TROY, Mich. — Citing women’s apparel as one of the few strong areas in a lower-than-expected sales picture, Kmart Corp. said it expects first-quarter earnings to be well below year-ago results.
In the year-ago period, Kmart earned a restated $55 million, or 12 cents a share. The figures were restated to exclude PACE Membership Warehouse and PayLess Drug Store businesses, which were sold.
Kmart said it still expects higher operating earnings for the year, noting the first quarter is a relatively small contributor to overall results. Joseph E. Antonini, Kmart’s chairman and chief executive officer, said, “Sales in April continue to trend below plan in the U.S. Kmart store division,” and strong results at specialty store businesses are not enough to offset this profit shortfall.
Antonini continued, “Gross margins and expenses have been in line with our expectations. Less-than-expected sales are the root cause of our disappointing results.”
Antonini blamed the sales slump on major inventory adjustments over the last six months, including the elimination of more than 10,000 slow-selling items from the basic Kmart store assortment, in fashion and hard-line goods.
He said the company had earlier indicated that inventory of the U.S. Kmart division for 1993 was down about $720 million at cost, or 10.4 percent, from 1992 yearend, which represents more than $1 billion in inventory at retail.
“While this [reducing inventory] represents an essential step in getting the proper balance in our merchandise investment, there has clearly been a short-term penalty to our sales,” he said.
A spokesman for Kmart said women’s apparel and domestics are the strongest areas in soft goods, whereas men’s apparel, infants and fashion accessories were weaker. He said hard and soft goods contributed to the inventory glut.
“Women’s apparel is the bright spot,” said David Poneman, a retail analyst at Sanford Bernstein. Poneman said he was not shocked by Kmart’s announcement, because the company had been reporting soft sales.