Kmart Reports $1.45 Billion Loss

DETROIT AP reported that Kmart Corp. posted a loss of $1.45 billion for the first three months of this fiscal year on Friday, the discount retailer's second consecutive quarterly deficit of more than $1 billion.

Kmart's loss of $2.88 a share for the 13-week period ended May 1 covered the first full quarter since it filed for federal bankruptcy protection. It reflected the reorganization items, notably its store closings.

During the same period last year, Kmart lost $233 million, or 48 cents per share.

For the fourth quarter of 2001, Kmart lost $1.5 billion, or $3.49 per share. The Troy, Mich.-based company posted a loss of $2.42 billion, or $4.89 per share, for 2001.

Analysts shrugged off the latest report.

``I think it shows there are still problems there, there are things that need to be worked out,'' said Eric Beder, with Ladenburg, Thalmann & Co. Inc.

But Beder said the results are typical of a company in its early stages of bankruptcy.

Ulysses A. Yannas, with Buckman, Buckman & Reid, said more telling will be the next quarter results.

``I'd be watching carefully July, August, September. ... That will tell you the true story,'' Yannas said.

James B. Adamson, Kmart's chairman and chief executive, said though the losses were significant, the company is making progress.

``We're not pleased with where we are,'' said Al Koch, Kmart's chief financial officer. But, he said, ``it's where we expected to be.''

Net sales for the quarter were $7.64 billion, a decrease of 8.4 percent from $8.34 billion in 2001. Sales at stores open at least a year declined 8.8 percent from the first quarter of 2001.

Excluding the 283 stores that were closed this year, the same-store sales decline was 11.7 percent.

Beder said the sales results reflect consumers' confusion over what bankruptcy means and fear that their store will close. He said he didn't anticipate that sales would become positive any times soon, ``but you have to see some change.''

Koch said the company recognizes it has a lower sales base, but said it is doing things to ensure improved sales, including keeping high in-stock levels on promotional items and its top-selling merchandise.

Among the biggest criticisms of Kmart is that it is often out of the items people go there to buy. Last month, Kmart's president Julian Day said the company spent several weeks physically cleaning up stores and fixing inventory levels.

Koch said Friday that May sales will show improvement over April.

Kmart also has long struggled to keep up with competitors Wal-Mart Stores Inc., which offers lower prices, and Target Corp., which features trendier items.

The retailer recorded a $758 million charge in the quarter related to inventory liquidation.

Excluding nonrecurring and reorganization items, Kmart lost $408 million, or 81 cents per share, in the first quarter.

In its earnings report filed with the Securities and Exchange Commission, Kmart said that at this time, it's not possible to predict the effect of bankruptcy on its business or when it will exit Chapter 11. The target date is July 31, 2003, though Koch acknowledged that it could be pushed back.

Kmart filed for Chapter 11 on Jan. 22 following disappointing holiday sales and a stock dive. The company has been investigating its own accounting practices and restated earnings from 2001 to reflect changes made as a result of the investigation.

Kmart also is investigating the way the company was managed under former chief executive Chuck Conaway. The FBI is working with Kmart on an investigation but has declined to provide details.

Kmart shares gained 2 cents to close at 93 cents Friday on the New York Stock Exchange.

Also Friday, a seven-member committee designed to protect the interests of Kmart shareholders while the company is in bankruptcy protection was appointed. The U.S. Trustee's Office approved the formation of a shareholder's committee last month.