Lampert, Edward S.

▪ 2006

      On March 25, 2005, investor Edward S. Lampert saw the completion of a deal that stunned the retail industry when it was first announced in November 2004: the acquisition of Sears, Roebuck & Co. by Kmart Holding Corp.—two of the largest retailers in the United States. Lampert had spurred the merger in 2003 by gaining a controlling interest in Kmart for $1 billion (although officially bankrupt at the time, Kmart was estimated to be worth $23 billion). When the former competitors merged into a single company, Sears Holdings Corp., the new firm ranked as the country's third largest retailer. Lampert controlled nearly 40% of the new corporation, and soon after its stock began trading on March 28, 2005, it became a favourite among the country's profit-focused hedge-fund managers.

      Lampert was born on July 19, 1962, in Roslyn, N.Y. He was 14 when his father, an attorney, died. While his mother took a job at Saks Fifth Avenue to support her family, Lampert eagerly learned about the stock market from his grandmother, and by the time he was in high school, he had grown familiar with corporate reports and financial theory. He studied economics at Yale University (B.S.; 1984), where he was tapped for the elite Skull & Bones society and became a research assistant for Nobel Prize-winning economist James Tobin. Lampert then joined the arbitrage department at Goldman Sachs, where he worked under Robert E. Rubin, later the U.S. treasury secretary. Risk analysis became one of Lampert's hallmarks; even as a relatively fresh hire, he reduced his department's exposure to the stock market when he foresaw overvaluations that led to the market crash in 1987.

      In 1988 he opened his own private equity fund, ESL Investments, Inc., which delivered annual returns of about 25% for its investors. Lampert gained a reputation for spotting opportunity where others did not; when he began acquiring Kmart stock in 2003, the company was little more than a distressed discount retailer with no means of reclaiming market share taken by competitors. The same held true for Sears, shares of which Lampert began amassing in 2004.

      Skeptics, doubting the success of his plan to merge Kmart and Sears into a superretailer against the more stylish Target stores and the low-cost Wal-Mart outlets, questioned whether his strengths as a financial manager would supply the marketing savvy needed to pull paying customers into aging and inefficient stores. Lampert, however, had successfully increased the profits of other store chains, such as AutoZone and AutoNation, by controlling costs and tightening management. Within six months of becoming chairman of Sears Holdings, Lampert named former Kmart chief Aylwin Lewis as the corporation's CEO, causing the former Sears CEO, Alan Lacy, to move down the ranks. Even if Lampert failed, many stores still held tremendous potential value—in the form of real estate where Kmart and Sears stores were located.

Sarah Forbes Orwig

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