TROY, Mich. -- You could tell just by looking at the number of people in the crowd that there is a lot of anxiety about Kmart.
Some 2,200 stockholders piled into the organization's headquarters here Friday for the annual meeting -- about 700 more than last year's attendance -- and many of them did not hesitate to express their concerns.
It was an unusually tense meeting. A controversial targeted stock proposal failed to win shareholder approval and Joseph Antonini, chairman and chief executive officer, took some personal heat, but promised that ongoing changes, including store renovations and tighter inventory controls, will produce better results this year.
"By the end of 1994, we will begin to show significant, tangible financial returns directly tied to these changes," Antonini told the crowd.
Last year, Kmart's operating profits at its discount stores tumbled 32.3 percent. However, Antonini said store modernizations that were completed in 1991 and 1992 are building enough volume to produce incremental earnings by this year and next.
The modernization program started in 1990. By the end of this year, 1,600 of the chain's 2,400 discount stores are expected to be modernized. While not making any specific forecasts, the beleaguered Antonini tried to reassure shareholders that better times are ahead, but several were skeptical. About a dozen stockholders criticized either the company's performance or its plan to sell off some stock for each of its four specialty divisions. One, who cited "inventory mistakes" of the past year, asked Antonini, "How can we have confidence in your leadership? These mistakes were made under your leadership."
Another stockholder said to Antonini, "Cancel all bonuses and perks, except insurance to protect you against irate stockholders."
Antonini responded that he hasn't lost confidence in his abilities, but added, "I think when you have a bad year, everyone questions what you are doing. We had a down year. Now we are going to get it back up, and that confidence will come back up."
During his speech, Antonini said that despite rising competition from expanding discount chains, Kmart has held on to its 6 percent share of the U.S. apparel market. He said the business at the stores should improve since the company is adding
Field management for more decentralized decision making.
New systems that analyze sales at individual stores to help tailor inventories to meet local demands.
Daily deliveries to stores so associates can concentrate on service, instead of stocking the shelves.
Antonini also spoke of consolidations at headquarters to improve operations and cut costs."Our management team is determined and personally committed to turning around the earnings of our core U.S. Kmart stores division," he added.
In some locations, Kmart has been replacing its traditional discount stores with Super Kmart Centers, which are larger stores selling groceries as well as general merchandise. Antonini said sales of general merchandise grow 150 to 300 percent when a Super Kmart Center opens.
Representatives of the Wisconsin Investment Board and the Teamsters Union, which hold large blocks of Kmart shares, spoke out against the targeted stock plan at the meeting. In addition, Michael Zucker, a director of the Amalgamated Clothing & Textile Workers Union, another shareholder, sent a letter to Antonini, dated Friday, citing "substantial and deep" opposition to the plan and a concern that Kmart wouldn't get full value for the stock. Shareholders were asked to approve a proposal to issue four new series of Kmart common stock intended to reflect the performances of its four specialty chains help raise cash to beef up Kmart's discount stores. Kmart would have retained 70 to 80 percent of equity in each specialty subsidiary.
The vote count was completed at around 5 p.m. Friday.
"We are obviously disappointed that our specialty retail stock proposal failed to get the affirmative vote of the majority of our outstanding shares," Antonini said in a statement.
Antonini stated that the company carefully reviewed the specialty stores and concluded that Borders/Waldenbooks, The Sports Authority and OfficeMax are "fast-growing, strongly profitable businesses." The fourth, Builders Square, has considerable turnaround potential, he noted.
Antonini held a press conference, but limited each journalist to one question.
Asked what changes in apparel planning might be ahead, he said the company will continue boosting inventories over the next 60 days, but did not specify.
Antonini acknowledged that Kmart went too far last year cutting inventories, "perhaps tweaking them too hard."
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