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TROY, Mich. - Kmart Holding Corp. reported its third consecutive quarterly profit yesterday despite declines in revenues, sales, and same-store sales.
Total sales in the three-month quarter ended July 28 fell 15.3 percent to $4.79 billion, while same-store sales dropped 14.9 percent. Total revenue also dropped 15.3 percent to $4.8 billion from $5.6 billion in the year-ago period.
Kmart blamed the same-store sales drop on cutbacks in promotional events and newspaper advertising, the impact of cool weather on sales of lawn and garden merchandise, and a transition in apparel lines ahead of back-to-school product launches.
Kmart, which emerged from bankruptcy-court protection in May 2003, reported net income of $155 million, or $1.54 a share, for the period ended July 28, in contrast to a net loss of $5 million, or six cents a share, a year earlier.
On the bright side, results for the retailer's latest quarter include a pretax gain of $72 million from the sale of assets. Moreover, gross margins increased by $9 million to $1.24 billion, and gross margin as a percent of sales increased to 26 percent from 22 percent, attributable to fewer markdowns, a reduction in inventory losses from shoplifting, and other factors.
During the quarter -- which analysts say provides the retailer's first "apples-to-apples" comparison since emerging from bankruptcy as a restructured company in May of last year -- cash and cash equivalents increased approximately $400 million to a total of $2.6 billion.
Kmart, which has earned distinction as the nation's largest retailer to ever to file for bankruptcy, said it reduced its credit agreement to $1.0 billion from $1.5 billion.
In a statement, Kmart c.e.o. Julian Day said: "We are pleased with our continued progress and ability to deliver consistent profit. We have continued to focus on process changes that simplify the operations of our stores and distribution centers, including improving merchandise flow and lowering inventory levels which result in lower shrink expense, lower clearance and promotional markdowns, and lower payroll expenses."
The struggling discounter, which announced last week it was cutting 10 percent of its headquarters staff in the information technology, human relations, public relations, and video networking departments, said lower payroll and clearance expenses helped boost profits.
Additionally, Kmart last week also lowered the maximum number of stores it plans to sell to Home Depot from 24 to 19 after the home improvement retailer said certain closing conditions of the deal weren't satisfied.
Although yesterday's earnings announcement sent Kmart's stock up 15 percent to a little over $74, Several Wall Street analysts have written research reports saying that Kmart's real estate is worth far more than its stores and questioning whether the company plans to sell its roughly 1,400 stores. Kmart has repeatedly denied such speculation, saying it is committed to improving the stores.