The Morning Call from Allentown, Pennsylvania • 3

THE MORNING CALL KMART BANKRUPTCY WEDNESDAY, JANUARY 23, 2002 A3 an with Monroe man vision East Stroudsburg AREA KMART STORES lj MONROE COUNTY (W (( CARBON )) COUNTY T( Wind (f jWalnutport NORTHAMPTON (rtg COUNTY JJ ff Phillipsburg ywp- nj. generous philanthropist who supported the YMCA in Stroudsburg, the Polk Township High School in Kresgeville and Gnaden Huetten Memorial Hospital in Lehighton. He had been named a Pennsylvania Ambassador, and was given an honorary degree by Dickinson College in 1950. A nonsmoker and nondrink-er, Kresge once said, "I never gave a dime to any church the pastor of which used tobacco." He often went right to the point in his speech. "When one starts at the bottom and learns to scrape, everything becomes easy," he said, referring to his work philosophy.

Among his most famous remarks was one made at the dedication of the Harvard Business School. "I never made a dime talking," he said, then sat down. Asked what was his greatest satisfaction, Kresge replied, "Picking out the location of one store after another, and the fact that the public likes to buy the merchandise we bought for them." first Kmart store in 1962 in a Detroit suburb. Kresge was educated at the Fairview Academy in Gilbert, Monroe County, and graduated from Eastman Business College in Poughkeepsie, N.Y. He helped pay for his education by raising bees on his father's farm.

He entered the retail business with J.G. McCrory, founder of the McCrory chain, but left after a few years to start his own business. When he died in 1966 in Monroe County Hospital, Stroudsburg, Kresge had been chairman of the board for 53 years the longest of any executive whose company was on the New York Stock Exchange at the time. He is buried in Monroe County. He left an estate valued at $3 million, including a winter home in Miami Beach and the family homestead in Mountain-home, Monroe County.

Kresge's stores did $850 million in business the year before he died. There were 673 S.S. Kresge stores, 135 discount Kmarts and 110 Jupiter stores in the United States, Canada and Puerto Rico. Personally frugal, he was a S.S. Kresge opened his first five-and-dime store in 1899.

By Ron Devlin Of The Morning Call Sebastian S. Kresge, an industrious visionary who grew up on a farm in the Poco-nos, started a five-and-dime store in 1899 in Detroit that would become the Kmart superstore chain. In keeping with his Pennsylvania Dutch upbringing near Kresgeville, a western Monroe County town named for his family, Kresge worked 20-hour days. He was on the job every day but Sunday. By 1912, the S.S.

Kresge Co. operated the second-largest group of dime stores in the world. Only Frank Woolworth, who invented the dime store, had more. For a half-century, the S.S. Kresge Co.

was one of America's most successful retail businesses. It was Harry B. Cunningham, Kresge's successor, who transformed the company into a discount store giant. The company opened its souin BUCKS COUNTY I Richland Larry Printi The Morning Call fjf A CUSTOMER ENTERS the Kmart store in South Whitehall Township Tuesday after the company said it would seek bankruptcy protection. Urban neighbors rely on familiar store mm 9 mm Associated Press THE FIRST S.S.

Kresge store in Detroit is shown in this photo. KMART'S HISTORY 1899: S.S. Kresge Co. founded by Sebastian S. Kresge of Monroe County.

1918: S.S. Kresge Co. became publicly traded company, listed on the New York Stock Exchange. 1929: Canadian subsidiary S.S. Kresge Co.

Ltd. was founded. By year end, 19 stores were operating in Canada. 1962: Company opened first Kmart discount department store in a suburb of Detroit. Seventeen other Kmart stores opened the same year.

1966: Founder Sebastian S. Kresge died at age 99. 1966: Sales topped $1 billion mark for the first time. Number of stores climbed to 915, including 162 Kmart stores. 1976: S.S.

Kresge opened a record 271 Kmart stores. 1977: Name changed from S.S. Kresge Co. to Kmart Corp. to reflect that in 1976 sales at Kmart stores accounted for 94.5 percent of the company's domestic sales.

1981: The Kmart store opened. At year end, there were 2,055 Kmart stores in the United States, Canada and Puerto Rico. 1984: Kmart acquired Walden Book Co. and Home Centers of America, which was subsequently renamed Builders Square. 1985: Company launched Jaclyn Smith signature sportswear collection.

1987: Kmart sold most U.S. Kresge and Jupiter stores to McCrory Corp. 1990: Company bought The Sports Authority, a 10-store chain of sporting goods superstores. 1992: Kmart acquired Borders, a chain of 22 book superstores in the Midwest and Northeast. 1994: Kmart launched Kathy Ireland Exclusive swimwear and bodywear collections.

