Kmart Reports Another Bad Month

March is chilly for the bankrupt discount chain.

Author:: Tim Arango
Publish date:: Apr 22, 2002 12:45 PM EDT

Kmart

is going to emerge from bankruptcy as a viable entity, it will have to do better than this.

In a filing with the

Securities and Exchange Commission

Monday, Kmart said same-store sales, which measure activity in shops open at least a year, fell 8.4% in March. This follows a 10.8% decline in February, and suggests Kmart continues to lose market share to rivals

Wal-Mart

(WMT) - Get Report

and

Target

(TGT) - Get Report

, both of which posted stellar March sales earlier this month.

The numbers look even worse when you consider that Kmart's figures don't include 283 stores it is in the process of closing, a plan announced in March that also included slashing 22,000 jobs. By contrast, mass market leader Wal-Mart saw comparable-store sales rise 9.5%, while upscale discounter Target posted a rise of 6.8%.

In the same filing, Kmart said it reported a net loss of $135 million on sales of $2.24 billion in March. Because Kmart is in Chapter 11, it no longer posts quarterly results, as public companies are typically required to. Instead it files monthly operating reports with a bankruptcy court in Chicago and subsequently with the SEC.

Kmart shares, which have stayed above $1 -- the threshold for being delisted by the New York Stock Exchange --- were off lately 6 cents at $1.36. Still, the stock has more than doubled since the company sought Chapter 11 protection in January after a weak Christmas season meant the company couldn't service its massive debt load.

Troy, Mich.-based Kmart has said it hopes to emerge from bankruptcy in 2003, and many analysts expect another round of store closings. But eventually, the company will have to do more than just close stores, observers agree, if it is to compete in the discount retailing market. Indeed, the company has yet to find a way to compete with Wal-Mart and Target, both of which have steadily taken market share from Kmart.

A more immediate question for shareholders is whether or not they will get a seat at the table as the bankrupt companies' assets are redeployed to help pay off creditors. A group of institutional holders of Kmart stock have retained Saybrook Capital, a California banking firm, and the Chicago law firm of Goldberg Kohn Bell Black Rosenbloom & Moritz to ask the bankruptcy judge to appoint an equity committee, but no decision has been made yet.

Typically, shareholders are largely left out of bankruptcy proceedings. Often, the stock is canceled and new equity is doled out to creditors and court-approved new investors.