- The Washington Times - Wednesday, January 15, 2003

Kmart Corp. plans to close 326 more stores and lay off up to 35,000 workers to cut costs and emerge from bankruptcy by April 30, the struggling discount retailer announced yesterday.
The Washington area was largely spared, with five closings in Virginia and three in Maryland. The closest are in Leesburg and Woodbridge, both in Virginia.
The shutdowns, which are subject to bankruptcy court approval, would eliminate up to 35,000 jobs in 44 states and Puerto Rico and would save the chain about $500 million this year.
"We deeply regret the impact these closings will have on our associates, customers and the communities where the stores are located," James B. Adamson, Kmart chairman and chief executive, said in a statement. "But this is a necessary and important step for Kmart as we prepare for our imminent emergence from Chapter 11 protection."
Since filing for Chapter 11 bankruptcy protection in January 2002, Kmart has shut 283 stores, laying off more than 22,000 workers. By closing the stores while under bankruptcy protection, Kmart can get out of its leases.
The company's board of directors has approved a five-year business plan and a framework for a plan of reorganization. The Troy, Mich., company will file that plan with the bankruptcy court later this month. It has received a commitment for up to $2 billion in exit financing from GE Commercial Finance, Fleet Retail Finance Inc. and Bank of America.
Kmart is one of several discount retailers that have fallen on hard times and filed for bankruptcy protection in hopes of turning around. Chains such as Montgomery Ward Inc. and Ames have closed during the past few years.
Kmart has struggled to compete with Wal-Mart, Target and Kohl's the top three discount giants. Analysts say Kmart stores haven't always been kept clean and its shelves weren't always stocked with merchandise, especially items advertised on sale.
Burt Flickinger, a retail analyst with Reach Marketing in Westport, Conn., says store closings are necessary, but Kmart isn't going about it the right way.
Kmart is basing its closures on performance during the past year "and should be looking at what the business will look like the next 12 months," Mr. Flickinger said.
Since filing for bankruptcy, the retailer has lost $2 billion and continues to face declines in sales at stores open at least a year, or "same-store sales" the best indicator of a retailer's financial health.
December same-store sales fell 5.7 percent from a year earlier, Kmart reported yesterday.
"As the company contracts, there's still no sign that it can make any money," Mr. Flickinger said. "There's so much uncertainty in what Kmart can do to solve its problems."
Mr. Adamson, however, remains optimistic. He says the introduction of brands such as Joe Boxer and prototype stores has helped the company during the past year.
When Kmart filed for bankruptcy, its intention was to emerge in the second quarter of 2003. The company is on track to surpass that goal, he said.
"Now that we've accomplished all that we can through the Chapter 11 process, we look forward to putting the considerable costs and distractions of bankruptcy behind us and focusing our full time and attention on revitalizing Kmart," Mr. Adamson said.
After the latest round of closings, Kmart will have 1,500 stores.
"These closings reflect an emphasis on protecting and strengthening our competitive position in key strategic markets," said Julian Day, president and chief operating officer. "To this end, we are planning an aggressive marketing campaign to remind our current and prospective customers about the outstanding products, service and value that will continue to be available."
This article is based in part on wire service reports.


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