KMART'S HEIR APPARENT: JOSEPH E. ANTONINI; A DISCOUNTER WHO COUNTS ON CONSUMER RESEARCH

JOSEPH E. ANTONINI could have stepped out of one of those classic American rags-to-riches tales, where the young hero starts out as a humble stock boy, works just a little harder than everyone else, climbs over all the obstacles and - lo and behold - ends up at the top of the heap.

For Mr. Antonini, 45, the happy ending seems to be in sight: Four months ago, he was named corporate president and chief operating officer of the K Mart Corporation; he is expected to be named chief executive at the retail company's annual meeting in March, and there is little doubt that he will become chairman in September, when Bernard M. Fauber retires.

But in real life, nothing is quite that simple. The irrepressible Mr. Antonini has plenty of challenges ahead, for K Mart, the nation's leading discounter and No. 2 retailer, is in a crucial period of transition.

K Mart is caught in a continuing race both to catch up with Sears, Roebuck & Company, the No. 1 retailer, and to stay ahead of the fast-growing Wal-Mart, the second-largest discounter. In the last two years, it has had to run faster and faster just to keep its place.

Mr. Antonini, a small gregarious man who seems as dauntless and happy as a terrier, thinks he can win the race just by sharpening K Mart's focus: with more market research, faster sales-inventory data, better technology, and centralized bookkeeping, he says, K Mart will be able to stay in closer touch with changing consumer needs.

His most dramatic decision so far was last month's closing of Designer Depot, a 73-store chain that consistently lost money selling higher-priced goods at a discount. Mr. Antonini has a special knowledge of apparel. As head of K Mart's apparel division for the last three years, he provided one of the bright spots in the company's profit picture. With his guidance - and his extremely successful emphasis on new lines of private-label clothing - the apparel division has contributed an increasing share of the company's overall sales and profits.

Not all aspects of K Mart's business have been so successful. After riding high in the 1970's, doubling its annual sales and stunning its competitors by opening as many as 250 stores a year, K Mart began to lose ground in the 1980's. While other retailers were constantly upgrading, K Mart did not make sufficient efforts to improve its merchandise or its accounting and inventory systems - or to modernize the look of its stores.

''The company's big problems have arisen from its lack of proper systems and a lack of competitive information, both of which have prevented it from being as sharply competitive as it should be,'' said Stuart Robbins of Donaldson, Lufkin & Jenrette, adding that the company's profit margin has suffered as a result. ''It has to learn to maintain its margins while being highly promotional. And it needs to improve its presentation in its stores.''

In 1985, K Mart's profits dropped to $471 million from $499 million the year before, even though sales increased to $22.6 billion, from $21.3 billion. Indeed, the company's return on sales slipped to 2.1 percent in 1985, from 2.3 percent the previous year and 2.6 percent in 1983.

Although profits jumped 51 percent in the first half of this fiscal year -due to sharply lower interest charges, improved expense controls and better inventory management - there is general consensus, both inside and outside the company, that K Mart has more work to do in repositioning itself for the years to come.

Mr. Fauber began the process of change, moving the company toward better inventory control and faster turnover, and installing better electronic systems. Now, said Mr. Antonini, ''I want to make a strong re-evaluation of all our markets to be sure that we are getting the business we should.'' And, he said, the company needs to take a hard look at its selling and administrative expenses.

''With competition getting bigger and better, we have to study our human resources development to plan for people to eventually take over real top jobs,'' he said. ''But we also have to look for ways to restructure and cut white-collar costs where we can.'' IN an era when job-hopping is increasingly the norm, Mr. Antonini, a native of Morgantown, W. Va., has been the quintessential organization man, one who has spent his entire career at K Mart - or the S.S. Kresge Company, as it was known when he first joined the company. Spurning offers from traditional department stores, and intrigued by Kresge's new discount division, Mr. Antonini joined the company right after his 1964 graduation from West Virginia University, where he had paid his tuition by forming his own dance band, ''The Bonnevilles.'' And but for a seven-month stint in the Army, he has been there ever since.

After starting as a stock boy in Uniontown, Pa., Mr. Antonini was transferred to the main offices in Detroit as an assistant manager in the sales department.

In 1970, he was moved to Buffalo, as manager to an old-fashioned Kresge store that still had old wooden floors that needed frequent oiling. (''The store was so old that it had no delivery chute, so that we had to bring merchandise up in a basket and we had to sweep the floor with sawdust,'' Mr. Antonini recalls.) Then, during the fuel crunch of 1973, it was on to Baltimore, as a district manager supervising 15 stores. (''I would get up at 5 A.M. to get into the waiting line at the gas pumps.'') In 1976, Mr. Antonini finally got a new K Mart discount store to run. From the start, Mr. Antonini had been fascinated with the idea of discounting, and with the plans of Harry Cunningham - the former chairman of Kresge - to build a nationwide chain of discount stores. So the chance to run a discount store of his own, at a time when K Mart was expanding faster than any retailer ever had, was a dream come true, he said.

''We could train everyone from the outset and as a new store it could be molded to exactly what we wanted,'' he said. ''We made a fetish of not only promoting our prices vigorously but also making sure that the items we promoted and all the wanted ones were always in stock. We did that by subdividing the ordering books by department so that they could be ordered directly by departments. We cut the order process from two to four weeks to only one week.''

His efforts paid off. The store became profitable in one year instead of the normal three. And Mr. Antonini's efforts did not go unnoticed: He was rewarded with four higher posts in the next seven years, ending as director of sales promotions in K Mart's Eastern regional offices. And in 1983 it became clear that the company's top management thought Mr. Antonini was something special - a sentiment they expressed by jumping him half-a-dozen levels in the corporate hierarchy, making him executive vice president for administration of the K Mart Apparel Corporation, the company's largest division.

By then, K Mart had reached almost $17 billion in sales, far more than any other American discount chain. But opening hundreds of stores a year takes its toll, and with more than 2,000 stores in 1983 the company's profits began to sag under the twin pressures of digesting the rapid expansion and absorbing the sales promotions that cut down profits on advertised items.

Apparel presented a prime opportunity, since clothing normally carries a higher markup than durables. Mr. Antonini moved quickly to improve product quality in both national and K Mart brands - advertising K Mart clothes, for the first time, in women's fashion magazines. He also sent merchandising co-ordinators into the field to study regional demographic and taste differences. From their studies the company found out, for example, that Florida shoppers wanted to see spring-summer clothing in October, and not wait until the traditional January arrival of warm-weather styles.

But the most important change was far more conceptual and philosophical than that. As Mr. Antonini and his staff studied the big shopping centers near K Mart stores, they found that many of the smaller stores, the ones between the big anchor department stores, were changing hands.

''They were losing the fads that they had gone into business with because tastes were changing,'' Mr. Antonini said. ''We realized that despite the big boom in specialty stores, their problem was that they were basically 'item' sellers, as opposed to selling a broad range of goods that could withstand changes in taste.''

Further studies by K Mart Apparel convinced Mr. Antonini that his focus should shift from what he calls ''items at a price'' to a coordinated, comprehensive private label program, that could be counted on to fill all the shopper's clothing needs from a full line of low-priced but stylish merchandise. And K Mart was big enough to promote them on such a large scale that the private label became, in effect, a national brand. One advantage to the company: Private- label goods made to a retailer's specifications provide more markup advantages than national brands distributed to many retailers. And the private-label strategy apparently pleased K Mart shoppers. In 1986, private-label apparel accounted for 50 percent of K Mart's clothing sales, compared with 10 percent in 1983.

Other moves included the addition of petite sizes for women and extra-sizes for men and women and the establishment of a full line of clothes in August 1985 under the label of Jaclyn Smith, the television actress. As a result, the company's apparel business gained much ground. In three years, its share of total K Mart sales rose to 24 percent from 20 percent and, according to Mr. Antonini, ''made a huge contribution to profits.'' MR. ANTONINI, who now lives in Bloomfield Hills, Mich., with his wife and two children, became president of the apparel division in 1984, senior vice president of K Mart in 1985, and executive vice president in January. Throughout his career, he has shown a strong interest in using market research to hone the merchandising process in each market: for example, in a New England focus group, he found a demand for snow-mobiles, which the stores did not carry. So he quickly added them to the inventory.

Mr. Antonini does not always look to the most obvious solutions to solve problems. When he supervised K Mart's private-label imports from the Far East, for example, he decided that the normal lead time of several months would be a continuing problem, so he convinced the company to make substantial investments in factories there, rather than going through middlemen or buying from independent factories, as most retailers do. As a result, the factories arranged to ship K Mart's goods much faster.

Said a manufacturer's representative who knows Mr. Antonini well, but who requested anonymity: ''He attacks every job as though it's a military operation, from sweeping the floor to helping run the company. He made it to the top as a kind of loner, without any politicking, by doing everything so well that there just was no way he could be ignored.''