Kmart CEO Antonini Resigns : Price of Stock Jumps 8% on News of Ouster
Joseph Antonini, the beleaguered president and chief executive of Kmart Corp. who had already lost the chairman’s post and endured months of criticism from shareholders over the retailer’s weak performance, resigned on Tuesday.
The announcement triggered an 8% surge in the price of Kmart stock and was cheered by investors and analysts, who said the removal of Antonini signals an invigorated board of directors and clears the way for a new direction at the nation’s second-biggest retailer.
The 53-year-old Antonini had held the company’s top spots since 1987, a period in which Kmart--once the front-runner in discount retailing--lost ground to No. 1 Wal-Mart and is now struggling to stay ahead of the hard-charging Target store chain.
Shareholders have also harshly criticized Kmart’s steadily declining profits, the pace of revitalization of its aging stores, and lackluster stock performance that saw the share price hit a five-year low of $12 on Tuesday, hours before Antonini’s fate was decided.
The leadership change was approved by the board of directors during a conference call Monday night after Kmart’s new outside chairman, Donald Perkins, met with Antonini at the company’s Troy, Mich., headquarters to discuss shareholder demands for a new chief executive.
In a statement, Antonini said, “External factors have made it increasingly difficult for our organization to focus on the tasks at hand.”
While the board searches for a new CEO, Anthony Palizzi, the company’s executive vice president and general counsel, will serve as interim president. Ronald J. Floto, executive vice president of the Super Kmart combination grocery-and-discount stores, was selected as interim chairman of the management executive committee.
Among the inside candidates is thought to be Floto, formerly of Kash n’ Karry Food Stores. He is described as an experienced turnaround artist and worked previously under Perkins at Jewel Cos., a food retailer.
“The board is driven by only one perspective,” Perkins said Tuesday, “and that is taking action to improve Kmart’s operating performance.”
Kmart had net income of $296 million last year but lost $974 million the previous year, when the company incurred restructuring costs. Kmart recently closed 110 poorly performing stores and is in the process of cutting 6,000 jobs.
Antonini, who spent 31 years at Kmart, led the retailer into its store renovation program, developed the Super Kmart Center format, and helped create popular merchandise collections from celebrities such as Jaclyn Smith and Martha Stewart. He also presided over Kmart’s expansion into sporting goods, books, office supplies and other goods.
But faced with stiff competition from Wal-Mart and Target, Antonini had to dismantle that specialty retailing empire to raise funds for the competitive battle against Wal-Mart and Target, especially to rejuvenate its dated stores.
He suffered an embarrassing rebuke in June, 1994, when shareholders rejected as inadequate a plan to sell minority shares in four of its specialty subsidiaries. Kmart regrouped by selling majority stakes in the units. Also, the company sold its PayLess drug store chain in 1994 to a Los Angeles investment firm that controls the Thrifty drug store chain.
Dissatisfied, Kmart’s board--under pressure from such activist investors as the California Public Employees Retirement System--set the stage for Tuesday’s change in January by stripping Antonini of the chairman’s title and launching a strategic review of top management.
Perkins, an outside director with no executive responsibilities at Kmart, was named chairman.
But the company came under continued shareholder fire for its inability to find an executive who could be groomed to replace Antonini. He responded by trying to build up his management with a host of new executives from other companies.
In all, the company hired four vice presidents over the last six months. But analysts said Antonini did not have a coherent strategy for engineering a turnaround.
“Antonini brought in a lot of new soldiers but there was no direction,” said Walter Loeb, of Loeb Associates in New York.
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Kmart CEO job poses daunting challenges. D2
