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Thalia Bolsters Kmart’s Hopes

NEW YORK — Kmart Corp. is planning a coming-out — of Chapter 11 — party for July, with the launch of an apparel line by Latin songbird Thalia as part of its celebration.<br><br>James Adamson, chairman and chief executive officer,...

NEW YORK — Kmart Corp. is planning a coming-out — of Chapter 11 — party for July, with the launch of an apparel line by Latin songbird Thalia as part of its celebration.

James Adamson, chairman and chief executive officer, said Tuesday at a press conference at the Dos Caminos Restaurant here that the apparel line targeting the Hispanic community will launch in “800 stores next July and August,” in time for the back-to-school season. Following closely will be product extensions in accessories such as hats and belts. Also in the works are a Thalia footwear line and Thalia-branded fragrances and cosmetics.

The ceo described the line as an exclusive, proprietary brand that is “sexy, body-conscious and more forward” than Kmart’s traditional apparel offerings.

Thalia, also present at the conference, said the benefit of working with Kmart is that the retailer will allow her to “capture her personal style,” which she described as a “little crazy.”

The singer told attendees that she will be featured in television advertising campaigns showcasing the line, noting that “it’s my collection so I have to support it.”

According to Mariana Keras, vice president for trend merchandising and product design at Kmart, the first collection will feature a heavy emphasis on casual denim and T-shirts, with price points at the “high end” of Kmart’s typical offerings. While opening prices have not been set yet, she noted that high-end offerings from the Jaclyn Smith collection, featuring lamb leather, range between $24.99 and $34.99.

Despite some recent weakness in denim among younger consumers, Keras said sales should hold up because of the variations in fabrications and finishes available.

Adamson noted that, while some products will be manufactured in the U.S., the majority will be done offshore to take advantage of lower production costs and make it affordable for Kmart shoppers.

The ceo also said the expectations for Thalia are between a “$300 million and $500 million business in its first year.”

Adamson disclosed that Kmart’s Joe Boxer collection, launched last July, is “now well over $200 million, and it’s not the end of the year yet. We thought it would do $100 million in the first six months.”

Joe Boxer, Adamson pointed out, has the potential to generate sales of “$800 million to $1 billion on a 12-month basis. The problem is that it flies out the door so fast that we keep running out of stock.”

While Boxer was launched chain-wide in more than 1,800 doors, Thalia’s 800 doors will be focused in communities with high Hispanic populations. Initial plans include Chicago, Florida, California and other parts of the Southwest, Adamson said, adding that a line targeting the African-American community is also in the works.

As reported, the discounter has been quietly testing a young men’s hip-hop, urban sportswear line — Ched-da — in 50 stores in New York, New Jersey, Ohio, Pennsylvania and Washington, D.C.

“We want to cross all people. Our going-forward strategy is that we do well on the [proprietary] brands [where] we don’t have to compete,” Adamson said.

As part of that strategy, the ceo disclosed the discounter will begin to phase out private label lines such as Basic Addition, which is geared toward the low-end opening-price points.

As for holiday sales, Adamson said, “So far, so good. I’m very pleased with Thanksgiving week. The first week met our expectations. Thanksgiving is our first week of December. The second week softened slightly.

“October improved over September, but November is difficult to call. It was softer than I would have thought,” Adamson noted.

Kmart’s October and third-quarter results, already late as previously announced, are expected to be filed with the Securities and Exchange Commission next week.

Also, because of the shift in the calendar this year, Adamson said he, like others in the retail sector, isn’t quite sure how the holiday season will shape up. “We won’t know until the end of Christmas,” he said.

So far, Joe Boxer continues to do well and Martha Stewart’s new Holiday collection has been “blowing away expectations,” he said. Both apparel and seasonal merchandise have excelled.

“Whether partly brilliance and partly the luck of God, apparel did really well,” he said, noting that the category represents more than 20 percent of sales.

As for Kmart’s future, Adamson pointed out the number of stores rumored to be closing — nearly 600 sites — has been “highly exaggerated.” A real estate source working with Kmart told WWD that the closures are likely to reach “at least 250″ stores.

The current time frame calls for Kmart to finalize during the second week in January the locations it will shutter as part of its reorganization plan, which is expected to be filed with the bankruptcy court in Detroit sometime within the first three months of 2003. He added that the expected announcement may not be a final determination because “we can close stores right through the end of the bankruptcy.”

Adamson said leases are among the areas being studied as the retailer contemplates an exit from Chapter 11.

“We’ve started taking a look at negotiating with our landlords [regarding] rent reductions,” the ceo noted. As an example, Adamson said where Kmart has an 18-year lease, the company is trying to get that term reduced to between two and three years to “de-risk” the chain’s exposure.

The second factor will be just how well Christmas sales turn out. “I don’t want to risk this company coming out [of bankruptcy protection] and then going right [back] in,” Adamson emphasized.