NEW YORK — Kmart Corp. named Donald S. Perkins chairman, pulling the position away from Joseph E. Antonini, who continues as president and chief executive officer.
Antonini has been pressured by shareholders and the board to revive Kmart’s sagging discount stores and because of that, has been criticized for holding the three top jobs. Observers say Antonini is still feeling the heat and Tuesday’s appointment could presage his replacement.
The 67-year-old Perkins was chairman and ceo of Jewel Cos. Inc. for 10 years and retired from that post in 1980. He joined the Kmart board of directors in 1986.
“His career in the supermarket business and in the development of food/general merchandise combination stores will also be an asset to Kmart,” Antonini said in a statement. He was not available for further comment.
F. James McDonald, who is on the Kmart board, said in a statement that Perkins will spend “an important part of his time helping management during this critical period as Kmart makes a concerted effort to better leverage the major investments which have been made in the refurbishment of its stores in recent years.”
Kmart said Perkins will not have an office at Kmart headquarters in Troy, Mich., but will work closely with Antonini, who still oversees the day-to-day operations.
While Kmart’s board has been among the more passive in retailing, Tuesday’s developments indicate it is now exerting some muscle. The board plans to add two independent members with strong business expertise. They are expected to be named in advance of the firm’s annual stockholders’ meeting in the spring.
“I think this means the writing is on the wall for Antonini,” said Richard L. Church, an analyst at Smith Barney Shearson. “The board is dissatisfied at the progress that’s been made.”
Church suspected that the board gave Antonini until the fourth quarter to turn things around. Kmart is now expected to show fourth-quarter earnings of about 43 cents a share against a severely depressed 53 cents a year earlier.
Church believes that a “search has been under way” for a successor to Antonini, and anticipates that a large part of Perkins’ role will be to recruit a new chief executive.
Sources have noted that the search has been going on for months and that some top retailers, including Roger Farah, chairman of Woolworth’s and former R.H. Macy president, and Myron E. Ullman, former Macy chairman and ceo and now head of Duty Free Shops. Some interpreted the difficulties as a sign that Antonini has been able to maintain control.
However, Jeffrey Edelman, at C.J. Lawrence, said the move to bring in a new chairman “sets the stage for someone to come in and take a much larger role in management,” expecting Perkins, to be at the post only temporarily.
Edelman also said it was a positive that the board was “taking a more active role in management and seeing that more things got done.”
Last week, Edelman issued a buy recommendation on the company’s stock, which is at historical lows. He cited the addition of outside management, and said he expects new merchandisers to be named soon. He also said efforts are being made to cut expenses and solve problems such as insufficient stock levels and weak customer service.
Kmart’s recent spinoffs of specialty operations, such as Sports Authority and its Australian operations has funneled cash into the business and allowed management to concentrate more on the core discount business in the United States.
Kmart has begun a strategic review of its business, which will address issues critical to shareholders, such as merchandising, leadership, financial policies and operational execution.
Some analysts also expected Kmart’s dividend would be cut Tuesday, but the board declared a regular quarterly dividend of 24 cents a share.
Meanwhile, Standard & Poor’s lowered its rating on about $3.7 billion of Kmart Corp.’s debt, and said the outlook is negative. S&P cut its rating on Kmart’s senior debt to triple-B from triple B plus. The rating agency said the downgrade on long-term debt is based on expectations that earnings and returns will continue to be below levels appropriate for the prior rating.
S&P noted that earnings in the core discount store business were down 31 percent for the first 39 weeks of 1994, and the rating agency expects continued promotional activity in the fourth quarter will lead to another weak quarter and uncertain prospects for significant improvement in 1995.
Shares of Kmart Corp. rose 3/8 to 13 5/8 Tuesday on the New York Stock Exchange.