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Kmart shakes up management to try to restore investor, lender confidence

Posted: Friday, January 18, 2002

DETROIT (AP) -- Discount retailer Kmart Corp. announced sweeping management changes Thursday in an attempt to restore its credibility with bankers, vendors and investors.

The new chairman, James B. Adamson, has experience with bankrupt companies, and his appointment comes amid speculation that Kmart could declare bankruptcy within days. He had been a member of its board of directors.

Adamson will serve as ''the principal liaison between the board and the company's senior management,'' the company said.

Former chairman Charles Conaway, who was brought in to restructure the ailing retailer in May 2000, remains CEO. President and chief operating officer Mark S. Schwartz has left the company, Kmart said.

Kurt Barnard, president of Barnard's Retail Trend Report, based in Montclair, N.J., sees Kmart's hiring of Adamson as a sign that the company probably will file for bankruptcy.

''Conaway will now be able to devote his entire time to running the company, without getting involved in bankruptcy issues,'' Barnard said.

Adamson is the former chairman of Advantica, one of the nation's largest restaurant companies, and helped lead the company out of bankruptcy in 1998.

He played a significant role in regaining respect for Denny's, an Advantica property that was mired in claims of racial discrimination, said John Plummer, president of Rowaton, Conn.-based Plummer Associates, an executive recruiting firm.

''Jim has bankruptcy experience, and he is also the kind of guy who can get Kmart through public relations troubles,'' Plummer said.

The company's stock price jumped a bit after the announcement. The stock closed at $1.79, up 19 cents from Wednesday's closing price of $1.60. It was the most heavily traded stock on the New York Stock Exchange, with nearly 82 million shares changing hands.

Kmart's troubles accelerated Jan. 10 after officials announced that 2001 results would break even at best because of disappointing holiday sales, and suggested they might seek additional financing.

In its statement Thursday, Kmart said it continues to evaluate its finances and business plans for the 2002 and 2003 fiscal years.

Since Conaway became CEO, he has closed unproductive stores, reintroduced the BlueLight Special, and made other changes to help the discount retailer become more productive and efficient.

The discount retailer has been struggling to compete against Wal-Mart Stores Inc. and Target Corp., battling the nationwide recession while mounting its aggressive restructuring effort.

Kmart has about 275,000 employees and 2,105 stores in all 50 states, Puerto Rico, U.S. Virgin Islands and Guam.

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