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Strategies & Market Trends : Sharck Soup -- Ignore unavailable to you. Want to Upgrade?

To: Jim Spitz who wrote (37468)	1/3/2002 7:58:22 AM
From: Jim Spitz	Read Replies (1) \| Respond to of 37746

Kmart shares fall as analyst says 'sell' Associated Press Published Jan 3 2002 DETROIT -- Shares of Kmart Corp. fell more than 13 percent Wednesday after an analyst downgraded the stock to "sell," citing disappointing fourth-quarter sales and earnings and a "precarious" cash position. Prudential Securities Inc. said it would not be surprised if Troy, Mich.-based Kmart filed for Chapter 11 bankruptcy "if trends do not improve" in the next six months. The financial organization downgraded the discount retailer's stock from "hold" to "sell." While bankruptcy is not imminent for Kmart, it is possible if the retailer's performance does not improve by the second half of the year, Prudential said in a research report released Wednesday. Kmart has 2,100 stores, 43 of them in Minnesota. "Fourth-quarter sales and earnings have been disappointing, and our concerns about cash flow have been heightened," the report said. A Kmart spokesman said Prudential's concerns are unfounded. "Kmart has sufficient funds and available lines of credit to continue to carry out our strategies," spokesman Jack Ferry said. "Kmart is implementing a major corporate revitalization strategy that includes massive cultural and operational changes" that are already showing results, Ferry said. Still, Prudential is not the only financial institution to question Kmart's ability to fend off more-vibrant competitors Wal-Mart Stores Inc. and Minneapolis-based Target Corp. "Kmart just seems to be the third choice for consumers behind Wal-Mart and Target because [Wal-Mart and Target] have cleaner stores, they're more modern, even better parking lots," said David Sowerby, portfolio manager for Bloomfield Hills, Mich.-based Loomis Sayles Inc. From December 1991 to December 2001, Target's stock price increased 696 percent, Wal-Mart's rose 291 percent, but Kmart's dropped 77 percent, Sowerby noted. Kmart said in a recorded message that sales from Dec. 20 to Dec. 26 were "above plan," with high-ticket items, such as TV sets and videogame consoles, leading the way. For the month of December, though, the retailer said its sales were below expectations; the company had anticipated results for the month to be flat or to increase by 2 percent. The company will release complete sales results for the month next Thursday. Prudential lowered its fourth-quarter earnings estimate for Kmart from 43 cents a share to 20 cents and a loss of 12 cents a share for the full year compared with its previous estimate of 15 cents. Its estimate for the next 12 months also was reduced from 35 cents a share to 25 cents. A consensus of analysts surveyed by First Call/Thomson Financial expects the company to earn 39 cents for the fourth quarter ended Dec. 31 and 10 cents for the full year. In November, Kmart announced a third-quarter loss of $224 million, or 45 cents per share. Excluding a hefty restructuring charge, the nation's No. 3 retailer lost $127 million, or 25 cents per share, in the quarter. The results beat Wall Street expectations, but in December Moody's Investment Service downgraded Kmart's debt rating to junk status. In trading Wednesday on the New York Stock Exchange, shares of Kmart fell 72 cents to $4.74. © Copyright 2002 Star Tribune. All rights reserved.