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Kmart Making a List and Checking it Twice

Bankrupt retailer is studying its stores to determine which ones it will close

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Executives of Kmart Corp. (Troy, Mich.) are in the process of assessing the chain's 1832 stores to decide which ones they may close, according to a company spokeswoman.

Any closings will have a direct impact on Kmart's brand partners, particularly Martha Stewart, who is paid a royalty based on total chain sales.

While the spokeswoman gave no numbers, one retailing consultant said that the company may close as many as 598 stores in the United States and Puerto Rico. The retailer, which has said it wants to emerge from Chapter 11 bankruptcy protection by July 2003, closed 283 stores in March and laid off 22,000workers.

In recent days, a list has apparently been circulating among local real estate brokers and others that includes dozens of stores in fast-growing states like Texas, Florida and California, as well as in Midwestern states like Illinois, Ohio and Michigan, where Kmart has historically had a large following.

Another 28 stores in North Carolina are also supposedly on the list, including Kmarts in Concord and Greensboro, where Wal-Mart has recently opened large stores. Five Kmarts in Puerto Rico and four in Alaska are also on the list, the analyst has.

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“Wal-Mart is clearly winning in the Southern states and the Great Lakes region,” he said. At the same time, he added, none of the Kmarts in Arkansas, where Wal-Mart has its headquarters, are expected to close, suggesting that Wal-Mart will have continue to have competition closer to home.

The Kmart spokeswoman said the company did not plan to close “nearly that many stores.” She said the list was not Kmart's total, but she confirmed that stores are being evaluated for various criteria as part of the giant discounter's reorganization.

“We have said that the process will be completed sometime in the new year,” she said, adding that the criteria include sales growth, profitability, “the competitive environment” and performance during this year's holiday season. By the end of January, which is also the end of Kmart's fiscal year, the store evaluations will be finished, she said.

CEO James Adamson has said the company plans to close as few stores as it can and still turn the business around.

Other than Martha Stewart Living Omnimedia, Kmart's exclusive partners include Joe Boxer and the Walt Disney Co. Martha Stewart's company signed a contract last year that calculates royalties paid to the company based on sales in Kmart stores. Fewer stores could mean a reduction in that income, although there is a guaranteed minimum payment. (A spokesman for Martha Stewart Living Omnimedia said the company had no comment.)

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