Kmart announced plans to make initial public offerings of its interests in The Sports Authority, OfficeMax and Borders Group; completed IPOs for 70 percent of The Sports Authority and 75 percent of OfficeMax. 1995: IPO for Borders Group completed; Kmart sold its remaining interests in The Sports Authority and OfficeMax. 1997: Kmart introduced its new Big Kmart store format and logo. Kmart launched Martha Stewart Everyday line of bed and bath fashions, and complementary 256-color paint line. Kmart sold operations of Builders Square and Kmart Canada.

1998: By year end Kmart had opened or converted 1,245 Big Kmart stores. 1999: Kmart launched BlueLight.com, an e-commerce company. 2001: Kmart reintroduced Blue Light Special after 10-year absence. Jan. 22, 2002: Kmart files for Chapter 11 bankruptcy protection.

SOURCE: AP The Morning Call KMART FROM PAGE A1 Poor holiday season spurred filing against creditors while it tries to work out of its financial troubles. Kmart said it has secured $2 billion in financing to keep going. A U.S. bankruptcy judge approved the financing iate Tuesday. The company, based in Troy, said it would keep its 2,114 Kmart stores open for now, but would look to close unprofitable stores in coming months.

Analysts think Kmart will close hundreds of stores. There are 10 Kmart stores in the region. Company-wide, Kmart has about 275,000 employees. Once considered the most innovative of its retail brethren in the 1960s and 70s, Kmart has seen its image tarnished in recent years by din ron.devlinamcall.com 610-820-6512 Librarian Dianne Knauss contributed to this story. 7, CESAR LAURE The Morning Call familiar shopper.

The picayune might be put off by its drab interior and cluttered aisles. But to the frequent shopper, the simple setup is easy to navigate. Without it, Shirley Williams would have to fight the traffic to the mall. The Salisbury Township woman uses the Mountainville store three or four times a week. "We were talking this morning at work about all the things that closed around here," she said, citing Grant's, Acme, and the "You find other places to go, but it's not the same.

I guess it's what you get used to." chiavoci mcall.com 610-820-6509 Reporter Christian Millman contributed to this story. differentiate itself and win back alienated consumers. "It's the kind of thing that sets them apart," he said. And makes money. The Martha Stewart Everyday brand, which covers such products as sheets, towels, paints and kitchenware, is Kmart's largest volume-producing label, generating about $1.5 billion in sales last year.

Martha Stewart Living Omn-imedia has a provision in its contract that allows Stewart to exit Kmart in bankruptcy, but it would have to be approved by a bankruptcy judge. As of last week, Sharon Patrick, Martha Stewart presi Miii i David Jenkins walks to the Mountainville store for his asthma medication. "They know me," he said. If not for Kmart, Jenkins said, he'd be at a loss to find a store within walking distance that offers such a variety. Unlike suburban areas where department stores are as numerous as strip malls, urban neighborhoods offer slim pickings for shoppers seeking variety and savings.

Kmart commonly invests in grittier urban areas where competitors such as Wal-Mart rarely tread, said Frank Badil-lo, an economist with Retail Forward, a market research firm in Columbus, Ohio. "These stores have much more of an ethnic and immigrant base," he added. Kmart recognized profit uarmrupicy overall, reaeraieu uepdumem held the retail record for a dozen years. Whitehall Twp BERKS COUNTY Seeds of recovery in place Kmart has advantages as it starts its Chapter 11 reorganization. By John Gallagher Of Knight Ridder Newspapers DETROIT The seeds of Kmart's eventual recovery are in place as the company starts Chapter 11 reorganization, several bankruptcy experts agreed Tuesday.

Among the advantages the chain has as it goes into bankruptcy proceedings: It has lined up $2 billion in debtor-in-possession financing, or loans, to provide the cash flow it needs to operate. U.S. bankruptcy law allows the company to stop paying interest on existing debt. That's likely to save another $300 million a year. The code also allows Kmart to walk away from money-draining real estate leases on stores that are losing money or, in some cases, not operating anymore.

This will save more cash. Kmart's main lenders have agreed that vendors who sell goods to the chain during its bankruptcy will have their payments secured by a lien on Kmart's assets. That should reassure vendors and make them more willing to stick with Kmart, which in turn means an uninterrupted flow of products for store shelves. One analyst said Tuesday that all these factors will mean Kmart will generate better cash flow during bankruptcy than it had in recent months, giving it time to reorganize. gy, older stores and shelves that never seemed to contain quite what people wanted.

