Consolidated Stores Inc., a large retailer specializing in closeout merchandise, said Tuesday that it will sell its KB Toys division within a year.

``Our board and management universally believe a separation of our closeout and toy business will enhance the focus of each entity,'' Consolidated Chairman William Kelley said in a statement. ``Operating independently will allow each company to anticipate and respond to market conditions faster and more effectively, and enable both businesses to aggressively pursue future growth.''

The company also announced that Kelley is stepping down as chairman and chief executive.

Michael Potter assumed Kelley's CEO duties Tuesday and will take over as chairman in August. Potter, 38, had been executive vice president and chief financial officer.

The decision to sell the division follows the company's announcement three months ago that it had retained the investment firm Credit Suisse First Boston to look at ways to improve the company's stock, which has fallen by more than half in the past year.

Shares of Consolidated Stores fell 68.8 cents, to $13.25, Wednesday on the New York Stock Exchange.

KB, based in Pittsfield, Mass., has 1,308 stores in 50 states and Puerto Rico and is the second largest chain, behind Toys R Us Inc. Consolidated has 1,251 closeout stores under the Odd Lots, Big Lots, Pic 'N' Save and Mac Frugal's names.

Consolidated bought KB from Melville Corp. in 1996 when it operated 1,045 stores and had annual sales of $1.1 billion. Under Consolidated, it grew to 1,308 stores and 1999 sales of $1.8 billion.

``We're not shedding a bad business,'' Potter said. ``It's just better for shareholder value to be a separate business.''

Kelley, 54, who has run the company since 1990, is expected to stay two years as a consultant.

The company also said Albert Bell, 40, who had been executive vice president, general counsel and secretary, was appointed to the new position of vice chairman and chief administrative officer.

Source: AP

[Posted 6/29/2000]