Posted on 03/09/2005 2:30:36 PM PST by Cagey
DETROIT (AP) - Kmart Holding Corp. announced plans Wednesday to convert more than a quarter of its stores to a Sears format following its merger with Sears, Roebuck and Co. Troy-based Kmart disclosed the plans on the same day that it posted a $309 million profit for the fourth quarter, a 14 percent increase over the previous year. The retailer also said sales at stores open at least a year continued to fall, though at a much lower rate than they had been.
In trading Wednesday, Kmart's stock rose $2.42, or 2.2 percent, to close at $111.66 on the Nasdaq Stock Market.
Kmart and Sears shareholders are due to meet March 24 at Sears' headquarters outside of Chicago to approve Kmart's acquisition of the department store chain, first announced in November. The $11 billion deal will create the nation's third-largest retailer.
Kmart, which currently operates 1,480 stores, revealed in a filing with the Securities and Exchange Commission that it plans to convert about 400 Kmarts to Sears stores over the next three years.
The company didn't specify what kind of Sears stores they would be, but they likely would fit the new Sears Essentials concept for mid-size, stand-alone stores unveiled in February. Sears said then that it would convert 25 of the 50 stores it acquired from Kmart several months before the merger announcement into that format. The company previously had announced plans to turn three of the acquired Kmarts into Sears Grand stores, a similar off-mall concept, only bigger.
The Sears Essential stores will combine high-end Sears products such as appliances, tools and home electronics with convenience items such as health and beauty items, snacks and pet supplies. It also could provide a good venue to add well-known Kmart brands, such as Martha Stewart Everyday, to the Sears product mix.
The announcement of the store conversion was the latest sign that Kmart plans to diminish the role of its own brand in favor of the Sears name. The first sign came in the name of the merged company: Sears Holdings Corp., to be based at Sears' current headquarters in Hoffman Estates, Ill.
Gary Ruffing, a retail consultant at BBK Ltd. in Southfield and a former Kmart executive, said using the Sears name gives Kmart an opportunity to move out of the strictly discount market, where it has been sandwiched between low-cost Wal-Mart and stylish Target. Kmart always has been known as a discounter, he said, but with the Sears name, the company can add more expensive products and raise the prices on some of their successful brands.
"If they do that in a Kmart store, they'd be pricing themselves out of the market," Ruffing said.
But Ruffing said he did not foresee an end to the Kmart name in the immediate future because there are some Kmart stores that are doing well as Kmarts, despite the company's overall declining sales.
Kmart said Wednesday that it earned $3.09 per share in the quarter ended Jan. 26, compared with $2.78 per share in the fourth quarter of fiscal 2003. Excluding gains on sales of assets and bankruptcy-related recoveries, adjusted net income increased 20 percent over the prior year to $259 million, or $2.59 per share.
Total revenue fell 7 percent to $5.9 billion. Same-store sales, which compare sales in stores open at least a year and are considered a good measure of a retailer's health, fell 4.5 percent. In the two previous quarters, the decline was 12.8 percent and 14.9 percent, Kmart said.
"While we are pleased with our performance, our return to solid, profitable operations is only the first stage in our effort to revitalize this organization," chief executive Aylwin Lewis said in a statement. "We look forward to what still needs to be accomplished and plan to continue our momentum by further improving our operations and the customer shopping experience in 2005."
Income for the full year was $1.1 billion, or $11 per share. That included $579 million from asset sales and $37 million in bankruptcy-related recoveries, as well as a $14 million after-tax charge related to the company's decision to reduce and terminate a credit facility.
There were no comparable full-year 2003 earnings because the company was in bankruptcy for part of that year.
They should replace the "K" with the wildly popular "Wal"
My favorite thing about Sears is that it says, "Satisfaction Guaranteed or Your Money Back" above every entrance door. (Note the conspicuous lack of any time limit.)
My favorite thing about Kmart is that I rarely have reason to set foot in one.
Who cares what they call the stores? All the Sears tools and appliances I bought several years ago have been replaced by better products at the same or a lesser price. That's what they need to fix, not their image.
My only hope is that my local Sears doesn't become infected by Kmart. Kmart would do well to just fire every single one of their employees and start from scratch. I'm not certain how they recruit their people, but it appears to take a certain type of surly laziness to become a manager there.
What they should replace is that God-awful cotton candy/strawberry syrup odor that hits you square on the minute you go through the doors as you enter. Then they'd be one giant leap ahead of Wal-Mart, which has a similar, but not as offensive odor wafting through their aisles as well.
Do they manufacture that odor? What's the deal with that?
sorry friend that was just changed. 90 days money back.
electronics 30 days
A rose by any other name......................
Went shopping today. Sears seems to be deserted and their merch is poorly organized. Fred Meyers is sharp and on the ball as usual, but with minor complaints about labeling discount items. The Federal Building had two guards, an x-ray, a walk-thru metal detector, and a wand. I got to use all of these and show picture ID, too. Even after filling up their large metal dish with the metal from my pockets I stuned the beeber. Strangely, there were few visitors aside from those with urgent business or plenty of time to kill.
Based on the physiques of much of the employees and customers, it apparently is some kind of glucose solution they are required to consume in bulk.
Gee, from bankruptcy to $111 a share in a couple of years...meanwhile the old KMRT shareholders got completely hosed, wiped out. This is/was one of the most inventive deals of all time. [withholding opinion/comment]
{GASP!} I'm going to make it a point to see if the lettering was removed from the entrances before I buy that new refrigerator. If not, I'll make sure to keep a timestamped photograph.
Profits through M&A. Store closures and changing the color of money. Wonder the organization will be profitable in 3 years when the merger is closer to completion.
Sears AND K-Mart both have a corporate policy that if you want a career in management with them, you must be 100% fully and totally relocateable, on their whim, at the drop of a hat. Only a certain unstable segement of society is willing to agree to such a deal.
WalMart chased most of the K-Marts out of Texas. The only one I know about that is left is just off post at Ft. Hood, although I'm told there are a few others.
Now I can boycot Sears as well as K-Mart. Curious how Sears, Wards, and K-Mart went downhill when they stopped (or cut way back) selling guns and ammunition. I used to like Sears. I had a JC Higgins (by High Standard) shotgun and did my father. I traded my in about 20 years ago, but my brother is having Dad's refurbished for my nephew to use, the thing is well over 50 years old and has a cracked stock. It's been cracked for most of that 50 years in fact.
We call it Kmapart around here.
I got a notice in the mail yesterday.
Cash in my shares of Sears stock at $50 or get 1/2 as many shares of the 'new' company.
Both stocks are selling above those prices so I think I'll switch.
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