RETAIL SURGE LEAVES KMART BEHIND

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Retailers' sales will heat up this spring based on March's buoyant results, but Kmart Corp. remains out in the cold.

Results reported last week reflected this year's early Easter and showed gains in apparel and home furnishings. Wal-Mart Stores reported overall March sales up 31% from a year ago, to $6.16 billion, with sales at stores open at least one year up 20%; Sears, Roebuck & Co. was up 18.9% to $2.32 billion, with same-store sales gains of 16.8%; and J.C. Penney Co. said sales rose 15.6% to $1.8 billion as same-store gains were 13.7%.

But at Kmart, things were considerably less upbeat, and criticism of President-Chairman-CEO Joseph E. Antonini is growing from shareholders fed up with the giant retailer's continuing dismal results.

Critics say Kmart has failed to effectively answer intensified competition from Wal-Mart and aggressive discounter Target Stores, and that an unfocused store strategy and erratic ad positioning are compounding its weaknesses.

Overall sales at Kmart's core general merchandise division rose 6.3% to $2.3 billion in March, while comparable store sales grew only 3.3%. Total corporate sales of general merchandise plus Kmart's specialty store units Builders Square, Sports Authority and Borders-Walden Group,increased 8.9% to $3 billion; total comparable store sales climbed 4.5%.

"Kmart continues to flounder. They've made changes on top of changes, and they're making still more as they try to find the formula," said Edward F. Johnson, director of New York-based Johnson Redbook Service, a retail analysis company.

Corporate patience with Mr. Antonini seems to be wearing thin. Kmart revealed last week he received no salary bonuses for the year ended Jan. 26, during which the company lost $1.19 billion, due to his "failure to achieve the performance goals" set by directors. Mr. Antonini received only his base salary of $893,000 in 1993, 39% less than the previous year, when he got a $604,901 bonus.

"I wouldn't say [Mr. Antonini] is on the ropes yet, but it's getting closer. The company's problems are not excusable, and the directors are putting the blame directly on him now," Mr. Johnson said.

Part of the problem may be an overambitious agenda. This year, the company is simultaneously refurbishing hundreds of core stores, expanding its sprawling network of specialty stores and opening 55 Super Kmart stores.

"Kmart's trying a lot of things at once, while it's facing tremendous competition at every level. It's going to be a while before the results of any of these efforts begin to show up on the bottom line," said N. Rick Nelson, a retail analyst with Chicago-based Duff & Phelps.

One of Kmart's toughest problems has been finding its true marketplace positioning. In recent years, it has waffled between upscale and downscale, at times mingling ad testimonials from elegant entertainment maven Martha Stewart with down-and-dirty lowest price guarantees under the ad theme: "Kmart, the savings place."

Its latest campaign, introduced in February, tries to hit middle ground by describing Kmart's merchandise as high-quality and fashionable, yet guaranteed to be the lowest price. The theme, from Ross Roy Communications, Bloomfield Hills, Mich., is "Is this place great or what?"

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