Ex-Californian Is a Surprise Choice to Head Kmart Stores : Retailing: Troubled chain turns to Floyd Hall, a former Target executive. He promises to broaden customer base.

Kmart Corp. on Monday ended a long search for a new top executive with a surprise choice, a former Target stores executive with strong California connections who hadn’t figured in Wall Street’s speculation.

Floyd Hall, 56, replaces Joseph Antonini, who resigned in March under pressure from shareholders and directors after two consecutive years of declining profits. Hall will take the titles of chairman, chief executive and president.

Kmart said Hall’s diverse retailing experience makes him suitable for the top job at the Troy, Mich.-based company. Hall said he will continue to close money-losing Kmart stores but will also open stores and try to broaden the chain’s customer base.

Hall moves to Kmart from the Museum Co., a chain he co-founded in 1989 that sells museum reproductions. He was chairman of the Grand Union supermarket chain from 1984 to 1989. He was chief executive of Target from 1981 to 1984, a period of heavy expansion for that Kmart rival.

Hall grew up in Bakersfield, where he got his first retailing experience selling appliances at a Montgomery Ward store at age 18. He later led a major expansion of Target into California, where he once opened 20 stores in a single day.

Hall said he will review Kmart’s entire merchandising strategy. He said he got to know Kmart well as CEO of Target and that he sees some continuing problems, including poorly stocked shelves and unsightly stores.

“Some of those things I don’t like now, I didn’t like then either,” he said. “We need to go through every department--including apparel--and revisit what we’re offering. We also want to make the stores easier to shop by improving the presentation of merchandise.”

By fixing problems at the store level, he said, the chain can expand its customer base beyond the traditional discount shopper.

Hall said Kmart will continue to close poorly performing stores. The company last week announced it would close 72 stores, in addition to the 110 closings announced last year, eliminating about 13,000 jobs. The nation’s second-largest retailer has more than 2,200 stores nationwide.

The stock market responded favorably to Hall’s selection. Kmart stock rose $1.375 to $14 Monday on the New York Stock Exchange. Nearly 11 million shares were traded, making it the day’s most-active NYSE issue.

The news that Kmart finally had found a chief executive was welcomed by analysts. Industry sources said the company had approached numerous executives about the job but found no takers. Former Macy Chief Executive Myron Ullman and Kenneth Macke, former chairman of Dayton Hudson Corp., were among those approached, sources said.

However, Kmart’s eventual selection surprised industry analysts. Some questioned the choice.

“Hall managed Target when it was in an expansion mode,” said Kurt Barnard, a New Jersey-based retail economist. “Kmart is in a downsizing mode and needs drastic surgery. This is a very different situation.”

Barnard said Hall should close hundreds more stores, renovate others and reduce overall operating costs to compete more effectively with its price-slashing rivals--Target and Wal-Mart, the nation’s leading retailer. But analyst Richard Nelson at Duff & Phelps in Chicago applauded Kmart’s selection. Nelson said Hall’s supermarket experience will be useful as the company expands its Super Kmart Center stores, which combine groceries with the company’s traditional discount merchandise.

“I’m encouraged because he has the appropriate background in discount retailing and the grocery industry,” Nelson said. “He has a reputation for building up the spirit of executive teams.”

Analysts said Hall displayed that talent at Grand Union Co., a New Jersey-based chain that was losing money when he joined it in 1984 but was highly profitable when he left. Hall is credited with improving service and stocking the stores with better-quality food.

Hall left Grand Union to co-found the Museum Co. in 1989. The privately held firm, also based in New Jersey, now has 63 stores.

However, Hall’s reputation as a business builder was developed at Target. Under Hall, the discount chain grew from 97 stores to 205, and sales rose from $1.3 billion to $3.1 billion. Much of that expansion took place in California.

Target and Wal-Mart have continued to make gains in recent years, much of it at the expense of Kmart. The company has endured nine consecutive quarters of disappointing earnings, including a $28-million loss in the first quarter of this year.

* Bloomberg Business News contributed to this story.