In his last major act as Kmart CEO, Charles Conaway announced that the bankrupt discount chain will close 284 under-performing stores, liquidate more than $1 billion in inventory and lay off some 22,000 store workers as part of its Chapter 11 restructuring plan.
Days later Conaway himself was pink-slipped, along with CFO John McDonald.
The embattled chief executive was succeeded by James Adamson, who had relieved Conaway of his chairman's title in January. Adamson is a turnaround specialist credited with resuscitating Burger King and Denny's. He quickly appointed Albert Koch CFO and filled the vacant post of president/chief operating officer with Julian Day.
Koch was previously chairman of a turnaround management firm, while Day, a former Sears chief operating officer and Safeway CFO, had been a consultant.
Pending approval by the bankruptcy court on March 20, Adamson will proceed with plans to shut about 13 percent of Kmart's 2,100 stores, resulting in a cash charge of between $1.1 billion and $1.3 billion.
Kmart said cost savings from the move will improve cash flow by about $550 million this year and some $45 million annually thereafter, and will boost earnings before interest, taxes, depreciation and amortization (EBITDA) by about $31 million a year.
Analysts had expected Kmart to shutter between 400 and 500 of its 2,100 locations, and news of the more moderate closings pushed its share price up 8 percent in the hours following the announcement.
Prior to his dismissal, Conaway noted that "The decision to close these under-performing stores, which do not meet our financial requirements going forward, is an integral part of the company's reorganization effort. We are confident that doing so will provide the company with a healthier, more productive store base."
While Conaway is credited with improving Kmart's chaotic back-end operations, industry observers criticized him for failing to develop a marketing plan that would distinguish the chain from its discount competitors. Instead, he futilely attempted to go head-to-head with Wal-Mart on price. He will receive a severance package worth about $9.5 million.