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Kmart To Close 284 Stores, Cut 22k Employees

3/08/2002 02:35:00 PM Eastern

Troy, Mich. - Kmart will close 284 under-performing stores, liquidate more than $1 billion in inventory and lay off some 22,000 store workers as part of its Chapter 11 restructuring plan.

Pending approval by the Bankruptcy Court for the Northern District of Illinois on March 20, the nation's No. 2 discounter plans to shut 271 Kmart stores and 12 Kmart Supercenters in 40 states, as well as one Kmart store in Puerto Rico, resulting in a cash charge of between $1.1 billion and $1.3 billion.

The struggling mass merchant said cost savings from the move will improve cash flow by about $550 million this year and some $45 million annually thereafter, and will boost earnings before interest, taxes and depreciation (EBITDA) by about $31 million a year.

Analysts had expected Kmart to shutter between 400 and 500 of its 2,100 locations, and news of the more moderate closings pushed its share price up 8 percent in the hours following the announcement.

In a statement, Kmart CEO Charles Conaway noted that "The decision to close these under-performing stores, which do not meet our financial requirements going forward, is an integral part of the company's reorganization effort. We are confident that doing so will provide the company with a healthier, more productive store base."

He said the company "deeply regrets" the impact of the closings on the stores' employees, customers and communities, and that it will make "every effort to ease the transition for those associates who are displaced."

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