When Alan Lacy took charge at Sears, Roebuck and Co. four years ago, he called his top executives to a meeting to talk strategy.

A series of slides laid out Sears' plight--falling sales, a drooping stock price, ineffective marketing and high costs. Then Lacy laid out his turnaround plan.

"We will act," said one of the slides Lacy used at that meeting. "This will take time. But we don't have time."

Time just ran out for the Lacy-led turnaround effort at Sears. From this point forward, it's Eddie Lampert's show, with Lacy cast in a supporting role.

By engineering the $11 billion merger of two of his biggest investments--Sears and Kmart--42-year-old finance whiz Lampert has made a move to turn those investments into winners.

It's no sure thing. Not by a longshot. Even Lampert admits it won't all go smoothly. But he says that his big ownership stake in the combined companies should buy him the time he needs to do it right. Lampert will be the company's chairman, Lacy its CEO.

"We understand the potential for the combination. We're going to manage the potential, and we're not going to try to generate sort of steady progress," Lampert said Wednesday. "It's going to be probably lumpy progress over time."

Mergers are not easy under the best of circumstances. But taking two struggling retailers and taking on Wal-Mart Stores Inc. and Target Corp. makes that challenge even more difficult.

"The question is, are you putting the blind and the lame together? Or are you putting together two companies that can benefit from the synergies of the two," says Robert Miller, a principal at New York's Miller Mathes restructuring consultancy. "It's hard enough to take one company and fix it. Now you've got to take two companies and fix them both together. It's a real challenge."

In the entire, unsettled situation, perhaps only one piece is crystal clear: Eddie Lampert is in charge now.

It was Lampert who opened talks with Lacy this summer, just as Sears negotiated with Lampert over the purchase of up to 61 Kmart stores for $621 million. It is Lampert who, as Sears' largest outside shareholder, has been a booster and sounding board to Lacy since Lacy took charge at Sears. It is Lampert who controls Kmart and just put a new chief executive there, former PepsiCo executive Aylwin Lewis.

And it is Lampert, a former Wall Street arbitrage investor with no experience running any company other than his own ESL Investments Inc. private investment fund, who now is taking on perhaps the toughest challenge in retailing.

Past failures

Turning around Sears has proven the undoing of many an experienced retailer. Longtime chief executive Ed Brennan could not do it during the 1980s. The flashier Arthur Martinez seemed briefly to have found the magic with his famed "Softer Side of Sears" marketing during the 1990s. But that flickered out.

Lacy has tried, with little success, since the century turned.

Now it's Lampert's turn. Lacy will retain the title of chief executive. But it's clear that the major strategic and financial shots will be made by the Yale-educated former arbitrage trader from Greenwich, Conn.

This will be the biggest test of Lampert's so-far-unblemished career. Little known outside financial circles until recently, Lampert made headlines in 2003 when he was kidnapped but talked his captors into releasing him before they could obtain a $1 million ransom.

Suddenly Lampert is the "It Guy" of Wall Street. He appears on Business Week's cover this week--in a story that unblushingly compares him to superinvestor Warren E. Buffett.

The comparison is strained. While both men started with relatively minor stakes and built them into fortunes, Buffett has shown his acumen again and again, from the Geico insurance company to the Washington Post Co., to the Salomon Bros. brokerage to the Coca-Cola Co. He has shown a remarkable 25 percent annual return, on average, over a 40-year investment career.