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Kmart Posts 4Q Profit

BY CSA STAFF

Troy, Mich., Kmart Holding Co. posted a $309 million profit for the fourth quarter, a 14% increase over the previous year. Same-store sales fell, but the rate of decline was much less than the previous two quarters.

Net income grew to $309 million, or $3.09 per share, from $270 million, or $2.78 per share, a year ago. Excluding gains on sales of assets and bankruptcy-related recoveries, the company posted adjusted profit of $259 million, or $2.59 per share, in the latest period.

Total sales fell to $5.91 billion from $6.33 billion last year. Same-store sales declined 4.5% vs. a decline of 12.8% and 14.9% in the previous two quarters.

Kmart also announced plans to convert approximately 400 Kmart stores to Sears stores over the next three years, after its merger with Sears, Roebuck and Co. is complete. The plans, revealed in a filing with the Securities and Exchange Commission, bode well for the expansion of the new Sears Essentials concept, which is a freestanding, mid-sized format.

In related news, Institutional Shareholder Services (ISS), the nation’s leading independent proxy advisory firm, released a report today that gave a favorable recommendation to the proposed Sears-Kmart merger.

“Based on our review of the terms of the transaction … in particular the reasonable premium received, the reasonable synergy assumptions, the positive market reaction and the improved governance profile, we believe that the merger agreement warrants shareholder support,” ISS stated.

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Frank’s Nursery & Crafts Files Reorganization Plan

BY CSA STAFF

Troy, Mich., Frank’s Nursery & Crafts announced the filing of its proposed plan of reorganization in the Bankruptcy Court for the Southern District of New York. The company filed for Chapter 11 bankruptcy protection in September 2004. Frank’s has concluded the wind-down of its store operations by completing going-out-of-business sales at its locations and has also sold or rejected substantially all of its leasehold interests.

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Kroger Reported to Consider Winn-Dixie Buy

BY CSA STAFF

Cincinnati, Kroger Co. may be considering making a play for a large chunk of Winn-Dixie, according to a report in the South Florida Business Journal. Kroger would serve as a supplier to a portion of the bankrupt supermarket operator’s 900-plus supermarkets at first. Eventually, it would take over Winn-Dixie’s operations in northern Florida and other states, the report said, with Winn-Dixie retaining a core group of stores in southern and central Florida.

In other news, Kroger reported wider fourth-quarter losses due to a hefty impairment charge related to the company’s Ralph’s and Food 4 Les chains. Quarterly losses totaled $675.9 million, or 93? per share, including a goodwill impairment charge of $884 million, or $1.21 per share. In the year-ago period, Kroger reported a loss of $337.4 million, or 45? per share, including charges of $663.1 million, or 89? per share. Total sales increased 5.1% to $13.7 billion from $13.03 billion last year.

Looking ahead, Kroger expects 2005 net income to exceed $1.16 per share, excluding the effect of the goodwill impairment charge. Kroger expects its earnings growth to be fueled by improved results in Southern California and lower interest expense.

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