Retailer Kmart Holding Corp. Thursday posted its first quarterly profit since emerging from bankruptcy, and built up a surprisingly large amount of cash as it cut costs and spruced up its stores.
The Troy, Michigan-based retailer said it earned $276 million, or $2.78 per share, in the fourth quarter ended Jan. 28, compared with a loss of $1.1 billion a year earlier.
Kmart filed for Chapter 11 bankruptcy protection in January 2002 after a poor holiday shopping season compounded its financial woes. It emerged in May 2003 with a new management team, 600 fewer stores and much lower debt.
The retailer had said in January that it recorded a profit in November and December, which could put it on track to post its first quarterly profit since exiting bankruptcy.
Total sales dropped 25.8 percent to $6.3 billion, in part because of store closings. Sales at stores open at least a year -- a key retail measure known as same-store sales --dropped 13.5 percent.
Kmart has been holding back on price cuts to preserve profits. The retailer listed about $2.1 billion in cash and cash equivalents as of Jan. 28, more than expected.
The company has also been reducing inventory and cleaning up stores, which critics said had looked cluttered before and during bankruptcy.
Kmart faces fierce competition from Wal-Mart Stores Inc. and Target Corp., and some analysts have questioned whether the retailer has a place in a discount sector dominated by those two powerhouses.
Kmart is banking on its exclusive brands such as Martha Stewart Everyday and Joe Boxer to keep customers coming in.
Stewart’s recent conviction for lying to investigators over a suspicious stock sale cast a huge shadow over her long-running relationship with Kmart. The retailer made no comment about Stewart Thursday, and previously said only that it was saddened by the verdict.
