DETROIT — Amid speculation Kmart Corp. could seek bankruptcy protection, the troubled retailer announced on Thursday some key management changes and said it was continuing to review its finances.
Kmart named James B. Adamson, one of its board of directors, to be chairman, replacing Charles Conaway, who remains as chief executive.
Kmart also said Mark S. Schwartz, who joined the company in September 2000 and most recently served as president and chief operating officer, is "no longer with the company."
The retailer, based in Troy, Mich., said Adamson will serve as the principal liaison between the board and the company's senior management.
Adamson, 53, has been a member of the Kmart board since 1996. He is the former chairman, president and chief executive of Advantica Restaurant Group Inc., which owns and operates Denny's, CoCo's and Carrow's. He previously was CEO at Burger King Corp. from 1993 to 1995 and earlier served as a senior executive at Target Corp.
Kmart is the nation's third largest discounter behind Wal-Mart Stores and Target, but has been struggling to compete against the lower prices of its main rivals.
Kmart's troubles picked up speed earlier this month after officials announced that 2001 results would break even at best because of disappointing holiday sales, and suggested they might seek additional financing.
The retailer's board held a regularly scheduled meeting on Monday and Tuesday, but until Thursday's announcement, Kmart had refused to comment on its financial state.
Shares of Kmart were down 8 cents a share at $1.52 a share in late morning trading after initially rising on the New York Stock Exchange. Its stock has been sinking since last week's announcement about 2001 earnings expectations.
In Thursday's release, Kmart said it continues to evaluate its finances and business plans for the 2002 and 2003 fiscal years. The company said it also is continuing discussions with its lenders regarding existing and possible supplemental financing facilities.
On Jan. 2, Prudential Securities Inc. said it would not be surprised if Kmart filed for Chapter 11 bankruptcy "if trends do not improve" in the next six months. The investment firm downgraded the discount retailer's stock from "hold" to "sell."
For the most part, industry experts have been able only to speculate about a Chapter 11 filing, which experts say would mark the biggest retail bankruptcy in history.
Justin Pettit, a partner with Stern, Stewart & Co., said it's hard to determine what the impact of Thursday's changes will be.
"I think (Chapter 11) is absolutely still an option," Pettit said. "I think the Chapter 11 fear is almost self-fulfilling. I don't think we have enough information yet to stop the downward spiral."
Pettit said the fact Conaway is still with the company tends to indicate that the company is sticking with its previous restructuring strategy.
Since Conaway became Kmart's CEO in May 1999, he has closed unproductive stores, reintroduced the BlueLight Special and made other changes to help the discount retailer become more productive and more efficient.
Standard & Poor's took Kmart off its 500 index at the market's close Wednesday. That forces mutual funds modeled on the index to shed the stock.
Kmart has about 275,000 employees and 2,105 stores in all 50 states, Puerto Rico, U.S. Virgin Islands and Guam.