The cutting continued at Kmart on Tuesday, with the Troy-based retailer announcing it would dismiss 10 percent of its headquarters staff in a budget move affecting about 200 workers.
Kmart Holding Corp. didn't say how many jobs were being cut, but in February, the company said that 2,200 people worked at its headquarters. As many as 3,500 worked there in the early 1990s.
"While today's decision was extremely difficult, these changes better align corporate headquarters' support with the improved field organization," the retailer said in a statement. A spokesman declined to elaborate.
Some retail analysts said the cuts signify that Kmart, which emerged from Chapter 11 bankruptcy protection 17 months ago, still hasn't found the right formula for success.
"Remember, Kmart is a company probably still in search of an identity, and unable, so far, to come up with one," said Kurt Barnard, president of Retail Forecasting LLC in Upper Montclair, N.J.
The cuts were the latest move by Kmart Chairman Edward Lampert, who bought about half of Kmart after it filed for bankruptcy in 2002 and who has been selling stores and trimming merchandise to build cash reserves and boost profit. Kmart operated more than 2,100 stores a little more than two years ago; it will operate about 1,425 by next year.
"It doesn't take much to understand that Kmart, as a retailer, is not a leader," said Richard Hastings, a Charlotte, N.C., retail analyst with the investment firm Bernard Sands. "If they choose to invest more in fixtures, signage, displays, staffing, and really getting aggressive on merchandising, then we might get the sense that Kmart management is committed to a very interesting future, but I don't see that."
Also Tuesday, Kmart said it has had to scale back plans announced in June to sell stores to other retailers. As part of its retooling, Kmart had agreed to sell as many as 54 stores for $621 million to Sears, Roebuck and Co., and up to 24 stores to Home Depot for as much as $365 million.
Retail analysts said those moves would boost Kmart's cash reserves to about $3 billion.
But Tuesday, Kmart said it would sell to Home Depot only as many as 19 stores, for up to $288.5 million in cash. The sales to Sears were not affected. Kmart would say only that the reduction in the number of stores being sold to Home Depot occurred because certain conditions had not been met.
"Kmart doesn't want to scale it back," Hastings said, adding that Home Depot "saw too many issues. It's a continuation of long-standing problems in which" Kmart "stores have been neglected for so many years. ... The purchase price on the surface may have looked attractive, but the cost of fixing everything up changed everything."
A prominent investor agreed.
"Home Depot did a thorough review and decided some of these stores wouldn't work for them," Marvin Roffman, president of Philadelphia-based Roffman Miller Associates, told the Bloomberg news service. Roffman Miller is a money-management firm whose holdings include Home Depot shares. "It's a disappointment to Kmart to be losing any potential revenues from the sale of leases."
Once the nation's leading retailer, Kmart now trails well behind rivals Wal-Mart and Target. But if it has been losing ground in the marketplace, it has nonetheless become more valuable to investors. After the reorganized Kmart emerged from bankruptcy in March 2003 under Lampert's control, its stock price rose more than 400 percent in little more than a year.
The latest news apparently didn't sit well with investors, however. Kmart's stock closed Tuesday at $64.40, down $3.21 from Monday.
"The question is, where does Kmart belong?" Barnard said. "What is its role? Can it continue to operate in the long run? In the short run, it has demonstrated that it can, but the question really is, how effectively can it run, even in the short run? It's a troubled company."
Lampert owns ESL Investments Inc., based in Greenwich, Conn., which has sought to purchase securities that it considers to be undervalued by other investors. Its holdings have included Sears and AutoNation Inc., the biggest U.S. retailer of cars.
Retail analysts suggest that Lampert is focusing Kmart on selling clothing and other soft goods, trying to capitalize on its exclusive brands that include Thalia Sodi, Jaclyn Smith, Joe Boxer, Kathy Ireland, Martha Stewart Everyday, Route 66 and Sesame Street.
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