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CHICAGO - In its plans filed Friday with the U.S. Bankruptcy Court for the Northern District of Illinois, Kmart said it would begin a new strategy to zero in on neighborhoods.
The retailer will begin stocking its 1,513 stores with items specific to communities where it operates. The strategy is considered a key initiative by Kmart brass, who outlined a five-year business plan in the filing.
The "store of the neighborhood" concept is based on smaller stores where local managers will be able to buy fashion, food and everyday items that cater to the tastes of their shoppers.
Kmart will retain its exclusive brands: Martha Stewart Everyday, Joe Boxer, Disney and Sesame Street.
The retailer said it expects to be profitable by next year with net income of $181 million. By 2007, it forecasts a profit of $644 million. That compares with a loss of $286 million when this fiscal year ends Jan. 31.
Kmart said its reorganization plan calls for two key creditors, ESL Investments and Third Avenue Trust, to invest about $293.4 million in exchange for stock in the reorganized company.
In a separate filing, the retailer said a review of how former managers ran the company found "credible and persuasive" evidence that some had violated their responsibilities to the company.
At issue in the so-called "stewardship review" are millions of dollars in loans given out to top executives shortly before Kmart declared bankruptcy a year ago, and allegations ?- raised by anonymous letter writers -- of accounting irregularities.
Since filing for bankruptcy protection, Kmart has closed more than 600 stores, affecting 70,000 workers.
The reorganization plan is subject to bankruptcy court approval. A hearing is scheduled for Feb. 25.