Kmart loses $1.19 billion for quarter

March 01, 1994|By New York Times News Service

The Kmart Corp. decided to clean house in the fourth quarter, writing off losses on two specialty store chains it sold and taking a big charge for renovations and other improvements in an effort to make its core discount-store business competitive.

As a result, it reported a loss yesterday of $1.19 billion, or $2.61 a share.

But analysts said that even without the string of one-time charges, Kmart's fourth-quarter results were disappointing. The retailer's sales growth was good but failed to translate into tTC better earnings, in part because of heavier than expected markdowns.

The company said, however, that its efforts to control inventory were paying off. Corporate inventory at the end of the 1993 fiscal year was $720 million less than a year earlier, which should help Kmart avoid excessive markdowns.

In addition, a greater proportion of its sales came from hard goods, like small appliances and kitchen products and other nonapparel items, and basic apparel staples, like T-shirts, that have lower profit margins.

Kmart's gross profit margins dropped to 24.9 percent of sales, compared with 26.5 percent in 1992.

So even without one-time charges, the company would have reported a modest $247 million profit, or 53 cents a share, in the quarter that ended Jan. 26, compared with the corresponding period a year earlier when it earned $501 million, or $1.07 a share, excluding the PACE Warehouse Club and Payless Drug Store businesses that the company has sold.

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