President, Kmart Corporation
Born: May 14, 1952, in Scarborough, England.
Education: Oxford, BA, 1974; Oxford, MA, 1979; London University, MS, 1979.
Family: Son of Stephen Bradshaw and Gwendoline Adams; married Kathleen Lynn Healy; children: two.
Career: McKinsey & Company, 1980–1985, senior engagement manager; Chase Manhattan Bank, 1985–1987, European development manager, then vice president; Kohlberg, Kravis, Roberts & Company, 1987–1993, executive management consultant; Safeway, 1993–1998, CFO, then executive vice president; Sears, Roebuck and Company, 1992–2002, CFO and executive vice president; Kmart Corporation, 2002–, COO, then president, CEO, and director.
Address: Kmart Corporation, 3100 West Big Beaver Road, Troy, Michigan 48084; http://www.kmart.com.
■ Julian C. Day was appointed as president and chief executive of Kmart Corporation in January 2003 when the board of directors sought their sixth CEO in an eight-year period. With Day at the helm Kmart emerged from bankruptcy through refinancing and store closures. He used back-to-basics strategies to improve the corporate culture, streamline inventory management, and decentralize merchandising decisions in order to tackle the logistical and accounting problems that had caused the largest-ever retail bankruptcy. Stock analysts were hopeful that the surfing, marathon-running, rugby-playing executive would have the discipline needed to whip Kmart back into shape, a task he had accomplished for other companies.
Day was considered one of the best financial consultants in the retail industry. He developed his reputation after he left Kohlberg, Kravis, Roberts & Company and went to work at the struggling Safeway, whose stock was worth $5 a share
when he started and over $40 when he left. His get-it-done attitude and ability to make tough decisions helped him create one of the best performing supermarket chains through the implementation of simple solutions such as the cutting of office costs and the streamlining of the data-processing system. Day stated in CFO magazine that he felt that "getting things right in the company is an amalgamation of getting a lot of small things right in the right places" (May 1999).
Day took this attention to detail to Sears, Roebuck and Company, where he was recruited as a turnaround specialist. His work at Safeway had been noticed by James Drury of the chief-executive search firm Drury Partners, who tipped the Sears board off that Day would be "their man"; as reported in the Detroit Free Press , Drury called Day an "off the chart smart guy who is able to take his intellectual brilliance into a tough setting and draw upon it" (March 12, 2002). At Sears, Day proved that his grocery-retail skills could be transferred to a company with an assortment of business lines, from clothes to credit cards. While there he created and developed the Global-NetXchange, which allowed retailers and manufacturers to use the Internet more efficiently as a business-to-business marketplace for buying and selling goods. He also directed cost reductions for the chain of 860 department stores and 2,100 retail outlets. His reputation for "saving the day" was well established by the time he decided to leave. His shared office of chief executive was eliminated by the new president, Alan Lacy; he was ready to test his strength on another challenge.
His reputation led him to be highly demanded by Kmart, which had once been larger than Wal-Mart and would prove to be Day's next renewal project. When he took over, two former Kmart vice presidents were facing federal indictments for overstating the company's revenues by $42.3 million; in May 2002 it was revealed that the 2001 earnings were inflated by improper bookkeeping of rebates and supplier discounts. Through court hearings, shareholders learned that the corruption had spread to the top. The former president Charles Conway had concealed Kmart's sinking finances from the board of directors, had taken part in a plan to cheat vendors, and had been one of 25 large-loan recipients, providing himself with $28.9 million of the company's money.
The company was reeling and by January 2002 had no choice but to file for Chapter 11 bankruptcy. Over three hundred stores were closed in order to liquidate $1.5 million; more than 35,000 workers lost their jobs. Kmart's creditors anxiously pushed for litigation against the corrupt executives. Financial institutions received 40 cents on the dollar against the $1.8 billion in loans, while shareholders received nothing. Everyone hoped that Day would revitalize if not reinvent Kmart's remaining 1,500 stores.
Those remaining locations included many unprofitable stores that Day projected he could turn around within the first year of Kmart's rebirth. He planned to draw on his financial strength to achieve three priorities: The first was to drive same-store sales while keeping a close eye on the overall company profit margin. Monitoring same-store sales was critical because it allowed Day to assess the strength of the stores that had survived the bankruptcy sell-off.
Day also planned to cut expenses while maintaining a high level of customer service and to use inventory and other assets more effectively. He perceived that the company had a solid information system but was not putting it to good use. Ten years had passed since the company had last done a stock-keeping unit rationalization to obtain assortment recommendations and analyze the special-products inventory. Of existing stock 10 percent was thinned out, freeing space for the best-selling products—poor supply-chain management had given Kmart an out-of-stock reputation that could not be afforded in a fierce retail marketplace where customers could easily turn to Wal-Mart and Target.
