Sears CEO Ousted; Chairman to Be Hands-On

Hedge fund wizard Edward Lampert is taking on an unexpected new role at Sears Holdings Corp.: chief marketer and merchandiser.

The billionaire chairman shook up top management at the No. 3 U.S. retailer Thursday after another poor quarter, naming Aylwin Lewis to replace Alan Lacy as chief executive and taking on a more direct role at the company.

The moves come with sales still sinking at the company’s two laggard chains, nearly six months after Kmart Holding Corp.’s acquisition of Sears, Roebuck & Co. Reporting results from the first full quarter after the merger, Sears Holdings said it had a lower-than-expected profit of $161 million.

The news disappointed investors, who had driven up Sears’ stock significantly before and after the March 24 merger engineered by Lampert. Shares in the company sank $7.04 to $127.81, far off their peak of $163.50 in July.

Lampert, founder of Greenwich, Conn.-based hedge fund ESL Investments, which takes large stakes in distressed companies, will direct the marketing, merchandising, design and online businesses of Sears Holdings as well as its Lands’ End casual clothing unit.

He named Lewis, former head of Kmart and of Sears’ retail business, to take over as CEO and president of the Hoffman Estates, Ill.-based company effective Sept. 30.

Lewis will have responsibility for the company’s 3,900 stores as well as home services, finance, legal, supply chain, information technology and human resources departments.

Lacy, who stays on for now as vice chairman and a director, headed Sears Roebuck from 2000 until its acquisition by Kmart and was CEO under Lampert for the last six months. His demotion was not completely unexpected because he had failed to halt Sears’ retail slide and had a diminished role under Lampert.

More surprising is the hands-on role being assumed by Lampert, who has made a giant mark in financial dealings but little in retail. Lampert made $1.02 billion last year at ESL Investments, according to the industry magazine Institutional Investor’s Alpha.

Sears’ second-quarter net income grew to $161 million, or 98 cents a share, from $154 million, or $1.54, a year earlier. The latest period included $42 million of restructuring costs related to the merger and bankruptcy-related recoveries of $15 million.

Total revenue was $13.2 billion, well shy of the $13.7 billion analysts expected.