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Kmart Loses $69 Million in 3rd Quarter : Retailing: Discounter blames reorganization of stores and competition from rival Wal-Mart.

From Reuters

Discount retailer Kmart Corp., grappling with poor performance at its older stores and stiff competition from Wal-Mart Stores Inc., on Thursday reported a loss for the latest quarter, blaming the downturn on the reorganization of its stores.

It said results were also hurt by weakness at its home improvement retailer, Builders Square, and Kmart’s Canadian operation.

The nation’s second-largest retailer said it lost $69 million, or 15 cents a share, in the third quarter, contrasted with a profit of $39 million, or 8 cents a share a year earlier. The loss came despite a 2.5% rise in total revenue to $7.98 billion, compared to $7.78 billion in the third quarter of 1994.

Following the news, Kmart’s stock slipped 12.5 cents to $7.625 a share on the New York Stock Exchange.

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The company said its results were affected by aggressive clearance of discontinued inventory, continued promotional activity, liquidation of closed stores and shifts in the company’s merchandise mix.

“Sales in our U.S. Kmart stores increased 4.1% on a comparable store basis in the third quarter and 5.4% for the first nine months of 1995,” said Floyd Hall, chairman, president and chief executive.

“However, our gross margin shortfalls continue to be a major problem,” he said.

The company said its profit margin for the third quarter shrank to 21.2% from 24.4%, reflecting increased volumes of lower margin goods and the clearance of discontinued merchandise.

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“In the first nine months of 1995, we eliminated over $500 million, at retail, of discontinued goods and we anticipate that the impact on gross margin rate will moderate during the fourth quarter,” he said.

Kmart said its third-quarter results included a net gain of $48 million from the sale of its remaining interest in The Sports Authority Inc.


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