Sears' Lampert lambasted for drop

Sears Holdings Chairman Edward Lampert faced a barrage of criticism Thursday as the retailer's quarterly profits plunged 99 percent.

Supporters and critics alike said they were mystified by his remedies gone bad at the Hoffman Estates-based retailer.

Same store sales were falling before Lampert, 44, bought Sears Roebuck and Co. and merged it with Kmart in 2005. And they have fallen ever since.

"He baffles everybody," said Kurt Bernard, a retail consultant based in Nutley, N.J.

Shares Thursday plummeted 11 percent, or $12.25 to $104.09. It was the biggest single-day drop since 2003, before the merger. Shares are down 47 percent from their 52-week high of $195.18.

A year earlier, profit was $196 million but fell to $2 million in the latest quarter. That translates into a profit of 1 cent a share. Analysts were expecting 53 cents.

Adding to the bad news, Sears said it didn't expect "any significant near-term improvement in the overall retail environment" for the rest of the year.

"As a retailer, he's not qualified and he has severely damaged the business," said Howard Davidowitz & Associates, a New York-based retail consulting firm.

Sales at U.S. Sears stores open at least a year fell 4.2 percent, while they dropped 5 percent at Kmart. Total domestic same-store sales slumped 4.6 percent.

"Kmart and Sears have been in a downward spiral for the last two years," said Britt Beemer, founder of America's Research Group, which surveys consumer behavior. "I think you're in a major free-fall."

Beemer said Thanksgiving weekend surveys by his group indicated both chains have 20 percent fewer shoppers than they did three years ago. There has been "no effort to make Kmart or Sears competitive," Beemer said.

Sears Holdings, which earlier this week offered to buy specialty retailer Restoration Hardware Inc. for about $269 million, attributed its current problems to everything from increased competition to unseasonably warm weather.

"We are very disappointed in our performance for the third quarter," said Aylwin Lewis, chief executive and president, in a statement. "We cannot blame our results entirely on the retail and macro-economic environments. We have much on which to improve and are working hard to do so."

Credit Suisse analyst Gary Balter said in a research note titled "Death Spiral?" that there was "nothing good" to take from the latest earnings report. "It should be clear to investors that if Sears continues to try to make it as a retailer, it will likely not happen," Balter wrote.

Standard & Poor's Equity Research slapped a "sell" rating on Sears Holdings, replacing its prior "hold" rating.

"We think Sears' chances of executing a turnaround are slim," S&P analyst Jason Asaeda said in a statement.

Thursday's results may put more pressure on Lampert to sell stores or brands and hasten acquisitions and share buybacks, analysts said.

Lampert has added Lands' End clothing to Sears stores, added Craftsman tools at Kmart, boosted technology investments and introduced advertising campaigns this year for both chains. He told shareholders at the company's annual meeting in May fixing retail was "a priority."

Sears shares have held appeal for some investors because of cash -- totaling $1.48 billion at the end of the third quarter, and property, both of which investors trust Lampert to invest wisely.

In the meantime, retail analysts lament Lampert's inability to regenerate Sears as an American retail icon.

"If we have a recession next year and consumers really cut back on spending, this company will be in real trouble," said George Whalin, president of Carlsbad, Calif.-based Retail Management Consultants. "As for Lampert, I really don't know what is in his mind."