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Sears Loses Its Head

By Rich Duprey – Updated Apr 5, 2017 at 10:12PM

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The retailer's CEO steps down amid a shake-up in operations.

Well, that was a surprise. Not the announcement that Sears Holdings (Nasdaq: SHLD) CEO Aylwin Lewis was stepping down, but rather that Sears even had a CEO. Given the tight control that Chairman Eddie Lampert has exerted over the discount retailer, it was easy to forget that there was even a body keeping the CEO title warm.

In reality, Lewis had little chance for success from the start. He came from Yum! Brands (NYSE: YUM), where he worked to sell fast food, not a diverse field of clothes, hardware, tools, and appliances.

True, many companies think that bringing in an "outsider" offers a fresh perspective, but instead, investors often come away disillusioned. Simply having run a previous company isn't always enough. It's more important for a CEO to have a thorough knowledge of the business, and how it fits into its industry.

While outsider CEOs have certainly enjoyed some successes, their ranks are also littered with abundant failures. Blockbuster's founders nearly ruined the Boston Chicken franchise when they took over. Home Depot (NYSE: HD) reeled when Bob Nardelli brought his General Electric (NYSE: GE) background and cronies in (good luck, Chrysler!), even as Lowe's (NYSE: LOW) prospered.

Yet with Lampert running the fiefdom, having divisions report directly to him, Lewis was left with little more than a title and a figurehead position. Even if his role was more operational, Lampert didn't give him much to work with there, either.

As a numbers guy, Lampert seemed more interested in financial gimmickry than retail basics. He slashed costs to get Sears to post profits, rather than investing in his stores to build and strengthen its brand as a retailer. While Wal-Mart (NYSE: WMT) and Target (NYSE: TGT) maintained, brightened, and expanded their stores and offerings, Sears was content to sell off real estate and use credit swaps to make numbers. Lampert didn't care that same-store sales deteriorated each and every quarter since the company emerged from bankruptcy. In fact, he fell in with the crowd that argued that monthly comps were unimportant. Funny how the only companies that seem to feel that way have falling comps.

Sears is now being broken up into five autonomous divisions, with Lampert supposedly staying out of the decision-making. Certainly, the company needs a fresh infusion of some sort of entrepreneurial spirit -- assuming it isn't already too little, too late.

Lewis' abrupt departure creates a void that might be tricky to fill. Then again, I'm not sure this will be too big a problem. After all, who really remembered that Lewis was there in the first place?

Remember these related Foolish articles?

Sears, Wal-Mart, and Home Depot are all recommendations of Motley Fool Inside Value. A free 30-day trial gets you our full list of Wall Street's biggest bargains.

Fool contributor Rich Duprey owns shares of Wal-Mart, but he does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.

Stocks Mentioned

Sears Holdings Stock Quote
Sears Holdings
Walmart Stock Quote
$151.49 (-0.11%) $0.17
Target Stock Quote
$155.43 (0.33%) $0.50
General Electric Stock Quote
General Electric
$86.39 (2.04%) $1.73
Yum! Brands Stock Quote
Yum! Brands
$131.36 (0.34%) $0.45
Home Depot Stock Quote
Home Depot
$318.81 (-0.40%) $-1.27
Lowe's Companies Stock Quote
Lowe's Companies
$204.15 (-0.99%) $-2.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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