NEW YORK — Kmart narrowed its fourth-quarter losses, but its yearend stockpile of red ink mushroomed to $3.22 billion under the weight of reduced sales and charges due to store closures.
This story first appeared in the March 25, 2003 issue of WWD. Subscribe Today.
Julian Day, chief executive officer, during a conference call acknowledged that many customers still have not returned to Kmart, a situation typical of many bankrupt firms.
“No one is saying that this company is fixed,” he said.
For the fourth quarter ended Jan. 29, the loss narrowed to $1.1 billion, or $2.13 a share, from $1.65 billion, or $3.31, a year ago. Sales fell by 20 percent to $8.87 billion from $10.88 billion, while comparable-store sales, which exclude results for the 283 stores closed during the second quarter of 2002, dropped 9.8 percent.
For the year, Kmart’s loss widened to $3.22 billion, or $6.36 a share, from $2.45 billion, or $4.95, a year ago. Sales declined by 15 percent to $30.76 billion from $36.15 billion, while same-store sales dropped 10.1 percent in the period.
Day added that there were some hopeful signs, such as improved gross margins during February, the first month of the new fiscal year. He said he was “cautiously optimistic as February results start to to hint at [Kmart’s] progress.”
For the month of February, Kmart’s loss was $54 million on sales of $2.17 billion, while comps fell 2.5 percent compared with February 2002. Inventory clearance sales at the 316 closing stores were not included in the same-store sales results. Total sales, which include the closing stores, decreased by 1.3 percent.
Al Koch, chief financial officer, said that February’s gross margin as a percentage of sales rose to 21.6 percent compared with last year’s 17.5 percent.
Day said that the company was on track to emerge from bankruptcy proceedings on April 30. “Our reorganization will continue beyond that date. We will emerge from Chapter 11 accomplishing four key objectives: strengthening our store portfolio, streamlining our organization, cutting costs and reducing debt significantly. [After we] emerge, we will focus our time and resources on refining our business.”
The ceo said that for now, its customer continues to be “anyone with money in their pockets and who continues to buy goods” at Kmart. As for how it distinguishes itself from competitors such as Wal-Mart and Target, Day said Kmart will focus on ensuring that “our assortments in our stores appeal to the specific demographics” so that stores accurately reflect the neighborhoods in which they are located.
He also said that in addition to its White Lake prototype, the retailer has opened a number of “experimental stores of the future” in Illinois. Kmart is in the process of evaluating which features — wider aisles, consumables at the back of the store or increased lighting, for example — best enhance the shopping experience.
“I don’t plan on any further rollout until we have a clear picture of where the return is on capital dollars,” Day said.
The ceo also said that he is making progress in his search for possible management team members, but isn’t yet ready to announce appointments.