Kmart to close 284 stores in 40 states, cut 22,000 jobs - NewsOn6.com - Tulsa, OK - News, Weather, Video and Sports - KOTV.com |

Kmart to close 284 stores in 40 states, cut 22,000 jobs

Updated:
DETROIT (AP) _ Kmart Corp. will close 284 stores in 40 states and Puerto Rico, cutting about 22,000 jobs, as part of its restructuring under Chapter 11 bankruptcy, the company announced Friday.

The stores to be closed include 271 Kmart discount stores and 12 Kmart Supercenters and one Kmart store in Puerto Rico.

Kmart, the nation's third biggest discount retailer after Wal-Mart and Target, currently operates more than 2,100 stores nationwide. The job cuts amount to just under 9 percent of its work force of about 250,000.

``The decision to close these underperforming stores, which do not meet our financial requirements going forward, is an integral part of the company's reorganization effort,'' Chuck Conaway, chief executive, said in a statement.

``While the business rationale supporting this action is compelling, we deeply regret the impact these store closings will have on our associates, our customers and the communities where these stores are located,'' he said.

The Troy-based retailer released the number of closings as it notified affected employees. The stores will remain open pending bankruptcy court approval.

Kmart said it anticipates that the sales generated from store closings and related cost savings will be about $550 million in 2002 and about $45 million annually after that.

An employee at a store in the Detroit suburb of Novi and one in Atlanta confirmed that employees were informed of those stores closing.

``It's just another stupid move,'' said Norman Beasley, who was shopping Friday at the Novi store. ``What am I supposed to do now, go to Wal-Mart?''

Linda Muhammad, working at a Kmart service desk in Atlanta, said she wasn't given any details about when the store would close. ``It'll be the third (Kmart) store that I've worked at in 10 years,'' that has closed, she said.

Kmart filed for Chapter 11 bankruptcy protection on Jan. 22, following lower-than-expected holiday sales, downgrades by several credit rating agencies and a stock dive.

At the time of the filing, Kmart said it would close a number of unprofitable stores. Analysts predicted anywhere from 250 to 700 stores could close.

Kmart expects to record a charge in the range of $1.1 billion to $1.3 billion as a result of the closings and job cuts, but the closings are expected to improve its earnings before interest, taxes and depreciation by about $31 million a year.

On Wednesday, a bankruptcy court approved $2 billion in additional financing for Kmart, plus up to $150 million in bonuses for employees who help the company get off the rocks.

The $150 million is a ceiling on bonuses Kmart can pay to vice presidents, various middle managers and pharmacists whom it considers crucial to keeping stores in operation.

Union attorney William Widmer ridiculed the notion that more than 9,000 employees are key to Kmart's longevity. He said those likely to get the money were to blame for the company's woes.

Bankruptcy and lease experts say the store closings will be devastating for the smaller stores that share a strip mall with a soon-to-be dark Kmart.

``They depend on Kmart for foot traffic,'' said Martin Zohn, with Proskauer Rose LLP. ``The center loses most of its attraction to consumers, so even if there is a replacement tenant eventually, there's a long period of a boarded-up store.''

For property owners, it means they have to find ways to fill the space, likely with supermarkets, other discount retailers, health clubs or home improvement stores, said Robert Futterman, CEO of Robert K. Futterman and Associates.

``It throws a real wrench in the works,'' Futterman said.

It also could take Kmart anywhere from six months to two years to liquidate a store, Futterman said, further damaging other tenants who might have to deal with an anchor store that has a ``going out of business sale'' sign up.
Powered by Frankly
News On 6
303 N. Boston Ave.
Tulsa, OK 74103
Newson6.com is proud to provide Oklahomans with timely and relevant news and information, sharing the stories, pictures and loves of Oklahomans across our great state.
All content © Copyright 2000 - 2017 KOTV. Oklahoma Traveler™ is a registered trademark of Griffin Communications. All Rights Reserved.
For more information on this site, please read our Privacy Policy, and Terms of Service, and Ad Choices.