Kmart Corp will fire as many as 37,000 workers and shut 326 stores as it tries to stem losses and emerge from bankruptcy. The 106-year-old discount chain lined up US$2 billion in financing.
The restructuring will cost about US$1.7 billion and follows the elimination of 22,000 jobs and the shuttering of 283 stores last year. Chief Executive James Adamson said on a conference call that he doesn't anticipate further closings at the 1,800-store chain and expects to exit bankruptcy by April 30.
PHOTO: AP
Competition from Wal-Mart Stores Inc and Target Corp has driven chains ranging from Ames Department Stores Inc to Bradlees Inc out of business the past few years.
Kmart's survival depends on winning back customers with cleaner stores and more exclusive merchandise such as Martha Stewart housewares and Joe Boxer apparel, analysts said.
"It's a big challenge for them," said Walter Loeb, president of Loeb Associates, a New York-based retail-consulting firm. "I haven't seen their stores looking ready, nor is the economic environment such that they can be sure about coming out of bankruptcy."
The job cuts are the fifth-largest round of firings by a US company in the past decade and the biggest since Motorola Inc said it would eliminate 42,900 positions in 2001. Hardest hit will be Texas with 54 Kmart stores, Florida with 25, North Carolina with 18 and New York with 14.
Kmart's store closings are expected to reverberate through local communities, affecting the stores that sit next to them in malls, the real-estate companies that own those properties and the local newspapers that count on them for advertising.
"People are going to feel it," said Richard Dunne, executive director of community and economic development for Derby, Connecticut, where Kmart is closing one store located next to a Wal-Mart. "I don't think a discount retailer would do very well if it took the site." The company is closing 266 Kmart and Big Kmart stores and 60 Kmart supercenters in 44 states and Puerto Rico. It is also shutting a distribution center in Corsicana, Texas.
Kmart, based in Troy, Michigan, has about 205,000 employees.
Loans from General Electric Co's Commercial Finance unit, Fleet Retail Finance Inc and Bank of America will replace debtor-in-possession financings once it exits bankruptcy, Kmart said in a statement. The loans are secured by inventory.
Kmart will seek US Bankruptcy Court approval at a Jan. 28 hearing and expects the store closings to finish about 60 days after that.
Kmart's debt rose US$0.0225 on the dollar, to about US$0.1825, traders said. The company's shares, which will be worthless under the reorganization, fell about US$0.09 to US$0.17.
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