Kmart cuts its losses during September

TROY, MI — Working its way through a painful bankruptcy and restructuring, giant Kmart Corp. posted a $176 million loss during September. And while same-store sales continue to decline, the trend line is clearly improving, and the dips are growing smaller, as new merchandising programs kick in.

Still on the downturn, September same-store sales fell by 6.9 percent, but the rate of decline has slowed substantially since the summer doldrums. And the September results were a big improvement over an 11.9 percent drop recorded the month before, and an even steeper skid of 13.8 percent in July. Same-store sales hit their lowest point of the year during April, plunging by 16.4 percent.

Putting the September number into further perspective, the 6.9 percent decline marks a real improvement over the average monthly decline of 11 percent since the company filed for Chapter 11 protection from its creditors in January.

And things are looking somewhat better going forward. Same-store sales are expected to improve modestly in October, the retailer said in a conference call, with customers spending more on average. "While we certainly don't want to celebrate too early here, I believe that the improving sales trend and average ticket may be an indication we're getting back some market share," said Julian Day, president and coo. "We continue to expect a modest improvement in the same-store sales trend over the next few months."

In even more encouraging news, Kmart said it's on a fast track to emerge from bankruptcy and expects to emerge from Chapter 11 by July 2003.

The September loss was almost 40 percent wider than the month-before deficit of $126 million, due in large part to weaker margins and higher costs. Average gross margin narrowed to 14.7 percent from 18.0 percent in August, while costs climbed higher to 23.8 percent of sales, up from 22.8 percent the preceding month.