Posted on 03/09/2005 2:30:36 PM PST by Cagey
DETROIT (AP) - Kmart Holding Corp. announced plans Wednesday to convert more than a quarter of its stores to a Sears format following its merger with Sears, Roebuck and Co. Troy-based Kmart disclosed the plans on the same day that it posted a $309 million profit for the fourth quarter, a 14 percent increase over the previous year. The retailer also said sales at stores open at least a year continued to fall, though at a much lower rate than they had been.
In trading Wednesday, Kmart's stock rose $2.42, or 2.2 percent, to close at $111.66 on the Nasdaq Stock Market.
Kmart and Sears shareholders are due to meet March 24 at Sears' headquarters outside of Chicago to approve Kmart's acquisition of the department store chain, first announced in November. The $11 billion deal will create the nation's third-largest retailer.
Kmart, which currently operates 1,480 stores, revealed in a filing with the Securities and Exchange Commission that it plans to convert about 400 Kmarts to Sears stores over the next three years.
The company didn't specify what kind of Sears stores they would be, but they likely would fit the new Sears Essentials concept for mid-size, stand-alone stores unveiled in February. Sears said then that it would convert 25 of the 50 stores it acquired from Kmart several months before the merger announcement into that format. The company previously had announced plans to turn three of the acquired Kmarts into Sears Grand stores, a similar off-mall concept, only bigger.
The Sears Essential stores will combine high-end Sears products such as appliances, tools and home electronics with convenience items such as health and beauty items, snacks and pet supplies. It also could provide a good venue to add well-known Kmart brands, such as Martha Stewart Everyday, to the Sears product mix.
The announcement of the store conversion was the latest sign that Kmart plans to diminish the role of its own brand in favor of the Sears name. The first sign came in the name of the merged company: Sears Holdings Corp., to be based at Sears' current headquarters in Hoffman Estates, Ill.
Gary Ruffing, a retail consultant at BBK Ltd. in Southfield and a former Kmart executive, said using the Sears name gives Kmart an opportunity to move out of the strictly discount market, where it has been sandwiched between low-cost Wal-Mart and stylish Target. Kmart always has been known as a discounter, he said, but with the Sears name, the company can add more expensive products and raise the prices on some of their successful brands.
"If they do that in a Kmart store, they'd be pricing themselves out of the market," Ruffing said.
But Ruffing said he did not foresee an end to the Kmart name in the immediate future because there are some Kmart stores that are doing well as Kmarts, despite the company's overall declining sales.
Kmart said Wednesday that it earned $3.09 per share in the quarter ended Jan. 26, compared with $2.78 per share in the fourth quarter of fiscal 2003. Excluding gains on sales of assets and bankruptcy-related recoveries, adjusted net income increased 20 percent over the prior year to $259 million, or $2.59 per share.
Total revenue fell 7 percent to $5.9 billion. Same-store sales, which compare sales in stores open at least a year and are considered a good measure of a retailer's health, fell 4.5 percent. In the two previous quarters, the decline was 12.8 percent and 14.9 percent, Kmart said.
"While we are pleased with our performance, our return to solid, profitable operations is only the first stage in our effort to revitalize this organization," chief executive Aylwin Lewis said in a statement. "We look forward to what still needs to be accomplished and plan to continue our momentum by further improving our operations and the customer shopping experience in 2005."
Income for the full year was $1.1 billion, or $11 per share. That included $579 million from asset sales and $37 million in bankruptcy-related recoveries, as well as a $14 million after-tax charge related to the company's decision to reduce and terminate a credit facility.
There were no comparable full-year 2003 earnings because the company was in bankruptcy for part of that year.
let me know if you write a book about Sears
Sears hand tools are pretty good. However I can't recommend Craftsman sheets, towels, and suits.
You should think of the current K-mart as a real estate liquidation company, not a retailer. They were running low on good locations to sell, so they went after Sears. They'll slap the Sears name on a bunch of locations they haven't been able to sell, and probably close about that many Sears stores to liqudate the real estate.
I take it you have never followed the "flashing blue light?" Where else but K-Mart can one see a wedding gown draped over a case of Pennzoil?
ROFLMAO!!! One of the funniest lines I've read on this forum yet.
Hah. "Receipt"? That guarantee above the door says nothing about a receipt. We don't need no stinkin' receipt!
Years ago, I worked in the plumbing & hardware dept. at Sears for a while. A certain element would occasionally march in and demand refunds for Craftsman power tools that they had obviously just bought at garage sales. The persistent ones got their refunds. That was what really opened my eyes to the greatness of that motto above the doors. Since then, all of my major appliance purchases have been from Sears.
If they don't add something like "certain restrictions apply" to that guarantee emblazoned above the doors, the persistent ones will continue to get their refunds.
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