DISCOUNTERS : Kmart, in a Turnaround, Posts $402-Million Profit

Kmart Corp. said Tuesday that it earned $402.3 million in the fourth quarter ended Jan. 30.

A year earlier, Kmart reported a $20.5-million loss.

The company’s fourth-quarter 1989 results reflected one-time charges for Kmart’s store modernization program that is scheduled for completion in 1994. Without those costs, income for that period would have been $395.6 million, the company said.

Fourth-quarter sales totaled $9.748 billion, down $4 million from a year earlier.

Kmart said its latest results included a $57-million pretax charge to account for the effects of inflation on its discount store inventory. The company said it adopted a new accounting system in 1990 that mitigated the effects of inflation on its balance sheet.

Without this change, Kmart said it would have incurred a pretax charge of $216.1 million to cover the impact of inflation.

For all of fiscal 1990, Kmart reported earnings of $756.2 million on sales of $32.07 billion, compared to $322.7 million on sales of $29.53 billion in 1989.

Without a $640.1-million provision for the store modernization program, earnings in 1989 would have been $745.2 million, the company said.

The Troy, Mich-based retailer reported that its gross margin was lower than a year ago: 25.5% of sales compared to 26.4% in 1989. The company said the reduction primarily reflects expansion of Kmart’s expanded competitive pricing program and the inclusion of the lower-margined PACE Membership Warehouse operation for all of 1990. The PACE results were included in only the last two months of the 1989 results.

Kmart said the Persian Gulf crisis had not affected sales at the company’s 4,000 retail outlets, including 2,327 Kmart stores as well as the company’s Pay Less Drug Stores, Builders Square, Waldenbooks, PACE Membership Warehouse and Sports Authority stores in the United States, Puerto Rico and Canada.