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Kmart restructures
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February 5, 2002: 5:01 p.m. ET
Bankrupt retailer trims operating divisions, names Treadway to head units.
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NEW YORK (CNN/Money) - Bankrupt discount retailer Kmart Corp. unveiled a restructuring plan Tuesday that reduces the company's operating divisions to five from six and promoted Gregg Treadway to head the units.
The Troy, Mich.-based retailer is restructuring its store operations and field organization into four regional operating divisions, West, Southeast, Northeast and International. A fifth division is being created for its super centers. The company previously operated with six divisions.
Kmart, the No. 2 U.S. discount chain, behind Wal-Mart Stores Inc. (WMT: Research, Estimates), said Treadway, a 26-year retail veteran, will report directly to CEO Chuck Conaway. He joined Kmart in 2001 as senior vice president for the company's Midwest division.
Kmart's (KM: Research, Estimates) stock slumped 22 percent, losing 29 cents to finish at $1.04 Tuesday.
Caving to competition from Wal-Mart and Target Corp. (TGT: Research, Estimates) as well as its own operational issues, Kmart filed for Chapter 11 bankruptcy protection on Jan. 22.
"Kmart is committed to addressing our operational challenges in a thoughtful, yet aggressive, manner," Conaway said in a statement. "This new organization will provide a clear, focused direction and strong leadership for our store teams."
Kmart, with $37 billion in annual sales, expects to emerge from bankruptcy in July, 2003, and currently is in the process of reviewing each of its 2,100 stores. Analysts have said the company could close up to 700 stores as part of the streamlining process.
Kmart spokesman Jack Ferry declined to discuss store closings, but acknowledged that the company is scheduled to outline plans for closings at a March 20 bankruptcy court hearing.
"We've said that we have the whole fiscal first quarter to make that decision, so that would give us until May 1, but obviously we would want to make a decision earlier than that," Ferry said. "We'd like to get it behind us and get everybody focused on how its going to look in the future, but it's still under review."
The next bankruptcy court hearing is scheduled for Feb. 13 in Chicago.
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Conaway, who analysts generally give high marks for trying to cut costs and clean up stores, has also been criticized for trying to go head-to-head with Wal-Mart on low prices, something analysts said led the chain into bankruptcy.
Industry observers have said that instead of pricing, Kmart needs to emphasize its unique products such as its line of Martha Stewart products and Sesame Street apparel, as well as its private label Route 66 clothing brand.
Meanwhile, the company is continuing to investigate an anonymous letter it received last month raising concerns about unspecified accounting practices, something that regulators and corporations are particularly sensitive about amid the collapse of energy trader Enron Corp. 
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