Troy, MI, Mar. 24--Kmart Corp. reported a loss of $3.22 billion for last fiscal year, hit by massive restructuring and store-closing costs in the aftermath of its bankruptcy filing.
Kmart, which aims to get out of bankruptcy in about six weeks, said it saw some signs of improvement in the first month of the current year, when it posted a smaller drop in sales.
"Although this company has a long way to go, we are encouraged by February's results, which demonstrate signs of progress," Julian Day, Kmart's chief executive officer, said.
The retailer, which hopes to return to profitability in 2004, also posted losses for January and February 2003.
Still, the company said it remains on track to get out of bankruptcy by April 30 as planned. Day said the retailer would focus on keeping down costs and reviving sales when it emerges from bankruptcy.
"Emergence is right on schedule," said Richard Hastings, retail analyst with consulting firm Bernard Sands. The turnaround management team has done a good job of making sure the right stores are open and the wrong stores are closed."
Sales for the year ended Jan. 29 slumped to $30.76 billion from $36.15 billion in 2001, hurt primarily by store closings. Kmart closed 13 percent of its total store base in 2002, and is now in the process of shutting more than 300 stores and cutting as many as 35,000 jobs.
Kmart reported a loss of $2.42 billion for 2001. It filed for Chapter 11 protection in January 2002.
Stripping out the store closing and other one-time costs for both years, Kmart said its net loss for last year would have been $846 million, or $1.67 per share, compared with a loss of $1.54 billion, or $3.12 per share, a year before.
Last year's sales at stores open at least a year -- a key retail measure known as same-store sales -- dropped 10.1 percent. On a conference call with reporters, CEO Day said many customers stopped shopping at Kmart soon after the bankruptcy filing because shelves were empty of key items.
"We disappointed a significant number of customers, particularly early last year," he said. "Many of them have not yet resumed shopping at our stores."
Last month, Kmart dumped its grocery supplier, Fleming Cos. Inc. , and has since begun distributing food to its stores by itself. Day said the transition was going well so far, however a few stores that he visited had run out of milk -- something he called a "cardinal sin".
"Let me tell you, that was immediately corrected," he said. "Our in-stock level today is at least as good as it was when Fleming provided us with those perishable goods."
Kmart reported losses and same-store sales declines for January and February of 2003, typically slow periods for the retail sector.
Many retail chains struggled through February, the first month in the retail fiscal year, after massive winter storms forced hundreds of store closures along the U.S. East Coast.
For January, Kmart lost $1.4 billion, including store closing costs. Same-store sales fell 8.9 percent. In February, it lost $54 million, with same-store sales down a more modest 2.5 percent.
"Look at what the rest of the retailers did in February -- that's not bad," said Hastings of Bernard Sands. "Gross margin was up to 21 percent. That's a pretty big turnaround."
As part of its bankruptcy exit plan, the retailer has lined up new investors who have promised to inject more than $300 million in cash for shares in the reorganized company.
