Kmart Corp. said Tuesday that it is closing 326 stores and eliminating up to 37,000 workers nationwide in an aggressive move to emerge from Chapter 11 bankruptcy protection by April 30.
Nine stores will close in Illinois–five in the Chicago area, and the others in Jacksonville, Ottawa, Springfield and Urbana. They are part of the 266 Kmart and 60 Super Kmart stores–a combination general merchandise and grocery store–scheduled to close by April 30. The closings, which must be approved by a U.S. Bankruptcy Court judge in Chicago, will drop the total number of Kmart’s stores to 1,500. In June, the discount retailer closed 283 stores, a move that eliminated 22,000 jobs.
At the Super Kmart at 6211 N. Lincoln Ave., most shoppers said they would miss the 24-hour store, which includes a grocery, a pharmacy and a Western Union outlet along with the chain’s usual offerings.
“I think it’s very sad,” said Louis Charriez, who lives nearby and regularly stops at the store to buy his groceries. “Dominick’s is near here, but it so high-priced. I get my meat and everything else I need all in one place.”
“It’s a shame because it is going to hurt the community,” said Charriez, a cashier supervisor at the Target store in Niles. “A lot of senior citizens come here to get their food.”
Nell Finch said she has shopped at the store about twice a month for the last two years since the Kmart nearer to her home closed.
“I’m sorry to hear it’s closing. It had everything I needed,” Finch said. “It was convenient and reasonable.”
Executives for the discount retailer said closing nearly 17 percent of its existing store base, shutting down a distribution center in Texas and trimming jobs would ensure Kmart’s financial future.
Employees losing their jobs who have worked for Kmart for at least one year will get an average of four weeks of termination pay. Employees who have spent less than one year at their jobs will get a pro-rated payment based on salary and length of employment. All will get extended benefits and job-placement assistance.
Store closings were only part of the news Kmart released Tuesday. The company said it had obtained $2 billion in exit financing, received approval for a five-year business plan from its board of directors, posted its first monthly profit since filing for bankruptcy protection Jan. 22, 2002, and restated its 2001 financial report.
Executives also said they would file a plan of reorganization by Jan. 24 that calls for creditors to be paid in newly issued shares of stock. Current shareholders will not receive any new shares, and their current Kmart shares will be worthless.
Kmart has been trading on the over-the-counter bulletin board since it was delisted by the New York Stock Exchange on Dec. 19.
`Excellent chance’ to survive
Ulysses Yannes, a retail analyst with Buckman, Buckman and Reid in New York, said he was surprised that Kmart planned to emerge from bankruptcy in April and that it posted a profit of $349 million in December, a tough month for many retailers.
“They had the best gross margins than they had all year,” Yannes said. “It shows me how profitable they can be. I think they have an excellent chance not only to survive, but survive profitably.”
Jim Adamson, Kmart’s chairman and chief executive, called the decision to close more stores and eliminate more jobs an “extremely difficult and particularly painful,” yet “necessary action to make Kmart a stronger company.”
Several factors considered
Kmart officials said they compiled the closing list by analyzing several factors, including sales performance, lease terms, surrounding competition, distance from a distribution center and the proximity to another Kmart store.
The company operated 2,100 stores before seeking protection from its creditors.
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Kmart became the nation’s largest retailer to seek protection from its creditors when company executives filed for bankruptcy reorganization in Chicago. Poor holiday sales, combined with aggressive spending, left the retailer short of cash and unable to pay its bills.
Some critics contend that previous leaders mismanaged the company.
Federal agencies and Kmart officials are investigating the use of corporate jets and loans to top executives totaling more than $20 million in the weeks before filing for bankruptcy protection.
Kmart executives said Tuesday that it has substantially completed its internal investigation on the actions of former executives. Details have not been released.