NEW YORK — Shifting its calendar for an exit from Chapter 11 up to March from July 2003, Kmart Corp. acknowledged it will be closing more stores in the future but hasn’t yet decided which ones.
This story first appeared in the October 18, 2002 issue of WWD. Subscribe Today.
That was the message Thursday from Julian Day, president and chief operating officer, who told WWD that more closures are ahead but their number and locations have yet to be determined.
“The ideal store base will be those stores which can emerge from bankruptcy that ensure ourselves a position to positively compete and grow from that base,” Day said. “The real question is which stores we have in the store base which, given a reasonable amount of time to implement the changes, we can expect to have a bright trading future. It is a moving target.”
It’s also a subject of growing discussion as sources in the real estate market said that a minimum of 250 stores will need to be shed, a number that could reach higher than 450.
The buzz since the end of the summer among real estate investment trusts (REITs), which manage and develop shopping centers, has escalated from questions about “if” Kmart would institute additional closures to “how many” and “when.” Sources in Florida said that the state, home to 72 Kmart locations, is under intense review at Kmart headquarters in Troy, Mich., and that at least one store in south Florida is set to close during the first week of January.
Day denied this report. “I know of no specific store which is slated for closure,” said Day, who indicated that he doesn’t share the viewpoint allegedly held by some at Kmart that Florida is under special scrutiny. Day said he has final say on store closures within Kmart’s management.
Day also said he did not know when an announcement regarding additional store closures would take place. Such an announcement would have to come soon, if Kmart is to make good on its new goal of exiting bankruptcy proceedings early next year.
James Adamson, chairman and chief executive officer, said Thursday that the company expects to file its reorganization plan and disclosure statement in January in preparation for a March exit. The company has the exclusive right to file a plan of reorganization until Feb. 28.
Kmart still has much on its plate that it needs to resolve, and it is not just which stores to close.
The company said it now expects the internal investigation into its former stewardship to be completed in December. Adamson said he hopes that the independent Federal Bureau of Investigation and Securities and Exchange Commission probes are on the same timetable as Kmart’s December date.
Another issue that Kmart needs to review is how to handle the loans made to 28 current and former employees under the reign of Adamson’s predecessor, Charles Conaway.
Of those individuals who received loans, five are still with the company. Adamson declined to disclose the names of the individuals still employed. Two others, Paul Heuber, senior vice president for store operations, and Randy Allen, senior vice president for strategic planning and business initiatives, were let go last week as part of the restructuring of its operations department.
According to Adamson, two of those still employed offered to return their loans, but the company has not accepted the offers. “We have not decided how to handle it. We want to make that determination first, so that all 28 individuals will be treated the same way,” he said. The one loan that was returned happened months before lawyers advised Kmart to hold off on accepting loan repayments, the ceo explained.