Archive for Sunday, January 27, 2002

Officials fear ‘huge hit’ from Kmart

January 27, 2002


If Kmart's foray into bankruptcy eventually leads into closure and liquidation, Lawrence resident Dennis Reed doesn't want to face the consequences.

"If Kmart goes under, Wal-Mart has more free rein to do as they see fit," said Reed, returning a floor jack last week to the Kmart store at 3106 Iowa. "That's not good for competition. This country was built on competition."

Kmart's decision last week to seek Chapter 11 bankruptcy protection is doing more than worrying shoppers who have counted on Blue Light specials for savings and Martha Stewart Everyday products for linens, flatware and bath towels.

In Lawrence, Kmart's moves also are worrying hundreds of employees, dozens of business leaders and a handful of government officials left uncertain of the effects brought on by the largest retail bankruptcy in U.S. history.

They have their eyes on Kmart's two operations in town:

A retail store that broke ground for the retail rush of the past decade onto South Iowa Street.

A sprawling, 30-year-old distribution center with 650 employees and $21.2 million in land, building and equipment that ranks among the five largest private employers in town.

"It's a huge hit," said Debi Moore, senior vice president for economic development at the Lawrence Chamber of Commerce. "It's potentially a huge hit to the local economy."

Besides millions of dollars in lost payroll, benefits, sales taxes and related revenues, local governments could lose out heavily if the operations were to close.

Kmart is paying $135,740 to cover its 2001 taxes on the distribution center's personal property and equipment, ranging from desk chairs to conveyor belts.

"If the distribution center would close, all of the equipment that's in the plant would probably be moved somewhere else and disposed of in some way," Moore said. "And that would be taken off the property taxes."

Kmart officials haven't offered many specific clues for the company's reorganization plan, other than that every store will be evaluated and "unprofitable or underperforming stores" will be pushed to close by year's end.

As for distribution, the company will focus on "optimizing the supply chain to maximize efficiencies and service capabilities," Kmart said in a statement.

Kmart intends to save $350 million by cutting jobs, consolidating offices, "re-engineering the organization" and undertaking other actions.

Analysts have speculated that Kmart could close as many as 700 stores.

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