
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, June 4, 1994                   TAG: 9406060166
SECTION: BUSINESS                    PAGE: A-4   EDITION: METRO 
SOURCE: Associated Press
DATELINE: TROY, MICH.                                LENGTH: Medium

SHAREHOLDERS BLOCK KMART'S STOCK-STREAMLINING PLAN

Shareholders blocked Kmart Corp. on Friday from proceeding with a plan to issue a new class of common stock for each of its four specialty-store businesses.

The vote was a major setback to the management of the large retailer, which has been struggling to find ways to compete more effectively with its rivals Wal-Mart Stores and Sears, Roebuck.

Although 61 percent of the shareholders who cast ballots favored the plan, 27.8 percent didn't cast ballots. That kept Kmart from getting the 208 million-vote minimum - or 50 percent of outstanding stock - needed for passage.

The vote was announced after the close of the stock market. Kmart shares rose 50 cents to $16 on the New York Stock Exchange. Late last year, Kmart was trading above $24 a share.

Kmart Chairman Joseph Antonini said he was ``obviously disappointed.'' He said the board of directors would have to consider alternatives.

``Kmart's management and board of directors are dedicated to building long-term value for Kmart shareholders,'' he said in a written statement.

The proposal would have allowed Kmart to sell about a quarter of the stock in each of its specialty stores - OfficeMax, the Sports Authority, Builders Square and Waldenbooks-Borders BookShop.

Kmart said the value of the specialty stores has been depressed by the performance of Kmart's core business. Kmart contended that by selling stock in the stores, it would have unleashed their potential value.

But some institutional investors contended that spinning off the shares would simply create another way to invest in Kmart. They think the smaller companies should be sold entirely, and Kmart should focus on its core business.

``We feel like the idea of spinning off the stores is not a bad one. It's just the way they wanted it done,'' said Michael Zucker, director of financial affairs for Amalgamated Clothing and Textile Workers Union, which holds 29,000 shares of Kmart stock.

There are nine Kmart stores in Western Virginia, including three in the Roanoke Valley. Besides its discount department stores, Kmart operates outlets of its Waldenbooks and Office Max units.

In recent weeks, local Kmart stores began changes designed to make its stores friendlier to customers. Among them are a night stocking program so daytime employees would be freed to be more available to help shoppers.

Staff writer Sandra Brown Kelly contributed to this story.

by CNB