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Official: Kmart center still a go

January 23, 2002

Official: Kmart center still a go



By STACEY DANZUSO

chbbureau@innernet.net

CHAMBERSBURG, Pa. - Filing for bankruptcy protection should not affect Kmart's plans to open a distribution facility in Chambersburg, Pa., next month, according to a local development official.

"Based on conversations with company officials, I'm still expecting a long-term commitment with Chambersburg," L. Michael Ross, president of the Franklin County Area Development Corporation, said Tuesday.

The discount chain filed for Chapter 11 bankruptcy protection in federal court Tuesday, four months after announcing it would open a distribution center in the Chambers-5 Business Park by mid-January.

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The schedule proved too ambitious, and Kmart announced last week it would not open the facility for another month, Ross said.

Kmart has hired about 200 employees for the distribution center and plans to add nearly 300 more in the next three years, he said.

Kmart has sunk millions of dollars into retrofitting the facility, a fact Ross believes will keep the company in Chambersburg.

"At least for the foreseeable future we should not have negative consequences as far as the Chambersburg facility," he said.

Plans were moving forward, and work continued at the facility this week.

"Obviously when a company files for Chapter 11, red flags go up," he said. "Clearly, Kmart is in need of some significant changes."

Ross said he hoped filing for Chapter 11 would allow Kmart to reorganize and find long-term stability.

"We saw Grove Worldwide file for Chapter 11 and go through significant reorganization. They emerged from Chapter 11 in 90 days as a stronger company," he said of the Shady Grove, Pa.-based crane and manlift manufacturer.

The bankruptcy protection allows Kmart to evaluate its store leases.

"Kmart has made no secret of the fact it is looking to terminate relationships with underperforming stores," Ross said. "From a retail perspective I don't know how the local stores will fare."

In Franklin County, Kmart has stores in Chambersburg, Waynesboro and Shippensburg.

Kmart plans to move operations from its aging North Bergen, N.J., distribution center to the Chambersburg facility, which was once intended for Toysrus.com.

At the time of the announcement last year, a Kmart spokesman said the move would cut costs and improve productivity and flow of goods to Kmart stores.

The 850,000-square-foot distribution center would repackage shipments of soft goods, including clothing and jewelry, Ross said.

Kmart spent millions to reconfigure a material handling system installed by Toysrus.com to suit its own needs, Ross added. It also built the Tower Road extension and expanded the parking area.

"They have done a considerable amount of work in a short period of time," Ross said.

Kmart's uncertain future brings back memories of Toysrus.com, which planned to moved into the building in 2000. After hiring hundreds of workers, Toysrus.com backed out of the project when it merged with Amazon.com.

Ross said he has no reason to believe Kmart will make a similar move.

"We expect this to be long term," he said.

Kmart officials were not available for comment on the company's plans for the Chambersburg distribution center.

Kmart filed for Chapter 11 Tuesday, a day after a major food distributor said it had cut off shipments to Kmart because the chain owed $78 million in back payments.

Kmart, which is based in Troy, Mich., has 2,114 stores.

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