Kmart loss in fiscal 2001 increased tenfold

More than half was lost in 4th quarter, leading to bankruptcy filing

May 16, 2002|By BLOOMBERG NEWS

TROY, Mich. - Kmart Corp. reported yesterday that it lost $2.42 billion last fiscal year, including a $1.58 billion fourth-quarter loss that pushed the discount retailer into bankruptcy.

The loss for the fiscal year that ended Jan. 30 was 10 times the company's previous year loss of $244 million, and reflects a restatement of results for the first three quarters, Kmart said. The loss per share was $4.89 for the year vs. earnings of 48 cents a share for fiscal 2000.

Annual sales fell 2.4 percent to $36.2 billion from $37 billion in 2000, the company reported to the Securities and Exchange Commission.

Kmart blamed advertising reductions, increased competition from rival discounters such as Wal-Mart Stores Inc. and Target Corp., and price cuts on more than 30,000 items for the slump in revenue that led to its Chapter 11 filing in January. Kmart makes about a third of its annual sales in the fourth quarter.

"These results reconfirm the significant difficulties Kmart experienced last year, including unsuccessful sales and marketing initiatives, an erosion in supplier confidence, and below-plan sales and earnings performance in the fourth quarter - all of which were factors in the decision to file for Chapter 11," said James B. Adamson, the chief executive hired in March.

Kmart made the U.S. retail industry's largest bankruptcy filing Jan. 22.

"A lot of issues affected the company last year, but none so much as the decline in gross margins," said Albert A. Koch, Kmart's chief financial officer. "We lost 350 basis points on about $36 billion in sales."

Koch said Kmart's profit margins have "improved significantly year-to-date."

Koch, chairman of consulting firm Jay Alix & Associates, said Kmart is working to improve its advertising and the appearance of its stores.

"We're also looking at staffing" at the company's headquarters in Troy to help improve financial results, said Koch, who also was hired in March.

Kmart also restated the losses it had previously reported for the first three quarters of last year, which raised its annual loss by more than $500 million. The company said the restatements reflected accounting changes resulting from an internal investigation supervised by its board's audit committee.

For the first quarter, the company said, it lost $233 million, compared with the $25 million previously reported.

For the second quarter, the company said it lost $377 million, compared with the previously reported $95 million. For the third quarter, the company said it lost $235 million, compared with the previously reported $224 million.

In a bankruptcy-court filing last month, Kmart said it lost $135 million in March as sales fell and store-closing costs rose.

The loss included expenses of $14 million for discounts on merchandise at the 283 stores Kmart is shutting. The company's April results will be filed with the U.S. Bankruptcy Court in Chicago next week, according to Koch.

Kmart shares fell 5 cents yesterday to $1.17. They have fallen more than 88 percent in the past year. The financial results were reported to the SEC in the company's 10-K annual report and released to the public after regular trading closed in New York.

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