Kmart Profit Up 35% in Second Quarter

Troy, Mich.-based Kmart Corp., the nation’s third-largest retailer, said that strong sales of most merchandise pushed second-quarter profit up 35%, slightly exceeding Wall Street estimates. Kmart’s income from continuing operations rose to $31 million, or 6 cents a share, in the quarter ended July 30, from $23 million, or 5 cents a share, a year earlier. The results excluded Kmart’s Builders Square home-improvement chain, which was sold in July to investment bank Leonard Green & Partners. With Builders Square included, the year-ago net income was $34 million, or 7 cents a share. The profit topped average forecasts of 4 cents a share published by First Call, which tracks profit estimates. Analysts said Kmart’s earnings would have been far higher had it not been for problems in its women’s clothing business, where its fashion-oriented offerings turned off customers. Markdowns to clear slow-selling items slashed gross profit margin to 21%, from 22.3% a year earlier. Sales at stores open at least a year rose 5.6%. Kmart stock rose $1.19 to close at $12.94 on the NYSE.