Kmart Posts Profit; Shares Rise 6.9%

Kmart Holding Corp., the third-largest U.S. discount retailer, reported its first quarterly profit in three years Thursday after closing stores and cutting jobs during bankruptcy proceedings. Shares of Kmart rose 6.9%.

Fiscal fourth-quarter net income was $276 million, or $2.78 a share, the Troy, Mich., company said. Kmart had a loss of $1.1 billion, or $2.13, a year earlier, before the company reorganized its finances. Revenue in the period ended Jan. 28 fell 26% to $6.33 billion.

Kmart, which shut 599 locations and fired about 57,000 workers, has focused on weekly specials on some items instead of trying to match Wal-Mart Stores Inc.’s low prices. Chief Executive Julian Day kept inventory low during the holiday season to limit the need for clearance sales.

Shares of Kmart rose $2.38 to $37.06 on Nasdaq. They have gained 55% this year.

Kmart also benefited from an $86-million pretax gain from real estate transactions. Sales at stores open at least a year declined 14% as the company reduced the number of products sold and inventory after its bankruptcy filing in January 2002.

Kmart hasn’t seen significant changes in sales of Martha Stewart Everyday housewares after Stewart’s conviction on charges of obstructing justice two weeks ago, the retailer said in a filing with the Securities and Exchange Commission.

The retailer has relied on exclusive lines such as Martha Stewart Everyday towels, gardening tools and Christmas ornaments to attract shoppers. Kmart started selling Martha Stewart housewares in 1997 after working with Stewart on a consulting basis for about a decade. The products, which now include chrome toothbrush holders, bamboo gardening rakes and blue-and-white cornflower comforters, have been among the retailer’s best-selling items.

Kmart had $2.1 billion in cash and cash equivalents at the end of the quarter, more than expected, it said.