Struggling Kmart Corp. may close North Adams store
NORTH ADAMS, Mass. — The Boston Business Journal last week reported that Kmart is planning to close 291 of its 2,114 stores including three in Western Massachusetts — in North Adams, Hadley, and Westfield.
However, North Adams Mayor John Barrett III said Monday that it is too early to tell, and he pointed out that Kmart's moves are subject to approval of bankruptcy court.
"They're not telling us anything, because I don't think they know anything yet," he said. "It's hard to read right now."
On Jan. 22, Kmart Corp. and several of its U.S. subsidiaries filed for reorganization under Chapter 11 of the U.S. bankruptcy code. Kmart has indicated that it will reorganize on a fast-track basis, targeting emergence from Chapter 11 in 2003.
The list of stores to be closed reportedly was obtained from a source familiar with the company's reorganization by the Atlanta Business Chronicle, a sister paper of the Boston Business Journal. Kmart has secured a $2 billion financing package to fund its turnaround and continuing operations, subject to bankruptcy court approval. Kmart said it will formally announce store closings on March 20.
Company officials could not be reached for comment, and reporters calling the company were referred by voice mail to information on the company's website, www.bluelight.com. On its website, Kmart called a Jan. 30 Detroit News article citing a specific number of store closings "baseless, speculative and reckless."
Kmart operates three stores in The Advocate's circulation area — in North Adams, Great Barrington, and Bennington, Vt. Barrett said he's heard rumors that stores other than the North Adams one might close, including the Kmart in Braintree. He emphasized that the bankruptcy court will make the ultimate decision on closings. The mayor said the company might even have to pull completely out of New England if too few stores make distribution matters here unprofitable.
The Kmart building in North Adams was expanded in 1993 as part of a five-year company plan to open new stores and expand and modernize existing ones. Barrett said that if Kmart does in fact end up pulling out of the city, they will leave a great new building in a great location and the city would be proactive in finding a new tenant for it.
The company said its decision to seek judicial reorganization was based on a combination of factors, including a rapid decline in its liquidity from sales less than anticipated and poor earnings performance in the fourth quarter of 2001. Other reasons include an erosion of supplier confidence, tense competition in the discount retailing industry, unsuccessful sales and marketing initiatives, and the continuing recession.
Said Kmart CEO Charles C. Conaway, "We are committed and determined to complete our reorganization as quickly and as smoothly as possible while taking full advantage of this chance to make a fresh start with a repositioned Kmart for the future."
Kmart also has announced that Ronald P. Hutchinson has been named executive vice president and chief restructuring officer, a new position. Hutchinson and James P. Adamson, elected non-executive chairman of Kmart's board of directors Jan. 17, will be engaged in advising Kmart on reorganization matters and working with senior management in rebuilding and repositioning the company.
Conaway has outlined strategic, operational, and financial initiatives that the company intends to continue or implement during the reorganization process. These include investing in merchandising and marketing initiatives and evaluating the performance of every store and terms of every lease in the Kmart chain by the end of the first quarter of 2002 with the objective of closing unprofitable or underperforming stores this year to increase cash flow and return on investment capital.
Kmart filed more than 30 "first-day motions" in bankruptcy court in Chicago to keep the operation going and effect the reorganization. These were approved. The Troy, Mich.-based Kmart Corp. is a $37 billion company with about 240,000 employees. It is the largest retailer ever to file under Chapter 11. The company was founded more than 100 years ago when Sebastian Spering Kresge opened a modest five-and-dime store in downtown Detroit. By 1912, he had expanded to 85 stores.
