Kmart Corp. (Troy, Mich.) is reporting a loss of $2.42 billion in fiscal year 2001 and restating its results for the first three quarters of the year.
The loss, the largest in the discount retailer's 40-year history, is nearly a tenfold increase over its loss in 2000 of $244 million. For the fourth quarter ended Jan. 30, Kmart lost $1.5 billion.
“These results reconfirm the significant difficulties Kmart experienced last year,” says James Adamson, Kmart's chairman and ceo. Those problems, he said, included unsuccessful sales and marketing initiatives, an erosion in supplier confidence and below-target sales and earnings in the fourth quarter.
“We are moving aggressively to address these challenges,” says Adamson.
Kmart was to have filed its annual report April 30, but asked for an extension so its new executives could review its accounting. Kmart had said it might have to restate some of its previously reported quarterly results following a review of its accounting methods.
The company began examining its accounting following an anonymous letter claiming to be from employees. The letter was received shortly before the retailer's Chapter 11 filing on Jan. 22. It was addressed to the SEC, Kmart's auditor, PricewaterhouseCoopers, and Kmart's board of directors.
Kmart said the review was related to vendor discounts and general liability reserves. As a result of the accounting investigation, Kmart is changing the way it reports vendor discounts, which it said alters its results for the first three quarters of the past fiscal year.
The first quarter restated net loss was $233 million, up from a loss of $25 million. For the second quarter, it reported a loss of $377 million from the previously reported loss of $95 million; and its restated loss for the third quarter was $235 million, up from a loss of $224 million.