Shares for the new Kmart Holding Corp. jumped 36.2% for the week to close at $25.20 on Friday after the reporting early in the week that the discounter had narrowed its Q1 losses amid lower comparable stores sales for the quarter.
In its first quarterly report since emerging from Chapter 11 bankruptcy protection last month, Kmart posted a loss of $862 million, or $1.65 a share, for the quarter ended April 30th, compared to a loss of $1.44 billion, or $2.87 a share, for the same period in 2002. Last year’s results include a charge of $542 million recorded in the first quarter of 2002 in connection with the store closing liquidation sales.
Sales were down 13.9%, to $6.18 billion versus the year-ago quarter. Same-store sales were off 3.2%. February comps were down 2.5%, March fell 7.4% and April comps inched up 1.1%. April comps last year were down 16%.
The effects of jettisoning the nearly 600 under-performing stores, while impacting total net sales, had an alarming positive impact of gross profit margins, which includes occupancy costs. Gross margin jumped 1220 basis points to 22.6% of sales, or $1.42 billion. The gross margin rate was also favorably impacted by 2003 closing store liquidation sales, a decrease in sales of lower margin consumables, and a decrease in promotional markdowns, partially offset by the impact of clearance markdowns.
The future of the discount retailer is in heavy debate within the market.
“Theyre continuing to lose market share against their competitors, and that speaks to the future,” said Howard Davidowitz, chairman of Davidowitz & Associates, a retail-consulting firm. “Theyre continuing to deteriorate at a very rapid rate in my view.”
On the other hand, Ulysses Yannas, an analyst with Buckman, Buckman & Reid, in New York, points to the GM improvement as hope for the future.
But Kurt Barnard, president of Barnard’s Retail Consulting Group was less impressed by the results. “What we have to see is evidence of increased same-store sales — not just lower negative numbers,” said Barnard. “Gross margins have improved — that’s very good, but there’s nothing I can sink my teeth into.
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