RETAILING : Kmart Discounts Speculation on Chapter 11

Speculation that Kmart Corp. might file for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code is inaccurate and misleading, the company said Monday.

“We want to reassure the vendor community and the financial community that the company is solid,” spokeswoman Mary Lorencz said after the discount retailer issued a press release in response to a Wall Street Journal story Monday on the speculation.

The company issued a similar statement Friday evening at the request of the New York Stock Exchange after Kmart shares fell 75 cents, to $11.375, on huge volume of 10.2-million shares. On Monday, shares plunged 87.5 cents to $10.50, a 10-year low. More than 12.5 million shares changed hands, making it the most active NYSE stock.

The market was reacting Friday in part to a report from CNBC-TV commentator Dan Dorfman that said some Kmart suppliers were nervous about the company’s condition.

Some other analysts have been suggesting that it might be wise for the company to seek Chapter 11 protection.

However, Kmart Chairman Floyd Hall said Monday that the company’s financial position is solid and improving. He said its liquidity has increased with the sale of $3.5 billion in assets during the past 18 months, its expenses have been reduced by $500 million during 1995 and an additional $300 million in cuts have been identified through the end of 1996.

Kmart operates 2,163 Kmart stores and 171 Builders Square outlets.

The company lost $54 million in the second quarter. With many tired and under-performing stores, Kmart has been struggling to compete for discount shoppers with Wal-Mart Stores Inc. and Dayton-Hudson Corp.’s Target chain.