Kmart woes may not be felt locally

SuperKmart in North Carson City isn't likely to close or suffer massive layoffs as the nation's No. 3 discounter rebuilds following Tuesday's Chapter 11 bankruptcy filing, said assistant manager Stan Ure.

According to Ure, the North Carson City location "is one of the best stores in the chain" with consistently strong financial performance.

"We think that everything is going to be fine," he said. "I don't foresee this one closing."

After several weeks of speculation following poor fiscal year-end earnings -- and a Wall Street downgrade of Kmart's credit rating -- the company finally succumbed to its financial woes Tuesday, a day after a grocery supplier canceled future shipments on claims it was owed $78 million.

Ure said shipments were uninterrupted to the Carson City location while the company made good on its debt.

Kmart secured approximately $2 billion in funding through JPMorgan Securities Inc. and Fleet Securities Inc., money it will use to fund vendors and store operations, including employee payroll and benefits, according to the company.

The "fast-track reorganization" is slated to be complete by 2003. "We are determined to complete our reorganization as quickly and smoothly as possible," chief executive Chuck Conaway said.

"All 2,114 Kmart stores are open and serving customers," a company statement said. "The company's credit cards, checks, gift certificates and store credits will be honored as always and its return policies have not been affected by the filing. Kmart associates are being paid in the usual manner and their medical, dental, life insurance, disability, and other benefits are expected to continue without disruption."

The company has vowed to review the financial performance of each store in the chain by the end of this quarter "with the objective of closing unprofitable or underperforming stores this year to increase cash flow and return on invested capital," Kmart reported.

The company has not yet released information about potential store closures and layoffs, but analysts said they expect Kmart to close as many as 700 U.S. stores.

Under the bankruptcy filing, the company, the largest retailer ever to file for Chapter 11, will continue operating under protection from debt liability. Kmart must next file a plan to manage debt, and restructure the business for a turnaround.

Additionally, the company is seeking approval to terminate leases to 350 tenants inhabiting former store sites that have returns below Kmart's obligations. The potential savings from the move would save the retailer from a reported annual loss of $250 million.

Kmart employs approximately 240,000 people and has 4,000 vendors. It reported $17 billion in assets and $11.3 billion in liabilities as of the quarter ending Oct. 31, 2001.

Kmart stock fell $1.04 to 70 cents on Tuesday, while chief competitor Wal-Mart gained $1.66 to $58.01.

By the time Kmart figures out its business strategy, customers may have found somewhere else to shop. Analysts said filing for bankruptcy means the shelves are not going to be fully stocked, something Kmart is already struggling with.

"You're going to frustrate customers and they're going to go and it's going to be hard to get them back," said Emme Kozloff with Bernstein Sanford.

The first Kmart discount store opened in 1962 and the chain got its official corporate badge in 1977, when the S.S. Kresge Co. changed its name to Kmart Corp.

Kmart introduced the BlueLight Special in 1965, flashing blue police lights in the aisles to lure customers to discounted items.

The Martha Stewart Everyday brand, which includes sheets, towels, paints and kitchenware, is Kmart's largest volume-producing label, generating about $1.5 billion in sales last year.

Last week, Kmart ousted its president and named a new chairman, James Adamson, to replace Conaway, who remains as chief executive. On Tuesday, it named Ronald Hutchison as the head of its restructuring.

Hutchison, 51, was most recently chief financial officer of Advantica Restaurant Group Inc., where he and Adamson were instrumental in the company's reorganization.

The bankruptcy filing in federal court in Chicago was good news for Kmart's suppliers, including food wholesaler Fleming Co. The company cut off shipments Monday, saying it was owed $78 million.

Fleming said Tuesday it intends to resume deliveries to Kmart "upon receiving satisfactory assurances from Kmart, via the bankruptcy court."

Other suppliers have delayed or stopped shipments to Kmart, but the bankruptcy filing is expected to restore their confidence.

The Associated Press contributed to this report.