Kmart Corp. reported lackluster earnings again Monday and said tough competition and slow sales continued to batter its core discount store operations.
The eighth consecutive quarter of disappointing earnings was below Wall Street's low expectations. Kmart shares closed down 87.5 cents at $12.875 on the New York Stock Exchange.
"The magnitude of the decline was significantly greater than I had been expecting," said retail analyst Joseph Ronning of Brown Bros. Harriman in New York. "Clearly, it was a very disappointing quarter."
The nation's second-largest retailer earned $145 million, or 31 cents a share, for the three months ended Jan. 25. That contrasts with a loss of $1.19 billion, or $2.61 a share, for the same period a year ago. Results for the year-earlier quarter reflected one-time charges of $521 million for the sale of operations and $862 million for a restructuring.
Sales in the latest period fell to $10.44 billion from $11.01 billion.
Kmart said sales of winter apparel were weak in the fourth quarter and combined with "an extremely competitive retail environment" to force price cuts.
For the year, Kmart earned $296 million, or 63 cents a share, which contrasts with a 1993 loss of $974 million, or $2.15 a share. Sales totaled $34.03 billion, down 7.3% from $36.69 billion.
Sales for 1993 included income from three subsidiaries that are no longer part of Kmart. On a comparable-store basis, 1994 sales were $34.03 billion, up 5.9% from $32.13 billion in 1993.
Earnings were improved by a one-time pretax gain of $168 million from the sale of majority stakes in Kmart's OfficeMax and Sports Authority subsidiaries.
"We are disappointed with 1994 earnings," President and Chief Executive Joseph E. Antonini said. "We enter 1995 with a strong commitment to reduce costs and improve our financial performance. Our U.S. Kmart executive team is accelerating the process of identifying and implementing initiatives to strengthen our business."
The company said its aggressive markdown policy on discontinued and seasonal merchandise in the fourth quarter cut its gross profit margins by $171 million, which more than offset the gain of $168 million from the offerings of shares in OfficeMax and Sports Authority.
"Everybody was looking for pretty low numbers," said Ron Petrie, a retail analyst with Roney & Co. "They're certainly pretty low numbers."
Kmart has been struggling for several years to overcome fierce competition from discounters with more modern stores and efficient operations, especially No. 1 Wal-Mart Stores Inc. and Dayton Hudson Corp.'s Target stores.
The Troy, Mich.-based company is undergoing a major restructuring and has remodeled hundreds of stores and closed others. Ronning said the recent cost cutting should show results later this year.
"Hopefully, they have their inventories in line and with the benefits of cost cutting (and) 1995 should show a substantial improvement," he said.
Kmart took a pretax charge of $257 million against fourth-quarter earnings for restructuring costs, including closings of regional offices, the sale of corporate aircraft and "a more aggressive merchandise markdown policy."