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Kmart boots its president
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January 17, 2002: 2:34 p.m. ET
Retailer shakes up management as it continues to seek financing.
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NEW YORK (CNN/Money) - Beleaguered retailer Kmart Corp. shook up its top management Thursday, saying it continues to review its liquidity and have discussions with lenders amid speculation of a possible Chapter 11 bankruptcy filing and the shuttering of hundreds of stores.
Kmart (KM: down $0.11 to $1.49, Research, Estimates) said it elected James Adamson non-executive chairman to serve as the principal liaison between the board and senior management. Additionally, Chuck Conaway, who replaced Floyd Hall as CEO in 2000, remains, but Mark Schwartz, the company's president, is "no longer with the company."
Kmart's shares were down 9 cents to $1.51 in Thursday afternoon trading. The stock is well off its 52-week high of $13.55, set last August.
A company can be de-listed from the NYSE if its shares fall below $1 for at least 30 days.
Adamson is the former chairman, president and CEO of Advantica Restaurant Group Inc., operator of the Denny's restaurant chain. He previously served as CEO of Burger King, and held senior positions at Revco Inc. and Target Corp. (TGT: up $0.64 to $40.30, Research, Estimates)
Schwartz is a 16-year Wal-Mart veteran hired by Conaway in September, 2000. He was previously CEO of home improvement chain Hechinger Inc., which went bankrupt.
Some analysts see the move as a sign that the board is losing patience with the 41-year-old Conaway, who has been criticized for directly engaging in a price war with rival Wal-Mart Stores Inc., the world's biggest retailer, which expects to log $200 billion in sales in 2001, compared with Kmart's $35 billion to $37 billion in annual sales.
"To go head-to-head with a 10,000-pound gorilla is nonsense. It's like Switzerland declaring war on the United States. That, of course, doesn't work," said Kurt Barnard, president of Barnard's Retail Consulting Group. "Wal-Mart ate Kmart's lunch."
A company spokesman was not immediately available for comment Thursday.
Barnard said Conaway gets high marks for initiating cost-cutting improvements at Kmart stores, but he failed to communicate those changes to shoppers.
"He improved the looks of the stores, installed controls, systems which needed to be installed ... but he failed completely in communicating all these successes to you, me and 270 million other Americans -- that Kmart is a much better place to shop."
The announcement is the first word out of Kmart since the board convened a meeting Monday as its ratings were slashed to junk status and its stock posted double-digit percentage declines to trade below $2. The company is struggling to pay off $1.6 billion in debt as it grapples with fierce competition from Wal-Mart Stores Inc. (WMT: up $0.90 to $56.89, Research, Estimates).
"We appreciated the loyalty Kmart has received from our customers and the continuing support shown by many of our vendors and other business partners," Conaway said in a statement.
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Some analysts think Kmart is close to a deal to refinance part of its debt. New financing will likely be tied to a voluntary Chapter 11 bankruptcy filing, giving the company time to pay off creditors as it attempts to get back on its feet.
"There's no question that Kmart is in deep trouble, and how that trouble is going to resolve itself remains to be seen," Barnard said.
Kmart was dropped from the broad Standard & Poor's 500 stock index Wednesday. S&P also cut Kmart's ratings to low junk grades, its second downgrade this week, and faulted management for a "lack of communication" about plans to invigorate its business.
Moody's Investors Service cut its rating on Kmart's senior unsecured debt Wednesday. 
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