When Edd Lampert merged K-Mart and Sears Roebuck into Sears Holdings Corp. (NASDAQ: SHLD), he probably didn't plan for a complete and unmitigated disaster. But, from all accounts, that is what the company is at this time. Its sales have consistently plummeted for more than just a few quarters now, the competition has killed it. Sears merchandising frankly is really, really bad -- and on and on.

Lampert's grand vision is still alive, but the realities of running a national retailer in an intense environment have not proved easy at all. What's keeping Sears Holding's shares above $100, you say? Check out the company's vast real estate holdings. Don't think for a second that this isn't the reason Sears is majority owned by Lampert, who could care less about the retail end of the business.

Still, you have to run a business. It's always nice to see that a former CEO who appeared to do virtually nothing in terms of performance get an annual base salary of $1 million through the next few years -- even though he's no longer at the company. Ousted CEO Alwyn Lewis, who was highly regarded when recruited for the Sears Holdings CEO spot but who was wholly ineffective, will receive his salary package through March 24 of 2010. Lewis will also continue to have health and welfare plan availability along with having his remaining stock and option awards vest until 2010 as well.

Even though the boards of public companies should be completely separate from the management and owners of the company, it's hard to see that they're not when excessive, after-term packages like this come to light. Pay for performance? Hogwash. CEO compensation committees can be as corrupt on company boards as those Enron folks from years back. Well, to a degree, anyway.

Super-investor Eddie Lampert has cut his stake in Citigroup Inc. (NYSE: C) by 31%, leaving him with a position of 19.1 million shares valued at a little under $500 million. It is likely that Mr. Lampert sold the shares at a substantial loss.

Lampert's large presence in the stock was a source of confidence for battered bulls who watched the stock decline through subprime write-downs and a managerial shake-up. Long considered to be one of the great value investors, Lampert's latest 13-F filed with the SEC shows stakes in Acxiom Corp. (NASDAQ: ACXM), AutoNation Inc. (NYSE: AN), AutoZone Inc. (NYSE: AZO), Citigroup, Home Depot Inc. (NYSE: HD), and, of course, Sears Holdings Corp. (NYSE: SHLD).

Lampert's decision to cut his stake in Citi has to make investors nervous. He's ridden the stock down for months, and it hasn't exactly been rebounding.

Last year was tough for Lampert, with Sears' stalled turnaround bringing him poor returns and the worst publicity of his career.

Eddie Lambert may have to loan Sears Holdings (NYSE: SHLD) some money. Cash at the company be getting very tight. According to the Wall Street Journal, "some analysts wonder whether falling sales, slimmer profit margins and other woes are causing cash flows to decline to a level that could hinder a turnaround."

The last cash balance that Sears announced was lower than most analysts expected. If the company needs to spend money to improve its stores or increase inventory in products it thinks will sell well, it could draw down the cash level even further.

For Lampert, the bad news keeps getting worse. Sears stock has staged a mini-rally over the last two weeks, moving from below $85 to $103. News about cash problems could push the shares back down.

Lampert made the classic error of thinking that with Sears and K-Mart 1+1=3. In reality, he took two weak companies and saved some money in a merger. The problem was that the companies got even weaker.

Who says that hedge fund managers don't make good corporate chiefs?

Douglas A. McIntyre is an editor at 247wallst.com.

Aylwin B. Lewis will step down as CEO of Sears Holdings (NASDAQ: SHLD), paying for the sins of his boss, hedge-fund billionaire Eddie Lampert. Lampert put together the Sears chain with K-Mart and found that one plus one equals zero when the brands are so poor that people would rather shop at Wal-Mart (NYSE: WMT).

Shares in Sears are down from a 52-week high of $195 to under $100. They will probably fall much further. Lampert has said he will make operating units more free to handle decisions at the brand level. He brought in new management to run the company's e-commerce unit.

In a statement quoted at MarketWatch, Lampert said ,"We are entering a new phase in Sears' evolution as a multi-channel retailer, as reflected by the new operational structure we recently announced, and the board has determined that now is the right time to put in place new leadership to take the company forward."

In other words, "we have no idea what we are doing, so we will try a new horse."

Douglas A. McIntyre is an editor at 247wallst.com.

Quoted in a piece in the Sunday New York Times, Bruce Greenwald (author of the terrific Value Investing: From Graham to Buffett and Beyond) sums up Eddie Lampert's problems at Sears Holdings (NYSE: SHLD) beautifully: "He did really well on Autozone. Most of his stocks are retail stocks, and he has done really well with them. So he decided he was a genius at retail, and it didn't occur to him he could be wrong about it. He believed his own press."

