Kmart's reports $2.42 billion loss in 2001

DETROIT - Kmart Corp. reported a nearly tenfold increase in losses for fiscal year 2001 over the previous year, posting a loss of $2.42 billion, or $4.89 per share. <br> <br> The bankrupt discount retailer released its 2001 earnings Wednesday in its annual report that also included some amended earnings for the first three quarters of 2001 as a result of an investigation of its accounting methods. <br> <br> In 2000, Kmart lost $244 million, or 48 cents a share. <br> <br> For the fourth quarter ended Jan. 30, Kmart lost $1.5 billion, or $3.49 per share. That compares with earnings of $249 million, or 48 cents per share, for the fourth quarter of 2000. <br> <br> &#34;These results reconfirm the significant difficulties Kmart experienced last year,&#34; said James B. Adamson, Kmart&#39;s chairman and CEO. Those difficulties, he said, included unsuccessful sales and marketing initiatives, an erosion in supplier confidence and below-target sales and earnings in the fourth quarter -- the same reasons the retailer filed for bankruptcy. <br> <br> &#34;We are moving aggressively to address these challenges,&#34; Adamson said. <br> <br> Kmart had said it was reviewing its accounting following an anonymous letter claiming to be from employees. The letter was received shortly before the Troy, Mich.-based retailer&#39;s Chapter 11 filing on Jan. 22. <br> <br> The FBI is working with Kmart on an investigation, The Detroit News reported. An FBI spokesoman declined to give details. <br> <br> Wednesday, Kmart said it has since received copies of additional letters sent to the SEC and others &#34;expressing concern&#34; about various matters. Kmart said it&#39;s investigating those matters, as well as the way the company was managed under former chief executive Chuck Conaway. <br> <br> The investigation spawned by the first letter was related to vendor discounts and general liability reserves. <br> <br> Kmart said it is changing the way it reports vendor discounts following the accounting review. It released new data for the first three quarters to reflect the change. <br> <br> There has been heightened sensitivity about accounting issues in the wake of the collapse of energy trader Enron Corp. <br> <br> Kmart said because of the bankruptcy filing and uncertainty of its future relationships with vendors, it will now record the discounts -- called rebates and allowances -- only after it has a formal agreement. <br> <br> Previously, Kmart recorded the discounts in anticipation of receiving them. <br> <br> The first quarter restated net loss is $233 million from a loss of $25 million. For the second quarter, it reported a loss of $377 million from the previously reported loss of $95 million; and its restated loss for the third quarter was $235 million, from a loss of $224 million. <br> <br> Kmart also reported that its net sales for the 2001 fiscal year were $36.1 billion, a decrease of 2.4 percent from the $37 billion reported the previous year. <br> <br> &#34;It&#39;s pretty massive (the losses) but to be honest I really didn&#39;t know what to expect,&#34; said Mike Porter, a retail stock analyst with Morningstar. &#34;What I didn&#39;t expect was that sales would hold up as well as they did.&#34; <br> <br> Porter said it looks like Kmart sacrificed profits for sales growth. <br> <br> &#34;That&#39;s not something you can do for an extended period of time. You can do it for a while but not very long,&#34; Porter said. <br> <br> Marty Zohn, partner in the law firm of Proskauer and Rose, said the loss is &#34;a very deep hole to climb out of. <br> <br> &#34;The challenge for the company is to show lenders and funding sources that it has turned a corner and the bad news is over,&#34; he said. <br> <br> Kmart was to have filed its annual report April 30, but asked for an extension so its new executives could review its accounting. <br> <br> Analysts expressed concern that the delay was because of an investigation, saying it suggested there were worse problems prior to bankruptcy than have been revealed. <br> <br> Excluding nonrecurring items, including income from reorganization items and results of discontinued operations, Kmart reported a loss of $987 million, or $2 a share, in 2001 compared to earnings of $219 million, or 47 cents per share, in the previous year. <br> <br> On the New York Stock Exchange, Kmart shares closed Wednesday down 5 cents at $1.17. <br> <br> <br> ------ <br> <br> On the Net: <br> <br> Kmart Corp.: http://www.kmartcorp.com <br> <br>

http://accesswdun.com/article/2002/5/194639