Part of Day's plan to help the company switch gears was to move away from a top-down management style toward a store-level approach. The new executive management team granted more purchasing power to store-level management, allowing them to customize inventory for their particular communities; they chose from lists of high-volume items in order to match their stores' stocks with local needs. Putting more decision-making power in the hands of individual managers helped keep shelves full and merchandise out of the back rooms, reversing the out-of-stock reputation that had haunted the chain.
While Day's customized approach made sense, critics from Kmart's earlier days were quick to point out that such strategies had been tried in the past. When Super Kmart centers had been planned, attempts had been made to create a new operating culture and shed the out-of-stock stigma; decision making had been decentralized and more choices had been put in the hands of store managers. But in the early 1990s upper management had been stricken with shortsightedness, and support for the changes had been insufficient. Day felt that he was in a position to buck old trends with his new management style. In the first year his performance was closely watched and judged by the price of the company's stock.
Midway through Day's first year as president, Kmart's sales were still falling and its rivals Wal-Mart and Target were still growing. Antsy investors traded the new stock, which had started at $15, when the price dipped to $14.35 so that they could get back money lost in the bankruptcy. Yet Day showed himself to be a long-term thinker—a characteristic that had been lacking in previous Kmart presidents—emphasizing that the company was ahead of its core earnings goal of $75 million for that year. Day offered extra bonuses to encourage demoralized executives to beat the forecasted core earnings. The 2003 adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, reorganization costs, fresh-start valuation charges, restructuring, impairment, and other charges and bankruptcy-related items) was $164 million. This performance helped to earn back investor confidence in that it proved that Day's management abilities were indeed restoring the chain's profitability.
Kmart's process of recovery was relatively successful due in large part to Day's solid financial grounding. When he took over he announced, "Gone are the days when this company was operated by the seat of its pants with a lot of merchant flair"; he told employees to "picture an internal memo with an image of a cowboy on it with a line through it" (March 2003). He made sure to fill executive openings that had resulted from the scandal following the bankruptcy with new hires that had "financial literacy."
Day worked to build a new culture in the upper management of Kmart that was based on honesty, integrity, discipline, and leadership. He seemed to target the executive level in order to overcome the corruption that had led to the company's downfall. The move away from top-down management was a bold effort to pay closer attention to details at the individual-store level. He stated, "Operating retail stores is all about details. It doesn't matter how smart we are or how good the concept is if we can't execute it" (March 2003). It was his goal to make the chain "customercentric" to woo shoppers back from Wal-Mart.
Cutting costs did not mean cutting the company's support of local communities and national charities. Day continued Kmart's two-decade tradition of sponsoring fundraising campaigns with the March of Dimes. Each year store employees participated in WalkAmerica events; in 2003 Kmart raised $3.5 million to help the volunteer health agency prevent birth defects.
While Day's strategies appeared pragmatic, Drury, who had watched Day's career since Sears, as quoted in the Detroit Free Press , saw "real flashes of strategic balance" (March 12, 2002). As president, chief executive, and even chief merchant, Day filled many roles in leading Kmart's recovery.
Listed as one of the top executives in the country in making physical fitness a priority, Day brought his sense of personal discipline into the work environment. He reenergized companies by proving that good discipline created good business habits and a strong company. In addition to his duties at Kmart, Day was also the advisor to several other companies and a member of the board at Petco.
See also entries on Safeway Inc., Sears, Roebuck and Co., and Kmart Corporation in International Directory of Company Histories .
Bennet, Jeff, "Tough Pro Will Run Kmart," Detroit Free Press , March 12, 2002.
"Business: Kmart Ex-VPs Indicted over Accounting," Facts on File World News Digest , March 13, 2003.
Hoffman, Gene D., "Will Julian Save the Day?" Retail Merchandiser 43, no. 4 (April 2003), p. 38.
Jacobson, Greg, "Day's Turn at Kmart," Mass Market Retailers 20, no. 6 (March 24, 2003), p. 1.
"Julian Day Exits Sears," Women's Wear Daily , September 25, 2000.
"Kmart and March of Dimes Kick Off 2004 Campaign," Business Wire: Yahoo Finance, March 17, 2004, http://biz.yahoo.com/bw/040317/175698_1.html .
"Kmart's Day, On the Record," DSN Retail Fax 10, no. 10 (March 10, 2003), p. 1.
"A New Day for Sears," CFO , May 1999.
Tierney, Christine, "Kmart's Toughest Sell," BusinessWeek Online , May 5, 2003.
—Margaret E. Gillio