DETROIT — Kmart Holding Corp. announced plans Wednesday to convert more than a quarter of its stores to a Sears format following its merger with Sears, Roebuck and Co.
Troy-based Kmart disclosed the plans on the same day that it posted a $309 million profit for the fourth quarter, a 14 percent increase over the previous year. The retailer also said sales at stores open at least a year continued to fall, though at a much lower rate than they had been.
In trading Wednesday, Kmart's stock rose $2.42, or 2.2 percent, to close at $111.66 on the Nasdaq Stock Market.
Kmart and Sears shareholders are due to meet March 24 at Sears' headquarters outside of Chicago to approve Kmart's acquisition of the department store chain, first announced in November. The $11 billion deal will create the nation's third-largest retailer.
Kmart, which currently operates 1,480 stores, revealed in a filing with the Securities and Exchange Commission that it plans to convert about 400 Kmarts to Sears stores over the next three years.
The company didn't specify what kind of Sears stores they would be, but they likely would fit the new Sears Essentials concept for mid-size, stand-alone stores unveiled in February. Sears said then that it would convert 25 of the 50 stores it acquired from Kmart several months before the merger announcement into that format. The company previously had announced plans to turn three of the acquired Kmarts into Sears Grand stores, a similar off-mall concept, only bigger.
The Sears Essential stores will combine high-end Sears products such as appliances, tools and home electronics with convenience items such as health and beauty items, snacks and pet supplies. It also could provide a good venue to add well-known Kmart brands, such as Martha Stewart Everyday, to the Sears product mix.
The announcement of the store conversion was the latest sign that Kmart plans to diminish the role of its own brand in favor of the Sears name. The first sign came in the name of the merged company: Sears Holdings Corp., to be based at Sears' current headquarters in Hoffman Estates, Ill.
Gary Ruffing, a retail consultant at BBK Ltd. in Southfield and a former Kmart executive, said using the Sears name gives Kmart an opportunity to move out of the strictly discount market, where it has been sandwiched between low-cost Wal-Mart and stylish Target. Kmart always has been known as a discounter, he said, but with the Sears name, the company can add more expensive products and raise the prices on some of their successful brands.
"If they do that in a Kmart store, they'd be pricing themselves out of the market," Ruffing said.