KMART APPAREL TO BLOOM FOR SPRING?
Byline: Valerie Seckler
NEW YORK — Kmart is digging to revive its drooping women’s apparel business by springtime.
Moreover, the nation’s second-largest retailer expects improvements over a weak third quarter for women’s wear to start to crop up for Christmas.
“We expect to see our apparel business improve over time, beginning with the holiday season,” said Warren Flick, president and chief operating officer, in a recent interview. “If comps don’t rise above third-quarter levels, it will have happened on my watch.”
Back on May 5, Flick, then president and general merchandise manager of Kmart Stores, forecast that a “renaissance” would unfold in Kmart’s 2,020 U.S. discount stores by spring 1997. It is a goal he insists is still attainable.
Building a robust apparel business is a critical element in Kmart’s turnaround effort, a reality that several Wall Street analysts contend is at least a couple of years away for the Troy, Mich.-based firm.
“I think they’re still well behind schedule in improving their apparel operation,” said Joseph Ronning, retail analyst at Brown Bros. Harriman. “Their out-of-stock situation has improved, but it’s still a problem with high-turn merchandise. The apparel assortments they’re aiming at are only in 20 to 30 percent of their stores.”
A high-yield bond analyst, who requested anonymity, noted, “It is taking longer than I expected for Kmart to buff up its apparel merchandise mix.”
Despite a long list of challenges, from featuring flashier brands to offering better prices, Flick said Kmart has significantly improved the apparel business since his arrival in January, listing the repositioning of private labels and improving relations with branded vendors as chief among them.
He cited as successful both the launch of Kmart’s Route 66 private-label denimwear last summer for back-to-school and the repositioning of store labels such as Kathy Ireland and Jaclyn Smith in women’s this year. Kathy Ireland, he maintained, “is now clearly defined as a younger, more contemporary line aimed at 20-to-35-year-olds.”
Further, Flick credited the new apparel team as being “very effective in cementing our relationships with branded vendors — an important piece of improving our apparel assortments,” adding, “I believe we’re on schedule with our initiative to achieve a higher awareness of our brands among consumers.”
Nonetheless, myriad executive changes this year have slowed moves to enliven the apparel business, according to retail analysts, a notion with which Flick agreed. Indeed, Flick is staking his claim that business will improve by springtime partly on the realignment of Kmart’s merchants into a single team, a development announced last July.
Buyers and merchandisers were realigned into a team guided by the more than 150 planning executives — added by Kmart this year — who are overseeing the purchasing and replenishing of goods. The team approach has brought together several groups that previously worked separately at the chain: buyers, product developers and sourcing experts.
“The professional planners are aiding our attempts to lift in-stock apparel positions and to micro-assort clothes according to specific markets,” Flick explained. “Getting there in a hurry is crucial.”
However, the addition of Stephen Ross as chief merchant in April has caused some retail analysts to wonder whether the discounter needs a chief merchant specifically for women’s. Ross’s expertise, like Flick’s, is in men’s and children’s apparel.
“A chief women’s merchant could make sense for Kmart,” said Christine Fasano, high-yield bond analyst at Donaldson, Lufkin & Jenrette. “Apparel has been underperforming, probably due to the disruption in the team. They will need to shore up that business really quickly.”
“The apparel presentation leaves a lot to be desired, and that’s where they’ve had a lot of [personnel] turnover,” said Ronning, who noted that a chief women’s merchant could sharpen the chain’s focus on the category.
For his part, Flick discounts the notion that Kmart needs a women’s chief.
“With Steve Ross as chief merchant, Maria Comfort as divisional vice president of ladies ready-to-wear and Terry Michner overseeing intimate apparel, hosiery and accessories, we’ve built substantial momentum in our repositioning strategies,” Flick maintained.
Yet, with the addition of Maria Comfort in June, and Flick himself now more than 10 months into his role as Kmart president, the Kmart official acknowledged that pressure has been mounting to bolster the weak apparel business.
For October, Kmart posted a paltry comparable-store sales gain of 1.3 percent overall. That figure followed a 0.8 percent slide in September, a 1 percent uptick in August and a 3.8 percent drop in July.
By comparison, several Kmart competitors topped the chain in October comps: Target jumped 9.6 percent, Wal-Mart was up 4.2 percent, MacFrugal’s moved ahead 14 percent and Shopko surged 13.6 percent.
With Comfort in place since June, Stephen Ross on board since April and the reorganization of the merchandising staff in July, Flick said: “We can expect some serious improvement in our apparel business next year. We are trying to accelerate sales growth in our stores by having our buying teams working together in a united way.”
Nonetheless, contend analysts, Kmart needs to develop and market some meaningful apparel brands, edit and replenish its assortments more efficiently and offer pricing that’s more competitive with chains such as Wal-Mart, the nation’s biggest retailer.
“One problem that’s worsened for Kmart is pricing,” said Fasano. “Some studies show as much as a 9 to 10 percent gap between Kmart and Wal-Mart.”
A failure to compete on price is one of Kmart’s fundamental problems, observed Peter Schaeffer, retail analyst at Dillon Read & Co. “Either they have to cut costs or they have to decide to be price-competitive on X number of items,” Schaeffer advised.
Others, such as David Goldberg, a partner in Marketing Management Group, fashion business consultants, said Kmart needs to sell apparel brands that will draw traffic. Because discount retailing is built on offering the best prices, if prices aren’t competitive and brands aren’t compelling, there is no reason to shop a given discount store other than location, another Kmart weakness.
“Part of Kmart’s problem is that their locations aren’t the greatest,” said Schaeffer. “They’ve brought good people in, but the best people can’t always turn around a very troubled company. They’re making a lot of moves, but nothing big has changed. They’ve got to find a way to make the fundamentals work.”