Sears is looking for an executive with a formula for reviving a middle-market department store in an era dominated by discounters and specialty retailers, a feat no retail leader has yet accomplished. Slow retail sales growth, thin profit margins and a sluggish credit card operation present a combination of challenges few executives have faced.
So daunting are the problems and so unclear are the solutions that an executive with a shot at the CEO job at another retailer is unlikely to jump at the Sears opening.
"There are not very many candidates out there," said Daniel Skoda, former head of Marshall Field's and now president of D&R Consulting, a Chicago-based management and marketing consultancy. "[The search] is not going to be easy. It's clearly something that's going to take a lot of work from the search committee."
LEADING A TRANSFORMATION
The difficulty of the task is matched only by its importance. The chosen successor will lead either a last-ditch effort to preserve the Sears we know today, or a dramatic transformation of the century-old retailer.
Potential external candidates cited most often by industry sources are Terry Lundgren, 48, president-chief merchandising officer at Federated Department Stores; Kenneth Woodrow, 56, who headed Target Stores for five years before being promoted to vice chairman of Target Corp. in July; and Roger Goddu, 49, CEO of Montgomery Ward & Co. since 1997. Mr. Woodrow declined to comment, and Messrs. Lundgren and Goddu didn't return calls.
Internally, the top candidates are Julian Day, 47, exec VP-chief operating officer, and Alan Lacy, 46, president of Sears' home services business. Both are members of the office of the chief executive, along with Mr. Martinez. They declined to comment for this article.
Both internal candidates are considered long shots. Neither has a merchandising background, and each suffers from his association with latter stages of the Martinez regime, a period investors would like to forget.
"They need to bring somebody in from the outside. They're ready for the next phase of their evolution," said Christine Dowdle, director of retail practice at Chicago-based A.T. Kearney Executive Search, who is not involved in the search; Chicago-based Heidrick & Struggles International is handling.
DARK HORSE CANDIDATE
Observers wouldn't be too surprised to see Sears pluck a relative unknown, someone for whom the opportunity to run a retail and credit card giant with $41 billion in annual sales is worth the obvious risks of piloting a listing tanker.
And the successor won't get clear orders from the board, which is searching for a strategy as much as for a CEO. The board will expect the new CEO to come with a plan for restoring profitable growth at Sears.
"We're not going to tell the guy what to do," said Sears board member Hall "Cap" Adams, a member of the search committee. The new leader will have to choose between another attempt to breathe life into Sears' increasingly anachronistic middle-market department store format or adopting the strategies of discounters such as Target.
The new CEO also may choose a more radical course: restructuring the company to focus on its historic strength in appliances and tools and abandoning a heretofore futile effort to compete in the apparel business.
Sears' choice of a successor will signal its future direction.
If the retailer believes it simply needs to polish its stores and upgrade its apparel, Mr. Lundgren would be a logical choice. But he is heir apparent to Federated CEO James Zimmerman and therefore unlikely to find the Sears job appealing.
If Sears wants to become more like a discounter, Mr. Woodrow would make sense and would draw cheers from Wall Street. Just one year younger than Target CEO Robert Ulrich, Mr. Woodrow might see the Sears job as his best chance to run a major company.
If the board is looking for more drastic measures-such as closing stores, exiting merchandise lines or splitting up the company-it may opt for someone with financial or turnaround experience. Mr. Day, who led a restructuring at Safeway before joining Sears in 1998, would fit that bill. When he left Safeway, Mr. Day made it clear he hoped someday to become a CEO.
The only obvious external candidate with firsthand knowledge of the problems facing Sears is Mr. Goddu, who's wrestling with them now at Ward's, another middle-market department store battered by innovative rivals and saddled with outmoded store layouts and unpopular mall locations.
While Mr. Goddu has won praise for reconfiguring Ward's stores along the lines of a discounter and upgrading the merchandise, it's far too soon to declare him a success.
What's clear is that Sears is in for a long hunt. Mr. Adams said the search, which began early this year, won't be over in time for Sears' annual meeting next month. The company will say only that it's "evaluating internal candidates, as well as others from the retail industry."M
Mr. Baeb is a reporter at Crain's Chicago Business.