|
Kmart takes $230M charge
|
 |
June 11, 1999: 2:37 p.m. ET
Retailer blames 2Q write-off on its relationship to troubled Hechinger
|
NEW YORK (CNNfn) - Kmart Corp. said Friday it will take a $230 million charge in its fiscal second quarter because of its financial ties to Builder's Square operator Hechinger Co., the home improvement products retailer that has filed for bankruptcy law protection.
Kmart, the nation's third-largest general retailer, said the non-cash after-tax charge reflects the possibility that up to 115 former Builders Square locations currently operated by Hechinger may become its liability. That's because Kmart (KM) has guaranteed the leases at certain Builders Square locations.
"While the precise outcome of the legal process remains to be seen, Kmart believes that, in light of Hechinger's filing, it is appropriate to take the charge at this time," said Floyd Hall, chairman, president and CEO of Kmart. "Considering current market conditions, we anticipate that Kmart will be able to convert or sub-lease most, if not all, of these properties within a reasonable period after they are returned."
Hechinger, which filed for Chapter 11 protection Friday in United States Bankruptcy Court for Delaware, said it immediately will close about 89 under-performing stores in approximately 36 markets in order to stem losses.
Following the closures, Hechinger will operate approximately 117 stores in 21 states. The Largo, Md.-based company plans a major reorganization.
"Our primary objective is to right-size the company so we can focus management and move forward with a solid core of performing locations with an appropriate capital structure," said Mark Adams, president and chief executive officer of Hechinger.
Hechinger, which has lost customers to upstart rivals such as Lowe's Cos. Inc. (LOW) and Home Depot Inc. (HD), listed assets of $1.3 billion and liabilities of $1.4 billion, including $323 million in unsecured or subordinated bond debt. Some 22 Hechinger affiliates, including BSQ Acquisition and Center Holdings, also filed for Chapter 11 protection.
Hechinger's second quarter runs through the end of July. A year ago, it earned $80 million, or 16 cents per diluted share, after a $13 million after-tax charge for an early-retirement program
Shares of Troy, Mich.-based Kmart were unchanged at 14-15/16 in mid-afternoon trading Friday. 
-- from staff and wire reports
|
|
|
|
|
 |
|
