DETROIT -- Chuck Conaway joined Kmart with a promise to revive the struggling retailer, but less than two years later, the company is in bankruptcy and Conaway has resigned. His biggest mistakes, analysts said, were in trying to battle Wal-Mart on price and in focusing on groceries instead of the retailer's exclusive brands such as Martha Stewart. Damien grad takes over
as chief exec of Kmart
By Alexandra R. Moses
Associated Press Writer"He just bit off more than he could chew," said retail consultant Gary Hoover.
Conaway was replaced Monday as chief executive officer by James Adamson, who had already replaced him as chairman Jan. 17.
Adamson, 54, is a graduate of Hawaii's Damien High School.
When Kmart filed for Chapter 11 bankruptcy Jan. 22, analysts and experts said it would be no surprise if Conaway was pushed out.
The bankruptcy filing followed several stumbles at Kmart, including a poor holiday sales showing. Conaway's ressurection of the BlueLight Special backfired, with Kmart turning in a disappointing 1 percent drop in sales in December at stores open at least a year.
Rival Wal-Mart Stores Inc., meanwhile, generated an 8 percent gain in same-store sales. And at No. 2 discounter Target Corp., which lures shoppers with its trendy fashions, same store-sales rose less than 1 percent.
Analysts say Conaway made some strategic mistakes, including trying to compete with Wal-Mart on price and not playing up its strengths such as its exclusive Martha Stewart brand.
"The monolithic focus on the food fight to have the lowest price on everything from turkey to T-bones to Triscuits ... really hurt the company because often times people would come in to buy the deeply discounted product and not shop in the rest of the store," said Burt Flickinger III, managing director of Reach Marketing, a Westport, Conn.-based retail consultant.
When Conaway joined Kmart in May 2000, replacing Floyd Hall, he inherited a company with a litany of long-existing problems. Conaway closed stores and pledged to liquidate unprofitable products and invest in more efficient inventory control as part of a two-year turnaround plan.
Conaway had won many fans on Wall Street as the No. 2 executive at Woonsocket, R.I.-based CVS, where he helped build the drugstore chain into an industry powerhouse with more than 4,100 stores and annual sales topping $18 billion.
Several analysts say Conaway simply ran out time at Kmart.
"Conaway clearly is a smart retailer," Hoover said. "I really believe he just got there too late."
A Kmart spokesman said Conaway would not be available for interviews Monday.
Since the bankruptcy filing, three separate lawsuits have been filed against Conaway on behalf of shareholders who claim Conaway and Kmart made materially false statements when they assured investors that the company was involved in a comprehensive restructuring of operations that was revitalizing the retailer.
Leslie Gaines-Ross, with Burson-Marsteller, a global communications, counseling and public relations firm, said Conaway promised too much when he laid out his turnaround plan in 2000.
"He was so clear on what he was going to deliver ... and he didn't deliver," Gaines-Ross said. "I certainly think he did his job in earnest. He was doing a lot of the right things."
"He has two very big competitors, and I don't think he was able to turn it around fast enough," she said. "In a sense, time just ran out on him."