NEW YORK -- Charles C. Conaway just saved beleaguered Kmart Corp. several million dollars.
The bankrupt retail chain on Monday announced a series of management changes that include the resignation of Conaway from the post of chief executive officer and the appointment of former Sears, Roebuck & Co. executive Julian C. Day to the post of chief operating officer.
Taking over the role of ceo will be James B. Adamson, just finishing his second month as the firm's chairman. As reported, Conaway would have received $11.5 million had he remained with Kmart until July 31, 2003, according to an amended employment agreement on file with the bankruptcy court in Chicago. The payment would have included a retention payment of $6.5 million and the forgiveness by Kmart of a $5 million loan that the discounter made to him. Under the terms of the agreement, Conaway's loan could still be forgiven if his resignation falls under a provision in the agreement referred to as the "included constructive termination" clause.
Day, appointed Kmart's president and chief operating officer on Monday, was executive vice president and chief operating officer of Sears when he left in September 2000. His departure coincided with the appointment of Alan Lacy as CEO of Sears. Lacy succeeded Arthur Martinez as president and CEO upon the latter's retirement later in 2000.
Kmart shares closed up 16 cents, or 12.4 percent, at $1.45 in New York Stock Exchange trading Monday.
Also joining the company are two executives from turnaround firm Jay Alix & Associates: Albert A. Koch as chief financial officer and Ted Stenger as treasurer. Koch succeeds John T. McDonald Jr., who will be leaving the firm. The treasurer position had been vacant.
Conaway's hold on the ceo post was considered tenuous even prior to Kmart's Jan. 22 Chapter 11 filing. As reported, Adamson, a long-time Kmart director who was involved in the turnaround of Denny's and its parent company Advantica Restaurant Group, was named to succeed Conaway as chairman on Jan. 17.
According to a home furnishings source, Peter Thorner, whose background includes top level positions at Ames and the now defunct Bradlees, interviewed for a position at Kmart a few weeks ago, but turned it down. Another retailing source said Thorner had been offered the spot Day now holds. Thorner could not be reached for comment.After Kmart's announcement that it would close 284 sites last week, some vendors expressed concern that Kmart still didn't have a strategy in place to effect a turnaround.
A buyer for an apparel firm saw the appointment as "a step in the right direction. At least now we're making progress. I believe that the company still needs a merchandising officer to help Kmart find its niche. Someone with a background in fashion would be a big plus."
While most of the executives appointed Monday have some exposure to fashion -- Adamson at Target and Gap; Day at Sears, and Stenger at Leslie Fay, Fruit of the Loom and Maidenform Worldwide -- none will be focused on merchandising responsibilities.
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