Kmart to Close 72 Stores in Effort to Boost Earnings

Kmart Corp., the nation’s third-largest retailer, is closing 72 of its less-profitable stores in 28 states, affecting 5,000 workers, in an effort to improve earnings.

Although most of the stores being closed are marginally profitable, Kmart said they didn’t justify additional investment because of such factors as their location and suitability for expansion. They include 66 traditional Kmarts and six Super Kmarts, most of which will close by Nov. 1, and represent just over 3% of all Kmart stores.

Hourly workers at the affected stores, including one in Anaheim, will lose their jobs but are being advised to apply to other Kmart locations; managers are being transferred, Kmart spokesman Steve Pagnani said Tuesday.

The retailer also will put on sale piles of merchandise filling its warehouses and invest in more efficient inventory control.

As a result, the retailer will take a one-time restructuring charge of $740 million during its second quarter. Those earnings are scheduled to be released Aug. 10.

Chuck Conaway, the retailer’s new chairman and chief operating officer, is considered an expert in inventory control. Previously president of the CVS Corp. drugstore chain, Conaway has spent much of his time touring Kmart stores and assessing the company’s situation since taking over from retiring Chairman Floyd Hall on May 31.

Although Kmart is considered more financially sound than it was in the mid-1990s, it has struggled to compete with Bentonville, Ark.-based Wal-Mart Stores Inc. and Minneapolis-based Target Corp. Its stock price is down 54% in the last 52 weeks, from its high of $15.25 on June 28, 1999. On Tuesday, its shares rose 31 cents to close at $7.38 on the New York Stock Exchange.

The retail chain is in the midst of an ambitious yearlong plan to build its presence on the Internet as well as renovate and open new stores. Kmart, which earned $403 million on revenue of $35.9 billion in fiscal 1999, operates 2,171 stores.

Other California stores to close by Nov. 1 are in Barstow, Bishop, Marina, Sacramento, Sanger and Woodland.