Kmart's losses totaled $137 million last month

Same-store sales declined 8.7% at bankrupt retailer

July 23, 2002|By BLOOMBERG NEWS

TROY, Mich. - Kmart Corp., the largest U.S. retailer to file for bankruptcy, said it had a loss of $137 million last month as same-store sales fell.

The loss for the period that ended June 26 included reorganization expenses of $11 million for professional fees and $8 million in retention bonuses, Kmart said in a regulatory filing. That brings to $2.26 billion the discount retailer's loss since it filed for bankruptcy protection Jan. 22.

Same-store sales, excluding 283 stores that Kmart finished closing June 2, dropped 8.7 percent in the period that ended July 3. The discount retailer filed for Chapter 11 after a failed attempt to win business by matching the low prices of larger rival Wal-Mart Stores Inc. Sales at Wal-Mart stores open at least a year, called same-stores sales, rose 8.7 percent in June.

"Kmart should be gaining some market share in this economy because people are pinching pennies, but the current management is not taking proper advantage of that," said John Adhia, who last month sold the Kmart shares his Adhia Investment Advisors Inc. held among its $70 million in assets. "They may have to close more stores and focus on their merchandising."

Total sales in the month were $2.33 billion, Kmart said in the filing with the Securities and Exchange Commission. The retailer has to file monthly operating reports as part of the bankruptcy proceedings.

Same-store sales were less than expected, Chief Financial Officer Al Koch said. "The traffic is coming back more slowly than we had hoped."

Vendors held back deliveries just before and after the Chapter 11 filing as Kmart sought new terms for shipments, which prevented the retailer from restocking some basic items right away, Koch said. That disappointed some customers, such as mothers with young children who couldn't find diapers, formula and baby wipes in the store or at a competitive price, he said.

"These are folks that want to make one stop," Koch said. "We need to win them back. They're important, not just when they have little kids, but when their kids grow up."

Kmart is beginning to allow local store managers to reorder their 100 top-selling items to make sure the products are always in stock, rather than relying only on regular deliveries, Koch said.

The retailer had a $2.42 billion loss for all of last year as sales plummeted. Kmart tidied up its stores and held a weeklong "Welcome Back" sale in early June to try attracting customers back.

Kmart's shares rose 2 cents to 69 cents yesterday.

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