The Wall Street Journal-20080129-Sears CEO Departs- And Lampert Says He-ll Cut Own Role
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Sears CEO Departs, And Lampert Says He'll Cut Own Role
Full Text (828 words)Ending weeks of speculation, retailer Sears Holdings Corp. said the company's chief executive, Aylwin B. Lewis, will depart and his successor will have a freer hand to direct the company.
In a letter to employees yesterday, Chairman Edward S. Lampert said a restructuring of the company into five autonomous units announced earlier this month would "allow us to attract talented executives who are eager to take on the challenges of running their own businesses. As a result of these structural changes, I will no longer have any direct reports."
The move by Mr. Lampert -- who has had strategy, marketing and merchandising executives reporting directly to him -- comes amid troubles recruiting and retaining executives, say people close to the situation, including current and former executives. Key prospects have turned down or shied away from approaches as a result of Mr. Lampert's reputation for headstrong oversight of the Hoffman Estates, Ill., company, they say.
Mr. Lampert, a 45-year-old hedge-fund executive whose ESL Investments Inc. holds nearly 48% of Sears, informally has been seeking a possible new CEO for Sears since late last year, according to people familiar with the situation. He found several interested outside prospects, but serious talks never materialized, a person familiar with the situation said. Some balked because "this was viewed as a major turnaround with major changes to be made," this person added.
Ideally, Mr. Lampert wants the next chief executive to be a star player who already runs a major business -- and can get along well with the dominant shareholder. That is more important than whether the new pick gets along well with Wall Street. The fact that Mr. Lampert no longer will have direct reports "will help" speed the external search, the person said.
W. Bruce Johnson, the 56-year-old head of logistics and operations, was yesterday named interim CEO of Sears. A company spokesman said it wasn't clear if Mr. Johnson, an executive vice president and the third highest-paid executive at the firm in 2006, would be a candidate for the permanent job. Before joining Kmart in 2003, he was an executive at French retailer Carrefour SA.
In his letter to employees, Mr. Lampert praised the departing Mr. Lewis, who will leave at the end of this week, for his "hard work and ethical leadership." Neither Mr. Lampert nor Mr. Lewis were available to comment, a Sears spokesman said. Mr. Lewis is expected to receive about $4 million in severance.
Mr. Lampert, who dislikes flying and works out of his ESL Investments offices in Greenwich, Conn., had top Sears merchandising executives fly to Connecticut to brief him twice a month.
Mr. Lewis was left to oversee operations. The CEO had no visible role in Sears's continuing efforts to acquire specialty retailer Restoration Hardware Inc. Instead, it was Mr. Lampert who first proposed a deal to a director of the Corte Madera, Calif., retailer. Mr. Lampert then contacted the specialty retailer's CEO and pressed the bid to its outside directors. Sears yesterday said it remains interested in a deal, though Restoration has agreed to accept an offer from private-equity firm Catterton Partners.
The change in Mr. Lampert's approach, say people familiar with the matter, reflects his struggles in recent months to persuade executives they can succeed at the retailer, which has about $50 billion in annual sales.
Mr. Lampert can be a difficult boss. While charming in group settings, he also can be abrupt to subordinates. He insists on approving major expenditures and personally manages senior executive hires. Mr. Lampert's tenure at Sears has been marked by departures of several executives. A chief financial officer and a chief customer officer each quit after less than a year in their posts. Other longtime managers have left for jobs at RadioShack Corp. and Pep Boys- Manny, Moe & Jack, among other retailers.
Analysts say the structure outlined by Mr. Lampert requires he pull back and give free rein to a strong CEO who will be able to mediate the conflicts likely to erupt among the five new business chiefs. "To find someone of that caliber, a perquisite would be to be the sole one in control," says Gregory Melich, an analyst at Morgan Stanley.
A problem for Sears, says Love Goel, a prominent private-equity investor in retailers and chairman of retailer Automotive Specialty Accessories & Parts Inc., is that Mr. Lampert "hasn't been able to attract the right talent. The way you tell is they haven't been able to execute on anything of substantial importance," he says. Mr. Goel says neither he nor his equity group own Sears stock.
By reducing his day-to-day management activities and adopting a holding-company structure, Mr. Lampert has made the CEO's job more attractive to outsiders, says Hal Reiter, chairman and chief executive of Herbert Mines Associates, a New York executive search firm that is not involved in the current search. But a new CEO "will have to be completely on board with the [chairman's] strategy," Mr. Reiter says.
