This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Code Blue for the Blue Light

Updated from 7:44 a.m. EST

Kmart (KM) sought Chapter 11 bankruptcy protection Tuesday in the largest-ever such filing by a U.S. retailer.

The move ended nearly two weeks of speculation and came after the discount retailer's situation with suppliers deteriorated over the weekend. The filing will buy Kmart time to assess its options, but it's not clear what the company might do to make itself viable in the face of rising challenges from rivals Wal-Mart and Target.

Kmart's board authorized the filing Monday after working to arrange $2 billion of post-petition financing to allow the company to keep operating under bankruptcy-court protection. Kmart said all its stores will remain open for now and that it hopes to emerge from bankruptcy next year. Kmart also named a chief restructuring officer, Ronald B. Hutchison, to work with the new chairman it named last week. Hutchison worked with Kmart Chairman James Adamson when both were at the Advantica Restaurant Group.

In making the filing, Kmart cited a rapid decline in its liquidity resulting from below-plan sales and earnings in the fourth quarter, the evaporation of the surety bond market, and an erosion of supplier confidence. Other factors included intense competition in the discount retailing industry, unsuccessful sales and marketing initiatives, the continuing recession and recent capital market volatility, Kmart said.

On Monday, Kmart's main grocery supplier, Fleming Cos. (FLM), said it was halting shipments after the company missed a payment. Fleming is trying to collect $78 million worth of goods already shipped but not paid for. Another supplier, Scotts Co. (SMG), also stopped shipments to Kmart stores.

Kmart management has often said the discount chain must restructure its stores, and analysts have predicted it might use the bankruptcy filing to get out of leases on more than 200 of them around the country. The company has seen its financial situation spiral downward after it missed its December sales goals and an analyst raised the prospect of bankruptcy in early January. The events touched off a cycle of downgrades by credit rating agencies and a selloff in its common shares. The shares plunged further Tuesday, recently trading down $1.05, or 60%, at 69 cents each.

Kmart's filing comes slightly more than a month after the largest bankruptcy ever, Enron's.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs