Kmart says it's making progress in reorganization

Posted 8:10AM on Wednesday 30th January 2002 ( 23 years ago )

TROY, Mich. - Kmart Corp. stock surpassed $1 a share for the first time since the retailer filed for Chapter 11 bankruptcy protection last week. Chief executive officer Chuck Conaway said the bankruptcy filing had many positive aspects, including improved cash flow and a complete re-evaluation of Kmart's methods of doing business. "It's unfortunate that you get to this point," Conaway told The Detroit News on Tuesday, one week after Kmart filed for protection from creditors while it reorganizes its finances. "The reality is that we've had problems that have plagued this company for over a decade. "Under the protection of Chapter 11, we get a phenomenal opportunity to take advantage of the process and start to go after a lot of those problems, both structural as well as some merchandising." Kmart shares, which closed as low as 69 cents last week, rose 31 cents Tuesday to close at $1.23. The Troy-based discount retailer filed for Chapter 11 bankruptcy protection following lower-than-expected holiday sales and fourth-quarter earnings, downgrades by credit-rating agencies and a stock dive. Conaway said Kmart's restructuring plans got a big boost when the bankruptcy court granted interim approval for it to access $1.15 billion of its $2 billion in debtor-in-possession financing. "Obviously we have made tremendous progress through the courts," Conaway said in a Detroit Free Press report published Wednesday. "We have dramatically changed the fiscal picture of our company with this $2-billion DIP that got approved on Friday that provides us with unprecedented liquidity." The DIP money has allowed Kmart to continue paying its employees and suppliers and keep its stores running. A key vendor, Handleman Co. of Troy, said Tuesday that it resumed shipping recorded music to all 2,114 Kmart stores. Fleming Companies Inc. of Dallas, Kmart's largest supplier, resumed grocery shipments one day after the Jan. 22 bankruptcy filing. "The vast majority of our suppliers are already shipping and are back to usual and customary terms," Conaway said. "They understand how powerful a franchise we have." Kmart also received bankruptcy court approval to terminate 350 store leases, most of which belonged to stores Kmart had closed or to its former subsidiaries such as Borders Group Inc. and The Sports Authority. "We've created almost $250 million in annual cash flow in just one day," Conaway said of Kmart's shedding of leases for "dark stores." The Chapter 11 filing also allowed Kmart to suspend payments on about $400 million in interest generated by debts totaling about $4.8 billion. Conaway declined to comment specifically on store closings, workforce reductions or other aspects of Kmart's restructuring plans. "We're looking at every unnecessary and unproductive asset -- that's across the company," The News quoted Conaway as saying. "We're working hard to be thoughtful and look at the business in detail. I'm anxious to get it behind us as quickly as possible." Kmart said earlier that it will decide by April which of its 2,114 stores will close. Conaway said he hoped to act sooner than that. "I want to move pretty quickly because our first priority is our associates, to make sure they're fully focused," he said. "You shouldn't be looking over your shoulder" wondering if you have a job. "At that point, from a personal standpoint, people can really be at rest and be focused on taking care of the customer." Kmart plans to emerge from bankruptcy by July 2003, according to court documents. The third-largest discount retailer has long struggled to compete with No. 1 Wal-Mart Stores Inc. on price and No. 2 Target Corp. on quality.

http://accesswdun.com/article/2002/1/199482

Kmart says it&#39;s making progress in reorganization

Kmart says it's making progress in reorganization