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Published: Wednesday, 10/16/2002

Deep in the red, Kmart abandons that color for its logo, picks green

WALL STREET JOURNAL

After months of secret strategizing, Kmart Corp. is ready to unveil its post-Chapter 11 plan. It involves lime green.

The discount retailer plans to show off a prototype of future stores that will feature a new logo, sleekly designed signs, better lighting, lower shelves, and wider aisles.

Gone will be Kmart's fire-engine-red logo in favor of a gray and lime-green `K.' Employees will trade in their red aprons for those in green, and color decorating accents in the stores will go green, as well.

“Green symbolizes growth and nature,” says Peter Arnell of the Arnell Group unit of Omnicom Group, Inc., which designed the Kmart store prototype to be showcased tomorrow in White Lake Township in Oakland County, Michigan. “Red is a common color that is too often used for other brands like Target.”

Kmart has dubbed its prototype the Store of the Future - in part to reassure employees that it does, in fact, have a future. Behind the prototype's streamlined layout is the idea that the stores will be “brand theater”: a backdrop to showcase brands such as Joe Boxer, Disney, and Martha Stewart Everyday.

Currently, many Kmart stores are disorganized and poorly illuminated. The stores often run out of certain items.

For now, the retailer plans to open one prototype; only four other stores will test the new logo.

So why is just one store getting the full facelift? Laboring under Chapter 11 bankruptcy-court protection since Jan. 22, Kmart can't afford to remodel every store. Chief Executive James Adamson said the company will study the prototype and focus on changes that boost sales the most.

Kmart hasn't said how long it will test its prototype before deciding what to do at other stores. “If it's the wider aisles, say, that are really a home run, it's not difficult to take that out to 1,800 stores,” Mr. Adamson said.

Besides the new look, Kmart is changing how it allocates inventory to its stores. The Troy, Mich., retailer said that by letting store managers decide how much to order of certain items, each store can better serve its market. Kmart concedes it had become notorious for advertising a product in Sunday newspapers and then running out of the item the same day.

Kmart also will allow its store managers to choose products suitable for their communities - such as tiny patio tables in areas with many apartment balconies.

It is still uncertain whether Kmart will even survive. Since seeking bankruptcy-court protection, the company has closed 283 stores, and it may close more. Sales at stores open at least a year dropped nearly 12 percent in August, the latest data available. The company has posted losses of more than $2.5 billion since the Chapter 11 filing, including charges associated with its reorganization. Kmart stock has fallen from more than $5 a share at the end of December to 53 cents yesterday at 4 p.m. in New York Stock Exchange composite trading.

The company also has said it is under investigation for some of its accounting practices and it is conducting its own investigation into the conduct of former executives. Although Kmart plays up its brands, that strategy is clouded by the woes of Martha Stewart, who is embroiled in an insider-trading investigation.



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