NEW YORK — Kmart Holding Corp.’s latest pick for chief executive officer, Aylwin Lewis, is an operations and multibrand specialist who knows the ins and outs of the food-service business.
Kmart named Lewis from Yum Brands, the company with nameplates such as Pizza Hut and Taco Bell in its stable, to replace Julian Day, a move investors applauded even as reactions from analysts were mixed.
Shares of Kmart spiked up 5 percent on the news, closing at $91.02, up $4.31, in trading Monday on the New York Stock Exchange.
A 13-year veteran of Yum, Lewis immediately replaced Julian Day, who retains his board position and will assist in the management transition. Lewis is also a board member at Halliburton Co. and the Walt Disney Co.
Day, a former Sears executive who took over the reins at Kmart in January 2003, succeeded James Adamson, whose résumé includes stints in the food-service industry with companies such as the Advantica Restaurant Group, Denny’s and Burger King Corp.
Lewis was president and chief multibranding and operations officer at Yum. While there, he executed Yum’s global operating platform, multibranding expansion and restaurant information systems, according to Kmart. He is believed to be the first African-American to hold a top management spot among the top 10 retailers in annual sales such as Wal-Mart, Target Corp. and Federated Department Stores, among others. Lewis was unavailable for comment.
Edward S. Lampert, chairman of Kmart and ESL Investments, the investment vehicle he controls that bailed Kmart out of Chapter 11, said in a statement that Lewis has a “strong record of successful operating performance,” which will help strengthen Kmart’s business.
“Aylwin Lewis brings to Kmart a wealth of retail operating experience, a track record of personal and corporate success, tremendous people skills and a strong work ethic and commitment to excellence,” Lampert said.
Kmart’s closing stock price on Monday was 46 cents off of its 52-week high. Gary Balter of UBS Investment Research has the stock pegged with a target price of $101.
“We view the change [to Lewis] as a positive, as to attract a talent as strong as Mr. Lewis likely implies that he was impressed with Kmart’s outlook for its retail operations. It could also signal the first move to expand executive talent and experience, should Kmart begin to invest outside of the pure retail area,” wrote Balter in a research note.
Dr. Leslie Gaines-Ross, Burson-Marsteller’s chief knowledge and research officer, said, “The first 100 days will be difficult for Lewis in the sense that he’s an outsider. He will have to very quickly win the loyalty of senior management there and figure out how the business is running and what needs to be done. It’s a different ball game when you bring an outsider in.”
According to Burson-Marsteller data, the first 100 days an executive takes over the helm of a firm typically represents a grace period.
“Lewis has a good three months to listen and by the end of 12 months, Wall Street will be looking at performance and customers will be looking for some change and a new positioning,” Gaines-Ross said.
Maggie Gilliam, who heads up an independent research firm bearing her name, observed, “This is a very tough one to figure out. With Kmart selling some of its best stores to Sears and Home Depot, you have to wonder, ‘What is Kmart’s game plan?’ Personally, I don’t think the plan is to make the company survive. If Kmart wants to hire a chief merchant, this new ceo announcement will make that very difficult to do. No merchant would want the job unless he or she could be ceo, as well.”
John Beisler of Whitaker Securities, who tracks Yum, observed, “They need something since Martha [Stewart] won’t be available for a few months.” He added that Yum’s customers tend to be younger, and suggested that “maybe that’s an avenue Kmart wants to go after.”
Richard Hastings, retail analyst at Bernard Sands, viewed Kmart’s executive change as a positive one for the firm. He speculated that bringing in a “ceo with other industry connections could be helpful to enter into very interesting licensed restaurant departments in the stores. The existing Kmart stores are typically too big for the current merchandising strategy, and changes in utilization of existing space could be an interest solution to [Kmart’s] modernization cost and space issues.”
Still, a key question centers on the lack of a chief merchant. But, according to Hal Reiter, ceo of search firm Herbert Mines, Kmart may be able to do without one.
“You have a marketing guy at the top at Gap who has four merchants running the different retail businesses. At Federated Department Stores, the guy in charge now is Terry Lundgren, who is a merchant.”
— With contributions from Meredith Derby