Kmart Owes Sara Lee

Sara Lee Corp. (Chicago), the parent company of Sara Lee Branded Apparel (Winston-Salem, N.C.), said in a regulatory filing that it was owed $40 million by Kmart Corp. (Troy, Mich.) at the time the retailer filed for Chapter 11 bankruptcy protection.

The manufacturer of underwear, legwear and active wear under a variety of brand names (including Bali, Dim, Just My Size, Hanes, Hanes Her Way, L'eggs, Playtex and Wonderbra) said it has entered into an agreement to shift its receivables to a third party, which would then buy the products.

The parent company, which also makes Sunbeam Bread, Sara Lee cheesecake, Ball Park franks, Hillshire Farm sausage, Chock full o'Nuts coffee, Kiwi shoe polish and Endust furniture polish, has been in an aggressive cost-cutting mode in the last several months in the face of sluggish sales. Though all of its subsidiaries have been faltering (including its Bakery Group, Coffee & Tea Worldwide, Foods and Household & Body Care divisions), none apparently has been suffering as much as the Branded Apparel group. It recently laid off 5300 workers in that unit. A Sara Lee spokeswoman blamed a soft retail environment for the ongoing apparel layoffs and a price war with rival Fruit of the Loom. The woes prompted Sara Lee in November to replace its head of North American apparel, Paul Lustig, with its cfo, Cary McMillan.