Kmart gathers steam after Ch. 11

TROY, Mich. — Fueled by stronger margins, deep cuts in costs and stringent inventory controls, Kmart recorded a first-quarter profit of $93 million, marking the retailer's second straight profitable quarter since emerging from bankruptcy.

Reflecting the earlier shutdown of hundreds of unprofitable stores, sales declined 25.3 percent, to $4.6 billion from $6.2 billion last year. Same-store sales continued to trend downward, falling off 12.9 percent.

In a big lift to the bottom line, Kmart slashed costs 29.3 percent, to $1 billion from $1.4 billion last year, yielding a cash savings of $417 million. Measured as a percentage of sales, costs were whittled 120 basis points, or 1.2 percentage points, to 21.8 percent from 23 percent last year.

In a further big assist, average gross margin swelled 160 basis points, or 1.6 percentage points, to 24.6 percent from 23 percent a year ago.

Improving the company's liquidity position, Kmart kept a watchful eye on stockpiles, reducing inventories $3.4 billion, or more than 23 percent, from year-before levels.

Julian Day, president and CEO, commented, "We are delighted with the progress we've made in our business. For the fourth consecutive fiscal quarter, we have reported improved year-over-year profitability and liquidity through our consistent approach of focusing on profitable sales with an improved gross margin rate, reducing operating costs through operational execution, and working to improve the productivity of our assets."

Home & Textiles Today Staff | News & Commentary

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