K mart Unveils Plans to Add 700 Stores in $1.3-Billion Expansion

K mart Corp. Chairman Joseph E. Antonini on Tuesday outlined a major $1.3-billion expansion plan designed to double sales and profits at the second-largest U.S. retailer and burnish its image.

Antonini told a news conference that the expansion would be the biggest for the Troy, Mich.-based company since the 1970s.

K mart, No. 2 behind Sears, Roebuck & Co. of Chicago, plans to add about 700 stores through 1995 to its current roster of 2,275 K mart discount stores.

The retailer also operates 1,815 specialty stores selling books, drugs, hardware and other goods.

Wants to Overtake Sears

K mart, outlining its five-year strategy, told analysts last week that it was confident about its prospects for growth.

The company has been seeking to improve profits and overtake Sears as the nation’s largest retailer.

But profit in the first half of 1989 fell nearly 16% to $239.1 million as revenue grew about 4% to $13.07 billion.

Antonini said in a speech Friday that the retailer’s expansion plans are designed to yield sales of more than $50 billion by 1995.

Analysts said K mart is targeting annual net income of $1.75 billion by the mid-1990s.

Last year, K mart reported earnings of $803 million on sales of $27.3 billion.

Regarding the expansion program, Antonini said Tuesday that K mart will open 85 to 100 new stores and an additional 100 stores will be expanded each year through 1995.

He had indicated to analysts that an average of 20 to 30 of the stores will be replacements for small K mart outlets.

Antonini said capital expenditures of about $1.3 billion will be allocated for the expansion program.

K mart also expects a positive fourth quarter, which includes the all-important Christmas shopping season, when many retailers post most of their profits.

“We don’t expect a very troublesome fourth quarter,” he said. Antonini said his optimism is because the fall season is “shaping up better than anticipated.”

Antonini said the company bases its projection in part on the fact that inflation remains under control and interest rates appear not to be too high.

Change in Media Mix

The company last week said it expected to report a decline in third-quarter earnings from the year-earlier’s $126.1 million.

In his remarks to analysts, Antonini said K mart’s strategy also includes:

- Creation of dominant life style departments.

- More centralized merchandising.

- Increased emphasis on everyday low prices.

- Major capital investment in automation.

- Growth and experimentation in non-discount store businesses.

Antonini also said the company is putting more emphasis on television advertising, cutting back slightly on print advertising.

K mart stock closed down 25 cents a share at $38.50 in New York Stock Exchange trading.