TROY, Mich. -- Kmart's new grocery chief Dick King said in an interview with SN last week that improving the discount-store chain's management of its food inventory is at the heart of his mission.
A 36-year veteran of Albertsons who was president of the Boise, Idaho-based supermarket chain from 1996 to 1999, King said he hopes to smooth the food-distribution process at Kmart, which has long had a reputation for out-of-stocks, analysts said.
"We want to improve the sales, the operational efficiencies, the inventory management and just the overall operation at Kmart," King said, speaking from an office in the Lewisville, Texas, headquarters of Fleming Cos., Kmart's primary grocery supplier.
King said one of his objectives is to develop systems that would keep Kmart's shelves from going bare.
"Part of our assignment is to make the process we have go faster, so we don't have to go through all these layers of people to get items out to the stores," he said. "Part of our scope is to work with Fleming, and Fleming has been very agreeable and very helpful, and of course they want to do the same thing. Everybody wants to improve identical-store sales, and Fleming wants to move more cases through. You have some things you don't agree on, and you just have to work through those issues."
Fleming declined to comment on King's role at Kmart.
After leaving Albertsons when it merged with American Stores in 1999, King spent over a year at the helm of Labor Ready, a Tacoma, Wash., temporary worker agency, before joining Encore Associates, the food industry business-solutions firm that Kmart has retained to improve its grocery operations.
King said that although he considers himself to function like an employee of Kmart -- he reports to Julian Day, Kmart's president -- technically he is an employee of Encore. He holds the title of general merchandise manager, food and consumables while at Kmart.
In a streamlining of its operations in May, Kmart released Michael Frank, who was senior vice president, general merchandise manager, food and consumables, along with other top executives.
"We're another set of eyes to get in there and help them look at things," he said. "We don't want to put all of our ideas in there, we want to take what Kmart has available and work through that. We can use my experience and take the things that have worked and avoid the things that didn't work quite right."
King said part of his responsibilities will be to recognize areas that need management attention and bring specialists in and out from Encore to address them. Encore's team includes former Albertsons and Safeway executives, along with specialists from marketing firms and other companies with ties to food retailing.
In addition to inventory management and reducing out-of-stocks, training employees in the handling of perishables has been another area of emphasis in his first few weeks at Kmart, King said.
Overall, he said he's optimistic about the future of food retailing at the company.
"I think Kmart has a lot of opportunities," he said. "We have to decide the strategy. What strategy do we want out there? What products do we want to carry and what should be the future of the supercenters?"
Analysts said King should be able to bring some much-needed operational expertise to Kmart's grocery business at its 1,831 stores, which include some 1,700 Big K stores offering expanded groceries and more than 100 SuperCenters.
"The challenges at Kmart are pretty basic and have been for a while," said Chuck Cerankosky, analyst, McDonald Investments, Cleveland. "It's maintaining a much better in-stock position, which customers expect in a consumables retailer. In-stock position has always been a challenge at Kmart, and they were particularly glaring in the grocery categories.
"I think Dick King's experience at Albertsons provides him with the experience of how it should be done properly," he added. "He certainly understands successful food and drug combination grocery merchandising, and should be able to improve what Kmart's doing. The burden is that he's operating in a bankruptcy situation, and grocery operations aren't the only thing that's wrong at Kmart."
Working with vendors while in bankruptcy is exceptionally challenging, he pointed out.
Meredith Adler, analyst, Lehman Bros., New York, agreed that King brings some needed skills to the job.
"Dick comes from Albertsons, and Albertsons was a very disciplined organization, especially when it came to store-level execution," she said. "Store-level execution was an issue across the board at Kmart, not just on the food side. I'd like to think that Dick will bring some of that."
She said she thinks the move signals a commitment to food retailing by the discount giant.
"They wouldn't have brought in somebody of his caliber if they weren't going to stay in the food business," she said.
Adler said Kmart and Fleming have been "testing some new things, most of which include an increased emphasis on consumables." The tests have taken place in Indianapolis and Chicago, she said.
