Conaway, Charles C.

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Conaway, Charles C.

(1960-)
Kmart Corporation

Overview

Charles C. Conaway had been chairman and chief executive officer of the discount department store chain Kmart Corporation since May 2000. A few days before Kmart filed for bankruptcy on January 22, 2002, James Adamson assumed the position of chairman. Dubbed by Kmart insiders as "the Kmart Tornado," Conaway heads the second largest retailer in the United States behind Wal–Mart. It operates 2,171 stores across the United States and more than one hundred 24–hour retail centers that also offer groceries, dubbed Super Kmarts, which Conaway helped establish. According to The Financial Times, "Mr. Conaway said Kmart would seek to close stores, cut jobs and consolidate offices." He has also made it a priority to enhance Kmart's brand position. Other plans scheduled for Conaway's five–year contract term included development of the online retail site BlueLight.com, investing in point–of–purchase technology, and revamping the distribution and inventory control systems. Conaway came to the Troy, Michigan–based retailer after a long and successful career at CVS Corporation, which culminated in his appointment to president and chief operating officer of the drug retailer.

Personal Life

Conaway is married to wife Lisa and has two daughters, ages 10 and 12. He enjoys golf and basketball. An avid bow–hunter, the sport has taken him big–game hunting in places such as South Africa. He has served on the board of directors of Linens'n Things, Streamline.com, and Health Connections.

Conaway was born in 1960 in Lapeer, Michigan. Still far from his corporate future, Conaway was raised on a farm in eastern Michigan and leaned how to sail in his youth at nearby Lake St. Clair. After his success, Conaway returned in May 2001 to give a commencement address at St. Clair County Community College, where he encouraged students to ignore the limits other people may set on them. The Times Herald reported he told the 564 new graduates, "In spite of what I've accomplished, I still have people challenging my abilities as they attempt to limit my expectations of what I can achieve at Kmart. I must admit I'm getting used to this. In fact (the comments) make me feel right at home . . . I have every intention of leading this company through a historic renaissance and proving my doubters wrong again." He received a Bachelor of Science degree in accounting from Michigan State University in 1982 and earned an master's degree in business administration from the University of Michigan in 1984.

Career Details

When Conaway was only 29, he co–founded Reliable Drug Stores Inc., in Indianapolis, Indiana, in 1989. He also served as the company's executive vice president and chief operating officer. The company eventually became a $400 million chain. In 1992 he left Reliable to work at CVS Corp., where he was brought on board as senior vice president of pharmacy. After success in that position, Conaway was promoted in 1995 to executive vice president and chief financial officer of the drug retailer and concurrently served as executive vice president and chief financial officer of CVS parent company, Melville Corporation. At Melville, he had a major hand in restructuring the company from a diversified specialty retailer into the country's largest drug chain.

Conaway's coup, however, came when he was given the job of integrating CVS's operation after it bought out Revco DS Inc. in 1997 and Arbor Drugs Inc. in 1998. It was then that he learned the value of accountability and performance measurement that he would later bring to Kmart. After the successful integration which nearly tripled the company's sales and store count within a year, he was rewarded with a promotion to president and chief operating officer of CVS in 1999. As president and chief operating officer for the drug store chain headquartered in Woonsocket, Rhode Island, Conaway headed up the company's merchandising, marketing, and Internet presence and had responsibility for the operations of each of the company's 4,100 stores. Under his leadership, CVS expanded its distribution network, added retail outlets, and developed an Internet presence. The company, which is the second largest drug chain in the country, grew to an $18 billion dollar enterprise under Conaway.

Meanwhile, discount retailer Kmart, which struggled throughout the 1990s after a disastrous move into specialty retail stores, was looking for a replacement for seasoned retailer Floyd Hall, after the company nearly failed in 1995. Hall saved the company from near–bankruptcy with a financial restructuring and introduction of the Big K format that featured food items in the stores. He also brought the popular Martha Stewart Everyday, Sesame Street, and Route 66 brands to the company. Widely credited with turning the company around, Hall left abruptly after five years as its chairman and CEO. While Hall turned the flagging retail giant toward profitability during his five–year tenure, a retail analyst at PaineWebber Group was quoted by the Associated Press as noting that "there is still farther to go." Kmart then began an executive search for a new boss. Although Conaway was on the short list, some on the Kmart board of directors were concerned that the young executive wasn't experienced enough to run the retail giant. Conaway, who had solely been a drug trade executive, also had no previous apparel experience. After meeting with Conaway, however, and seeing his energy and enthusiasm, the board's worries faded. After the announcement of Conaway's appointment in May 2000, investors nudged Kmart stock up 16 percent.

Once installed as Kmart's new chief, the Michigan native began a two–year plan to surpass Wal–Mart and make Kmart the number one retailer. Described as a no–nonsense businessman who gets the job done, he recalled in Business Week his first day on the job and ensuing plans: "When I arrived the first day at Kmart, I arrived with a 30–, 60–, and 90–day plan in detail. Obviously, those plans continue to be changed and altered. The important thing is, I want to communicate how we're running this business. We're running it with an incredible sense of urgency in 30–day increments. I think it forces discipline, accountability and the right tone that we need from a management team and a cultural standpoint for the amount of activity we have to get done." He continues to strive to rectify the company's 2001 net loss of $244 million and measly 3.1 percent sales growth. The three strategies he implemented, according to the company's Web site, are achieving "World Class Execution," maximizing "Sales and Marketing Opportunities," and becoming a "Customer–Centric Culture."

