Damien grad given CEO reins at Kmart

Advertiser Staff and News Services

TROY, Mich. — Kmart Corp. Chief Executive Officer Chuck Conaway resigned from the bankrupt retailer yesterday and was replaced by James Adamson, a 1967 Damien Memorial High School graduate who took over as Kmart chairman in January.

James Adamson is in charge of turning Kmart around. Advertiser library photo

His departure after less than two years at Kmart was almost assured after the company stripped him of the chairman's title and gave it to Adamson, a longtime Kmart board member and retail turnaround veteran, analysts said.

"Conaway's mandate was to save the company from bankruptcy, and he failed," said Sean Egan, managing director of Egan-Jones Ratings Co.

Adamson, 54, helped lead Advantica Restaurant Group Inc. through Chapter 11 proceedings. Kmart said last week it will close 284 stores and fire 22,000 workers in an initial phase of cost cuts intended to restore profit at the retailer after two years of losses. The retailer's seven stores in Hawai'i were spared.

Conaway had tried to revive Kmart by lowering prices on almost 40,000 items to compete with Wal-Mart Stores Inc., which responded with deeper discounts, analysts said.

"What he didn't understand was that in a battle, you don't take on an enemy that is much stronger than you are, you don't go head to head with a giant," said Kurt Barnard, president of Barnard's Retail Trend Report.

"Showing results right away for a company this size is a large mountain to climb," Adamson said. "Right now, it's purely about stabilization. Our real challenge is to get the business focused on the basics."

Adamson was an all-star basketball player at Damien who listed his career choice as Christian Brother. His teachers said he cared more about surfing than school at that time and earned marginal grades.

"He loved the beach and he loved basketball, and he wasn't awfully enthusiastic about school," Brother John Cullerton, who coached and taught Adamson at the private Catholic school in Palama, said in a January interview. "But he managed. He could have done a lot better, but it wasn't a priority at that time."

Adamson was among 144 students in the school's second graduating class. After Damien, Adamson went to Gonzaga University, where he graduated in 1971 with a bachelor's in business administration.

Joining Kmart are Julian Day as president and chief operating officer; Albert Koch as chief financial officer; and Ted Stenger as treasurer.

Day, a former executive vice president and chief operating officer of Sears, Roebuck and Co., fills the vacancy created in January when Mark Schwartz was ousted after 15 months in the job. Stenger is a principal of Jay Alix & Associates in Southfield, Mich., a leading turnaround management firm.

"He had a little problem with selecting high-quality, talented people," Adamson said of Conaway. "That would be his flat side. He would freely admit that."

But the revolving door on Kmart's management has stopped spinning for now, Adamson said.

"I do know the people we have brought in have experience in turnaround and in Chapter 11 and have the same shared value that I do," he said. And he doesn't plan to go anywhere. Adamson said he will move to Michigan from Manhattan and stay with Kmart "as long as I believe I am adding value."

He is not asking for additional compensation for the added role of CEO, but, with the approval of a bankruptcy court judge, he will receive $2.5 million to become chairman in addition to a $1 million annual fee through 2003. A judge is scheduled to approve or reject the package at a March 20 hearing in Chicago.

Adamson, who has steered two companies out of bankruptcy and helped restore profitability at another, will take on problems Conaway inherited, but was unable to completely fix.

But Adamson said he would not rush a decision on what the company plans to do to separate itself from the other discounters. He doesn't expect to announce a merchandise and marketing strategy until later in the year.

Adamson said he wants to focus first on areas such as cleaner stores and improved stock levels.