Kmart Cuts, Part II

In its ongoing efforts to emerge from bankruptcy, Kmart (Troy, Mich.) announced plans to close 326 underperforming stores around the country over the next three months.

The discount retailer's plan, which is expected to be reviewed in bankruptcy court at a January 28 hearing, calls for closing 266 Kmart and Big Kmart stores, 60 Kmart SuperCenters in 44 states and Puerto Rico and 18 distribution centers. Pending approval by the court, the stores will remain open. If the court accepts the plan, clearance sales would begin shortly thereafter, with all stores expected to be closed by April.

Last March, Kmart made a similar move when it closed 283 stores and cut 22,000 jobs. The new round of closings could result in as many as 35,000 employee layoffs.

Kmart officials said the factors considered in evaluating the store portfolio were both financial and strategic. “These closings reflect an emphasis on protecting and strengthening our competitive position in key strategic markets,” said Julian Day, president and coo of Kmart. “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 at more than 1500 Kmart stores.”

Based on the anticipated savings from the store closings, coupled with the retailer's ongoing efforts to reduce costs, increase inventory turns and improve gross margins, Kmart has moved up its reorganization timetable, stating that it now expects to emerge from bankruptcy by April 30, rather than the previous goal of July 2003.