Kmart to Close 110 Stores, Trim 7,650 Jobs : Retailing: Cuts will be made over the next two years. Five of the targeted outlets are in Northern California.

Kmart Corp., as part of its plan to turn around its core discount retailing unit, said Thursday that it will close 110 stores, including five in Northern California, and cut its work force by about 7,650 over the next 18 to 24 months.

The nation’s second-largest retailer said the plan will affect mostly older stores that have failed to meet sales, profit and return-on-investment targets.

Kmart’s general merchandise sales growth has been anemic this year, lagging archrivals Wal-Mart and Sears.

The store closings, scheduled for January and February, will eliminate 6,000 jobs, including 650 management positions. Kmart said it will cut another 1,650 management jobs over the next 18 to 24 months, bringing a total reduction of about 10% to its management ranks.

Kmart said the store closings mean it is abandoning 59 small markets to its competitors. The company operates about 2,350 general merchandise stores in the United States.

“Kmart conducted an assessment of our core discount stores to identify which stores were not meeting our return-on-investment requirements,” said Joseph Antonini, Kmart chairman, president and chief executive.

In California, Kmarts in Gilroy, Milpitas, Red Bluff, Oroville and Porterville were selected to close because they have not performed well, company spokeswoman Michelle DeLand said.

Among the hardest-hit states are Indiana and Texas, each with 12 store closings, followed by Missouri with six and Florida and California with five each. Kmart’s home state of Michigan emerged relatively unscathed, with only two closings.

Wall Street, which has clamored for improved performance at Kmart, applauded the move, sending its stock up 50 cents to close at $18 on the New York Stock Exchange.

Kmart spokeswoman Shawn Kahle said the costs of the closings and of eliminating the first 6,000 jobs have already been accounted for in an after-tax restructuring charge of $850 million taken against earnings in January.

But that charge did not cover the cost of eliminating the additional 1,650 management jobs, she said.

Those positions will be phased out in several initiatives that will begin next January, such as consolidation of Kmart’s headquarters operations, shifting some functions to outside sources, management severance programs and attrition.

Hourly employees affected by the closings will receive lump-sum payments ranging from $100 to $1,000 to continue working for Kmart until their stores close. The 650 managers affected will receive severance packages of up to a year’s salary and full bonuses for the current fiscal year.

Kmart also announced some top management changes Thursday, including the retirement of its former discount store chief.

Richard Miller, 54, executive vice president of Super Kmart Centers and a director, will retire Jan. 31 and will be replaced by an executive hired from the grocery industry.

Replacing Miller as Super Kmart chief will be Ronald Floto, who was also named a Kmart executive vice president.