An attorney for Kmart Corp. (Troy, Mich.) said the bankrupt mass-merchant would announce by next Monday (March 11) how many and which stores it will close in its effort to cut costs and return to profitability.
Kmart attorney Jack Butler also told a Chicago bankruptcy court hearing that Kmart needed permission to offer up to $150 million in bonuses to keep its key managers from being lured to other retailers. He said some competitors had already set up recruitment offices near Kmart's headquarters. The plan would cover nearly 10,000 workers, including regional vice presidents, distribution center salaried employees, store managers and pharmacists.
A Wal-Mart spokesman said the Bentonville, Ark., retailing giant is not among the companies setting up recruiting offices in Detroit, though “Wal-Mart is getting calls from concerned Kmart employees. They want to talk about career opportunities and, honestly, we're always interested in people with retailing experience.” He wouldn't say how many, if any, Kmart employees have been hired since Kmart filed for bankruptcy protection. Target Corp. officials in Minneapolis refused any comments.
The U.S. bankruptcy judge approved the bonus request, and also allowed Kmart to draw on a $2 billion bank loan, the biggest ever to a company reorganizing under Chapter 11 protection from creditors.
The judge furthermore approved the retailer's plan to proceed with its store closings, which calls for liquidating up to $750 million in inventory this summer. She gave Kmart approval to accept bids for a store closing agent that would conduct the clearance sales.
Still pending was a request by Kmart for more time to decide which existing store leases the retailer wants to keep. And a decision on Kmart's proposal to pay millions of dollars to top executives from senior vice president on up — including ceo Chuck Conaway and chairman James Adamson — was postponed until a March 20 hearing.
Kmart has said it will close hundreds of its stores in its plan to emerge from Chapter 11 by July 2003. A Detroit area commercial real estate developer said he thought Kmart would announce the closing of approximately 250 stores on Friday. “This is probably the first, but not the last announcement,” said Barry Klein, chairman of Barry M. Klein Real Estate Inc. in Farmington Hills, Mich. Klein, who has been in the commercial and shopping center business for 32 years and has worked with Kmart on several deals since 1972. Klein has predicted that Kmart will eventually close 500 to 700 stores.
Kmart spokesman Jack Ferry disputed that, saying the retailer only plans to make one store closing announcement during its reorganization. Kmart expects to save $250 million by closing unprofitable stores.