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Kmart Beats Expectations

May 17, 2001

DETROIT (AP) _ Kmart Corp. swung to a loss in the first quarter as the Troy-based retailer spent money to revamp its stores. The results were better than Wall Street expected.

For the quarter ended May 2, the company posted a net loss Thursday of $25 million, or 5 cents per share, compared with profits of $22 million, or 6 cents per share, in the year-ago quarter.

Excluding a one-time charge for early retirement and employee severance related to an employee buyout program announced in March, the company lost $10 million, or 2 cents per share, in the first quarter.

Analysts surveyed by Thomson Financial/First Call expected a loss of 7 cents per share for the quarter.

``I think they’re making good progress,″ said analyst Jeffrey Feiner of Lehman Bros. of New York.

Sales rose 1.7 percent to $8.3 billion from $8.2 billion in the first quarter of 2000.

Kmart chairman Chuck Conaway told analysts the company is pushing to increase it frequency, or the number of times a customer comes into its stores.

``The Holy Grail for Kmart is frequency. This is a constant march to the sea as we fix our frequency business,″ he said.

``These results are in line with our plan to fix our business by taking decisive, aggressive and focused steps to transform our company,″ Conaway said.

The company plans to cut advertising and other costs, fix its supply chain, enhance marketing and improve its 250 least-performing stores, he said.

Two-thirds of the chain’s stores are undergoing renovations and Kmart plans to spend nearly $2 billion on infrastructure improvements at stores.

Kmart is ``comfortable″ with analysts’ estimates the company will earn 46 cents per share for the year, said Juli Musch, a Kmart vice president for investor relations.

Since joining Kmart a year ago, Conaway has worked to invigorate the retailer by shaking up its management ranks and moving to spend $1.3 billion in technology to bolster in-store execution. He also resurrected Kmart’s the Blue Light Special marketing program.

Kmart’s top priorities include fixing its supply chain, enhancing its marketing, cutting expenses and improving its 250 least-performing stores, Conaway told analysts Thursday.

Research shows the Blue Light Special’s return is a success, he said.

``We’re very fortunate that we’ve got a megabrand. Blue Light serves as an umbrella marketing brand,′ Conaway said. ``Kmart is becoming a preferred store again.″

Kmart was up 45 cents a share to close at $10.58 Thursday on the New York Stock Exchange.

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On the Net:

Kmart, http://www.bluelight.com

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