Flick earns no. 2 spot and Kmart board seat - Warren Flick appointed chief operating officer - includes related article on Kmart's second Manhattan, New York, New York, store

Discount Store News, Nov 18, 1996 by Laura Liebeck

TROY, MICH. - Even before Kmart completes its turnaround, the nation's second largest discount store chain has solidified its executive succession.

Warren Flick, the No. 2 man to chairman Floyd Hall, moved up a notch in recent weeks with his elevation to chief operating officer, a newly created position. In his new post, Flick will be responsible for store operations at the chain's 2,020 traditional Kmart stores, while continuing to oversee all aspects of merchandising, presentation, promotion and advertising.

Flick has been president of U.S. Kmart Stores since joining the company in December 1995. At that time, his title was president and general merchandise manager of U.S. Kmart Stores and executive vp of Kmart Corp.

What's key about Flick's promotion is that he is now solidly the No. 2 man and the heir-apparent to Hall. Most important, the promotion puts Flick on the company's board of directors, a position from which he really can effect concrete changes and impact long-term strategies.

Joining the company's board of directors is the "real issue' said retail analyst Bernie Sosnick, Oppenheimer and Co. "Now he is clearly the No. 2 man in the company."

Most retail analysts who follow Kmart have high praise for Flick, the former chairman and chief executive officer of Sears de Mexico. "He was a superlative hire from Sears. He brought clear direction to the merchandising operation. He's a careful planner and a good communicator and [his hiring] was one of the most positive steps the company has taken," added Sosnick.

But the announcement caused no ripple effects for Kmart. The chain's stock stood at 95/8 at press time, down 1/4 from 9 3/4 on Oct. 30, the day of the announcement.

The reason for that is simple: Kmart has yet to deliver to the bottom line, the key to the chain's turnaround.

David Poneman, an analyst with Sanford C. Bernstein, is supportive of Flick and the entire management team under Hall, but is still waiting to see "positive results of his appointment."

He specifically noted that he is waiting for Kmart to deliver on margin stabilization. He is also looking for improvements in Kmart's fourth quarter report, particularly in gross margins and, of course, sales.

The chain's latest sales report for October didn't help its cause. Kmart reported sales for the four-week period ended Oct. 30 were up a mere 1.3% from September, but down from the 2.4% gain posted in October of last year.

"They have to start executing well enough," said Poneman. "They turned one corner when they turned this management team around with Hall and they turned another corner with cutting expenses with some sacred cows under Marv Rich. But the third corner comes from the stores and that has yet to come."

Poneman stressed that Kmart's biggest issue is "executing well." Flick's new title isn't meaningful, he said, because he is already the No. 2 man to Hall. He's the chief merchant, Poneman noted, land that's a big title."

Kmart announced on Oct. 30 that Flick was promoted to the newly created position of coo of U.S. Kmart Stores effective Nov. 1 and that he would join the company's board of directors on Nov. 19, its next board meeting.

In announcing Flick's promotion, Hall said: "We have made significant progress this year in merchandising, including sourcing, planning, buying, distribution, presentation and advertising. By integrating these merchandise functions and our store operations, we can further improve store-level execution. This move is the logical next step in our restructuring strategy, which is designed to enhance the total Kmart shopping experience for our customers."