Kmart's 3Q loss grows

TROY, MI — Kmart Corporation nearly doubled its third-quarter net loss from a year ago. The nation's second largest mass merchant reported a third-quarter 2001 net loss of $127 million, compared with a $67 million net loss from the same period in 2000.

The 2001 figure doesn't include a charge Kmart took for the restructuring of its supply chain operations. Including this charge, the total net loss was $224 million. Deepening the red ink, the retail chain reported an operating loss of $76 million, as compared with the $28 million operating loss from the third quarter of last year.

The announcement of the shortfalls came at a time in which Kmart has been facing controversy. In late October, a New York Times story cited unidentified Kmart vendors that said the mass merchant was "pressuring" them for givebacks and other concessions to help its bottom line.

The two biggest blows to Kmart's bottom line came from a drop in third-quarter sales and an increase in its selling, general and administrative expenses. Sales ended the quarter at slightly more than $8 billion, 2.2 percent off last year's third-quarter checkouts of $8.2 billion.

SG&A, meanwhile, ballooned in both dollar terms and as a percentage of sales. The company attributed this rise to the hiring of more store personnel to enhance its customer service. At more than $1.8 billion for the quarter, SG&A grew more than 7 percent from last year to this year. Coupled with the falloff in sales, the SG&A ratio expanded by 200 basis points, to 22.7 percent for the 2001 third quarter.

The sales drop also counteracted a 1.4 percent trimming in Kmart's cost of sales, leading to a 5.2 percent decrease in gross margin dollars. As a percentage of sales, gross margin fell 60 basis points in the quarter, to 19.9 percent.

Commenting on these flabby results, Chuck Conaway, Kmart's chairman and ceo, kept his sights firmly on the future. "We continue to work at fixing our core business by being in stock, pricing competitively and providing an excellent shopping experience for Kmart customers," Conaway said. "We have made considerable progress in all of these areas, but have a lot more work to do.

"During this past quarter, we completed all of our store resets, launched BlueLight Always everyday low pricing for our frequency categories and installed self-checkout registers in more than 1,000 stores," he continued. "We are focused on eliminating Kmart's liabilities and building a bridge of trust with Mom so that she can rely on us day in and day out."