DETROIT (AP) -- Amid speculation Kmart Corp. could seek bankruptcy protection, the troubled retailer Thursday announced sweeping management changes and said it was continuing to review its finances.
Kmart announced that its president and chief operating officer, Mark S. Schwartz, has left the company.
The retailer also named James B. Adamson, one of its board of directors, to be chairman, replacing Charles Conaway, who remains as chief executive.
It said Adamson will serve as the principal liaison between the board and the company's senior management.
Kmart is the nation's third largest discounter behind Wal-Mart Stores and Target.
The retailer's board held a regularly scheduled meeting Monday and Tuesday, but until Thursday's announcement, Kmart had refused to comment on its financial state.
Shares of Kmart rose more than 9 percent, or 15 cents a share, to $1.75 in morning trading on the New York Stock Exchange. On Wednesday, the shares had tumbled for a sixth straight day, closing at $1.60, down 85 cents, or nearly 35 percent.
The downward spiral began last week after officials announced that 2001 results would break even at best because of disappointing holiday sales and suggested they may seek additional financing.
In Thursday's release, Kmart said it continues to evaluate its finances and business plans for the 2002 and 2003 fiscal years. The company said it also is continuing discussions with its lenders regarding existing and possible supplemental financing facilities.
"We appreciate the loyalty Kmart has received from our customers and the continuing support shown by many of our vendors and other business partners," Conaway said.
On Jan. 2, Prudential Securities Inc. said it would not be surprised if Troy-based Kmart filed for Chapter 11 bankruptcy "if trends do not improve" in the next six months. The financial organization downgraded the discount retailer's stock from "hold" to "sell."
Standard & Poor's, one of the nation's largest debt rating agencies, took Kmart off its 500 index at the market's close Wednesday. The move forces mutual funds modeled on the index to shed the stock.
Also Wednesday, S&P lowered the retailer's credit rating on certain lease transactions for the second time this week.
The discount retailer has been struggling to compete against the lower prices of rivals Wal-Mart and Target, battling the nationwide recession while mounting its own restructuring effort.
Kmart has about 275,000 employees and 2,105 stores in all 50 states, Puerto Rico, U.S. Virgin Islands and Guam.
Martha Stewart is Kmart's largest-volume producing label, generating more than $1 billion in sales. Martha Stewart Living Omnimedia has a provision in its contract that allows Stewart to exit Kmart in bankruptcy, but any such move would have to be approved by a bankruptcy judge, the company said.
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