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U.S. Bankruptcy Judge Susan Pierson Sonderby has put her imprimatur on Kmart Corp.'s reorganization plan, which should allow the company to emerge from bankruptcy protection in early May. Under the plan, two companies -- ESL Investments and Third Avenue Trust -- reportedly will own a little more than half of Kmart’s stock and control four of nine seats on the board of directors.

The court approval came as Kmart’s management resolved objections to its reorganization plan that came from a number of its creditors, including landlords.

Kmart also reportedly will promote James F. Gooch to be its treasurer after the company emerges from bankruptcy.

Kmart filed for bankruptcy protection in January 2002, making it the largest retail bankruptcy in history. Since that time, it has closed more than 600 stores and laid off tens of thousands of people, looking for a financial formula that will allow it to return to profitability, not to mention long-term commercial viability.

Kmart lost more than $3.2 billion last year alone.
KC's View:
Okay, management seems to have the financial part of the equation figured out, and there are plenty of people who will come out on the other side of this bankruptcy with a nice hunk of change in their pockets.

In essence, the easy part is done. Now, in a marketplace dominated by Wal-Mart, and in which companies such as Target and Costco continue to help redefine how people shop, Kmart must find a legitimate reason for existing, an evolving rationale for why people should walk through its doors and spend money on its products.

Clearly, with brands such as Martha Stewart and Joe Boxer, it believes that it is taking steps in the right direction. But we think that these are small, timid steps taken by a management so obsessed with the financial side of the equation that the marketing/merchandising side has been shunted to a subsidiary position.

The heart and soul of any retail operation are the products it carries, the customer service it offers, the brand image it creates in the mind of the consumer, and the ultimate value and values it communicates with every move it makes.

We will find out in short order whether Kmart remains a retail operation without heart, without soul.

We are reminded of a favorite Randy Newman song, “Big Hat, No Cattle,” in which the lyrics go, in part:

    Big hat, no cattle
    Big head, no brain
    Big snake, no rattle.

And there’s another line from the same song that goes, A little lie can buy some real big peace of mind.

Time will tell, but these lines could well be Kmart’s epitaph.