KMART COST CUTTING 'AHEAD' OF PLAN; MORE CLOSINGS EYED
NEW YORK--Kmart Corp. said Thursday its cost-cutting effort is running "ahead of schedule" and it will consider additional store closings and staff reductions this year to meet its goal. The discounter said an internal task force, which is charged with eliminating $600 million to $800 million in expenses by 1996, already has identified $475 million of "direct expense savings" that it will implement this year. Additionally, Kmart has formed a Merchandising Flow Task Force to "build on the progress" of its cost-cutting group. The new task force will focus on keeping high-velocity consumable items in stock at all times. Ronald J. Floto, executive vice president, Super Kmart Centers, heads the new merchandising-flow group. Kmart said Floto's "broad experience in the high-turnover grocery industry" makes him the ideal executive for this position. On the cost-cutting moves, Marvin P. Rich, executive vice president, strategic planning, finance and administration, said in an interview, "We're way ahead of schedule. We've absolutely booked $475 million in our 1995 plan. It's a done deal." Rich, who joined Kmart last year, heads up the retailer's internal Productivity Improvement Task Force, which is overseeing the cost-cutting effort. Asked if the $125 million to $325 million of expenses that remain to be cut would include more store closings or staff reductions, Rich said, "Potentially both." He declined to comment on the number of stores Kmart might consider closing, but he said all stores are analyzed on a monthly basis to see if they are profitable or not. In terms of staff reductions, Kmart previously has said it expects to trim at least 750 more management positions as part of a plan to cut 10 percent of its management work force over the next two years. In addition to store closings and layoffs, "lots of other areas" are being considered in Kmart's cost-cutting effort, Rich said. Outsourcing of certain functions, such as housekeeping, also provides an opportunity to reduce expenses, he said. Rich said the task force has "nailed the numbers and nailed the decisions of what we're going to do" for other cost-cutting projects, but it's a matter of notifying the people affected by the changes. "We're not ready to make a public announcement until we get all of our ducks in a row," he said. In September, as reported, Kmart said it would close 110 underperforming stores and lay off more than 8,000 employees as the initial steps in its effort to reduce costs. Those store closings will begin later this month and conclude in mid-February. Kmart is attempting to turn around its 2,350-store discount division, which has been hurt by competitive pressure in the mass-market retail sector. The company's earnings have slipped for seven consecutive quarters. In December, Kmart eliminated 900 full-time positions, primarily at its Troy, Mich., headquarters, and began merging the administrative offices at its North Bergen, N.J., fashion office with their counterparts in Troy as a means of reducing expenses. Kmart also has closed 250 "underperforming or unprofitable" restaurants or delis located in its discount stores, a spokeswoman said. She declined to specify the savings generated by the various projects, but said the savings are included in the $475 million expense reduction already disclosed.
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