Edward Lampert became a billionaire hedge fund manager betting on distressed companies. Now he’ll have to make the right calls on which jeans will lure teenagers next spring as he directs merchandising at Sears Holdings Corp.
Lampert, who in March became chairman of the largest U.S. department-store chain, on Sept. 8 also took over the company’s marketing and its Lands’ End business. Lampert has spent two decades at Goldman Sachs Group Inc. and ESL Investments Inc.
“If you’re in the merchandising business, you have to have people expert in merchandising,” Allen Questrom, former chief executive of J.C. Penney Co., said. “You need to motivate people to get the job done. Not everybody can do that.”
Questrom, retired after a 30-year career at retailers including Federated Department Stores Inc., declined to comment specifically on Sears or Lampert.
Lampert will oversee the fashion choices for almost 3,900 stores at Sears and Kmart, whose same-store sales have each declined for at least three years. Sears is adding exclusive apparel such as women’s clothing by Max Azria and Liz Claiborne to catch up with Target Corp. and J.C. Penney, leaders in selling affordable designer apparel.
“I don’t think he can be a merchandiser,” said Tim Ghriskey, who helps manage about $800 million at Solaris Asset Management, including Sears shares, in Bedford Hills, N.Y. “That’s not his training. It’s a real specialty.”
“It’s very hard to develop the merchandising skills,” said Jane Hali, a former Macy’s executive who helped select fashions for the department store. “To come up with the compelling merchandise, you have to have a merchant’s eye in terms of color, silhouette and sellability,” said Hali, who runs retail and merchandise consulting at New York-based Coleman Research Corp.
Lampert, who says he is a student of billionaire Warren Buffett’s investment style, created the dominant U.S. department- store chain when Kmart Holding Corp. bought Sears, Roebuck & Co. for $12.3 billion and took on the Sears name. He earned $1 billion in 2004 at ESL, the most of any hedge fund manager, according to Institutional Investor’s Alpha magazine. His earnings more than doubled from 2003.
The shares of the company that became Sears Holdings have risen more than fourfold in the past two years as Lampert sold Kmart real estate to raise cash.
The transaction combined two ailing retailers that have lost shoppers to Target, J.C. Penney and Kohl’s Corp., which have been faster in introducing exclusive apparel. Comparable sales at Kmart have fallen for 14 consecutive quarters and for 16 of the past 18 quarters at Sears.
Target’s monthly same-store sales have risen an average of 6.7 percent since January.
Sears has yet to recover from several missteps, said George Whalin, president of Retail Management Consultants in San Marcos, Calif.
Lampert will need to demonstrate he can go beyond his expertise in finance, said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a retail consulting firm and investment bank in New York.
“He’s a brilliant financial engineer,” Davidowitz said. “His record is always the same: cut costs, sell assets. That’s terrific, only that’s no way to run a retail business.”
