Kmart CEO Conaway leaves company; Adamson named replacement

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Posted 10:33AM on Monday, March 11, 2002

DETROIT - Kmart Corp.'s chief executive, Chuck Conaway, left the nation's third biggest discount chain on Monday, three days after the company operating under bankruptcy protection announced plans to close 284 stores and cut 22,000 jobs. Chairman James Adamson, a turnaround expert and longtime Kmart board member, will replace Conaway as Kmart's CEO effective immediately. Kmart's chief financial officer, John T. McDonald Jr., is also leaving. The Troy, Mich.-based retailer filed for Chapter 11 bankruptcy protection on Jan. 22, following lower-than-expected holiday sales, downgrades by several credit rating agencies and a stock dive. "While I have been contemplating this departure for some time given my family needs and professional goals, it was critical that the transition go smoothly," Conaway said in a statement. Conaway, who was replaced as Kmart chairman by Adamson days before the bankruptcy filing, is a former president and chief operating officer of CVS. He signed a five-year contract with Kmart in May 2000, replacing Floyd Hall. As part of his compensation package Kmart is to forgive a $5 million loan it made to Conaway last year, according to bankruptcy court filings. The agreement also called for him to receive $6.5 million on July 31, 2003, or sooner if he was fired. Replacing McDonald as chief financial officer is Albert A. Koch, chairman of Jay Alix & Associates, a turnaround management firm. Kmart also named Julian C. Day as its president and chief operating officer. He is former executive vice president and chief operating officer of Sears, Roebuck and Co. Before joining Kmart, Conaway had won many fans on Wall Street as the No. 2 executive at drugstore chain operator CVS, which he helped build into an industry powerhouse with more than 4,100 stores and annual sales topping $18 billion. Under his watch, CVS developed its Internet strategy. He also oversaw the drugstore chain's distribution systems -- getting products from suppliers into its stores. When he was named Kmart CEO, analysts said one shortcoming was Conaway's lack of experience in fashion. Kmart has struggled to keep pace with retail chains like Old Navy that offer trendier items. Kmart long has struggled to compete with lower priced Wal-Mart Stores Inc., and more fashionable Target Corp., its two bigger rivals in discount retailing. Prior to the Chapter 11 filing, Conaway closed unproductive stores, reintroduced the BlueLight Special, and made other changes to help the discount retailer become more productive and more efficient. The BlueLight Special was revived in April 2001. The marketing tool, first introduced in 1965 and retired in the 1990s, offers customers lowered everyday prices on more than 30,000 items. Conaway also said Kmart would replace two aging distribution centers with modern facilities and would overhaul its product-delivery software in an effort to improve the flow of goods to its stores. Kmart has been criticized for having understocked stores. In another move disclosed Monday, Ted Stenger, also with Jay Alix & Associates, was named treasurer. He has served as a turnaround and restructuring adviser at Allied Holdings, Fruit of the Loom, FINOVA Group Inc., and The Leslie Fay Companies. In trading Monday on the New York Stock Exchange, Kmart shares were up 6 cents at $1.35. ------ On the Net: Kmart Corp., http://www.kmartcorp.com