More problems for Eddie Lampert’s empire: Sears Canada CEO quits

A Sears store stands in Peoria, Illinois, U.S., on Friday, Aug. 16, 2013. Sears Holdings Corp. is scheduled to release second quarter earnings on Aug. 22. Photographer: Daniel Acker/Bloomberg via Getty Images
Photograph by Daniel Acker — Bloomberg/Getty Images

The problems just keep piling up for hedge fund king Eddie Lampert and his crown jewel, Sears Holdings (SHLD).

On Tuesday, Sears Canada said its CEO, Doug Campbell, was quitting after only a year on the job: bad timing given its parent company is trying to sell off the Canadian unit to raise urgently needed cash. Earlier this week, the New York Post reported that the auction for Sears Canada, in which Sears has a 51% stake, had stalled.

While Sears Canada said Campbell, who will stay on until January 1 at the latest, was leaving to “tend to personal family issues,” his departure is only contributing to the uncertainty surrounding Sears, which also owns the Kmart discount chain, as concerns about its cash levels mount: Lampert‘s investment vehicle ESL Investments, Sears’ top shareholder, last week said it would lend the company $400 million in order to replenish coffers drained by a chronic, deep decline in sales. And two weeks ago, Fitch Ratings downgraded its long-term debt, citing the “magnitude of Sears’ decline in profitability” and questions about whether the company can turn things around. Sears’ shares have fallen by half since April.

Lampert, who became CEO in early 2013 after a period of intense turnover in Sears’ executive suite, keeps saying he is trying to turn the company into more of a digital/e-commerce player, with a membership program called Shop Your Way driving sales. But things are not working out that way, at least not quickly enough: Sears burned through $747 million in cash in the first half of the fiscal year, leaving it with only $829 million on hand at the peak buying period ahead of the holiday season.

“The question is: Does Sears have enough time and capital to execute this change? Or will the clock run out first?” veteran retail analyst Robin Lewis wrote in his widely read The Robin Report blog on Thursday. “Tick-tock, tick-tock. ‘Abracadabra’ Eddie has very few tricks left, he’s running out of cash, and the sea water is now chest high as the Titanic heads for the final plunge.”

As hard as it is to believe now, Sears used to be the largest U.S. retailer by revenue. Sears Holdings sales have fallen every year since 2005 and in August, it reported its ninth straight quarterly loss. Retail experts have blamed Sears’ decline on everything from blah merchandise to an utter lack in investments in stores. Lampert has also been blamed for dismembering the retailer by selling off its best assets, including its Lands’ End sportswear brand and its best store locations.

Sears last month estimated that Sears Canada had a market value of about $765 million. It had said in February that it planned to raise $1 billion in asset sales this fiscal year, half of which it has already gotten through the spin-off of Lands’ End. The company is also looking into selling its Sears Auto Center business.

Sears plans to close 130 stores this year, bringing closures since 2010 to more than 400. That will leave it with 1,900 Sears and Kmart stores, still making it one of the larger U.S. retailers.


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