CEO WANTED – KMART’S HALL LEAVING IN APRIL
Byline: Tim L. Moran
DETROIT — Another major retail search is under way.
On Tuesday, Kmart announced at its annual meeting that Floyd Hall, chairman, president and chief executive, will step down April 1, 2001, and that a search for a successor has officially begun. Company spokesmen said an informal search began in December.
It will be a tough position to fill, considering there are few with the kind of broad experience required to run a company the size of Kmart — and because J.C. Penney and Sears, Roebuck are also looking for ceos. Hall is credited with turning around the fortunes of Kmart, but all along said that he would not be with the company for the long haul and that he wanted to find a backup. He joined the company in 1994.
Sources said Herb Mines Associates is conducting the search. Hal Reiter, president of Mines, declined to comment.
In other news from the meeting here, Hall and Bluelight.com ceo Mark H. Goldstein said an initial public offering for Bluelight.com will happen in 2001, but details and timing were not set. Hall said the IPO would bring significant value to Kmart, but had no specific figures or estimates. BlueLight.com will begin carrying merchandise in September. The site is already available as a free Internet service provider (ISP) and has recruited more than two million members since its December unveiling.
Hall expressed frustration about how Wall Street has been beating down the firm’s stock, despite headway in the company’s performance.
The retailer’s Route 66 private line is approaching $1 billion in sales, Martha Stewart Everyday will exceed $1.4 billion in sales this year, Thom McAn shoe sales have grown 124 percent in one year, and Jaclyn Smith has gained the “highest customer awareness” of any private label brand, Hall told stockholders.
He also said the company has been profitable since 1996 and has achieved compounded annual growth of 36.5 percent over the three-year period. However, the market has pushed Kmart down. It closed up 3/16 at 7 5/16 on the New York Stock Exchange Tuesday.
“Like you, I am frustrated by the volatility of the market and the treatment of our stock price in the past year,” said Hall, who a year ago termed Kmart shares undervalued at a price over $17 per share.
In fact, the company bought back 17 million shares of its own stock at an average price of $11.75, and left management holding 37 million stock options that are now “underwater,” with some redeemable only at prices close to $18.
“Until the last year, basic financial fundamentals have always prevailed. Unfortunately, that hasn’t been the case of late,” Hall said. “The new economy has left millions of investors and pundits alike scratching their heads.”
Kmart’s basic health, aided by its apparel sales including the rapidly-growing Kathy Ireland and the stable Jaclyn Smith lines, has improved dramatically over 1994 levels when Hall came to rescue the retailer. It’s widely believed that Martha Stewart’s products were critical.
Kmart is a 59 percent owner of the San Francisco-based Bluelight.com, which also includes partners Yahoo! Inc., Martha Stewart Living Omnimedia, and Softbank Venture Capital.
Goldstein told shareholders Bluelight would be able to customize shopping promotions for 100 million households stored in Kmart proprietary databases.
At a press conference, Goldstein said Bluelight would start with 125,000 stockkeeping units and grow to four to five million, all in hard goods.
The company will add 30 Big Ks, 20 Super Ks and 11 expansions in 2001; and 20 Big Ks, 50 Super Ks and 20 expansions in 2002, Hall said.