EARNINGS ROUNDUP : Kmart Reports 2nd-Quarter Loss of $54 Million

Kmart Corp., hurt by heavy discounting on its merchandise and charges from divesting its OfficeMax Inc. and Borders Group units, said Monday that it lost $54 million during the second quarter.

The results include a $77-million charge associated with the sale of Kmart’s stake in the two units through initial public offerings earlier this year.

OfficeMax, a discount office supply chain, and Borders, a book superstore chain, were two of the crown jewels of Kmart’s once-burgeoning specialty retail empire. They were divested to raise cash and to allow the company to focus on its struggling general merchandise business.

Kmart’s loss came to 12 cents a share, a significant drop from the year-earlier profit of $94 million, or 20 cents a share.

“Most of us had been expecting a weak quarter and that’s what we got,” Brown Bros. Harriman retail analyst Joseph Ronning said.

Still, Kmart’s earnings from continuing operations fell below Wall Street estimates. Excluding the charges, the company’s operating income for the quarter totaled $23 million, or 5 cents a share, down from operating income of $90 million, or 19 cents a share, a year earlier.

Analysts had predicted that Kmart would earn about 9 cents a share from continuing operations, according to the Institutional Brokers Estimate System.

Total revenue for the Troy, Mich.-based retailer increased to $8.5 billion during the period, up from $8.02 billion a year earlier.

“Although the company continued to achieve sales gains and made progress on a number of operational initiatives, we are not satisfied with this level of earnings,” said Floyd Hall, Kmart’s new chairman, president and chief executive.

Hall, a veteran retail executive who ran the rival Target Stores in the early 1980s, was hired in June to succeed Joseph Antonini, who was forced out as Kmart’s chief executive in March.

Sales in Kmart’s core U.S. general merchandise stores increased 6.4% on a comparable-store basis--sales at stores open at least a year--for both the second quarter and the first six months of 1995. It was the retailer’s best sales improvement in 10 years. But operating income from Kmart’s general merchandise stores fell 39%, to $123 million from $202 million a year earlier.

“They need to get people to buy stuff at full price as opposed to the discounted, promotional price,” Ronning said.