TROY, Mich. - Kmart Corp., the largest U.S. retailer ever to file for bankruptcy, reported yesterday that it suffered a $753 million loss in the five weeks after it sought protection from creditors as consumers abandoned the discount chain in favor of rivals.
The loss includes an $815 million write-down for a drop in the value of tax benefits and $295 million in income related to its Chapter 11 reorganization, the company said in a filing with the U.S. Securities and Exchange Commission.
This is the first time that the discount retailer has provided details about its financial condition since filing for Chapter 11 on Jan. 22.
Kmart sought bankruptcy protection after holiday sales fell and key suppliers, such as grocery distributor Fleming Cos., halted shipments because of concerns about being paid.
"Unless they can demonstrate that they're taking steps to recapture market share, this is not a very good omen," said Kurt Barnard, president of Barnard's Retail Trend Report.
Sales at stores open at least a year declined 0.1 percent in January and 11 percent in February, Kmart said in the filing.
In contrast, those sales, known as same-store sales, jumped 10 percent in February at larger rival Wal-Mart Stores Inc., and 8.5 percent at Target Corp.
Same-store sales are an important indicator of a retailer's business because they exclude results from new and closed stores.
The company had a gain of $138 million from canceling leases on stores that already had been closed and $173 million from a reduction in the amount that must be set aside to cover general lawsuit claims, said spokesman Michael Freitag.
Kmart said it hasn't reported results for the fiscal quarter and year that ended Jan. 30 because it hasn't completed an audit.
Kmart's loss includes $579 million in the nine days that ended Jan. 30, and $174 million in the month ended Feb. 27, the company said in the filing.
The retailer is in the process of eliminating 22,000 jobs and closing 283 stores, and has said it may consider shutting others.
Retailers in bankruptcy often will write down the value of inventory immediately or record the full expense of projects such as store renovations rather than spread them out over several years, said Sean Egan, managing director of Egan-Jones Ratings Co.
"This is a housecleaning period," Egan said. "Most investors are willing to give management a six-month grace period."
Kmart had problems keeping its shelves stocked after vendors slowed or stopped deliveries. That meant customers couldn't find items that had been advertised, analysts said.
"They had a loss because the shelves were empty," said Britt Beemer, chairman of America's Research Group.
"When Fleming and other suppliers cut them off, some of their stores were half- empty. When that happens, customers leave in frustration."