BUILDERS SQUARE LOCATIONS TO BE RETURNED TO KMART

Byline: Vicki M. Young

NEW YORK — Home improvement retailer Hechinger Co. is calling it quits, and Kmart said it will get back 110 former Builders Square locations that were taken over by bankrupt Hechinger.
A Kmart spokesman said the discounter has identified 15 sites as candidates for conversion into Big K stores, but declined to name those locations.
He added that he didn’t know when Kmart will get those stores, but predicted that it won’t be for several months. Hechinger has started going-out-of-business sales in some, but not all, stores.
As reported, Kmart sold its Builders Square unit in September 1997 to an investment group that combined with Hechinger to form what was then the nation’s third-largest home improvement store chain.
The deal was structured, however, in such a way that Kmart retained liability for paying for the leases on the sites.
In mid-June, within a week after Hechinger filed for Chapter 11 bankruptcy court protection, Kmart said it would take a $230 million aftertax charge in the second quarter to cover the cost of the lease obligations.
The Kmart spokesman said last week that the charge was “adequate” and didn’t anticipate any further charges in connection with Hechinger’s decision to liquidate.
Kmart has been in discussions with various parties about sublease arrangements for the bulk of the stores it will get back, according to the spokesman, who added that those discussions have been ongoing for “several months.”
The spokesman noted that the Troy, Mich.-based discounter will operate 1,850 Big K format stores by yearend.
He said that 450 locations were converted this year into Big K’s; the company opened 10 new Big K stores in the same period. The typical store size of the Big K is at least 60,000 square feet.
Kmart also operates 105 Super K format stores, including two new ones opened this year. The supercenters average between 140,000 and 180,000 square feet.
Unlike the Big K format, which sell dry goods but not fresh foods, the supercenter has a full grocery. Included in the grocery are sections for fresh produce, a bakery and butcher shop.
Kmart will continue to operate 170 stores that will not be converted to the Big K format. The sites are under the required square footage needed for a conversion, the spokesman said. He added that the bulk of new store openings will be in the Big K format.