Kmart Corporation reported total sales for the 52 weeks ended January 29, 2003 totaled $30.76 billion, compared with $36.15 billion in fiscal 2001. As previously reported, Kmart closed 283 underperforming stores, or 13% of its existing store base, in the second quarter of 2002. On a same-store basis, sales declined 10.1% in fiscal 2002 from the previous year.
Kmart reported a net loss of $3.22 billion, or $6.36 per share, in fiscal 2002, versus a loss of $2.45 billion, or $4.95 per share during fiscal year 2001. Excluding non-comparable items such as special charges, reorganization items and results of discontinued operations, the Company’s net loss in fiscal 2002 was $846 million, or $1.67 per share, versus a net loss of $1.54 billion, or $3.12 per share, in the 2001 fiscal year.
Special charges affecting fiscal 2002 results consisted primarily of charges relating to the closure of 283 stores in the second quarter, charges recorded in the fourth quarter related to the announced closure of an additional 316 stores in 2003, asset impairments and corporate cost reduction initiatives. Special charges affecting fiscal 2001 results consisted of charges related to asset impairments and the restructuring of the Company’s supply chain operations and e-commerce business. See the Supplemental Schedule included within this press release, which provides a reconciliation of net loss, as reported to net loss, as adjusted.
Julian B. Day, President and Chief Executive Officer of Kmart, said: “In addition to the Company’s Chapter 11 filing in January of last year, Kmart’s 2002 financial results reflect the impact of significant charges associated with our restructuring efforts as well as a decrease in sales associated with the store closings and reduced customer traffic.”
Day continued, “As we draw closer to emergence from Chapter 11, we remain focused on achieving a cost structure and organization that is aligned with our reduced store base. Our objective is to ensure that the Company emerges from the reorganization process with a restructured balance sheet, stronger store portfolio, and an efficient, cost-effective organization positioned to compete in the discount retail sector. Our fast-track reorganization timetable remains on schedule, as we expect to emerge from Chapter 11 on or before April 30, 2003. Creditors are in the process of voting on our First Amended Joint Plan of Reorganization, and we anticipate the Plan will be confirmed in mid-April and the Company will complete its Chapter 11 reorganization by April 30, 2003.”
February 2003 Results
In its monthly operating report for the four-week period ended February 26, 2003, the first month of the 2003 fiscal year, Kmart reported a net loss of $54 million on sales of $2.17 billion. Same-store sales declined 2.5% compared to February 2002. Inventory clearance sales at the 316 closing stores are not included in the same store sales results. Total sales, which include the closing stores, decreased by 1.3%.
As of February 26, 2003, the Company’s balance sheet cash position was slightly more than $1 billion, of which approximately $260 million represented cash at stores. In addition, Kmart had no borrowings outstanding as of February 26, 2003 under its debtor-in-possession (DIP) facility and had borrowing availability under its DIP facility of approximately $1.55 billion.
Day said, “We have adopted a disciplined, low-risk approach to managing our business. Although this Company has a long way to go, we are encouraged by February’s financial results, which demonstrate signs of progress, particularly in achieving positive cash flow, controlling costs and enhancing gross margin. As we continue to control costs and improve margins moving forward, we remain focused on driving same-store sales, increasing customer traffic, enhancing our in-stock position and improving overall customer experience.”
Fourth Quarter and January 2003 Results
Net sales for the fourth quarter of 2002 were $8.87 billion, compared with $10.88 billion in the 2001 fourth quarter. On a same-store basis, which excludes the 283 stores closed in the second quarter of 2002, sales declined 9.8% from the fourth quarter of 2001.
Kmart reported a net loss of $1.10 billion, or $2.13 per share, in the fourth quarter of 2002, compared with a net loss of $1.65 billion, or $3.31 per share, in the same quarter a year ago.
In its monthly operating report for the four-week period ended January 29, 2003, the final month of the 2002 fourth quarter and fiscal year, Kmart reported a net loss of $1.41 billion on net sales of $1.70 billion. The net loss for the month includes several charges relating to the Company’s previously announced plan to close 316 stores in early 2003. These include a non-cash charge of $695 million relating to the impairment of long-lived assets at the closing stores and a charge of $471 million related to the write-down of inventory to its estimated selling value in connection with the liquidation sales at the closing stores. In addition, Kmart recorded a charge of $36 million related to the planned reduction of staff at the Company’s headquarters and in certain corporate support functions. Same store sales in January were 8.9% lower than the same period last year.
KMART CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts)
52-weeks 52-weeks
Ended Ended
January 29, January 30,
2003 2002
Sales $30,762 $36,151
Cost of sales, buying and occupancy 26,258 29,853
Gross margin 4,504 6,298
Selling, general and administrative expenses 6,544 7,588
Equity income in unconsolidated subsidiaries 34 -
Restructuring, impairment and other charges 739 1,091
Continuing loss before interest, income taxes,
reorganization items and dividends on
convertible preferred securities of
subsidiary trust (2,745) (2,381)
Interest expense, net (contractual interest
for fiscal years 2002 and 2001 was $426 and
$352, respectively) 155 344
Reorganization items, net 386 (183)
Benefit from income taxes (24) -
Dividends on convertible preferred securities of
subsidiary trust, net of income taxes of $0 and
$0, respectively (contractual dividend for
fiscal years 2002 and 2001 was $65 and $72,
net of tax, respectively) - 70
Net loss from continuing operations (3,262) (2,612)
Discontinued operations, net of income
taxes ($0) 43 166
Net loss $(3,219) $(2,446)
