Lampert’s management style closely at Kmart, said Mr. Lampert’s move is a symptom of the slow pace of the Sears/Kmart merger.

'Getting no results'
“He’s given that group time, but he’s got to be thinking, ‘What’s changed? What do we have to hang our hat on?’” Mr. Ruffing said. “They don’t have anything right now. They are also spending the same amount of money and getting no results.”

Mr. Ruffing also pointed to the failure at Sears Holding to incorporate the best of Kmart's and Sears’ brands into the Sears Essentials format that will be used in 50 stores by the end of the year.

“I think he’s disappointed and he wants to stimulate some new thought,” Mr. Ruffing said. “There is no integration of Kmart into the Sears thinking. They are not leveraging the brands, either Martha Stewart or Kenmore. It’s just another Sears. Lampert has got to be saying, ‘Where are the new ideas?’” Even so, Mr. Ruffing, like other analysts, questioned whether Mr. Lampert has the skills to manage marketing and merchandising, even if he had some success at Kmart.

“He’s dealing with a much bigger ship, 3,000 stores and a mass bureaucracy at Sears and he wants to cut right through that and get the job done. He’s had his fingers in a lot of retail, but he’s certainly never managed retail,” Mr. Ruffing said.

'Achieved outstanding results'
Richard Hastings, a retail analyst with Bernard Sands, took another view, saying Mr. Lampert is right in taking the reins of marketing.

“At Kmart, he achieved outstanding results because he was in charge of a lot of daily decisions,” Mr. Hastings said. “Kmart was a great advertising story at the time and Sears was not. The problem at Sears is they are not doing marketing, but merchandising and merchandise planning and not enough marketing.”

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