Kmart’s Route to Recovery

NEW YORK — Even chairman and chief executive officer James Adamson recognizes it will take a lot more than Joe Boxer to pull Kmart out of bankruptcy. <br><br>While the brand is giving Kmart some sales traction in an otherwise difficult summer,...

NEW YORK — Even chairman and chief executive officer James Adamson recognizes it will take a lot more than Joe Boxer to pull Kmart out of bankruptcy.

This story first appeared in the August 2, 2002 issue of WWD.  Subscribe Today.

While the brand is giving Kmart some sales traction in an otherwise difficult summer, Adamson stressed that the recovery hinges on much more. At Thursday’s official launch of the exclusive and expansive Joe Boxer collection for apparel and home, at Kmart in Astor Place here in the East Village, the strategies he singled out were:

Working for better execution, particularly being in stock on bestsellers.

Catering to Latin and black communities in urban America.

Building the stable of exclusive brands.

Changing the corporate culture by giving local store managers greater authority in determining the buy.

Adamson also said he has interviewed seven or eight candidates for the post of chief merchant, and will be interviewing more next week. At one time, Kmart was considering Roger Goddu, who was ceo of the now-defunct Montgomery Ward chain.

On the dark side, he said more cuts would happen, at Kmart’s Troy, Mich., headquarters and at distribution centers, as the company continues to examine costs. He did not specify how many cuts would be made. No additional store closings will be announced this year, but it is possible for next year. This year, 284 store closings are planned. “We’re stabilizing the business and seeing how we can grow it before we even look at store closings” beyond next year, Adamson said during a press conference. Kmart, which filed Chapter 11 last January, hopes to emerge from bankruptcy in about a year.

Apparel and financial circles have been expecting Kmart to come out with a new strategic vision for long-term survival that will give Kmart a new identity, but don’t count on it. “Everybody looks for that silver bullet, but the fact of life is that Kmart is a $36 billion company that customers already understand,” Adamson said. “It’s a neighborhood store, selling unique brands.” He added: “We are going to concentrate on basic execution, being in stock, and having clean, friendly stores.” He called being in stock, “our Achilles’ heel…We are going to get through this, one store at a time, one item at a time.”

Kmart contends financial difficulties and restructurings won’t stall the buildup of its exclusive brands — not even Martha Stewart Everyday.

Adamson said an exclusive brand deal aimed at the Latino community could be announced in about 30 days and in the stores next year, and that another exclusive deal geared to the black community could also be divulged this year.

He called Joe Boxer “Kmart’s biggest brand launch ever, right out of the box” and said it could ultimately compare in size with the Martha Stewart Everyday collection, which has sales of $1.6 billion a year. To put it in perspective, Mossimo, the popular apparel line sold at Target, which is outperforming Kmart, had first-year sales of about $750 million. Bill Sweedler, chief executive officer of Joe Boxer and president of Windsong Allegiance Group, the Westport, Conn.-based firm that bought Joe Boxer Corp. in March 2001, said the brand posted $25 million in sales at Kmart in its first 10 days.

Adamson said the two collections are “compatible,” with Joe Boxer aimed at a younger and trendier audience, while Martha Stewart takes a more classic approach and does not sell apparel. Joe Boxer merchandise occupies about 10 percent of the Astor Place store, although other units have smaller presentations.

The brand, which went into Kmart’s stores about two weeks ago, has instantly emerged as the retailer’s major junior resource, and includes T-shirts, sweaters, skirts, sleepwear and underwear, children’s, men’s, infants, footwear and hard and soft home goods. Prices on apparel range from $2.99 for a panty to $26.99 for decorated jeans. Turtlenecks are priced at $9.99.

July sales overall, Adamson said, were “a little softer,” than a year ago.

Kmart fashion executives said they knocked off designer looks for Joe Boxer, including horse prints seen in Stella McCartney’s collections, and instilled trendy touches, such as side-ties on plaid skirts. The Joe Boxer company handles marketing of the brand, while Kmart controls distribution. Joe Boxer now is focusing solely on Kmart after previously being a department store label.

According to Richard Adjmi, president of Age Group, a manufacturer that supplies about 50 percent of the Joe Boxer sleepwear, Kmart has a new merchandising tracking system called Elmo, that is geared to help the chain get goods from the trucks into distribution centers and to the stores more efficiently. To make room for the Joe Boxer merchandise, Kmart downsized other private labels. “Joe Boxer brings to Kmart what Mossimo brought, a whole new customer base, the junior and young-at-heart customer,” Adjmi said.

As far as the Martha Stewart Everyday collection, Adamson stated: “There has been no falloff of sales,” adding, “we’ve not let up in advertising.” Martha Stewart herself is being investigated for possible insider trading and her stock price has plummeted. Despite her personal problems, Adamson said Kmart will introduce a Martha Stewart Christmas collection this November.