TROY, Mich. -- Kmart here said last week it is focusing on product layout, selection and pricing in its efforts to improve its food offering, which it called an "underperforming" area.
During a conference call with reporters, following release of the company's results for the second quarter ended July 31, Julian Day, Kmart's chief operating officer, was asked to identify specific changes he might make in Kmart's food offering and replied, "There are some questions as to our adjacencies, which products are next to which. I think we need to look very closely at the whole SKU range of offerings. I think in some cases we need to look at our pricing."
Day also said that Kmart's problem with out-of-stocks was largely behind it. He noted that Kmart's "latest in-stock presentation was 95.9%," compared with 94.7% eight weeks ago and about 88% when the company filed for bankruptcy protection in January.
"Right after this company entered Chapter 11, there were very major out-of-stocks across many departments," he noted. "We now have a presentation in-stock number that is above our corporate goal. It will take a little bit of time, unfortunately, for customers to notice that we are in stock because some people haven't been in our stores for a while.
"We may have to set another goal, but getting back into stock is an action we regard as pretty much done."
Questioned about published reports that the executive at Fleming, Dallas, Kmart's principal distributor of food and consumables, responsible for Fleming's relations with Kmart had left the company, Day said he "heard about" those reports.
Fleming said that the executive involved, William H. Marquand, has resigned but will remain with the company for the next three months. "We continue to work closely with Fleming to improve our offerings in consumables," Day said.
Also last week, in a filing with the Securities and Exchange Commission, Kmart said it had concluded its investigation of past vendor allowance transactions and determined that it would not have to further restate financial results for prior periods because the amounts involved would have an "immaterial effect" on its past earnings, particularly as a result of its bankruptcy filing.
Kmart said that as a result of the premature recording of vendor allowances, the fiscal-2000 net loss was understated by $38 million, and the fiscal-2001 net loss was overstated by $78 million. The company noted, "We have taken actions to strengthen our internal controls concerning vendor allowance transactions."
Sales for the 13-week quarter declined 15.7% to $7.5 billion, same-store sales decreased 11%, the company had a net loss of $377 million (the same net loss as in second-quarter 2001), and the loss per share was 75 cents (vs. 77 cents in the previous second quarter).
For the first 26 weeks of 2002, sales declined 12.1% to $15.2 billion, same-store sales fell 11.4%, the net loss was $1.8 billion (compared with a loss of $610 in the first 26 weeks 2001), and the loss per share was $3.63 (vs. $1.25 in the previous first half).
