KMART COULD ADD 1,000 SUPERCENTERS OVER DECADE

ELLIOT ZWIEBACH

TROY, Mich. -- Kmart Corp. here said last week it is considering converting up to 1,000 existing discount stores to the supercenter format over the next 10 years.

Chuck Conaway, chairman and chief executive officer, said the company believes it has identified up to 1,000 locations that could be converted to Super Kmarts "over the next five to seven to 10 years."

He also said Kmart is working with Fleming, Dallas, to improve the food offerings at its discount stores. Fleming will become Kmart's exclusive food wholesaler in June after sharing that position for the last couple of years with Supervalu, Minneapolis.

Conaway made his remarks at a press conference in New York last week to disclose Kmart's plans to reintroduce its "blue light specials" program.

Questioned after the meeting, a spokeswoman told SN Kmart plans to become more aggressive beginning next year in growing its Super Kmart format. Kmart currently operates 104 supercenters, with plans to open eight more this year, including two expansions of existing discount stores.

Super Kmarts run 140,000 square feet, compared with the 85,000- to 110,000-square-foot range of Kmart's discount stores.

Regarding Kmart's plans to improve its food operations, the spokeswoman said the biggest complaint about the Pantry food sections in the company's Big Kmart stores is out-of-stocks, "and that's a function of ordering and getting it from the distribution center onto the shelves."

She said most of the anticipated improvements "are still to come," with Kmart and Fleming just beginning to put teams together to resolve some of the existing problems.

Effective on April 1, Kmart reintroduced the "blue light specials" that had been part of its heritage, the spokeswoman noted.

Under that program, each Kmart store will have a "blue light zone" in a fixed location, with hot specials moved into that area at the top of each hour for periods of 15 to 20 minutes. Specials will include both nonfood items and foods that reflect temporary price reductions from manufacturers.

For example, the spokeswoman noted that one of the first food-related blue light specials during the program's first weekend was a 2-liter bottle of Pepsi Cola for 39 cents.

The blue light special program will be used to highlight high-end quality merchandise, she noted, rather than to unload excess inventory, which is how it was used in the past.

Deborah Weinswig, a securities analyst with Bear Stearns, New York, told SN improvements in the Pantry sections and conversions of existing stores to Super Kmarts should have a positive impact on financial results "because food has a strong drawing power, with customers coming in up to 50% more often."

The company needs to improve its in-stock position, she added, "because historically the Pantry sections have had high out-of-stocks because of a shortage of labor and because the company identified in-stock as in the backroom. But now that it's increasing the amount of in-store labor and redefining in-stock as on the shelf, those problems should be resolved."