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Kmart names new CEO
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May 31, 2000: 3:14 p.m. ET
Former CVS operating chief Charles Conway will head No. 3 U.S. retailer
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NEW YORK (CNNfn) - Attention Kmart shoppers.
The nation's No. 3 retailer Wednesday named former CVS drugstore President Charles Conaway its new leader, in hopes he will put the flash back in the blue lights for a company that continues losing market share to Wal-Mart and Target.
Conaway succeeds Floyd Hall, who helped turn Kmart around during the last five years by helping to launch the Big Kmart and Super Kmart store concepts.
Conaway most recently was president and chief operating officer at CVS.
The news sent shares of Kmart (KM: Research, Estimates) up 1-1/16 to 8-11/16 in trading Wednesday.
 Kmart announced earlier this month that Hall would leave the company. He joined the discount retailer five years ago, when the company was mired in losses. Profitability improved every year during his tenure, with earnings from continuing operations of $633 million, or $1.29 a share, in the most recent fiscal year.
But Kmart recently announced disappointing earnings and sales for the fiscal first quarter of $22 million, or 5 cents a diluted share, down from $56 million, or 11 cents a share, a year earlier, and below the 10 cents a share predicted a week before the earnings report.
And while the company has improved its bottom line during Hall's tenure, it continued to be plagued with poor stock performance as it lost ground to Wal-Mart Stores Inc. (WMT: Research, Estimates), the nation's leading retailer, and Target Corp. (TGT: Research, Estimates).
Hall and management also clashed with style maven Martha Stewart, whose branded line of products sold exclusively by Kmart has grown to more than $1 billion in annual sales. The Wall Street Journal reported earlier this month that Stewart has sought a position on the Kmart board of directors, a move Hall rejected.
Conaway joins Kmart with a five-year contract. He helped restructure CVS, the former Melville Corp., from a diversified specialty retailer into the drugstore chain, which posted $18 billion in sales in 1999 and operates 4,100 stores nationwide.
Although relatively unknown among analysts who follow Kmart, his appointment is seen as a positive for the company.
"Probably from a lot of perspectives, the fact that they hired someone with a substantial position with a growth company is a statement about what they think they will be able to do," said Bruce Missett, an analyst with Morgan Stanley/Dean Witter. "They needed to get to the next level. I think Floyd did a phenomenal job getting them out of an incredibly deep hole. Floyd wasn't going to run this for another five years. They had to get to the next round of management. This is pretty impressive."
Missett said Conaway's chief focus will be establishing a strategy to better compete with Wal-Mart. He said brands such as Martha Stewart's line are what separate the company from competitors, and that Stewart's clash with Hall over becoming a member of the board was exaggerated.
"I'm sure she's his best ally," Missett said. "He needs the Martha Stewarts of the world with products that separate Kmart from Wal-Mart. You can't outflank Wal-Mart, you can't out-price Wal-Mart, you can't outweigh Wal-Mart. You have to do things that are unique."
PaineWebber analyst Jeffrey Edelman said bringing someone in from the outside is just what Kmart needs to put the "big" back in Big Kmart.
"Retailing is retailing, and Kmart was not where it should have been," Edelman said. "From that point of view, I think that new blood has got to be a benefit."
In the coming months, Edelman said he'd like to see Kmart lay out a game plan to improve the appearance of its 2,171 worldwide stores as well as customer service and inventory.
A native of Lapeer, Mich., Conaway previously was a director of Linen 'n Things, Streamline.com and Health Connections.
Separately, CVS said Chairman and CEO Thomas Ryan will assume the additional title of president. The company does not plan to conduct a search to replace Conaway.
CVS (CVS: Research, Estimates) shares rose 1/2 Wednesday to 42-3/16. 
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Kmart Corp.
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