Kmart Sales Still Slumping26 Dec, 2002 By: Hive News
Despite feeling the weight of a weak holiday season, executives at struggling mass merchant Kmart Corp. are still hopeful the chain will emerge from bankruptcy early next year.
"We continue to make good progress in many areas,” said Kmart chairman and CEO James B. Adamson. “Our reorganization team is hard at work finalizing a comprehensive business plan, analyzing our store base and taking other actions necessary to fulfill our goal of filing a proposed plan of reorganization with the court and emerging from Chapter 11 court protection as early as practicable in 2003."
For the 13 weeks ended Oct. 30, Kmart reported a net loss of $383 million, or $0.76 per share, versus a restated net loss of $249 million, or $0.50 per share, for the 13 weeks ended October 31, 2001. Excluding noncomparable items, discontinued operations and reorganization items, the company's net loss was $390 million, or $0.78 per share, in the third quarter of 2002, compared with a net loss of $152 million, or $0.31 per share, in the third quarter of 2001.
Net sales for the 2002 third quarter were $6.73 billion, compared with $8.02 billion in the same quarter a year ago. As previously reported, Kmart closed 283 underperforming stores in the second quarter of 2002. On a same- store basis, sales declined 7.6 percent from the third quarter of 2001. Comparable store sales for the four-week period ended Oct. 30 were 3.9 percent lower than the same period a year ago.
The earnings announcement came a week after the New York Stock Exchange delisted the retail giant. the first time in 84 years Kmart has been absent from the exchange.
The reported results reflect the restatement of the 26-week period ended July 31, as well as prior fiscal years. Kmart announced Dec. 9, that it would restate its financial results for these prior periods to reflect adjustments identified as a result of a review of its accounting practices and procedures.
In its monthly operating report for the four-week period ended Nov. 27, Kmart reported a net loss of $40 million on net sales of $2.47 billion. Comparable store sales during this period were 17.2 percent lower than the same period a year ago. In contrast to many other retailers, Kmart's fiscal period ends on the last Wednesday of the month. Accordingly, the reporting period for November 2002 does not include the sales results of Thanksgiving weekend, as it did in 2001, which resulted in an unfavorable comparison.
The chain's 2002 Thanksgiving weekend sales will be included in the December monthly results. As a result, Kmart expects its comparable sales trend for December to improve from November. However, its overall results for the fourth quarter of 2002 may still lag, with the company blaming fewer shopping days between Thanksgiving and Christmas this year and overall weakness in the U.S. retail environment this holiday season.
"The company's performance over Thanksgiving weekend was encouraging. The post- Thanksgiving period also started strong, but sales in the last two weeks have been softer than we had anticipated," Kmart president and COO Julian Day said. "In addition to concentrating on our same-store sales performance, we remain very focused on improving our gross margin management process, working on our cost base and increasing our inventory turns. Our challenge as a promotional retailer is to use aggressive event and pricing strategies aimed at driving store traffic and winning our customers back, while also providing a merchandise assortment that allows us to generate an acceptable margin rate."