Retail experts say that downtrodden image has proved tough to shed, and customers have fled in large numbers to Wal-Mart, Target, and other discounters. Though the chain had been struggling for some time, Kmart's bankruptcy filing was precipitated by a dismal holiday season that left it short of cash. Suppliers began shutting off the flow of goods to the retailer, fearing they wouldn't get paid. The most important supplier to do so was food distributor Fleming which stopped shipments to Kmart on Monday, saying it was owed $78 million. Fleming provides almost all groceries for Kmart's Super stores.

Kmart said it will reorganize on a fast track and hopes to emerge from Chapter 11 in 2003. Whether its future is bright depends on what it does in the present, said consumers and experts. Foremost, the company needs to stop the exodus of shoppers to its competitors. "They're going to need to come up with a strategy that In south Allentown, Kmart replaces other retailers. By Christine Schiavo Of The Morning Call In urban neighborhoods, people have come to rely on Kmart.

It replaced the corner drugstore and the old five and dime as a shopping staple in areas shunned by most mega-retailers. In the Mountainville Shopping Center on S. Fourth Street in Allentown, it's not uncommon for shoppers to walk to their neighborhood Kmart. Convenience, not cost savings, draws them to the store. Habit keeps them coming back.

TOP 10 RETAIL BANKRUPTCIES "1 AT Kmart is by far the largest bankruptcy of a retailer in U.S. history, potential in such areas and has tried to understand the shopping habits of urban customers. But that hasn't been easy, Badillo said, because there might be many diverse needs among consumers in one area. If the Mountainville store were to close, which is not in Kmart's immediate plans, it would hit the south Allentown area hard, said Tony Iannelli, president of the Lehigh County Chamber of Commerce. The store has had a positive effect on the neighborhood, he said.

Finding a replacement could be difficult. "I think it's a challenge to find someone who is looking for the same market niche that Kmart is, on that location," Iannelli said. The Kmart in Mountainville offers no frills for the ping at the South Whitehall BigK. And Kmart's customer service isn't too hot either, said Bortz. Crabby cashiers and sullen salespeople helped convince her that she was better off at Wal-Mart.

Those criticisms haven't fallen on deaf ears at Kmart. Since Charles Conaway became Kmart's chief executive officer in May 2000, he has closed unproductive stores, reintroduced the popular Blue Light Special, and made other changes to help the retailer become more efficient. The company also has made investments in technology to ensure more items are on the shelves. Kmart also would do well to continue its ventures into products that make it unique, said Cynthia Simmons of Eas-ton, who shops at the 25th Street Kmart in Palmer Township. "Some of the stuff Kmart sells, you can't get anywhere else," she said, such as the Martha Stewart line of housewares and Kathy Ireland-brand clothing.

Badillo, retail analyst, said those 'twd lines are solid4 examples of how Kmart can PRE-BANKRUPTCY ASSETS, IN BILLIONS $17 jr ana sixtn oiggesi u.a. Stores, owner of Macy's, Federated Dept. Stores Jan. 15, Montgomery Ward R.H.Macy&Co. Allied Stores Southland Corp.

Ames DepL Stores The Circle Corp. si i ii, July 7, 1997 Jan. 27, 1992 Jan. 15, 1990 Oct. 24, 1990 April 25, May 15, BANKRUPTCY FILING Jan.

22, 2002 1990 1990 Carter Kawley Hale Stores Feb. 11, 1991 $2 Ames DepL Stores Aug. 20, 2001 $2 $7.9 $4.9 $4.8 $3.5 $3.4 1990 $2.1 $2 RESEARCH: Librarian Laurel Bruce Gary Visgaitis The Morning Call "They're cheaper," she added, but then stopped herself. "They used to be cheaper." Lately, Flyte said, she's noticed other stores, including Wal-Mart and the Giant supermarket, offering lower prices. The only reason she sticks with Kmart? Because it's convenient.

Convenience is often cited as the main factor in choosing Kmart. Not only does Kmart lose out in the price war, it does a poorer job of stocking what peopieWant, said D.J. Maron, an Allentown resident shop SOURCE: BankruptcyData.com differentiates them from Wal-Mart," said Badillo. Kmart, he added, has been trying to compete based solely on price, and lags Wal-Mart in buying power, distribution abilities and cost-saving technology. And customers are noticing that the better deals are often found at Kmart's competitors.

Mary Flyte of Wind Gap often visits her local Kmart two or three times each week. "It's handy, for one," Flyte flald. She lives off Route 512, near the shopping plaza where the store is. dent and chief operating officer, said she was not looking to quit Kmart. Martha Stewart officials could not be reached for comment on Tuesday.

Kmart's attempts to remake itself might have succeeded without a bankruptcy filing if the economy hadn't taken a dramatic turn downward last year, Badillo said. "They just ran out of time and money," he said. christian.millmanwmcall.com 610-820-6664 V. 1 The Associated Press and Morning Call reporter Tom Coombe contributed to this story..