Kmart CEO Conaway Leaves Company
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DETROIT (AP) _ In a move analysts had anticipated, Kmart Corp. announced that chief executive Chuck Conaway has resigned amid sweeping management changes aimed at helping the discounter reverse its fortunes.
Chairman James Adamson, a turnaround expert and longtime Kmart board member, will replace Conaway, who took the helm in May 2000, as Kmart’s CEO effective immediately, the company said Monday.
Adamson had assumed Conaway’s title as chairman on Jan. 17, five days before it filed for Chapter 11 bankrupcty protection.
Kmart also named Albert A. Koch, chairman of Jay Alix & Associates, a turnaround management firm ’s chief financial officer, succeeding John T. McDonald Jr., is also leaving.
And it named Julian C. Day as president and chief operating officer. He is former executive vice president and chief operating officer of Sears, Roebuck and Co.
The management changes come three days after the nation’s third largest discounter, behind Wal-Mart Stores Inc. and Target Corp., announced it was closing 284 stores and cutting 22,000 jobs.
Adamson said it was Conaway’s decision to leave, though the ``separation was an evolving process.″ He added that Conaway submitted his resignation to the board on Saturday, and is leaving two-thirds of his compensation behind. He declined to discuss terms. The package is subject to bankruptcy court approval and is to be addressed April 24.
Conaway signed a five-year contract worth $1.4 million per year with Kmart in May 2000, replacing Floyd Hall. As part of his compensation package, Kmart was to forgive a $5 million loan it made to Conaway last year if he was fired without cause before a certain date, according to bankruptcy court filings. The agreement also called for him to receive $6.5 million on July 31, 2003, or sooner if he was fired
``While I have been contemplating this departure for some time given my family needs and professional goals, it was critical that the transition go smoothly,″ Conaway said in a statement.
The news did not come as a suprise to analysts, who have maintained that Conaway had failed to come up with an appropriate turnaround strategy. One of Conaway’s big mistakes was his decision to go after Wal-Mart on price, cutting prices on about 40,000 items. The strategy backfired, as Wal-Mart only further lowered prices.
``Conaway’s mistake was one of commission and omission,″ said Kurt Barnard, president of Barnard’s Retail Trend Report, based in Montclair, N.J. ``He tried to undercut Wal-Mart on price, which was a poor decision. He also did nothing whatsoever to encourgage consumers to come to the store and buy merchandise. He failed to impress a niche of distinction on Kmart.″
Eric Beder, an analyst with Ladenburg, Thalmann & Co. Inc., said:
``You need someone in there right now who’s going to be very well versed financially. That’s not Conaway’s skill set. He’s not a turnaround guy. He’s kind of a builder, and that’s not going to happen right now.″
Adamson has the experience to bring a company through bankruptcy, Beder said. Adamson has helped other troubled companies, including Denny’s parent Advantica Restaurant Group and drugstore chain Revco Inc.
``That’s what he does best. He wants to bring in his own team,″ Beder said.
Adamson said he realized Kmart’s shortcomings and said the company ``has a long road to go.″
``Before we get into what our niche is and what our strategy is, let’s get back to the basics and better execution,″ Adamson said in a conference call with reporters. ``Right now it’s purely about stabilization.″
Adamson said he wants to first improve in-stock levels and the company’s relationship with its vendors. He said he hopes to have Kmart’s strategy in place by the end of the year.
On the New York Stock Exchange, Kmart’s stock was up 9 cents at $1.38 in midday tading.
On the Net:
Kmart Corp., http://www.kmartcorp.com