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If American Express Co. has any snobs left among its cardholders, they'll have to rethink their identities.

Just days after AmEx announced it's now being accepted at Wal-Mart Stores, the once-snobby charge card has embraced discounter Kmart Corp. in a major holiday promotion that's breaking records for both companies.

Called the largest-ever targeted direct mail promotion for both AmEx and Kmart, the effort begins this week when a 16-page glossy catalog showcasing value-price Kmart merchandise will be mailed to 2.5 million AmEx cardholders. Inside are coupons good for savings on Kmart merchandise and details about a sweepstakes.

Customers will be automatically entered in the sweepstakes with each AmEx purchase at Kmart between Nov. 15 and yearend; the grand prize is a 1996 Dodge Caravan and there are 10 first prizes of expenses-paid trips for two to Mexico.

Themed around Kmart's "Home for the Holidays" promotion, AmEx designed the promotion to appeal to cardholders its database research says are most likely to shop for home furnishings products, electronics and computers, among other items, this holiday season. The promotion is being handled in-house by both marketers.

"We identified AmEx cardholders who already shop at Kmart, and other cardholders we think are likely to do so, based on their shopping habits," said Frank Gugliuzza, AmEx's VP-retail industries.

The AmEx connection is a coup for Kmart, which is still trying to shed its image as a fluorescent-lit destination for housewives in hair rollers. It's also aptly timed, as retail analysts are predicting penny-pinching consumers will make this a thrifty holiday.

Merchandise highlighted in the catalog ranges from a $119.97 Sunbeam electronic breadmaker to $4.99 bath towels, and on every page of the catalog AmEx's basic charge card and its revolving-credit Optima card are touted alongside Kmart's logo.

But AmEx isn't concerned about its upscale image eroding through increasingly intense association with discounters.

"We're linking with Kmart because our customers shop there, and we want to be the card that fits their lifestyles," Mr. Gugliuzza said.

For the third year, AmEx is getting heavy support from Kmart-along with dozens of other retailers-for its "Charge Against Hunger" holiday cause-related campaign. Kmart is again donating $250,000 to the cause, which it's also promoting at the point of purchase.

In another down-to-earth move, AmEx next week will break a new documentary-style TV campaign for the "Charge Against Hunger" effort, directed for the first time by Spike Lee. The campaign will demonstrate efforts to relieve hunger in Manhattan, Oklahoma and Mississippi, among other locations. Ogilvy & Mather, New York, is creating one 30-second spot and one :60.

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