By  on September 9, 2005

NEW YORK — Sears Holdings Corp. chairman Edward Lampert is taking a bigger hands-on role in managing day-to-day operations at the retailer after the ouster on Thursday of chief executive officer Alan Lacy.

The shakeup came as Sears Holdings reported second-quarter results in the first full quarter since Kmart's acquisition of Sears and declining same-store sales at both nameplates.

Kmart, however, posted positive comps in apparel for the quarter, though the company didn't provide figures. The decline in Sears' comps was partly because of fewer promotional events and the reduction in inventory levels to lower merchandise holding costs in an effort to improve gross margin.

Billionaire financier Lampert engineered Kmart's $11 billion acquisition of Sears, which closed March 24. Aylwin Lewis, who had been ceo of Kmart Holding Corp. since October, is replacing Lacy effective Sept. 30. Lacy retains his vice chairmanship. William Crowley, the chief financial officer, adds to his responsibilities the new post of chief administrative officer.

Lampert will direct the marketing, merchandising, design and online businesses of Sears and its Lands' End operation, with the goal of ensuring that Sears Holdings' initiatives "are clearly focused on responding to customer needs," the company said in a statement.

Lewis will oversee the company's 3,900 stores, as well as home services, finance, legal, supply chain, information technology and human resources, the company said.

Reaction to the news was mixed. Shares of the retailer fell by $7.04 to close at $127.81 in over-the-counter trading Thursday.

The company "needs a merchant to bring excitement to the store and make the store exciting for the customer,'' said Walter Loeb, a former analyst and now head of his own consulting firm, Loeb Associates. "I see too much basic, unexciting merchandise in the store and that is not what the customer wants."

Richard Hastings, an analyst at Bernard Sands, said the decision to move Lacy out of daily operations was not a surprise.

"Under his leadership at Sears, results declined and we were not surprised this morning to hear about the change in management," he said. As for Lampert's new role, Hastings said: "We think he knows how to make money.''For the second quarter ended July 30, Sears Holdings reported income of $161 million, or 98 cents a diluted share, on revenues of $13.2 billion. Kmart's same-store sales decreased by 0.3 percent, while comps at Sears' domestic stores fell by 7.4 percent. The year-ago results, in which income was $154 million, or $1.54, on revenues of $4.8 billion, is not a direct comparison, since it does not include Sears' results.

If the acquisition had occurred at the beginning of 2004, income would have jumped 46.4 percent to $161 million, or 98 cents a diluted share, from $110 million, or 67 cents. Revenues would have declined by 2.1 percent to $13.2 billion from $13.5 billion.

For the six months, which does not include Sears results prior to the acquisition, income was $152 million, or $1.05, on revenues of $20.8 billion.

The company said in its quarterly report filed with the Securities and Exchange Commission that 20 Sears and Kmart stores and facilities in Louisiana and Mississippi were damaged by Hurricane Katrina.

As for his additional responsibilities, Lampert wrote: "I intend to serve without compensation, either in cash or stock options, consistent with my belief that large owners who serve as chairman or ceo are best compensated by increasing the value of the company over time for all shareholders."

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