Kmart has big gaps in management staff
Associated Press
NEW YORK — As Kmart Corp. emerged from bankruptcy yesterday after almost 16 months of Chapter 11 protection from creditors, the discounter must still fill some key holes in its management, particularly chief merchandising officer.
The lack of a cohesive merchandising strategy has long been a problem at Kmart, and analysts say finding top talent to permanently fill that slot is key to Kmart's long-term survival.
The chief merchandising officer decides what the store is going to sell, giving it a signature that draws in shoppers and brings them back again and again.
Bill Underwood, executive vice president of sourcing and global operations, has fulfilled those duties since last May, when Cecil Kearse left, the company said. Jack Ferry, company spokesman, said a search is ongoing but would not comment on the status.
The Troy, Mich.-based discounter also is on the hunt for a new chief financial officer to replace Al Koch, chairman of Alix Partners, a turnaround management firm, who came on board in March 2002 to help with the reorganization.
Late yesterday, Kmart named Edward S. Lampert, chairman and chief executive officer of ESL Investments, as chairman. Lampert's investment firm is converting $2 billion in financial claims against Kmart into stock and will own 49 percent of the company.
"Eddie Lampert has a stellar reputation for building long-term value, based on solid business fundamentals," Kmart president and chief executive Julian Day said in a statement. "With Eddie's guidance, I am confident that the company is poised for a profitable and successful future."
But Burt Flickinger, managing partner at the consulting firm Strategic Resource Group, is wary of Kmart's fate.
"Kmart needs to dramatically overhaul management in the areas of buying, store operations and sourcing," he said.
To lure top talent, Kmart has said it has set aside 10 percent of the shares it is issuing as it emerges from bankruptcy to use for compensation.
Still, industry sources believe that Kmart may have a problem filling the remaining management gaps because, given the tough economy, people may be less inclined to want to jump to a company whose future is uncertain.
The company, which filed for Chapter 11 bankruptcy in January 2002, plans for this fiscal year to be a transition year for Kmart, with a profit not projected until 2004, under the plan of reorganization. The company lost $3.22 billion in fiscal 2002.
While Kmart's two chief rivals — Wal-Mart Stores Inc., known for having the lowest prices, and cheap chic Target Corp. have clear-cut strategies — Kmart hasn't articulated how it will stand out from the crowd, though it now has 600 fewer stores — about 1,500 in all — and a $2 billion loan to compete against bigger merchants.Kmart has only said it aims to be "the store of the neighborhood." and said it wants to strengthen its relationship with minorities.
