Kmart Lacks Details at Shareholder Meeting
During its first shareholder meeting since filing for bankruptcy in January 2002, Kmart gave little detail on how the store plans on improving sales. At the meeting, the company made no financial projections and gave few concrete examples of how it would improve merchandise and customer service.
"I wish I could tell you that there is some grand five-year plan," said Edward Lampert, company chairman during the meeting. "We're taking baby steps to try to define a message that we think...will resonate with customers."
Kmart closed 600 stores and eliminated more than 57,000 jobs. Now, the retailer has about 1,500 stores and 170,000 employees, according to The Detroit News. The company emerged from bankruptcy with a smaller debt pile and a new management team that has turned in two consecutive profitable quarters. According to Reuters, Kmart's total sales in the recently ended fiscal first quarter were down 25 percent, while sales at newly opened stores fell nearly 13 percent.
Lampert and the store have kept a low profile since Kmart emerged from bankruptcy in May 2003. Fewer than 100 people attended the shareholder meeting, which lasted an hour, most of which was spent asking Lampert questions, according to the Associated Press. During the meeting, Lampert focused on profitable sales and "back-to-basics" retailing, the same themes Kmart executives have been using over the past year.
According to USA Today, Lampert said the company would consider using some of its $2.2 billion cash pile for acquisitions, but he did not comment on the rumor that Kmart might merge with Sears, Roebuck and Co. Lampert did say money would be invested in the stores, but the emphasis would be on improving merchandise. He acknowledged that many stores need nicer fixtures and other upgrades. "Right now, we're working on merchandise and improving the basics," said Steve Pagnani, spokesman for Kmart in the Atlanta Journal-Constitution. "As far as the makeover, nothing major is planned."
Kmart has been cleaning up its 1,500 stores across the country. "If 90 percent of Kmart's product on the shelves is the same as Wal-Mart's, the tiebreaker is going to be the experience in the store," said Mark Speece, co-founder of Atlanta-based branding firm 800 Degrees. "And people say Kmart stores are a mess. Kmart has gotten better at marketing, but they've got to fix the stores."
According to the Atlanta Journal-Constitution, the first order of business, executives say, is finding ways to stand out against Wal-Mart. A disastrous price war with Wal-Mart was a major reason Kmart crashed into the biggest retail bankruptcy in history, in 2002. "If that's what our competition is going to be, and we're going to be a second- or third-rate version, I don't think we're going to win," said Lampert during the shareholder meeting.
"Ultimately, shareholders will be looking for two things: sustained profitability and growth," said Gary Balter, analyst for the global financial firm, UBS, in Reuters. "I give Kmart's management team full credit for their ability to restore profitability through aggressive cost management. The problem is that it's unclear whether that is sustainable, and the growth has been completely lacking."