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FOOL PLATE SPECIAL
An Investment Opinion
Kmart Snares Chief From CVS

By Dave Marino-Nachison (TMF Braden)
May 31, 2000

Two of America's best-known retailers must repaint the names and titles on the glass of their executive office doorways today, as CVS (NYSE: CVS) President and COO Charles Conaway moved to impressive -- and potentially daunting -- new digs as chairman and CEO of Kmart (NYSE: KM).

Thirty-nine-year-old Conaway, also chairman of PharmaCare Management Services' board and a Linens 'n Things (NYSE: LIN) director, has moved quickly up drugstore giant CVS's ranks over the last several years. Named to his most recent positions in April 1999, he was executive vice president and CFO from July 1996 to April 1999 after holding various positions in the company's pharmacy division since 1992.

Now he must step in for Kmart's retiring Floyd Hall, whose contract ends in a year. Hall came on board as chairman and CEO in 1995 after stints with The Museum Co., Alva Reproductions, and Glass Masters Inc.

As noted in a March Fool News item by Brian Lund, Hall was able to help drive incremental earnings increases from Kmart. But in a sales environment dominated by the likes of Wal-Mart (NYSE: WMT) and Target (NYSE: TGT), the company couldn't grow quickly or impressively enough to catch the favor of investors; its five-year stock chart tells the story.

Kmart is looking for new ways to update its business, however -- including aggressive promotion of its BlueLight.com free Internet service, which is seen as a marketing tool. An online store is expected to open soon, and a recent Reuters story said the service has 2 million subscribers after six months. Back in the "real" world, Kmart said at its annual meeting that it expects much of the capital used recently to update old stores to become available for new store expansion as well as technological and distribution improvements. (Click here for a press release detailing Hall's statements at the company's stockholder summit.)

CVS Chairman and CEO Thomas Ryan will reclaim the president's seat, which he held before Conaway stepped in. The company won't be looking for a replacement. And it's certainly not in the same boat as Kmart, operating as it is as one of the top two players in its industry nationwide and locked in a battle for continental dominance with Walgreens (NYSE: WAG).

CVS intends to enter three new markets next year, including Walgreens' hometown of Chicago. Though that's only a part of the company's domestic strategy, it's one worthy of note as CVS is also fighting entrenched local favorite Duane Reane (NYSE: DRD) for attention in New York City

And though Kmart shares did tick upward a bit this morning -- CVS's hadn't moved much by 10:30 a.m. ET -- it's difficult to quantify the effect executive changes will have at large companies with established businesses. The overall mission at Kmart, for example, isn't likely to change with Conaway at the helm. But how the company attempts to meet its goals may, and Fools interested in trying to get their hands on a new manager's style might begin by calling their company's investor relations department and requesting the bio and resume of its top executives.

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