Kmart's Troubles Growing

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Kmart's Troubles Growing

TROY, Mich. -- Bankrupt retailer Kmart Corp. posted a loss of $377 million in the second quarter, as sales lagged and the company dealt with the stigma of its Chapter 11 filing.

The company also revealed Monday it had discovered accounting transactions that boosted its loss in 2001 and understated the amount the year before. The Securities and Exchange Commission (SEC) is investigating the discrepancies, according to the Associated Press.

Kmart's net loss of $377 million for the quarter that ended July 31 was the same as the year-ago quarter. Company executives said the focus continues to be on lifting sales, which have grown slower than anticipated.

Improving sales "is job number-one around here," Kmart president and chief operating officer Julian Day said in a conference call with reporters. Day also said it wasn't certain when the company would emerge from bankruptcy. Officials initially pointed to the summer of 2003 as a target.

Kmart disclosed the new accounting discrepancies in a report, filed with the SEC Monday. The company said the transactions overstated the net loss for fiscal 2001 by $78 million, while understating the loss in 2000 by $38 million.

Chief financial officer Al Koch said it didn't appear that restating financial statements for those periods would be required, the report said. The SEC and FBI already were investigating Kmart's accounting practices.

Net sales for the period were $7.52 billion, a decrease of 15.7 percent from $8.92 billion in 2001. Kmart closed 283 underperforming stores in the second quarter. Same-store sales were down 11 percent for the second quarter.

Executives at the discount chain had hinted that sales were below expectations as consumers continued to shy away from Kmart stores during its reorganization, even though selections have increased. The company also has shed a total of some 22,000 jobs this year.