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Kmart Back in the Black and Rumors Swirl About Its Future

Kmart’s first profitable quarter in three years put it back on the retail radar and reignited speculation over a Kmart/Sears merger.

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NEW YORK — Call it the Kmart surprise.

With its first profitable quarter in three years and a hot stock, Kmart Holding Corp. is back on the retail radar, which reignited speculation over a Kmart-Sears merger, while also raising another critical question: Where’s the chief merchandiser?

Asked if Kmart’s first profitable quarter in three years symbolized a turnaround, spokesman Jack Ferry characterized the news as the “first signs” of the company’s efforts to “build a professional management team and establish the fundamentals for an effective and efficient retail organization.” But that team apparently won’t include a chief merchant for now — Ferry ended months of industry speculation by saying the search for one is on hold.

Meanwhile, Kmart’s fourth-quarter results gave Wall Street something to chew on. Kmart, which operates more than 1,500 stores, said for the fourth quarter ended Jan. 28, income was $276 million, or $2.78 a diluted share, against a $1.1 billion loss a year ago, or $2.13. Sales fell 25.8 percent to $6.33 billion from $8.53 billion. Same-store sales for the period fell by 13.5 percent.

Investors applauded the retailer’s results by sending the stock up 6.9 percent in trading on the Big Board to close at $37.06, up $2.38. The stock reached a new 52-week high in intraday trading, hitting $39.31 a share.

Regarding Martha Stewart’s conviction, Kmart said in a government filing there’s been no adverse impact on its Martha Stewart-branded goods business.

On the merchandise front, the retailer has been busy. In the last six months, Kmart has brought on two Gap Inc. veterans — Lisa Schultz as senior vice president and chief creative officer, and John Goodman as chief apparel officer, both new positions that will apparently fill the “merchandise vision” quotient customarily supplied by a chief merchant. Schultz works from the retailer’s new Manhattan design offices, set to open Monday at 111 Eighth Street.

Outside apparel, Kmart also has recruited broadly from retail ranks, bringing in former Sears, Carrefour and Home Shopping Network executives.

Ferry characterized the retailer as working on basic blocking-and-tackling operations — for instance, widening the aisles and waxing the floors to create a brighter, airier store.
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