Kmart finds less is more in 2nd Qtr
By Don Hogsett -- Home Textiles Today, 9/1/2003 12:00:00 AM
TROY, MI —
Helped by sharply stronger margins and lower costs, and putting behind it many of the bankruptcy and restructuring costs that dogged the bottom line a year ago, Kmart Holding Corp. reported a narrowed second quarter loss of $5 million, compared with a year-ago deficit of $293 million.
After closing 599 stores as part of a massive restructuring, Kmart sales declined by 21.3 percent, to $5.7 billion from $7.2 billion a year ago. Same-store sales, still weak, declined by 5.4 percent.
Wall Street drove the stock sharply higher in value once the news was released on Aug. 29. In mid-day trading, Kmart shares had jumped up more than 8 percent in value, by $2.45 a share, to $31.89.
Since emerging from bankruptcy in May, Kmart shares have more than doubled in value from a low of $12, and have produced a big payday — a paper gain in the neighborhood of $800 million — for investor Edward Lampert, who owns roughly half the company's stock.
Lampert, through his Greenwich, CT-based ESL Investments, is also a major owner of textiles producer WestPoint Stevens, and a major shareholder in Sears, Roebuck & Co.
Helping to fuel the bottom-line improvement, Kmart boosted its margins by 410 basis points, or 4.1 percentage points, to 21.8 percent from 17.7 percent a year ago.
Driving the margin improvement, Kmart said, was "a decrease in shrinkage and an overall improvement in the company's sales mix and lower buying and occupancy costs under post-bankruptcy accounting.
Lifted by the stronger margins, the retailer reported a small operating profit of $6 million, compared with a prior-year operating loss of $264 million.
Keeping a watchful eye on stockpiles, Kmart reduced its inventories by 23.1 percent. That was more than the 21 percent decline in sales, to $4.1 billion from $5.3 billion last year.
Kmart Holding Corp.
|Qtr. 7/30 (x000)||2003||2002||% change|
a-Second-quarter results include $2 million in income from a subsidiary vs. $14 million a year ago; and a $5 million income-tax benefit; and $3 million in income from discontinued operations, compared with $7 million a year ago. Results in the 2002 second quarter include $14 million in restructuring, impairment and miscellaneous charges; and $773 million in reorganization costs.
b-Six-month results include $51 million in restructuring, impairment and miscellaneous charges, compared with $14 million last year; $21 million in income from a subsidiary vs. $19 million a year ago; $773 million in reorganization costs, compared with $255 million the preceding year; a $3 million after-tax loss from discontinued operations, compared with a $160 million loss a year ago; and $6 million income-tax benefit, compared with a year-before tax benefit of $12 million.
|Oper. income (EBIT)||6,000||(264,000)||—|
|Per share (diluted)||(0.06)||(0.58)||—|
|Average gross margin||21.8%||17.7%||—|
|Oper. income (EBIT)||(266,000)||(1,272,000)||—|
|Per share (diluted)||(2.23)||(3.13)||—|
|Average gross margin||20.1%||13.5%||—|
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