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Competitive Watch

TROY, Mich. -- As Kmart emerged from bankruptcy Tuesday after almost 16 months of Chapter 11 protection from creditors, the discounter must still fill some key holes in its management, particularly chief merchandising officer.

The lack of a cohesive merchandising strategy has long been a problem at Kmart, and analysts say finding top talent to permanently fill that slot is key to Kmart's long-term survival. The chief merchandising officer decides what the store is going to sell, giving it that signature that draws in shoppers and brings them back again and again. Bill Underwood, executive vice president of sourcing and global operations, has fulfilled those duties since last May, when Cecil Kearse left, the company said. Jack Ferry, company spokesman, said a search is ongoing but would not comment on the status, according to an Associated Press report.

Overall, the Troy, Mich., discounter "needs to dramatically overhaul management in the areas of buying, store operations and sourcing," said Burt Flickinger, managing partner at the consulting firm Strategic Resource Group.

To lure top talent as it seeks to regain market share, Kmart has said it has set aside 10 percent of the shares it is issuing as it emerges from bankruptcy to use for compensation. Still, industry sources believe that Kmart may have a problem filling the remaining management gaps because, given the tough economy, people may be less inclined to want to jump to a company whose future is uncertain, the report said.

Kmart's two chief rivals -- Wal-Mart Stores, known for having the lowest prices, and cheap chic Target -- have clear-cut strategies, while Kmart hasn't exactly articulated how it will stand out from the crowd. But it now has 600 fewer stores -- about 1,500 in all -- and a $2 billion loan to compete against bigger merchants.

Kmart, though, is confident it can succeed in the highly competitive market. "We're a new company today," Dave Marsico, senior vice president for store operations, said to cheering employees Wednesday at a Super K in Detroit. "We've got a good plan and are marching forward."

Marsico also said small celebrations for employees were planned at all 1,500 Kmarts Wednesday.

Wal-Mart Drops the Stuff
Wal-Mart Stores Inc. yesterday announced it will no longer sell the men's magazines Maxim, Stuff and FHM in its U.S. stores because of objections from Christian groups over what they deem pornographic content in the publications.

A spokesperson for Wal-Mart Canada said the retail giant has no plans to stop selling the magazines in their 213 stores here. "As Canadians we all know that we have similarities to the U.S., but we're not the U.S.," said Andrew Pelletier, a spokesperson for company, adding that they rarely receive complaints about the so-called lads' magazines.

"We're a retailer operating in 12 different countries with 12 different cultures. It's really as simple as that. The customer decides the products we carry."

The magazines are known for combining pictures of scantily-clad models and frat-boy humor in proportions that are just tame enough to be sold with other general-interest titles. Maxim, Stuff and FHM have a combined circulation of almost five million in the U.S., with much of their success deriving from newsstand sales. According to Dennis Publishing USA, which owns both Maxim and Stuff, sales of the magazines at Wal-Mart account for less than 3 percent of the copies sold at newsstands.