Antonini and Kmart move on; remaking of discounter continues in aftermath of ceo's resignation - Joseph Antonini

Discount Store News, April 3, 1995 by Laura Liebeck

TROY, MICH. - The resignation of president and ceo Joseph Antonini severs Kmart's ties to a high-profile leader who has been the lightning rod for searing criticism from shareholders, stock analysts and the press.

Now, the pressure is on the Kmart board to find a successor and to communicate a new vision and strategy for the future.

Antonini resigned on March 21, ending an illustrious 31-year career on a sour note. He joined the company in 1964 as a management trainee in Uniontown, Pa.

Appearing on a Detroitarea TV program called "Bonds Tonight" two days after his resignation, Antonini blamed his departure on the pressure from institutional investors and the media (see exerpts, page 43).

"The pressure was so great from the outside sources, including the media ... that it wouldn't allow us to do our job," he said. Antonini defended his performance by saying he was making hard decisions to position Kmart for long-term growth.

"Kmart's fine," he concluded.

In the wake of Antonini's resignation, chairman Donald Perkins has assigned executive vp Ron Floto (who also is president of Super Kmart Centers) a wide range of responsibilities that indicate his contention for the now-vacant ceo post. Perkins and Floto are grocery industry veterans who worked together at Jewel Companies, where Perkins served as chairman and ceo of the highly regarded Chicago-based supermarket chain.

Some retail analysts, consultants and vendors, however, told DSN that Kmart needs a new ceo outside its current roster of just-assembled executives. But finding the right person may not be so easy.

Kmart has just put together a new management team of mostly outsiders, people who have only been with Kmart from two to six months. Another outsider might be reluctant to accept an existing team, however new, preferring to appoint his own group.

While Kmart seeks a new ceo, Anthony Palizzi, executive vp, general counsel, has been named interim president. Floto is serving as interim chairman of the management executive committee, overseeing operations, merchandising, systems and finance, marketing, distribution and Super K. The company's "platform team" of top execs is reporting directly to Floto.

Kmart is not likely to announce a new president and ceo until its May 23 annual meeting of shareholders. Antonini told WJBK-TV2 host Bill Bonds that the selection of his successor will take two to four months. However, other important decisions are expected soon.

A March 28 board meeting was to include a discussion on the executive search process for a new president, the announcement of two new members to the board of directors, as well as a review of Antonini's severance package, said spokeswoman Teri Kula.

At its April board meeting, the directors will discuss the company's dividend, which many analysts expect will be reduced so that the money could be reinvested in the discount stores.

Kula said the company is looking both inside and outside of Kmart for a new president and the search "won't be limited to people with retail experience."

She noted that the current structure of the management team is an interim one. "We don't know what the ultimate structure will be, but we are pleased with the people now in there," she said. Antonini told Bonds that his successor will have to accept the current management lineup.

"When they hire the new ceo, he's going to have to understand that that's his team," said Antonini.

Results of the new team's strategic review of operations is expected to be released soon, perhaps before the annual meeting. That review should reveal the retailer's new strategy, the next round of store closings and perhaps a definitive position on the future of Super K.

Immediately after the announcement of Antonini's resignation, the financial community and institutional investors, which had been lobbying hard for his ouster, generally expressed relief.

Natwest's Bob Buchanan, a New York-based retail analyst who has been following Kmart for six years, however, expressed deep frustration with Kmart's board for waiting too long to fire Antonini and for keeping long-term viability in question.

"I don't think this company is anywhere near out of the woods," said Buchanan. "It's going to be darn difficult to dig out of it. His leaving isn't going to be enough at this late juncture."

Speculation over Antonini's future with Kmart has been rampant since the retailer's June 1994 annual meeting, when shareholders turned down his plan for selling off shares of Kmart's specialty divisions.

The speculation intensified in the weeks following his loss of the chairmanship title in January. Although it seems apparent that the board of directors would have preferred to keep Antonini onboard to spearhead the turnaround, most observers doubted the executive would last until the annual meeting in May.

"He [Antonini] was good for the company at the beginning when he first took over, and had the right idea with upgrading the stores, but he clearly didn't have the people to take it to the next step," Jeff Edelman, director of C.J. Lawrence, a New York-based retail analyst, told DSN.