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Retailers top dim forecasts
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November 27, 2001: 4:00 p.m. ET
Kmart net loss triples from year-ago; Sports Authority 3Q also dim.
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NEW YORK (CNN/Money) - Kmart Corp. reported a third-quarter net loss triple the size of the prior year's shortfall as the nation's No. 3 retailer struggled with declining sales and rising costs related to a company-wide restructuring.
Separately, Sports Authority posted a third-quarter loss, coming in just shy of Wall Street's expectations on sliding sales of razor scooters and World Series merchandise.
Excluding a restructuring charge, Troy, Mich.-based Kmart Corp. (KM: down $0.46 to $6.39, Research, Estimates) posted a loss of $127 million, or 25 cents a share, compared with a loss of 16 cents a share a year earlier. That beats the forecast of analysts surveyed by earnings tracker First Call of 27 cents a share.
Including a $148 million pre-tax charge related to restructuring its supply chain operations and operating Bluelight.com, its e-commerce Web site, Kmart posted a net loss of $224 million, or 45 cents a share, compared with a net loss of $67 million, or 14 cents a share, a year earlier.
Sales slid 2.2 percent to $8 billion from $8.2 billion in the quarter. Sales at stores open at least a year, a key gauge known as same-store sales, fell 1.5 percent in the period.
Kmart's performance sharply contrasts with that of its chief competitors in the discount space such as Wal-Mart Stores Inc. (WMT: down $0.68 to $55.07, Research, Estimates) , Target Corp. (TGT: down $0.12 to $38.00, Research, Estimates) , which have posted sales and earnings gains in the last several quarters as consumers hunt for bargains amid sluggish economic activity.
Since taking the helm of the company about a year ago, Kmart CEO Chuck Conaway has embarked on a massive restructuring program that included shuttering under-performing stores and streamlining costs by getting rid of excess inventory, improving store appearances and adding more efficient checkout equipment.
Kmart also is ramping up its grocery offerings in order to better compete with Wal-Mart, which in addition to being the world's biggest retailer, is also the biggest U.S. grocery store operator.
However, as the economy has slipped into a recession with rising unemployment, decreased demand and a volatile market in the last year, many consumers who once frequented department stores and specialty shops have shifted their spending to discount chains where Wal-Mart and Target have consistently grabbed the lion's share from Kmart with stronger execution, analysts have said.
Kmart's prices still average higher than Wal-Mart and Target, according to analysts, despite its BlueLight Always program in which the company lowered prices on 30,000 every-day items.
"I think people are a little nervous about turnarounds in general," Eric Beder, a retail analyst with Ladenburg, Thalmann & Co. told Reuters Tuesday. "This is probably the largest turnaround ever tried in retail, and people are impatient."
For its part, Kmart remains optimistic.
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"We continue to work at fixing our core business by being in-stock, pricing competitively and providing an excellent shopping experience for Kmart customers," Conaway said in a statement. "We have made considerable progress in all of these areas, but have a lot more work to do."
Kmart told analysts on a conference call that its sales decline was due in part to a cut in the number of pages in its weekly advertising circular as well as its BlueLight Always campaign.
"There's no doubt we made a mistake by cutting too much advertising too fast," Conaway said.
But looking ahead, Kmart said sales over the Thanksgiving holiday weekend were encouraging. The retailer also said it was comfortable with Wall Street estimates for the fourth quarter.
Sports Authority 3Q lacks authority
Meanwhile, Fort Lauderdale, Fla.-based Sports Authority (TSA: down $0.05 to $5.40, Research, Estimates) lost $4.5 million, or 14 cents a share, in its third quarter ended Nov. 3. The company said a penny per share was for closing stores. Analysts surveyed by earnings tracker First Call had forecast a 14 cent a share loss, and First Call said the 13-cent-a-share loss figure is the one that is comparable to forecasts.
The net loss was little changed from the $4.6 million, or 14 cents a share, in the year-earlier period.
The company said it expects fourth-quarter earnings per share of 35 to 39 cents, although the company cautioned that economic uncertainty makes estimates difficult. That's below analysts' forecasts of 41 cents a share, according to First Call, but ahead of the 38 cents a share it earned a year earlier.
Third-quarter sales fell to $304.8 million from $331.9 million, as same-store sales fell 4.5 percent.
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Sports Authority said that in addition to the slowing U.S. economy, sales fared poorly because of the comparison with strong sales of scooters and merchandise related to the Subway World Series in New York a year earlier. Excluding the bump in sales from those items, same-store sales would have declined only 1 percent, the company said.
Shares of Sports Authority (TSA: Research, Estimates) lost 23 cents to $5.45 Monday. 
From staff and wire reports
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