Kmart Cuts Back and Cleans Up

Kmart announced yesterday that it will close 72 of its stores (six of which are in Super Kmart format). Charles Conway, Kmart's chair and ceo, explained the stores were profitable, just not profitable enough. He also insisted that Super Kmarts are still part of a larger plan to invigorate the company's profitability. The closings are, supposedly, not an omen.

In fact, he described the closings – both Kmart and Super Kmart — as a key to improving remaining stores. Taking a pretax charge of $740 million for inventory and closings should help make possible a technological upgrade for the rest of the stores. At least, that's the plan.

Kmart figures its bad luck must have something to do with being behind the times in technology. So the company will first spend $460 million to upgrade information systems. All the stores will receive new scanners, and the 300 highest-volume stores will receive new registers that are meant to monitor inventory better. Then, $210 million will be spent on improving distribution and logistics networks, so that the company can better predict when to mark down merchandise and, in turn, save money.