Kmart Holding Corp. (Troy, Mich.) announced that it expected net income to exceed $250 million for the key months of November and December despite a 13.5 percent drop in its same-store sales. The stock price of the still-shaky retail giant only nine months removed from bankruptcy protection Kmart shares climbed 27 percent on the news, to close at $29.12 on the Nasdaq Stock Market.
The retailer said that strong inventory management and the reduction of unprofitable promotions were behind the improved performance in the first two months of its fiscal fourth quarter. It reported same-store sales for November and December at about $5.1 billion, compared with $6.9 billion in the same period of fiscal 2002.
“Kmart's inventory position has been appropriately managed through the holidays, ending the month of December at a level below $3.5 billion,” down more than 20 percent from a year earlier, said president and ceo Julian Day. “The prudent management of our inventory has not only improved our cash position but has allowed us to reduce the large markdowns required in prior years and improve profitability.”
“In a nutshell, (Kmart) is saying, 'We're becoming more cost efficient,' which is good,” said Theresa Williams, a retailing expert at the Kelley School of Business at Indiana University. “The next thing you want to see is some kind of increase, or at least stability, in same-store sales.”