Business briefs

Kmart Corp. has sought U.S. bankruptcy court approval to give ceo James Adamson a new pay package potentially worth millions of dollars.

The retailer wants a green light to pay Adamson a salary of $1 million and another $4 million as a "success payment" if the troubled retailer is able to emerge from Chapter 11 by July 31, 2003. After that date, the bonus will decrease $7,299 a day. And if the retailer can't emerge from bankruptcy before May 1, 2004, no payment will be made.

Adamson succeeded Chuck Conaway as ceo on March 11 and is also eligible for a bonus of 125 percent of his base pay, or $1.25 million, although the bonus could be either larger or smaller, according to documents filed with the bankruptcy court. Kmart is also asking for other perks for Adamson, including reimbursement of living expenses, health care costs, taxes related to his use of the company jet and legal expenses.

A turnaround specialist, Adamson originally received $2.5 million from Kmart when he was asked to restructure the troubled retailer and lead it out of bankruptcy. Before being named chairman and ceo, Adamson was a Kmart director since 1996.

In addition to working out a new pay pact for Adamson, Kmart has asked the bankruptcy court for permission to pay Albert Koch, cfo, $640 an hour and to pay treasurer Ted Stenger $620 an hour. The two would also be eligible for performance bonuses.

After-tax profits for publicly held U.S. retailers climbed to a level of 2.5 percent of sales during the fourth quarter of last year, according to the Commerce Department, sharply higher than during the third quarter but roughly flat with earnings during the year-ago fourth quarter.

Buoyed by holiday sales, retail profits rose to a level of 2.5 percent of sales, up sharply from the 1.6 percent recorded during the third quarter. But reflecting sluggish consumer spending and the broadly weak environment that has prevailed for almost two years, the fourth-quarter number was little changed from the 2.4 percent recorded in the fourth quarter of 2000.

Measured in dollars, after-tax profits in the closing quarter totaled $9.27 billion, up 77.6 percent from $5.22 billion during the third quarter. On a year-over-year basis, after-tax profits rose by 8.3 percent, from $8.56 billion in 2000.

The annual rate of return on shareholders' equity climbed to 14.94 percent during the fourth quarter from 8.65 percent in the third quarter. On a year-over-year basis, return on equity was virtually unchanged, dipping slightly to 14.94 percent from 14.95 percent.

The U.S. economy may be on the mend, but the recovery is likely to be sluggish; and there remains a significant risk of a double dip back into recession later this year, according to a study from the Anderson School at UCLA.

And this could be a recovery with a big difference, said the UCLA economists — while consumer spending fueled past recoveries, this time it may be business capital spending and investment that will power the recovery. And that may not be such good news after all, with companies still paring their investment and spending as their profits remain weak.

"This adds up to a very sluggish period ahead, with no locomotive to pull the economy forward — neither consumers nor businesses," said the report.

Edward Leamer, who authored the UCLA report, said growth will be far weaker than in past recoveries, and not nearly as strong as most economists are projecting. Growth, he said, is likely to be in the 2 percent to 3 percent range rather than the 5 percent typical of past recoveries.