Business

Kmart’s retail experiment is freaking out employees

Eddie Lampert’s latest retail experiment has Kmart employees freaking out.

The hedge fund billionaire-cum-Sears Holdings chief executive has started moving Kmart stockroom merchandise onto the sales floor.

The move, according to the company, is aimed at freeing up employees to assist shoppers — making sure customers “[do] not wait in line at the checkout.”

But the cost-cutting maneuver had at least one immediate, unforeseen side effect: Employees thought the chain was going out of business.

To head off that misconception, Gareth Glynne, Kmart’s head of retail, set the record straight on the company blog: The 900-store Kmart chain has no plans to liquidate.

“We are currently rolling out a phased project” Glynne wrote, “whereby deliveries are directed to Kmart store shelves instead of the stockrooms.

The goal is for our stores to operate more efficiently, deliver improved customer service by enabling our associates to spend more time on the sales floor assisting members and customers, and to drive increased margins.”

Word that Kmart employees were concerned about a possible bankruptcy filing was first reported by Business Insider.

The roots of the snafu can be traced back to a conference call the company had with investors after it released its first-quarter results.

On the call, Sears Holdings, which owns Kmart, described efforts to “decrease the level of vendor support needed to run our business in a way that both benefits us and our vendor-partners.”

In short, Kmart is buying less merchandise. Moving stuff out of the stockrooms and onto the sales floor — á la Costco and Home Depot — would prevent the stores from looking threadbare.

The company described the move in the blog post as “making shopping fun again.”

Vendors, of course, who are getting less business, may feel otherwise.

Sears Holdings said in a regulatory filing that it had “accelerated the closing of 50 unprofitable stores” in the three months ended April 30 and will close another 117 stores before Jan. 31.

The Hoffman Estates, Ill., company said its gross inventory level had been reduced to $740 million from $2 billion in the first quarter of 2012.

Sears shares, down 27 percent this year, rose 3 cents on Wednesday, to $15.05.

In describing its decrease in “ vendor support,” the long-struggling retail chain may have been giving its suppliers a break by no longer hitting them up for end-of-season cash to cover items not sold at full price.

One apparel maker, Jamie Gorman, who runs Only Nine Apparel, which doesn’t sell to Kmart, said Lampert’s move may be tied to making sure nervous vendors don’t walk.