Shudders turned to shivers as news of the nation’s third-largest discount retailer filing for bankruptcy protection trickled down to Kaua’i and its single location in Lihu’e. Kmart Corporation (NYSE: KM) filed for Chapter 11 bankruptcy yesterday, also announcing that it
Shudders turned to shivers as news of the nation’s third-largest discount retailer filing for bankruptcy protection trickled down to Kaua’i and its single location in Lihu’e.
Kmart Corporation (NYSE: KM) filed for Chapter 11 bankruptcy yesterday, also announcing that it had secured $2 billion in loans to fund ongoing operations while hoping to emerge from bankruptcy stronger and leaner as early as next year.
The $2 billion financing plan must gain bankruptcy court approval.
Analysts have predicted the company will need to close as many as 700 of its 2,114 U.S. stores, but the company said it will only close unprofitable ones. The company has six Hawai’i stores: Three on O’ahu and one each on Maui, the Big Island and Kaua’i.
Managers at the Kaua’i store on Nawiliwili Road yesterday referred media calls to its corporate and media relations departments at the corporation’s Troy, Mich. headquarters. A recording there indicated that no information on closing of individual stores is available, and that all stores are open for business as usual.
The company’s e-commerce site, www.bluelight.com, is operating normally. Information on the bankruptcy filing and reorganization news available at www.kmartcorp.com.
Employees continue to be paid as normal, the company said.
The Kaua’i store has avoided the corporate hatchet before. Last year, it wan’t on a long list of unprofitable stores in the United States the company announced it would close.
The Kaua’i outlet is still thought to be profitable, though Kmart officials don’t discuss single-store results.
Maybe enough is told of the company’s future faith in its Kaua’i store that it was one of around 1,000 stores to install automated self-checkout systems, allowing customers to scan and bag their own items and pay with cash or credit card.
The Kaua’i store has a lease through the end of 2019, said Robin Gibson, senior property manager and broker in charge of the Chaney Brooks & Company office in Lihu’e that manages the property for developer MacNaughton Group of O’ahu.
Grove Farm Co. owns the land under the Kaua’i Kmart and has leased the Kukui Grove Marketplace to MacNaughton Group to develop and manage.
“They have no right to close. If they close, they’ll be in breach of their lease,” Gibson said.
He wouldn’t divulge lease rent details, store sales figures, or other confidential information. He did say he has a gut feeling the store is doing well financially.
In cases like this, Gibson explained, someone will take around 90 days to approve or reject in-place leases, then decide which stores to close.
In a press release announcing the bankruptcy filing and restructuring plan, Kmart officials said essentially the same thing, indicating that one of the restructuring strategies includes “evaluating the performance of every store and terms of every lease in the Kmart portfolio by the end of the first quarter of 2002, with the objective of closing unprofitable or underperforming stores this year to increase cash flow and return on invested capital.”
Still, the specter of the Kaua’i Kmart closing hung like storm clouds on a windless day over the offices of the Kaua’i Chamber of Commerce yesterday.
“We’re going to hurt for jobs” if the local store closes, said Mamo Cummings, president of the Chamber. She said she knows many of the 160 employees and that many of them are part-time workers. She asked where they will find other part-time jobs if the store closes.
Kmart said its decision to seek judicial reorganization was based on a combination of factors, including a rapid decline in its liquidity resulting from the company’s below-plan sales and earnings performance in the fourth quarter, the evaporation of the surety bond market, and an erosion of supplier confidence.
Other factors include intense competition in the discount retailing industry, unsuccessful sales and marketing initiatives, the continuing recession and recent capital market volatility.
“It became clear that this course of action was the only way to truly resolve the company’s most challenging problems,” said Charles C. Conaway, chief executive officer.
“I am confident that, with our tremendous resources and dedicated supplier and associate communities, Kmart will emerge from this process as a stronger, more dynamic, more profitable enterprise with a well-defined position in the discount retail sector,” Conaway added.
Conaway outlined how the company intends to continue during the reorganization process, including:
– Investing in key merchandising and marketing to enhance Kmart’s strategic positioning, and by offering exclusive brands that will differentiate Kmart from its competitors.
– Investing in critical technology, standardized information technology platforms and merchandising.
– Seeking bankruptcy court approval to immediately terminate the leases of approximately 350 stores that were closed previously by Kmart or are being leased by other tenants at rents below Kmart’s obligation, thereby resulting in an immediate annual savings of approximately $250 million.
– Seeking to reduce annual expenses by an additional $350 million through re-engineering the organization, staff reductions, office consolidations and other actions.
Kmart Corporation is a $37 billion company. For the four-week period ended Jan. 2, net sales decreased 1 percent on a same-store basis. Total net sales were essentially level with the $5.5 billion for the same period last year.
Staff Writer Paul C. Curtis can be reached at mailto:pcurtis@pulitzer.net or 245-3681 (ext. 224). The Associated Press contributed to this report.
