Little Light at the End of Kmart's Blue Tunnel

The holiday season's off to an unhappy start for perennial turnaround hopeful Kmart (KM Quote).

Though Tuesday's third-quarter earnings report topped analysts' expectations, the ugly bottom-line loss served as a grim reminder of just how far Kmart must go to revive its business. And with the economy suffering a sharp slowdown and competition in the low-margin discount business expanding practically by the moment, that task is getting taller all the time.

For the quarter ended last month, Kmart lost 25 cents a share, 2 cents better than sharply reduced expectations (as recently as seven weeks ago, analysts expected the loss to be only 10 cents a share, according to I/B/E/S). Sales fell 2% to $8 billion, from $8.2 billion a year earlier. ...