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Kmart's Loss Narrows After Closures, Layoffs

Revenue in the retailer's fiscal fourth quarter falls 18%. Same-store sales also decline.

March 25, 2003|From Bloomberg News

Kmart Corp., the largest U.S. retailer to file for bankruptcy protection, said Monday that its fiscal fourth-quarter loss narrowed to $1.1 billion after closing stores and firing workers.

The net loss was $2.13 a share, compared with a loss of $1.65 billion, or $3.31, a year earlier, the retailer said in a Securities and Exchange Commission filing. Revenue in the three months ended Jan. 29 fell 18% to $8.88 billion, while sales at stores open at least a year declined 9.8%.

Kmart's loss for the year widened to $3.22 billion from $2.45 billion in the year that ended in January 2002. The company lags behind discount retailers Wal-Mart Stores Inc. and Target Corp. in sales.

Kmart is closing about 316 stores and eliminating as many as 35,000 jobs after shuttering 283 outlets in the first half of last year as part of a plan to exit bankruptcy protection by the end of April. Chief Executive Julian Day needs to hold on to remaining customers to boost sales amid consumer concerns about jobs, the economy and war in Iraq, analysts said.

"We're not convinced the company has addressed some of the fundamental competitive problems it will be confronted with when it comes out of bankruptcy," said Andrew Ebersole, a fixed-income analyst at KDP Investment Advisors.

Kmart will have about 1,500 stores after the closings. The company has said same-store sales will increase this year, and it expects to become profitable in 2004. Kmart will have eliminated about 57,000 positions while in Chapter 11, it said in the filing.

"We're beginning to see some early signs of progress in controlling costs," Day said.

The Troy, Mich.-based retailer filed for bankruptcy protection in January 2002 after an attempt to beat Wal-Mart's low prices failed and some suppliers, including grocery distributor Fleming Cos., withheld shipments because they were concerned about being paid. Same-store sales have declined 17 straight months, including a 2.5% February drop, excluding stores that are closing.

Fleming said Monday that it expects to receive $37 million in cash from Kmart as part of a settlement of claims after the company dropped the supplier as its exclusive distributor of groceries this month.

Kmart expects to make as much as $900 million in contributions to its pension plan over five or six years beginning in 2005 or earlier because the value of the fund has decreased as stock markets declined.

Under Kmart's reorganization plan, ESL Investments Inc. and Third Avenue Value Fund will provide at least $140 million to repay lenders in exchange for shares of the reorganized company. ESL, also will give up a $153.4-million bank loan claim in return for additional shares. The investment companies will have a combined stake of about 50%.

Shares of Kmart, which are essentially worthless under the reorganization plan, were little changed at about 12 cents.

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