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Kmart To Close More Stores

1/14/2003 03:25:00 PM Eastern

Troy, Mich. - Kmart plans to shutter 326 stores, close a Texas distribution center and lay off upwards of 35,000 more workers as it prepares to emerge from bankruptcy by its target date of April 30.

The ailing discount chain, which filed for Chapter 11 protection one year ago, said its board of directors has approved a reorganization plan which it will file with the United State Bankruptcy Court later this month.

The company has also received a commitment for up to $2 billion in exit financing from GE, Fleet and Bank of America.

The store closings will include 60 Kmart SuperCenters and 266 Kmart and Big Kmart stores in 44 states and Puerto Rico. The closures, which will cost the company about $1.7 billion in restructuring charges, follow last year's shuttering of 283 stores and the layoff of 22,000 employees.

Closing stores while under bankruptcy protection allows Kmart to walk away from unfavorable leases, analysts said.

Said chairman/CEO James Adamson, 'I am extremely proud of the progress that Kmart has made over the past year. The company will emerge from its reorganization cases with a much stronger balance sheet, liquidity position and cost structure.'

Meanwhile, the company reported that net sales decreased 5.7 percent on a same-store basis to $4.71 billion for the five weeks ended Jan. 1. The decline would have been sharper save for the inclusion of Thanksgiving Day and weekend sales, which weren't included in the prior year period. Net income was $349 million.

'We were encourage by the company's performance in December, particularly in light of the extremely challenging economic environment nationwide,' said president/COO Julian Day. He said the results reflected Kmart's efforts to reduce costs, increase turns and improve gross margin.

Day added that the company is planning an 'aggressive' marketing campaign that emphasizes product selection, service and value.