With Sears Holdings' ( SHLD) CEO stepping down after a massive decline in the company's stock price, investors are left with two big questions:

No. 1: How much will shareholders have to pay Aylwin Lewis for failure?

And No. 2: Will Sears replace Lewis with a veteran merchandiser who can stabilize the company's retail businesses?

On the first question, Sears spokesman Chris Brathwaite declined to comment on whether Lewis' departure was voluntary or involuntary, or on the financial terms of his exit. The company's most recent proxy statement says that in the event of a "constructive termination," Lewis could receive cash, stock and benefits valued at $23 million.

Cramer: Leave Sears' Lampert Alone, Media Bullies

Lewis is stepping down after two years at the helm of Sears Holdings, the owner of the Sears and Kmart chains. The announcement comes after a disastrous holiday selling season that was only the latest in a string of disappointments for the company.

Sears Holdings' stock price is down 15% since the beginning of 2006, and has been nearly cut in half since its highs from last spring.

In a press release, Sears Chairman Ed Lampert said it was time for "new leadership" at the company in light of recently announced changes in its operational strategy.

The second question facing Sears is more complicated, because many observers don't believe that Lampert -- who took a lead role in merchandising and several other key operational areas at the retailer in 2005 -- is even interested in stabilizing the company's retail operations.

Lampert, a hedge fund manager who built Sears Holdings by merging Kmart and Sears Roebuck in 2005, has stuck to a strategy of sacrificing sales growth and market share to increase near-term profitability and cash flow. In doing so, he slashed costs, reduced investments into the company's store base and left prices higher than those found at discount competitors like Wal-Mart ( WMT), Target ( TGT) and Home Depot ( HD).

For a while, the strategy was successful in driving profits even amid consistent same-store sales declines. Lampert used the healthy cash flows generated by the business to repurchase shares, which pushed the company's earnings per share even higher.

The results delighted Wall Street, especially since Lampert was believed to be sitting on a treasure trove of undervalued real estate assets that could support Sears Holdings' towering stock price on their own. Lampert was widely thought to be milking cash from a dying business, which he could then use to invest elsewhere to build a publicly-traded investment vehicle modeled after Warren Buffett's Berkshire Hathaway ( BRK-A).

Skeptics pointed out that Lampert's strategy was unsustainable and a real estate downturn coupled with a consumer spending slowdown could amount to a double-whammy straight into the heart of Wall Street's investment thesis on the company. Now, with both a real estate slump and a shopper pullback underway, those skeptics are getting a second hearing.

"Sears is now in free-fall, and the worst is yet to come because retail is a momentum business and the momentum is against Sears in a big way," says Howard Davidowitz, a retail consultant with Davidowitz & Associates and a longtime critic of Sears.

Under Lampert, Sears has lacked retail merchandising experience in its executive ranks. Lewis came from fast-food giant Yum! Brands ( YUM), where he ran chains like KFC and Taco Bell.

His temporary replacement at Sears, W. Bruce Johnson, was not a merchandiser either. He was Sears' executive vice president of supply chain and operations, having previously worked at Carrefour and Colgate-Palmolive ( CL).

The New York Times reported over the weekend that Sears has reached out to Mickey Drexler, the apparel merchandising genius at J. Crew ( JCG), and Allen Questrom, the retail veteran who turned around J.C. Penney's ( JCP) fortunes. Both men declined to join Sears, according to the report.

One apparel retail veteran who declined to be named told TheStreet.com that any merchandiser entertaining a job offer from Sears would have to question whether Lampert is willing to provide the financial wherewithal -- and trust in his CEO -- to achieve an increasingly difficult turnaround.

"If you're going to have Lampert sitting in Greenwich looking over your shoulder and testing every single thing you do with strict financial measures, that's not very appealing to a merchandiser," says the former retail executive.

Dan Hess, CEO of research firm Merchant Forecast, points to Gap's ( GPS) marathon search for a CEO, which could provide a leading indicator for the difficulties Sears may have in finding a retail veteran to run the business.

Gap, an apparel retailer dealing with its own sales struggles, ultimately hired Glenn Murphy, the former head of Canada's Shoppers Drug Mart, to its top spot. That move that inspired little confidence on Wall Street.

"At Gap, you had a board of directors and an organization committed to growing the company as a retailer and providing all the resources necessary, but it was still a difficult search at a time when there's a lack of quality merchandisers in the job market," says Hess. "At Sears, you've compounded the problem, because anyone who comes there is going to be swimming upstream in trying to increase capital expenditures back into the stores and try to make Sears and Kmart relevant -- right now it's clear that they're not."

Interim CEO Johnson indicated that Sears' current strategy will continue on his watch. In a press release, he said the company will remain "focused on ensuring that our expense base is appropriate for the size of our business."

Davidowitz says Sears will have difficulty cutting expenses while its same-store sales decline.

"The lack of increased same-store sales means that the company can't leverage its expenses," says Davidowitz. "Lampert has to stabilize the core business or he can't do anything. Liquidating the stores takes a long time -- especially in an environment like this. They're going to have to close a gigantic number of stores, get rid of the Kmart brand and start investing in the remaining stores."

Meanwhile, the company's stock repurchases at prices that often dwarfed its current market valuation have reduced its cash position. At the end of its third quarter, Sears reported cash and equivalents of $1.5 billion, down from $2.1 billion a year ago and below the $4 billion it had at the beginning of the fiscal year.

"They don't have that much money considering the size of the company," says Davidowitz.

Shares of Sears were recently down 44 cents, or 0.4%, to $98.56.