NEW YORK -- The store closures at Kmart have started, but they're far from over.
After much waiting, bankrupt Kmart Corp. on Friday finally disclosed that 284 store sites will go dark, with 22,000 associates losing their jobs and its 2,114 store count being reduced to 1,830.
Kmart said the cost savings for the closures will boost its cash flow by $550 million in 2002 and $45 million a year thereafter. However, to effect those savings, Kmart will have to record a charge of between $1.1 billion and $1.3 billion, a figure that subsequently could be boosted.
The retailer said the closures include 271 Kmart discount stores and 12 Kmart Supercenters in 40 states, as well as 1 Kmart store in Puerto Rico. Of the 40 states, the seven hardest hit were: Texas, 33 units; Illinois, 21; Michigan, 18; California, 16; Florida, 16; Georgia, 14; and Ohio, 10. New York was among the states with nine sites closing, but none were in the city.
The 22,000 associates, or 9 percent of Kmart's workforce, were notified Friday.
Charles C. Conaway, chief executive officer, said in a statement: "The decision to close these underperforming stores, which do not meet our financial requirements going forward, is an integral part of the company's reorganization effort. We are confident that doing so will provide the company with a healthier, more productive store base."
Wall Street analysts have said that Kmart needed to close many more stores in order to have a workable overhead that can insure a certain level of financial stability. In a research note last month, Shelly Hale of Banc of America Securities wrote that she "hoped that, rather than continue to bleed itself to death by closing a couple hundred stores a year, Kmart will close up to 700 underperforming stores and eliminate up to $10 billion in unprofitable sales."
Friday's announcement, financial sources said last week, is just the first in a series of incremental store closures. A few analysts were concerned that Kmart hasn't yet figured out a game plan for its turnaround, and that if it had, Friday's store closure list would have had to have been higher.
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