Sears CMO Leaves Company

Joan Chow Exits as Retailer Struggles to Capitalize on K-Mart Merger

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COLUMBUS, Ohio ( -- Joan Chow, chief marketing officer at Sears for just 19 months and the last senior-level marketer to survive since Eddie Lampert took over the company, has left the 2,400-store chain.
Joan Chow's last effort for Sears was a holiday ad campaign promoting the retailer as a speedy shopping destination for the harried mother.
Joan Chow's last effort for Sears was a holiday ad campaign promoting the retailer as a speedy shopping destination for the harried mother.

Project seen as failure
Ms. Chow joined the company in 1998, long before its $11 billion takeover in November 2004 by K-Mart, an acquisition orchestrated by hedge-fund manager Mr. Lampert. Hailed at the time as a way to revive the ailing retail chains by cross-marketing their respective brands and compete against larger rivals, the strategy is now largely viewed as a failure by analysts, especially amid Mr. Lampert's heavy cost cutting, lack of investment in the stores and diminishing advertising spending.

"The behavior is not what you would see of a retailer trying to turn around two brands," said Kim Picciola, a retail analyst at Morningstar. "They continue to treat them as two separate companies. There has been some integration, but certainly not what we thought we might see in terms of bringing the two brands together."

Ms. Chow's departure comes just days after Sears reported same-store sales declined 5.6% over the holiday season. During that time, a campaign aired from WPP Group's Y&R, Chicago, that she oversaw, promoting Sears as a speedy shopping destination for the harried mother. K-Mart ran a separate campaign and reported same-store sales declines of 1.2% during the same period.

McGuire takes over
Until a replacement is found for Ms. Chow, Maureen McGuire, exec VP-chief marketing officer for Sears Holding Corp., a former IBM marketer who was appointed in October 2005 to oversee marketing at both the Sears and K-Mart chains, will take over Ms. Chow's duties, according to a spokesman.

Sears declined to make Ms. McGuire available for an interview, and a spokesman declined to answer any questions regarding the progress on the integration of the Sears and K-Mart brands.

More than two years after the merger between K-Mart and Sears was announced, Wall Street is still closely watching the reticent Mr. Lampert's every move. "He hasn't played all his cards yet," said Ms. Picciola. "It's still a mystery what the long-term strategy is."

What isn't a mystery anymore, though, is whether Mr. Lampert has any intention of turning around two of the retail industry's most iconic brands, according to industry-watchers and analysts. "He's squeezing the life out of both of these brands," said Robin Lewis, author of the industry's influential newsletter Robin Reports. "Mr. Lampert's promise to revive these brands was just a smoke screen. He's stopped sharing all these grandiose things he was going to do for these brands."

Mediocrity inevitable
Not all analysts are as cynical, arguing Mr. Lampert has simply changed course after digging into the collective challenges at both chains. "He thought he could do something you can't do," said Britt Beemer, a retail analyst at American Research Group. "How can you merge two mediocre companies and end up with anything but a mediocre company?"

Sears Holding Corp., despite declining market share and sales at both chains, is profitable, due in part to returns from investments in derivatives by billionaire and financial whiz Mr. Lampert. Although Mr. Lampert realized returns of $100 million on the derivatives trading during the quarter, the risky investments are never a sure thing and during the fourth quarter Sears Holding reported an undisclosed loss.

Even so, net income for Sears Holding'sfourth quarter of fiscal 2006 is expected between $750 million and $830 million, up from $648 million during the same period last year. For the entire year, net income is expected to come in somewhere between $1.42 billion and $1.5 billion when the fiscal year ends Feb. 3.
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