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Jennifer Marks

Try, try again

Here comes Kmart — again.

Now that the Kmart has settled most of the objections raised by 188 of its creditors (with the bankruptcy court casting aside the remainder), its plan of reorganization has been confirmed and the company plans to emerge from Chapter 11 protection in about a week.

Kmart will come out of its corner leaner, certainly, than it was when it went in. But will it be in fighting trim to be a meaner competitor?

Not at the moment. Kmart did a lot of cutting during its 15 months in bankruptcy, and once it got past the fat it began carving into the bone to ensure that it would hit its targets for a fast-track exit from the reorganization process.

Of particular concern is the thinness of the buying organization, which at this writing had yet to install a new chief merchant nor a new chief merchant of home. Inventories have also become emaciated in certain areas — a fact that is painfully obvious at store level.

And Kmart's plan upon emerging includes further cost reductions — along with simultaneous improvements in in-stocks, sku productivity and store-level service. That's a tough act for even the best retailers to pull off consistently.

But there are also some factors working in Kmart's favor.

First, it's emerging from bankruptcy in the midst of a troubled economy. As counterintuitive as it sounds, this could provide some cover for Kmart in the immediate term. It can't get clunked too hard for posting poor numbers when most other retailers are doing the same. Not that it won't get knocked for a weak performance, mind you. But if the economy were rebounding smartly and Kmart was unable to latch on for the ride, it would look a whole lot worse by comparison.

Second, it's got a name. Muddied as it may be in some quarters, the Kmart name has a high recognition factor.

Third, it's got Martha. Tarnished as her crown may be in some quarters, consumers still perceive her as an arbiter of taste and a lifestyle authority.

Finally, it's got home. Even after closing 600 stores, Kmart should round out the year as a $1 billion retailer of home textiles. That makes it one of just six.

But that also leaves it facing the challenge that helped bedevil it into to bankruptcy in the first place — the disconnect between the consumers who are drawn to one part of its store and the consumers who are drawn to the rest of it.

Several years ago, I remember that a retail guru considering Kmart's troubles suggested that the company should stop trying to put on airs and should learn to love — and leverage — its core. In so many words, his advice was "embrace the schlock."

Through the revolving-door regimes of the past six years, Kmart has managed to jettison most of the schlock. It hasn't fully replaced it with a clear market position. Here's hoping that this time, they'll manage to pull it off.

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