Sears loses CEO, but gains momentum
Just when things seem to be looking up for Sears Holdings, chairman Edward Lampert will assume the additional responsibilities of CEO following the revelation that current chief executive Lou D’Ambrosio will leave the company for family medical reasons.
News of D’Amrosio’s departure comes as the Sears Holdings preannounced improved profitability for the fist nine weeks of the fourth quarter and fiscal year ending February 2, D’Amrosio’s last day.
Fourth quarter profits on an adjusted basis are expected to range between $365 million and $465 million, compared to $351 million last year. Full year profits on an adjusted basis are expected to range between $560 million and $660 million, compared to $277 million last year.
"We expect to generate domestic (earning before interest, taxes, depreciation and amortization) improvement for the fourth consecutive quarter, and have reduced net debt by $400 million as of December 29, 2012," D'Ambrosio said. "We have also made considerable progress on our strategic priorities of transforming the company around Integrated Retail and our ShopYourWay membership program."
Despite the improved profitability, top line growth remains hard to come by at Sears and Kmart stores. Same store sales at Sears domestic units increased by half a percent while comps at Kmart were down 3.8%, leaving the company with a blended 1.8% decline for the first nine weeks of the fourth quarter and a 2.6% decline year to date.
The sales weakness was blamed on the consumer electronics category, which performed poorly enough at Sears and Kmart that the company said the comp figure for the nine week period would have increased 2.4% at Sears and declined only 2.4% at Kmart for a total company decline of only 0.2%.
Areas of strength singled out by the company were apparel and appliances categories at Sears, with apparel on track for six consecutive quarters of comparable store sales increases. Another bright spot was said to be online, where sales increased 20% thanks to omnichannel initiatives that allow for merchandise ordered online to be picked up in store or merchandise ordered in store to be shipped to customers’ homes. Meanwhile, at Kmart, the key drivers of sales weakness were significant declines in consumer electronics as well as declines in the pharmacy area due to increased availability of lower priced generic drugs. The grocery, household and drug categories were also said to be weak.
While the results are hardly spectacular, they do represent an improvement for Sears Holdings and chairman Lampert spoke highly of D’Amrosio’s contributions.
"The board greatly appreciates Lou’s strong leadership in accelerating the transformation of Sears Holdings, and we understand and respect his personal decision to step down," Lampert said. "Lou has guided Sears Holdings during a time of rapid industry change to become a more customer and member-focused company and positioned us to lead in integrated retail. His contributions to our company have been significant, and the entire Sears Holdings family wishes Lou and his family the very best."