New Kmart CEO Discusses Mistakes and Strategy

Mar 18, 2002

In an interview with BusinessWeek, Kmart’s new CEO, James B. Adamson discusses what went wrong, and his strategy for rebuilding Kmart. Here are some of the statements attributed to Mr. Adamson.

–When you’re going to forge your competitive niche, you don’t want that to be your competitor’s strength. You’d like to look for their weakness. And obviously, price at Wal-Mart has always been their strength. So it would have failed Day One to try to take them on, because… they’d just lower their price. You don’t win that game.

–The issue is that Chuck could have done a better job picking people. There have been four CFOs in the last few years… If you truly believe people make a difference in managing a business, that was the most problematic issue at Kmart over the last 18 or 19 months.

–The issue is: Who is Kmart? I want to take the time and figure it out, and analyze the research, what our store managers are saying, what our employees are saying about why customers come to Kmart. One of the key things we have to decide is, should we carry a little bit of everything for everybody, or do we really have to be more dominant in categories the customers are coming to us for? And that we have to answer very quickly.

–There is room for Kmart to thrive. I believe we could fix this company by getting customers to come back to our store one more time [per month]. You don’t have to borrow customers from other retail operations. We just have to do a better job of satisfying our existing ones and then potentially adding new ones. It’s back to the basics. Fix the execution.

–We’ve brought [former Safeway and Sears executive] Julian [Day] in as Kmart’s new president and chief operating officer. One of the reasons I liked Julian… is that he knows food. I don’t know a lot about food. With [Chief Financial Officer] Al Koch and his team coming in [from turnaround firm Jay Alix & Associates], we now have a very strong financial team.

–The Jaclyn Smith line, when done right, does extremely well. But there is plenty of room in our market going forward for someone that Hispanic people can look up to, or a line that would be more appropriate to the Hispanic population, and the same is true for the African-American population.

–The store closings we announced last Friday [Mar. 8], with great human toll, were financially oriented only. The next look will be maybe a year from now, when [we] come up with the strategy. If we do another store-closing process, it will be very small because we will not be allowed to close profitable, cash-generating stores. Besides the strategy, we have to look at whether our regional spread is too thin for the cost of distribution.

–[Martha Stewart is] locked in very well for a long period of time, assuming the bankruptcy court gives its approval [on Mar. 20]. Martha Stewart is so integral to our business going forward, there’s no way that’s not going to get through the bankruptcy court.

— [Ending the Fleming relationship] right now would be harmful from a stability point of view. And I don’t think we’ve given the contract enough time.

Moderator Comment: Did James Adamson, put too much blame on Charles Conaway for Kmart’s problems in the Forbes interview?

Mr. Adamson provides the answer to the question, “With friends like this, who needs enemies?”[George
Anderson – Moderator

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