K mart Profits Sag 16% in 3rd Quarter as Sales Drop

K mart Corp., the nation’s second-largest retailer, said Monday that declining sales pushed its third-quarter profit 16% below the year-ago period.

The Troy, Mich.-based company reported net income of $77.4 million in the quarter ended Oct. 30, compared to $92.4 million in the quarter ended Oct. 24, 1984.

Sales in stores open a year or more were down 3% from a year earlier, K mart said, although overall sales totaled $5.2 billion, up nearly 5% from $5 billion in the year-ago quarter.

“Sales have been terrible,” said Monroe Greenstein, an analyst with the New York brokerage Bear, Stearns & Co. “The company is unable to gain sales volume unless it can promote merchandise and there’s not enough promotion merchandise on the shelves.”

K mart this year has sought to move away from bargain promotions toward a higher quality of merchandise, “but it doesn’t seem to be working,” Greenstein said.

Bernard M. Fauber, K mart chairman, said this year’s earnings decline was “a substantial improvement over the 48.2% decline reported in the second quarter of 1985.”

“Cautious consumer spending has delayed the normal pickup in holiday and winter sales,” he said. “However, we anticipate an improvement in the pace of sales as we get closer to Christmas.”

K mart said its gross margin for the quarter was 28.7%, up from 28.1% a year earlier. “Improved inventory management and new merchandising programs are credited for this comparison,” Fauber said.

Stacy Ruchlamer, an analyst with Shearson Lehman Bros. in New York, noted the improved gross margin and said: “We’re excited by this. It reflects very strong apparel sales, which have a good margin. All in all, it’s not a bad quarter.”

K mart had 3,822 retail outlets in the third quarter, including 2,176 K mart stores.

Other outlets include Waldenbooks, Pay Less Drugs, Kresges, Furr’s Cafeterias, Designer Depots, Canadian Big Tops, Jupiters, Bishop Buffet Cafeterias, Builders Squares, Bargain Harolds and an Accent store.