KMART'S BLUELIGHT DIMS

Retailer Files for Bankruptcy

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SAN FRANCISCO (AdAge.com) -- Kmart Corp., Troy, Mich., beating a hasty retreat from the price war it ignited last year, filed for bankruptcy today.

The Chapter 11 filing will protect the company from its creditors as it attempts to reorganize its operations and establish a court-approved plan for paying it debts.

The action by the comapny that operates more than 2,000 outlets across the country is believed to be the largest bankruptcy of a retailer in U.S. history.

Reorganization ad campaigns
Kmart last week said it was preparing a new branding effort that significantly dims its BlueLight Always low-price campaign. New work from Omnicom Group's TBWA/Chiat/Day, New York, is being readied for an early February launch. Interpublic Group of Cos.-backed Don Coleman Advertising, Southfield, Mich., is developing multicultural ads.

'Clear and distinct position'
The new campaign, at least as devised at the moment, recognizes Kmart "needs to find a clear and distinct position in the marketplace," said an executive familiar with the campaign.

Kmart's director of marketing communications, Dave Karraker, declined to comment on new brand ads or whether marketing suppliers have asked for changes in payment plans.

"Negotiations between media and buyers and Kmart are confidential," he said.

Blue Light blitz
Just last summer, Kmart revived its Blue Light imagery in a highly publicized

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INSIDE LOOK AT THE BLUELIGHT BATTLE PLAN

$25 million campaign with TV spots and outdoor ads. Kmart followed that in late August with the centerpiece of its turnaround strategy, BluLight Always everyday low prices on some 38,000 products. That triggered a price war with No. 1 Wal-Mart Stores.

To make room in Kmart's $500 million annual ad budget for last year's broadcast blitz, Kmart slashed output of circulars, a move Charles Conaway, the Kmart CEO who last week lost his title of chairman, later acknowledged was a mistake. One executive who works on Kmart advertising said the Blue Light positioning confused even those working on the campaign.

"Was Blue Light a business strategy or a communications strategy?" he asked.

Martha Stewart
One of Kmart's biggest allies, Martha Stewart, declined through a spokeswoman to speculate on whether she would break a contract for Martha Stewart Everyday kitchen, linen and decorating products. Martha Stewart Living Omnimedia garners 80% to 90% of its cash from Kmart.

Ms. Stewart has no shortage of suitors, with matchmakers looking to Target Stores and Wal-Mart, among others. "We haven't even thought about it," said a Target spokeswoman. A Wal-Mart spokesman declined comment.

Sears, Roebuck & Co.'s John Lebbad, director of event marketing and sales promotion, noted Sears sells a line of Martha Stewart paints but hadn't approached her because of the Kmart relationship.

"Clearly, we're always out looking for opportunities to connect with our core female customer and Martha does do that," Mr. Lebbad said.

Staff writers Jon Fine, Wayne Friedman and Richard Linnett contributed to this report.

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