Troubled Kmart shakes up top management, continues reviewing finances; president is out
Thursday, January 17th 2002, 12:00 am
By: News On 6
DETROIT (AP) _ Amid speculation Kmart Corp. could seek bankruptcy protection, the troubled retailer Thursday announced sweeping management changes and said it was continuing to review its finances.
Kmart announced that its president and chief operating officer, Mark S. Schwartz, has left the company.
The retailer also named James B. Adamson, one of its board of directors since 1996, as chairman, replacing Charles Conaway, who remains as chief executive.
It said Adamson will serve as the principal liaison between the board and the company's senior management. Adamson, 53, is former chairman, president and chief executive of Advantica Restaurant Group Inc., which owns and operates Denny's, CoCo's, and Carrow's. He previously was CEO at Burger King Corp. and a senior executive at Target Corp.
Kmart is the nation's third largest discounter behind Wal-Mart Stores and Target.
The retailer's board held a regularly scheduled meeting Monday and Tuesday, but until Thursday's announcement, Kmart had refused to comment on its financial state.
Shares of Kmart were down 8 cents a share at $1.52 a share in late morning trading after initially rising on the New York Stock Exchange.
The downward spiral began last week after officials announced that 2001 results would break even at best because of disappointing holiday sales and suggested they may seek additional financing.
Kmart said it continues to evaluate its finances and business plans for the 2002 and 2003 fiscal years. The company said it also is continuing discussions with its lenders regarding existing and possible supplemental financing facilities.
``We appreciate the loyalty Kmart has received from our customers and the continuing support shown by many of our vendors and other business partners,'' Conaway said.
On Jan. 2, Prudential Securities Inc. said it would not be surprised if Troy-based Kmart filed for Chapter 11 bankruptcy ``if trends do not improve'' in the next six months. The financial organization downgraded the discount retailer's stock from ``hold'' to ``sell.''
Justin Pettit, a partner with Stern, Stewart & Co., said it's hard to determine what impact Thursday's changes will have.
``I think (Chapter 11) is absolutely still an option,'' Pettit said. ``I think the Chapter 11 fear is almost self-fulfilling. I don't think we have enough information yet to stop the downward spiral.''
Pettit said retaining Conaway indicates that the company is sticking with its previous restructuring strategy.
Standard & Poor's, one of the nation's largest debt rating agencies, took Kmart off its 500 index at the market's close Wednesday. The move forces mutual funds modeled on the index to shed the stock.
Also Wednesday, S&P lowered the retailer's credit rating on certain lease transactions for the second time this week.
Kmart has been struggling to compete against the lower prices of rivals Wal-Mart and Target, battling the nationwide recession while mounting its own restructuring effort.
Kmart has about 275,000 employees and 2,105 stores in all 50 states, Puerto Rico, U.S. Virgin Islands and Guam.
Martha Stewart is Kmart's largest-volume producing label, generating more than $1 billion in sales. Martha Stewart Living Omnimedia has a provision in its contract that allows Stewart to exit Kmart in bankruptcy, but any such move would have to be approved by a bankruptcy judge, the company said.