Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, January 6, 1994 TAG: 9401060080
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
TROY, Mich. - The Kmart Corp. said Wednesday it would reduce its 1993 after-tax earnings by $850 million for the cost of closing and relocating more of its stores. It also said it planned public stock offerings for four of its specialty divisions.
Working to turn back inroads made by Wal-Mart, Home Depot and other mass merchandising chains, Kmart, the country's second-largest retailer behind Wal-Mart, had begun a $3 billion program in 1990 to renovate, expand and relocate virtually all of its 2,200 stores in the United States.
Wednesday, Joseph Antonini, the chairman and chief executive of Kmart, said at a news conference at the company's headquarters that about 800 of the stores that were to be refurbished would be closed or moved instead.
The company could not identify specific markets and would not say if any of the stores are in Western Virginia.
Employees are expected to be transferred to other Kmarts and no layoffs are planned, the retailer said. Kmart said it was closing small, very old stores that can't be renovated or expanded.
Antonini said research had proved that shoppers viewed merchandise more favorably when it was in larger stores. The company's older stores typically were 40,000 to 60,000 square feet; the new ones, based on prototypes tested by Kmart, range from 94,000 to 115,000 square feet, he said.
The charge against earnings covers expenses "substantially associated with the restructuring of the U.S. Kmart stores division, certain specialty retail businesses and Kmart Canada," the company said.
Antonini said the charge would mean Kmart would post a loss for its fourth fiscal quarter, which ends Jan. 26, and for fiscal 1993-94. Profit for the quarter and year, he said, was adversely affected by flat sales in most apparel lines, an $87 million operating loss at the Pace Membership Warehouse division in the first nine months of 1993 and other factors. Kmart has sold the Pace operations.
In the fourth quarter of last year, Kmart earned $535 million, or $1.15 a share; in the 1992 fiscal year, it earned $941 million, or $2.06 a share.
Shares of Kmart fell 50 cents, to $21, on the New York Stock Exchange on Wednesday.
The company said it would seek shareholder approval in May for the public stock offerings of four of its specialty divisions: Borders-Waldenbooks, a combination of its two bookselling units; Builders Square, the building-supply operation; Officemax, the office supply chain; and The Sports Authority, a specialty retailing businesses.
Antonini said the stock offerings were intended to raise the company's stock price, improve employee incentive plans and "provide Kmart with additional financial flexibility."
Antonini estimated that the four divisions represented about $3 billion of equity value. He said Kmart might sell 20 percent to 30 percent of the equity, implying that Kmart could realize $600 million to $900 million in new cash. Borders and Walden, previously separate, are being combined to form a single book group.
The creation of the separate stocks would help Kmart match the compensation systems at Wal-Mart and Home Depot, which are heavily dependent on stock options to compensate key managers and employees.
George Mrkonic, executive vice president of Kmart's specialty retailing group, said providing employees with stock ownership would foster an "ownership culture."
He said owner-led companies had outperformed their competitors in virtually every segment of retailing, "particularly when competing companies are divisions of larger corporations."
Employees of Kmart subsidiaries now qualify for compensation that is tied to the performance of Kmart stock.
Kmart said it would close about 187 "underperforming" Waldenbooks outlets, of the 1,232 it operates.
On Tuesday, Kmart announced executive changes in the merchandising department that it said would save $10 million a year.
by CNB