Amid speculation it could seek bankruptcy protection, Kmart announced sweeping management changes today and said it was continuing to review its finances.
Kmart names Mr James B. Adamson, one of its board of directors, to be chairman, replacing Mr Charles Conaway, who remains as chief executive.
The retailer also announced that its president and chief operating officer, Mr Mark S. Schwartz, has left the company.
It said Mr Adamson will serve as the principal liaison between the board and the company's senior management.
Kmart is the third largest discount retailer in the US behind Wal-Mart and Target.
The retailer's board held a regularly scheduled meeting on Monday and Tuesday, but until today's announcement, Kmart had refused to comment on its financial state.
Shares of Kmart rose more than 9 per cent, or 15 cents a share, to $1.75 in morning trading on the New York Stock Exchange.
The rise broke a downward spiral, which began a week ago after officials announced that 2001 results would break even at best because of disappointing holiday sales and suggested they may seek additional financing.
On January 2nd, Prudential Securities said it would not be surprised if Troy-based Kmart filed for Chapter 11 bankruptcy "if trends do not improve" in the next six months. The financial organization downgraded Kmart stock from "hold" to "sell."
Kmart has been struggling to compete against the lower prices of rivals Wal-Mart and Target, battling the nationwide recession while mounting its own restructuring effort.
Kmart has about 275,000 employees and 2,105 stores across the US.