No sale: Analysts blast Sears marketing shuffle

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Amid sneers from retail-watchers, Eddie Lampert is personally grabbing the marketing reins at Sears and Kmart.

The Sears Holdings Corp. chairman last week demoted Sears CEO Alan Lacy and replaced him with former Kmart CEO Aylwin Lewis, while expanding his own role in day-to-day merchandising and marketing duties. Mr. Lacy will continue to serve as vice chairman, a director and as a member of the office of the chairman.

Mr. Lampert took a lambasting from industry insiders over the move, which comes as same-store sales at Sears, Roebuck & Co. plunged 7.4% and Kmart eked out a mere 0.3% gain. The take is that the hedge-fund manager and financier, whose company ESL Investments orchestrated the Sears/Kmart merger, should stick to what he knows best.

"What makes him think he is qualified to do this?" asked George Whalin of Retail Management Consultants, San Diego. "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, this is clearly not for people who don't know what they are doing." Sears did not make Mr. Lampert available for comment.

Retail experts warned that Mr. Lampert's decision to take a more hands-on role in marketing and merchandising could rile marketing brass at Sears, which includes Luis Padilla, exec VP-marketing and merchandising, and Joan Chow, recently named chief marketing officer.

Mr. Padilla and Ms. Chow likely have deferred to Mr. Lampert already. Sears' consolidation of its $640 million advertising account with Young & Rubicam was orchestrated and negotiated directly by Mr. Lampert with the holding company's chief executive, Martin Sorrell.

Turn off for new talent?

There's also a danger that Mr. Lampert's day-to-day involvement could dissuade new talent from joining the company. "If you are a talented executive at Target, is Sears where you are going to want to go?" said Howard Davidowitz, chairman of Davidowitz & Associates, New York.

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

"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."

He also criticized the promotion to CEO of Mr. Lewis, who was named at Kmart less than a year ago after spending most of his career at Yum Brands, which operates 34,000 restaurants under the KFC, Pizza Hut and Taco Bell banners, noting metaphorically: "This man does not have one day of general-merchandise experience."

Some see it as a stopgap. "Lampert is trying to understand the business and what he is buying and trying to do that before he goes out and hires a bunch of external people," said Neil Stern, an analyst with retail-consulting firm McMillan Doolittle in Chicago. "He might not even know who to hire at this point. He did this to get familiar enough with the business so when he does make that hire he can get the right person."

Indeed, there's a lot at stake for Mr. Lampert. "This is the biggest investment he's ever made and he's got billions of dollars of his money on the line and he wants to take an active role in it," said Mr. Stern. "I don't see him crafting ad campaigns, but getting close to it and making a decision to bring in a bigger hitter."

Not everyone is down on the idea of Mr. Lampert running Sears' marketing. "At Kmart, he achieved outstanding results because he was in charge of a lot of daily decisions," said Richard Hastings, a retail analyst with Bernard Sands. "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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