I would argue that the problem might even run deeper than that: Lampert wanted to be seen, and to see himself, as more than just a great investor. He wanted to become a great manager.

It's somewhat similar to former all-star slugger Jose Canseco, who decided he wanted to try pitching. He promptly injured his arm and missed the rest of the season. His attempt at pitching hurt him as a hitter.

Lampert's fall from grace has been steep and rapid. We used to talk about how shares of Sears were trading at a "Lampert premium," based on the idea that his investment prowess would lead to great returns on capital for the struggling retailer.

Now, with Herb Greenberg recently having named him the worst CEO of 2007, shares of Sears are trading at a Lampert discount and are, according to many, currently valued at well below the company's break-up value. There may be value to be had in Sears, but Lampert's struggles provide an important lesson for investors: great investors aren't necessarily great managers, but, like Carl Icahn did with TWA, they might not be able to help themselves from giving it a try.

I wrote a couple weeks ago about a very serious issue with Sears.com's privacy policy. It seemed that Sears Holding Corp. (NASDAQ: SHLD) had a major issue with their online offering. Sears has finally taken the issue seriously and disabled the bug in their how-to-figure-out-how-much-your-next-door-neighbor-paid-for-his-plasma-TV search function on the Sears website.

This morning, WSJ.com reports (subscription required) that an ex-Microsoft (NASDAQ: MSFT) executive is being appointed head of Sears' newly formed online division, one of five such divisions the retailer is forming as part of a turnaround. The article says that James Barr, a 12-year Microsoft executive and general manager of MSN Shopping and Marketplaces, will take over the online unit effective Feb. 2 as a senior vice president of Sears Holdings.

Barr joins former Walmart.com executive, Neil Day, the newly-named Chief Technology Officer for the Sears.com group.

These changes are being made by Chairman Eddie Lampert as he tries to boost sales and stave off further profit losses.

It appears one of my personal favorites, LandsEnd's, LandsEnd.com, will not be part of this unit, which will include Kmart.com and Sears.com.

Zack Miller is the Managing Editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Author holds no positions in stocks mentioned above.

I like Eddie Lampert and I like those Sears stores. I like Craftsman tools and I (sort of) also like the Kmart part of Sears Holdings (NYSE: SHLD).

For those who might be confused as to what Eddie is doing with his potential company "break up," he's taking a distressed operation and laying it directly at the feet of the rubes who have screwed it up. It's a tactic that I myself would employ. Eddie Lampert is the somewhat silent watchful type, observant to a fault. He's a "big picture" thinker in the classic style. He plans and plots and weighs. Yeah, that's the ticket.

You see, Eddie "Golden Boy" Lampert isn't the kind of fellow who'll just blindly clear the decks of seasoned personnel in an effort to generate profit. If such were the case, we'd have seen way more of those pink slips flying long before now. I believe that by fracturing the company structure and by giving more divisional independence, he is now setting the stage for some timely and precise head-chopping down the road.

Eddie Lampert, worst CEO of 2007? Not in my book, not by a long shot. Yes, perhaps if you measure things strictly in growth dollars, Sears Holdings looks pretty ugly right now, but there's far more to the retail game than just rapid growth. Give the man some time to reveal his hand, one carefully picked card at a time. Besides, Eddie Lampert doesn't hold much regard for judgment by share price alone, and frankly my friends, neither do I.

Eddie Lampert is desperate. His Sears Holdings (NASDAQ: SHLD) will divide itself into several units to try to stop its hemorrhaging of customers. According to (subscription required) The Wall Street Journal, "the contemplated restructuring would create separate units to manage Sears's real-estate holdings and run brands such as Kenmore, Diehard, and Craftsman." How the stores-owned under brands like Kmart and Sears will be divided has not been disclosed.

Shares in Sears now trade at just above $89, down from a 52-week high of $195.18. The stock is down about 50% in the last year, while shares in rival Wal-Mart Stores (NYSE: WMT) are flat.

Why Lampert believes that moving his chess pieces around the table will work is anyone's guess. Pushing decisions about merchandise and brand marketing to divisions is no different than having "brand managers" under the current structure. Many successful companies, such as Procter & Gamble (NYSE: PG), are already run this way.

People don't want to shop at Sears and Kmart. The brands are dying.

Lampert is just grasping at straws.

Douglas A. McIntyre is an editor at 247wallst.com.

See also:
Zac Bissonnette's Lampert looks to shake things up at struggling Sears
Gary Sattler's Get off Eddie Lampert's back already, will ya?

Sears Holdings' shares plunged $6.90 to $89.39 Monday at mid-day after the company announced that same store sales for the holiday period fell 3.5% and that Q4 earnings could be about 50% of last year's Q4 profit.

