Kmart Corp. will close 13 percent of its stores, cutting nearly nine percent of its work force, as part of its reorganization under bankruptcy protection. This results in a charge of $1.1 billion to $1.3 billion. The closings, which require bankruptcy court approval, will shutter 284 of the company’s 2,114 stores and reduce its 250,000-person work force by 22,000. Kmart said it expects to liquidate more than one billion dollars in inventory as it closes the stores.
This news follows on the heals of a bankruptcy court approval for two billion dollars in new financing, plus up to $150 million in bonuses to encourage key employees to stay with the company and help it through its financial woes. The troubled retail operator views the new financing as essential to staying in business and engineering a financial turnaround.
Moderator Comment: Should publicly traded companies such as Kmart be required to let shareholders know when turn around efforts are not working?
In related news, a group of stockholders filed a class-action suit against Chuck Conaway, ceo, Kmart. The suit claims that Mr. Conaway’s statements that the company was being revitalized by a restructuring of operations was false and misleading.
Mr. Conaway is the subject of the lawsuit because Kmart is in Chapter 11 bankruptcy protection. [George Anderson – Moderator]
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