K-Mart Closing 72 Stores Nationwide
Tuesday, July 25th 2000, 12:00 am
By: News On 6
TROY, Mich. Jul 25 -- 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.
While most of the stores being closed are marginally profitable, Kmart said they didn't justify additional investment because of factors including 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 percent of all Kmart stores.
Hourly workers at the affected stores 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 the piles of merchandise filling its warehouses on sale and invest in more efficient inventory control. It did not say how many jobs would be lost because of the closures.
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 for retiring chairman Floyd Hall on May 31.
While 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 percent in the last 52 weeks, from its high of $15.25 June 28, 1999.
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.
At a shareholders' meeting in mid-May, Kmart said it would spend $340 million to open 20 new Big Kmart stores, expand 12 to 15 existing stores and adding five new Super Kmarts -- 24-hour centers that combine traditional Kmart discount stores with full grocery operations.
In its statement Tuesday, Kmart also said it will invest $460 million this year to upgrade its information systems, and $210 million to improve its distribution and logistics network.
Initiatives include installing new scanners in all stores, new registers in the company's 300 highest-volume stores, and new systems to help Kmart's merchants monitor and manage inventory.
Kmart said affected stores are in Alabama, Arizona, Arkansas, California, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, New Hampshire, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, Texas, Washington, West Virginia and Wisconsin.