Sears (NASDAQ: SHLD) now expects to earn $2.59-$3.48 per share for Q4 F2007. The Reuters Q4 F2007 consensus estimate is $4.43. Sears earned $5.33 per share during Q4 a year ago.

Sears said for the 9-week period ended January 5, same store sales fell 2.8% at Sears stores and 4.2% at Kmart stores. The company cited increased competition, the housing sector's slowdown, and consumer credit concerns as reasons for the sales shortfall.

Another SHLD disappointment

Analyst C. Leonard Bauer told BloggingStocks on Monday that Sears' announcement will not do much to increase Wall Street's low confidence in the company's prospect, at least short-term.

When it rains, it pours for Sears Holdings Corp. (NASDAQ: SHLD). As if an ailing stock price weren't enough for its chairman, Eddie Lampert, being named the Worst CEO of 2007. a huge slap in the face, a blog post went up over the weekend titled, Sears Exposes Customer Purchase History in Violation of Its Privacy Policy.

The well-written post gives clear, easy-to-understand instructions on how to figure out how much your next door neighbor paid for his plasma TV when he bought it at the neighborhood Sears. After a back and forth, Sears finally took the issue seriously and disabled the bug in their search function on the Sears website.

Turns out that the blog cited above is written by Ben Edelman, an assistant professor at the Harvard Business School in the Negotiation, Organizations, & Markets unit. In Edelman's bio (he's got four degrees from Harvard!), Edelman claims that he wrote about domain name politics, particularly in the context of expired domain names subsequently used for pornography and registered with false WHOIS data. He developed methods for testing internet filtering worldwide, without leaving his office, publishing reports on filtering in China and in Saudi Arabia.

He is a serious dude when it comes to Internet strategy and techniques. Maybe Sears should hire Edelman to run its online division?

Zack Miller is the Managing Editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Author holds no positions in SHLD.

In today's Wall Street Journal, Herb Greenberg picks Circuit City Stores' (NYSE: CC) CEO Philip Schoonover as the worst of 2008. He also includes Sears Holdings (NYSE: SHLD) CEO Aylwin Lewis in that mix.

It's an interesting coincidence to me. On Monday I appeared on CNBC to discuss my picks for the three best and worst CEOs of 2007. Two of my worst CEOs were Schoonover and Eddie Lampert of Sears. I agreed with Greenberg's pick of Lampert as the worst CEO of 2007 and even though Lampert -- who reportedly gets deeply involved in operational decisions -- is not a CEO, but chairman. Lampert underinvested in Sears' stores -- he spent $1.33 a square foot, which is 20% of what its peers spend -- and its stock fell 39% in the last 52 weeks.

But in my mind Schoonover is significantly worse. His 3,400 person headcount cut in March 2007 actually helped out Circuit City's competitor in a very direct way. That's because customers who buy electronics value the expertise of the sales staff. And in canning those highly paid sales people through what Schoonover called "transformation work," he freed those salespeople and their customers to take their business to Best Buy (NYSE: BBY). As I pointed out, in my post, this "transformation work" helped Circuit City's sales decline by 3.1% while Best Buy beat revenue and profit growth expectations.

Is it better to invest in a company whose CEO is a star or a company that breeds generations of outstanding CEOs? If you think a star CEO is better, I have two stocks to consider -- but also one to avoid. And if you think a CEO breeding ground is better, one stock comes to mind.

Today, I appeared on CNBC's Squawk Box this morning with Yale's Jeff Sonnenfeld to give my picks for the three best and worst CEOs of 2007. Here are the three best CEOs along with the name of the company, the stock price performance over the last year, and my reasons:

• Steve Jobs of Apple Inc. (NASDAQ: AAPL) +144%. Successful iPhone introduction with a million units sold in its first 74 days (some estimate Apple will announce it's sold five million in mid-January) plus outstanding performance of Apple retail stores -- they account for 20% of Apple revenue and those revenues have grown 42% in the last year while the stores earn $4,000 per square foot -- much more than competitors. At a Price/Earnings to Growth (PEG) of 1.8 it remains to be seen whether Apple can grow enough to justify its P/E of 50.
• Warren Buffett of Berkshire Hathaway Inc. (NYSE: BRK.A) +28%. Berkshire's stock had a great year -- it has not done as well since 1998 when it rose 52%. Berkshire's return on equity is up from 11% in 2006 to almost 16% as of September. Berkshire is a safe haven stock and Buffett continues to find places to invest his $47 billion in cash. One caution -- Barron's thinks that Berkshire stock is 10% overvalued.
• Lloyd Blankfein of Goldman Sachs Group (NYSE: GS) +6%. Only firm to make money while peers lost billions -- its short position of the ABX index--which represents a basket of credit default swaps on mortgage-backed securities- yielded $4 billion in profit -- offsetting a $2 billion loss in its $10 billion CDO portfolios. I was impressed by the way Blankfein carried Goldman's culture of encouraging intellectual debate between lower-level traders and top executives to arrive at the best decisions. Goldman trades at a P/E of 8.6 and its earnings are expected to grow 4% next year. But that forecast is a real toss up so if you buy the stock, take a long term view.

