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Kmart beats estimates
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March 6, 2000: 9:03 a.m. ET
Nation's No.3 retailer uses $1.1B store conversion to vault past expectations
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NEW YORK (CNNfn) - A recent overhaul of its typical store prototype helped Kmart Corp. rebound from a disappointing third quarter and post a double-digit increase in fiscal fourth quarter earnings that easily surpassed Wall Street's expectations Monday.
The nation's No. 3 retailer, behind Wal-Mart (WMT: Research, Estimates) and Sears Roebuck & Co. (S: Research, Estimates), posted a profit from continuing operations of $412 million, or 77 cents per diluted share, for the quarter ended Jan. 26.
That exceeded both the $353 million, or 65 cents per share, the company earned a year earlier and the 69 cents per share analysts polled by research firm First Call Corp. were expecting.
Including previously announced non-recurring charges, Kmart (KM: Research, Estimates) actually earned $403 million during the quarter, down from the $518 million it earned last year.
Company officials attributed the earnings growth to a $1.1 billion store conversion process completed during 1999 that implemented its big-box Big Kmart prototype, featuring an expanded selection of merchandise, in nearly 1,900 Kmart stores nationwide.
While the high costs of that conversion had helped stymie the company's profit margin in previous quarters -- including its fiscal third quarter when it missed analysts' expectations -- Kmart rebounded to post a gross margin of 22.2 percent of overall sales during the fourth quarter.
Sales for the quarter were $11.1 billion, up 6.8 percent from the $10.4 billion it recorded a year earlier. Comparable store sales during the quarter were up 3.7 percent.
For the full year, Kmart recorded earnings from continuing operations of $633 million, or $1.22 per diluted share, up from the $518 million, or $1.01, it earned a year earlier.
Overall sales for the year rose 6.6 percent to $35.9 billion, up from the $33.7 billion recorded a year earlier. Comparable store sales increased 4.8 percent in 1999.
Kmart shares added 5/16 in trading Friday to close at 8-9/16. 
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Kmart Corp.
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