Cash fast missouri

While many Wall Street analysts have predicted Kmart will close several hundreds of stores--some calling for as many as 700--most hard evidence, including recent bankruptcy court filings, suggests the nation's second-largest discount retailer is on the verge of shuttering roughly 300 of its more than 2,100 locations. In the end, though, it's not just the number of stores that counts. Rather, what counts equally is the fact that Kmart is finally taking steps to eliminate underperforming aspects of its business, which, in this case, will dramatically alter the profile of the company-not to mention the retail industry.

In court papers filed with the U.S. Bankruptcy Court of the Northern District of Illinois on Feb. 15, Kmart reported it expects to save about $250 million a year from the store closings. Based on this figure, the short-term number of closings should not surpass 300, though drawing one figure from the other must be acknowledged as a approximate act. No one will know for sure until the company's court filing is made public.

Kmart has noted that it planned to confidentially file a store-closing plan with the bankruptcy court on March 11 and make an announcement shortly thereafter about which stores will go.

In documents supporting a motion filed Feb. 15 with the bankruptcy court, Kmart reported that it had begun the store review process and concluded how much it would save through envisioned unit closings and ancillary actions, which may include dropping one or more distribution centers.

The document stated: "The debtors are engaged in an extensive analysis of all of their stores and the financial performance of each, Based on this analysis, the debtors plan to compile a list of store locations that are either unprofitable or not performing in accordance with debtors' expectations. By closing the stores, the debtors will be able to focus their reorganization efforts on their profitable stores. In addition, by streamlining the debtors' retail operations, they will be able to increase cash flow, minimize excessive carrying costs and increase return on invested capital. For example, the debtors expect to realize approximately $250 million in annual savings upon completion of the store-closing sales."

The documents filed Feb. 15 also stated the retailer expected store-closing sales would be completed by this summer and that Kmart's store-closing agent may not advertise a clearance event as a "going-out-of-business" sale.

Among the most aggressive in advocating store closures, Shelly Hale of Banc America said closing up to 700 stores will significantly boost Kmart's average annual performance per store-driving it from $17 million to $18.5 million--and staunch the wounds inflicted on Kmart by powerful competitors. "Rather than continue to bleed itself to death by closing a couple hundred stores a year, we believe the protection of bankruptcy will allow Kmart to more quickly address the severity of its problems by closing a significant number of underperforming stores and up to $10 billion in unprofitable sales."

As with other analysts, Hale has issued a store-closing scenario that suggests Kmart is in need of significant restructuring. She also argues Kmart is best served paring down stores to concentrate where it has demonstrated an advantage, in urban areas and with ethnic consumers.

Still, several lines of evidence suggest the 300 number is safer, at least for the moment. At a recent press conference, Kmart chairman Jim Adamson said that the number of stores closed would not correspond to the higher estimates published by some analysts. One thing is certain though, Kmart, in its strategic considerations, will not abandon urban and ethnic consumers, Adamson said, adding that he is personally reviewing operations at all urban stores that might be candidates for closure to see if they can be turned around rather than shuttered. "Forty percent of dollars spent at Kmart are spent by African-American, Native American, Asian-American and Latino consumers."

However, broad-line retail executives contacted by DSN Retailing Today, including one completely noncompetitive with Kmart, said a figure up to around 300 closures seemed most likely. One retail executive speculated that creditors' committees might pressure Kmart to close more stores further down the line.

At least one critical vendor seems to be banking on a relatively small number of store closings. Fleming, in a recent conference call, suggested it was looking at around 200 Kmart store closings. Although the suggestion was labeled hypothetical, it was made to an audience of Fleming analysts and has to be considered within that context.

Other evidence suggesting the 300-unit figure is close to the money include an anonymous report first obtained and published by the Atlanta Business Chronicle that included a list of 291 stores slated for closure. Though Kmart refused to comment on the authenticity of the report, listed stores that DSN Retailing Today visited were engaged in unprecedented clearance activity and were largely soldthrough on frequently delivered items in health and beauty aids and frozen foods. In one case, a nearby unlisted Kmart in the same community as one cited for closure was in substantially better shape in terms of in-stocks, and its employees were convinced its sister store was on the way out.

The list gained credibility among retailers, vendors and others as it circulated in February and into March, with some saying they had confirmation of its legitimacy. In addition, on another tack, a Kmart analyst related the retailer had designated between 200 and 300 stores as inventory drawing points during the period immediately after the retailer filed for Chapter 11 when vendor shipments were still sporadic.

The question of how Kmart is evaluating stores for potential closure is a matter that will impinge on the number and location to be shuttered, as Adamson noted. Kmart, for reasons of common sense and bankruptcy rules, will justify the closure of most stores based on profitability issues. However, the current bankruptcy filing is an opportunity for the retailer to reshape the map and place itself on a better competitive footing, as Hale noted.

David Rosenberg, executive vp at retail real estate specialist Robert K. Futterinan & Associates, noted Kmart is strong in the Northeast, for example, with many newer stores and fewer key competitors. Given its position, Kmart's strengths in the Northeast should be telling. "You probably will see fewer closings in this area than in others," he said.

He said he expects to see few, if any, store closings in Northeastern metropolitan areas such as New York City. Due in part to its strength with urban and ethnic consumers, Kmart has many of its highest-volume units there. It also benefits from a lower degree of broad-liner competition in northeastern cities as with the demise of lowprice department stores such as Alexander's and regional discounters such as Caldor.

Rosenberg also believes strength in cities is a factor likely to weigh on Kmart as it makes store-closing decisions nationwide. Yet, the store-closing formula may be complex. Kmart will have to weigh the value of older units in markets that have been subject to demographic shifts or in circumstances that preclude their being overhauled to satisfy evolving operating dynamics, as well as competitive and cannibalization issues.

"I think Kmart has to play to competitive advantages, said Eric Beder, a ladenberg Thalmann analyst. "They have a once-in-a-lifetime opportunity to reconfigure the store base and set up stores for growth down the road. They're not going to get this opportunity again. Management has to be aggressive to get rid of leases where they are weak and concentrate where they are strong."