So how does Eddie Lampert, chairman of Sears Holdings (NASDAQ: SHLD), with his stellar track record as a hedge fund manager, the man behind the 2005 merger of Sears Roebuck and Kmart merger -- how does he end up as a Money Loser of 2007?

Things looked bright at the beginning of the year as Lampert was hailed as the next Warren Buffett, and Sears Holdings was seen as developing in the mold of Berkshire Hathaway (NYSE: BRK.A). Lampert was a long-time favorite of Jim Cramer, who early in the year felt that Sears was a better investment than Wal-Mart (NYSE: WMT).

Investors and watchers waiting for the Lampert magic to happen were puzzled by his interest in Citigroup (NYSE:C), though that interest did benefit Citigroup at the time. But as Sears' first quarter results showed sales further slumping, investors grew impatient.

Even as Lampert called for $5 billion in cash in early summer, a visit to Sears stores showed an enterprise badly in need of a face-lift. Sears was lagging further behind other retailers, and the share price was sliding from a 52-week high in April. It grew increasingly clear that Lampert was neglecting the retail side of the business. Sears warned not to expect much in the second quarter.

I know it's the end of the year. We're all bombarded with the "Top X of 2007" or the "Worst Y this Year." I'm actually thinking of making the top lists of the top lists. It's like Kramer's coffee table book about coffee table books on Seinfeld.

Anyway, Herb Greenberg of Marketwatch threw his hat into the ring this morning with his vote cast on the worst CEO of 2007. The winner (or is it loser?): Eddie Lampert, CEO of Sears Holdings (NASDAQ: SHLD). Herb says of Lampert, "So far, for all of Sears, including Kmart, the strategy [of focusing on profitability over revenue growth] has failed miserably. Not only have same-store sales (which Lampert says are "overrated" as a metric) gone deeper into the red, but gross margins, Ebitda and operating income for Kmart are also going in the wrong direction."

I'd like just to posit the idea that while Lampert might have failed as a CEO of Sears, the retail store, turning around the old-school retailer hasn't really been his main priority. He's trying to follow in Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) shoes by using a cash flow business as the crux of an investment empire. So investors should begin to judge Lampert's firm as a holding company, not just on Sears' results.

Recently 24/7 Wall St. ran a list of CEOs who may need to go back to business school. The performance of their companies has been so poor that they need a period of re-education, some tutoring in the basics.

The 24/7 list included the heads of AMD (NYSE: AMD), Boston Scientific (NYSE: BSX), McClatchy (NYSE: MNI), Level 3 (NASDAQ: LVLT), Yahoo! (NASDAQ: YHOO), Countrywide Financial (NYSE: CFC), and Morgan Stanley (NYSE: MS). None of them have done shareholders any favors even if stock price is the only measurement.

But, it is time to add a few more names to the list.

Starbucks (NASDAQ: SBUX): These shares are now off to $22.49, near a 52-week low. The shares have a period high of $37.14. James Donald has the CEO job at Starbucks, but the founder Howard Schultz is still around. Wall Street could certainly argue that the company has made a lot of mistakes starting with overbuilding stores in the US. Another is that the new menus in the stores seem to be have been decided by random. If the company cannot improve same-store sales soon, the stock will go lower. This seems basic, but SBUX has not given shareholders any plan for addressing it.

Blockbuster (NYSE: BBI): It is hard to have blown the lead that Blockbuster had in movie distribution. But it did. CEO James Keyes does not seem to have any logical vision about how to solve the company's problem, which is that digital distribution has passed it by. He argues that customers will go to kiosks at Blockbuster stores to download movies. Instead of doing it at home on the internet? Or getting the DVD in the mail? Not much of a plan.

Sears Holdings (NASDAQ: SHLD): The name on the CEO's door at Sears is Aylwin Lewis. But Eddie Lampert is the chief. The marriage of K-Mart and Sears has been a disaster. Same-store sales at both companies run below the industry average. It would be very hard to argue that the merchandising programs at the retail outlets is compelling enough to bring in new customers. Lampert exhibited poor judgment in sending out a letter that was picked up by the press. His defense of the company was that it had reduced debt and bought back shares. That will help a lot when his stores are empty.

Douglas A. McIntyre is an editor at 247wallst.com.