Troubled Kmart Names New CEO
Beleaguered Kmart Corp. replaced its chief executive Monday, in a management shake-up just three days after the discount retailer outlined plans to shut down 284 stores and dismiss 22,000 workers nationwide
The Troy, Mich.-based retailer said Charles C. Conaway, 41, had resigned and was immediately replaced by turnaround specialist James B. Adamson. The move was not a complete surprise because Adamson, a Kmart board member since 1996, replaced Conaway as chairman shortly before the company filed for bankruptcy protection in January.
The 54-year-old Adamson, who steered Advantica Restaurant Group Inc. and drugstore chain Revco D.S. Inc. through bankruptcy reorganizations, said his immediate goal is to stabilize the company--focusing on workers, on the firm’s relationship with suppliers and on keeping stores clean and well-stocked to regain customers.
But Adamson was short on details and did not venture an answer to a key question that investors and consumers are asking: How will the company compete against discount price leader Wal-Mart Stores Inc. and the trendier Target Corp.?
“Now we have a new chief executive officer and chairman of the board who says the same things” Conaway did, retail expert Kurt Barnard said. “I’m very much afraid that the basics alone will not bring Kmart customers back.”
Adamson acknowledged Monday that Kmart must better define itself, saying a strategy to differentiate itself from competitors should be completed by year’s end.
“It’s going to take some time to really analyze where the business is today--where its strengths are [and] where its opportunities are,” Adamson said.
Conaway’s departure comes less than two years after he was hired. Analysts said he made significant blunders, including launching a doomed price war with Wal-Mart. Conaway could not be reached for comment Monday.
One thing Kmart will try to build upon is its licensing agreements with some strong brands, including Martha Stewart, Disney and Sesame Street. The company has asked the Bankruptcy Court to let it keep its agreements with these suppliers.
Adamson said he expects the relationship with Stewart, Kmart’s most known brand, to continue and grow stronger. He acknowledged that Kmart must stabilize its relationship with its vendors, including Fleming Cos., Kmart’s only grocery supplier.
The Dallas-based Fleming said Monday that it is shaving about 20 cents a share from its earnings projections this year and next largely because of the upheaval at Kmart. But Fleming applauded Kmart’s store closures, saying that by shuttering the least productive stores, both companies will be better able to “move the remaining business forward.”
The change in chief executives was part of a larger management restructuring that included the naming of Julian C. Day as president and chief operating officer, positions that previously were vacant. Day has been COO at Sears, Roebuck & Co. Also, Albert A. Koch, chairman of turnaround management firm Jay Alix & Associates, was named chief financial officer.
Kmart shares closed at $1.45, up 16 cents, in New York Stock Exchange trading.
