KMART BEGINS LAYOFFS, CUTS 900 POSITIONS
Byline: Mark Tosh
NEW YORK — The ax fell again for Kmart Corp. employees Monday.
The nation’s second-largest retailer eliminated the “equivalent” of 900 full-time positions, as part of its plan to cut 10 percent of its management work force — or 2,300 jobs — over the next two years.
The cuts, made primarily at the discounter’s Troy, Mich., corporate headquarters, are part of Kmart’s previously announced efforts to reduce expenses by $600 million to $800 million in the next 18 to 24 months. An unspecified number of administrative employees at Kmart’s fashion offices in North Bergen, N.J., also were part of Monday’s layoff.
Kmart, as reported, said in September it would close 110 underperforming stores, eliminate about 6,000 store associates in addition to thinning management ranks by about 2,300, including 650 store managers who were let go at that time.
After the cuts made Monday, Kmart said it expects to trim “at least 750” more management positions from its work force as part of the management reduction plan.
These 900 positions eliminated Monday will affect more than 900 people, as that number includes full-timers as well as part-timers, temporary help and contract employees. Kmart declined to specify the precise number of people who will lose their jobs. The company employs about 5,000 people at its corporate headquarters.
A Kmart spokeswoman said some of the management laid off Monday were at the vice president level, but she declined to specify a number or name them. The cuts were “not material to merchandising systems,” she added.
The company declined to estimate the savings generated by the management reduction, but said it is part of the overall cost-cutting effort.
Kmart is striving to lower costs and boost income after seven consecutive quarters of declining earnings. The retailer reported net income of $151 million for the 39 weeks ended Oct. 26, compared with $287 million for the same period of 1993.
Increased competition in the discount sector, especially from Wal-Mart Stores, has cut into Kmart’s market share, which has slipped from an estimated 40 percent to roughly 25 percent over the past 10 years.
Performance at the company’s core discount stores has also been dragged down by poor results in apparel departments.
The discounter said “jobs in virtually every department” were eliminated. The cutbacks are the result of restructuring and outsourcing of certain functions, Kmart said.
At its North Bergen facility, Kmart is preparing to merge the information systems and financial functions of its fashion operations with their counterparts in Troy. The reorganization of the administrative offices, which should be completed by July 1995, will not affect the distribution center’s operations.
This move is a continuation of actions Kmart said it began in 1992, when fashion operations moved to Troy. Kmart said the integrated systems serving hardlines and fashions “will enhance productivity by eliminating redundant processes.”
The employees affected were informed of the reductions Monday morning and let go later in the day. They were paid through the month of December and offered a severance package that included a health-care benefit subsidy, outplacement counseling and unused vacation time.
Kmart stock closed at 14 1/4, up 1/2, in trading Monday on the New York Stock Exchange.