Updated from 2:18 p.m. EDTKmart ( KMRT) stock soared more than 21% on Monday, after the company said it had narrowed its first-quarter loss. After opening at $18.53, Kmart's new shares closed at $22.50 amid news that it lost $862 million in its fiscal first quarter. The earnings release was the company's first since its emergence from bankruptcy on May 6. In the year-earlier quarter, the company had posted a loss of $1.44 billion. Before interest, reorganization items, income taxes and discontinued operations, Kmart's loss was $32 million for the 13 weeks ended April 30, compared with $920 million in the first quarter of last year. Despite the red ink, investors were encouraged by the discount retailing giant's progress in a historically weak retailing quarter. "Strange things are happening in this market that remind me of 1999," said Ulysses Yannas, a retail analyst at Buckman, Buckman & Reid. "I'm not sure if today's rally was the result of irrational exuberance or what." Yannas added that he is "one of the few" who thinks that Kmart is still going to make it. "It's very early to tell," he said. "This is still a bankruptcy quarter, but their gross margins are very strong, and their selling, general and administrative expenses were low. These facts point to improvements in their business model." Kmart posted net sales of $6.18 billion in the quarter, down from $7.18 billion in 2002. On a same-store basis, sales declined 3.2% from the first quarter of 2002. Gross margin was $1.42 billion, or 23% of sales, for the 13 weeks ended April 30, 2003, up from $745 million, or 10.4% of sales, last year. The increase is primarily related to a $542 million charge recorded in the first quarter of 2002 in connection with store closing liquidation sales. "This management team is very focused on building the financial foundation of the new company," said Julian Day, the company's president and chief executive, in a statement. "We are strengthening our business by driving profitable sales, identifying opportunities to further improve efficiency and reduce costs, and enhancing the productivity of our assets." Kmart filed for Chapter 11 in a cash crunch. It was delisted from the New York Stock Exchange, leaving shareholders with worthless stock. It emerged from bankruptcy on May 6, after closing 599 stores, laying off 57,000 workers and shedding $7 billion in debt. Its new shares were listed on the Nasdaq on June 10, opening at $17.55.