TROY, Mich., June 14, 2002 -- Kmart Corporation (NYSE: KM) announced today the financial results for its first quarter of fiscal 2002. This period covers the first three full months following Kmart's voluntary Chapter 11 filing on January 22, 2002. Operating reports for each of these three months have previously been filed with the U.S. Bankruptcy Court in Chicago and the Securities and Exchange Commission.
For the 13 weeks ended May 1, 2002, Kmart reported a net loss of $1.45 billion, or $2.88 per share, versus a net loss of $233 million, or $0.48 per share, for the 13 weeks ended May 2, 2001. Excluding non-comparable and reorganization items, the Company's net loss was $408 million, or $0.81 per share, in the first quarter of 2002 compared with a net loss of $218 million, or $0.45 per share, in the first quarter of 2001.
Net sales for the 13-week period ended May 1, 2002 were $7.64 billion, a decrease of 8.4 percent from $8.34 billion in 2001. On a same-store basis, sales 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.
James B. Adamson, Chairman and Chief Executive Officer of Kmart, said, "Kmart's significant losses and sales decline in the first quarter reflect the many challenges the Company faced in the period following our voluntary Chapter 11 filing. These challenges included reduced inventory levels as vendors withheld shipments in the early days of the reorganization and reduced store traffic arising from the bankruptcy filing."
Excluding non-comparable and reorganization items, gross margin as a percentage of sales increased to 18.3 percent for the 13 weeks ended May 1, 2002, from 18.0 percent in the first quarter of 2001. This increase is attributable to decreased sales, as a percent of total sales, of food and consumables, which carry lower margin rates, and a shift from clearance sales to regular sales, partially offset by reduced retail pricing and decreased vendor allowances.
Selling, General and Administrative expenses (SG&A) increased $79 million from the year-ago quarter. SG&A, as a percent of sales, was 23.4 percent in the first quarter of 2002 compared with 20.5 percent in the first quarter of 2001. This increase is due primarily to severance and contractual obligations, increased bonus accruals, utility rate increases, decreased co-op recoveries, and increased expenses for general liability claims. These were partially offset by the elimination of a previous bonus program for store associates.
Adamson said, "While there is still much hard work ahead, we are pleased with the early progress we are making in addressing in-stock levels, customer service and store traffic. Nearly all of our vendors have resumed shipments to us and in-stock levels in the stores have improved. Likewise, our focus on improving the physical condition of our stores and enhancing customer service helped produce a successful Customer Appreciation sale in early June."
As of May 1, 2002, Kmart had approximately $1.1 billion in available cash and approximately $1.6 billion available under its debtor-in-possession credit facility.
Reconciliation of net loss
The following unaudited table reconciles net loss as reported to net loss adjusted for non-comparable and reorganization items for the 13 weeks ended May 1, 2002 and May 2, 2001, respectively:
|
|
|
|
(Unaudited) |
($
Millions, except per share amounts) |
|
|
13-weeks
Ended
May 1,
2002 |
|
13-weeks
Ended
May 2,
2001 |
|
|
|
|
|
|
|
|
Net
loss, as reported |
|
|
$ (1,449) |
|
$
(233) |
|
|
|
|
|
|
|
|
Non-comparable
items: |
|
|
|
|
|
|
Markdowns for inventory
liquidation |
|
|
758 |
|
- |
|
Accelerated
depreciation |
|
|
18 |
|
- |
|
|
|
|
- |
|
23 |
|
Total
non-comparable items |
|
|
776 |
|
23 |
|
Tax
benefit on non-comparable items |
|
|
- |
|
(8) |
|
Total
non-comparable items, net of tax |
|
|
776 |
|
15 |
|
|
|
|
|
|
|
|
Reorganization
items, net |
|
|
265 |
|
- |
|
Net
loss adjusted for non-comparable and reorganization items
|
|
|
$
(408) |
|
$
(218) |
|
|
|
|
|
|
|
|
Net
loss per share adjusted for non- comparable and
reorganization items |
|
|
$
(0.81) |
|
$
(0.45) |
|
Net
loss per share, as reported |
|
|
$
(2.88) |
|
$
(0.48) |
|
|
|
|
|
|
|
|
Basic
and diluted weighted average shares (in millions) |
|
|
502.9 |
|
488.5 |
|
|
|
|
|
|
|
During the first quarter of fiscal 2002, Kmart recorded a charge of $758 million to write-down inventory in the 283 stores that were closed in May and June, and inventory transferred from the remaining stores to the closing stores. Of this charge, $384 million relates to the write-down of inventory at the closed stores to estimated selling value. Another $266 million relates to the write-down of inventory that was transferred from other Kmart stores to the closed stores and included in the liquidation sales. The remaining $108 million of the charge related to liquidation fees and expenses associated with the store closing sales.
Kmart recorded a total charge of $265 million for reorganization items in the first quarter of 2002, including a store-closing charge of $233 million for lease terminations and other costs associated with the 283 closed stores.
KMART
CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Dollars
in millions, except per share amounts)
|
|
|
(Unaudited) |
|
|
|
13-weeks
Ended
May
1,
2002 |
|
13-weeks
Ended
May
2,
2001 |
|
|
|
|
|
|
|
Sales |
$
7,639 |
|
$
8,337 |
|
|
Cost
of sales, buying and occupancy |
7,016 |
|
6,834 |
|
Gross
margin |
623 |
|
1,503 |
|
|
Selling,
general and administrative expenses |
1,791 |
|
1,712 |
|
Equity income (loss) in
unconsolidated subsidiaries |
5 |
|
(16) |
|
Charge for employee
severance and Voluntary Early Retirement Program
(VERP) |
- |
|
23 |
|
Loss before interest, income
taxes, reorganization items and dividends on convertible preferred
securities of subsidiary trust |
(1,163) |
|
(248) |
|
Interest expense, net
(contractual interest for 13 weeks ended May
1, 2002
was $93) |
33 |
|
83 |
|
|
|
|
|
|
Income tax
benefit |
(12) |
|
(109) |
|
|
|
|
|
|
Reorganization items,
net |
265 |
|
-
|
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