CHICAGO (AP) – Hedge-fund wizard Edward Lampert is taking on a startling new role at Sears Holdings Corp.: chief marketer and merchandiser.

The billionaire chairman shook up top management at the No. 3 U.S. retailer Thursday after another poor quarter, naming Aylwin Lewis to replace Alan Lacy as CEO and taking on a more direct role at the struggling company.

The moves come with sales still sinking at the company’s two laggard chains, nearly six months after Kmart Holding Corp.’s acquisition of Sears, Roebuck & Co. Reporting results from the first full quarter after the merger, Sears Holdings said it had a lower-than-expected profit of $161 million.

The news disappointed investors, who had driven up Sears’ stock dramatically both before and after the March 24 merger engineered by Lampert. Shares in the company sank $7.04, or 5.2 percent, to close at $127.81 in heavy trading on the Nasdaq Stock Market, far off their peak of $163.50 in July.

Lampert, founder of Greenwich, Conn.-based hedge fund ESL Investments, which takes large stakes in distressed companies, will direct the marketing, merchandising, design and online businesses of Sears Holdings as well as its Lands’ End casual-clothing unit.

He named Lewis, the former head of Kmart and of Sears’ retail business, to take over as CEO and president of the Hoffman Estates, Ill.-based company effective Sept. 30. Lewis will have responsibility for the company’s 3,900 stores as well as home services, finance, legal, supply chain, information technology and human resources.

Lacy stays on for now as vice chairman and a director but will see his base salary cut to $1 million from $1.5 million, as disclosed by the company in a regulatory filing later Thursday. He headed Sears Roebuck from 2000 until its acquisition by Kmart and was CEO under Lampert for the past six months, but his demotion was not completely unexpected since he had failed to halt Sears’ retail slide and had a diminished role under Lampert.

More surprising is the hands-on role being assumed by Lampert, who has made a giant mark in financial dealings but little in retail. Lampert made $1.02 billion last year at ESL Investments, according to the industry magazine Institutional Investor’s Alpha.

Sears did not hold a conference call with analysts or respond to reporters’ queries about the changes, in keeping with Lampert’s tight-lipped policies. But in a letter to shareholders posted on the company’s Web site, he said he will perform his expanded Sears duties without compensation.

“My decision to become more deeply involved in certain aspects of Sears Holdings’ business reflects the board’s and my desire to make the company more responsive to our customers and to involve me more directly in the renewal of the company,” he wrote.

Hinting at more cost-cutting to come, he said Sears’ retail competitors have lower cost structures but did not cite specific plans or discuss his new responsibilities.

Analysts were caught off guard by Lampert’s expanded role and had mixed opinions on whether Lewis, a fast-food industry veteran who came to Kmart from Yum Brands Inc. last October, will fare better at Sears than Lacy did.

“Lewis is an operations guy,” analyst Jim Cramer said in comments posted at RealMoney.com. “His real strength: developing stores that appeal to those who aren’t the richest people on earth. For Sears Holdings, he needs to find a space between Wal-Mart and Target. I believe he can do it.”

Others panned the decision to put two non-merchants in charge. George Whalin, president of Retail Management Consultants in San Marcos, Calif., said Lampert’s chances of succeeding as chief merchandiser are “slim and none.”

“He’s a smart guy – anybody who underestimates him is pretty crazy,” he said. “But this is a role for retail people, real experts. I don’t understand why in the world he would do this.”

Added Walter Loeb, president of retail consulting firm Loeb Associates: “I don’t see how the company can operate without a dynamic merchant. … Lampert has financial responsibility to lead this company, but he also has to find somebody who’s going to execute.”

During his tenure, Lacy overhauled the layout and inventory of Sears’ 870 department stores, bought Lands’ End and sold the credit-card unit to Citigroup. But he could not halt Sears’ long-term sales slump.

Sears’ second-quarter net income grew to $161 million, or 98 cents per share, from $154 million, or $1.54 per share, a year ago. The latest period included $42 million of restructuring costs related to the merger and bankruptcy-related recoveries of $15 million. Kmart emerged from bankruptcy protection in May 2003.

Excluding those items, Sears’ earnings would have been $1.33 per share. That was 3 cents below analysts’ consensus estimate, although Thomson Financial said it could not immediately confirm that was the comparable number.

Total revenue was $13.2 billion, well shy of the $13.7 billion analysts expected. Same-store sales fell 0.3 percent at Kmart and 7.4 percent at Sears despite strong home appliance sales. The company attributed the drop to efforts to improve gross margin by reducing reliance on promotional events and reducing inventory.

—

On the Net:

www.searsholdings.com