Chronology: Charles C. Conaway

1960: Born.

1982: Received a B.S. in accounting from Michigan State University.

1984: Earned an MBA from the University of Michigan.

1989: Co–founded Reliable Drug Stores.

1992: Joined CVS Corp. as senior vice president of pharmacy.

1995: Promoted to executive vice president and chief financial officer of CVS and its parent company, Melville Corporation.

1998: Successfully integrated Revco and Arbor Drugs acquisitions into CVS.

1999: Became president and chief operating officer of CVS.

2000: Became chairman and CEO of Kmart Corporation.

2001: Reinstated company's Blue Light Special.

2002: James Adamson named chairman of Kmart, but Conaway remained CEO.

2002: Kmart Corporation declared bankruptcy.

As of April 2001, Conaway had identified and implemented almost 100 restructuring initiatives, meticulously tracking progress of each quarterly. That same month, Conaway also re–instated the company's famous Blue Light Special amid a $25 million advertising campaign. Beginning in the 1960s, the Blue Light Special, a flashing blue police light, was set up to attract shoppers' attentions to unadvertised specials but discontinued in 1991. The new Blue Light Special will be offered every hour on the hour for 25 minutes on popular products at greatly discounted prices. The "Blue Light Always" policy touted in the company's ads offers items like shampoo and groceries, discounted up to 5 percent all the time, to further cut into Wal–Mart's market. The company's BlueLight.com Internet site has already caught on with consumers.

Kmart's customers currently visit the store nine times a year on average. Conaway hopes the Blue Light initiative and Web site will increase current customers' visits to 11, the number of visits Target and Wal–Mart customers currently average. Conaway told The Associated Press, "This is no silver bullet. But this will help differentiate us, and drive traffic." Brent Willis, chief marketing officer at Kmart, says if Kmart can merely increase visits from their best customers from 3.2 per month to 4, that alone would increase sales by $2.8 billion. In September 2001, Conaway targeted more than 1,000 of its discount stores for reformatting into super-centers. The strategy will bring the focus to its consumables and commodities categories, which need to be replenished frequently. And with customer frequency the goal, Conaway told DSN Retailing Today, the company needs to "turbo–charge food."

Conaway's other strategies for gaining customers include revamping Kmart stores, closing unprofitable stores, increasing customer service through employee incentives, and heavily stocking the stores' more popular items. In order to keep shelves stocked, the company has spent $2 billion on inventory control technology. To keep track of customer service and other customer responses, Conaway introduced a toll–free number for customers to call and provide information on their shopping experience or to register complaints. To encourage participation in the feedback system, Conaway promoted a $10,000 sweepstakes for one lucky caller. Employee incentives have ranged from offering store stock to receiving quarterly cash bonuses.

Finding the right niche for Kmart may be the biggest challenge of all for Conaway. Wal–Mart, with its super–low prices and Target, with its cheap chic appeal, both have very defined markets. Conaway wants to become the authority for moms with kids who buy both for their children and their homes. To accomplish this, he has leveraged Kmart brands such as Martha Stewart Everyday bed and bath line, which has helped boost sales. In 1999 the Martha Stewart line had $1 billion in sales alone. Kmart also has the Sesame Street line of children's clothing, as well as Jaclyn Smith and Kathy Ireland designer merchandise. Although Conaway's initiatives have raised the company's value among some analysts, not all have had favorable opinions. Of the company's long–term growth, Linda Kristiansen, an analyst for UBS Warburg noted in DSN Retailing Today, "Kmart is changing virtually every aspect of its business model, a high–risk undertaking."

Social and Economic Impact

Often dubbed a whiz–kid throughout his years at CVS, Conaway was named chief of one of the largest retailers in the world, Kmart Corporation, before the age of 40. With no prior apparel experience, Conaway took control of the more than 100–year–old, $37 billion company, which is also one of the nation's largest employers. He has already begun to fix many of the problems of the retail giant, including customer service, supply–chain management, inventory control, and marketing with his keen attention to accountability and performance measurement, learned from his many years at CVS. His return to the Blue Light Special has given the Kmart retail brand character again and a unique promotional edge seeped in company history. Intent on growing the company's supercenters to encourage more frequent traffic through the purchase of groceries and related items, Conaway has named 1,000 stores to be overhauled. Making his mark early on, Conaway brought new, young executives from companies like Coca–Cola and Wal–Mart to help redefine Kmart's strategies and image.

Conaway was no less a defining force at CVS, where he helped build the company into the nation's second largest drug chain after acquiring drug retailers Revco and Arbor Drugs. With his fourteen years at the company, Conaway in his twenties and thirties, rose to its top position after working in merchandising, store operations, and logistics departments.

The bankruptcy of the company has forced some people into seeing Conaway in a slightly different light, however. According to Jennifer Dixon reporting for the Detroit Free Press, "Under Conaway, Kmart made a series of mistakes that analysts say ultimately forced the company into bankruptcy. Conaway was spending $2 billion on improvements to the stores and Kmart's inventory and distribution system, while cutting prices and advertising." He faces a great challenge to help Kmart, the largest U.S. retailer ever to declare bankruptcy, recover and work its way through bankruptcy.