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Kmart Goes Bankrupt

Aired January 22, 2002 - 16:43   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JUDY WOODRUFF, CNN ANCHOR: One of the largest and best known names in American retailing filed for bankruptcy protection today. Kmart officials say they were forced to seek protection from their creditors by a variety of factors.

For more on Kmart's problems and what happens next, let's join Lisa Leiter at CNN Financial News. She is in Chicago -- hello, Lisa.

LISA LEITER, CNN CORRESPONDENT: Hi, Judy.

Well, you are absolutely right, Kmart filing for bankruptcy protection here in Chicago today, ending a month of speculation that has hammered the company's stock price and caused a crisis of confidence about the company's suppliers. This afternoon, Kmart made another announcement, saying that it has created new job, that of the chief restructuring officer, naming Ronald Hutchison to that position.

He was most recently the chief financial officer of Advantica Restaurant Group. He was likely brought by Kmart's new chairman, James Adamson, who was most recently the chairman of that company, Advantica.

Now, Kmart made it clear in its bankruptcy protection announcement this morning that they continue to keep operating the 2,100 stores while under bankruptcy protection.

(BEGIN VIDEO CLIP)

CHUCK CONAWAY, CEO, KMART: Kmart is not going out of business. In fact, this is going to help Kmart actually expedite its turnaround plan and be stronger, more profitable and ultimately more competitive in the marketplace.

(END VIDEO CLIP)

LEITER: Analysts say Kmart's sales suffered as a result of the recession and also because of a few missteps. For example, Kmart cut back on newspaper advertising ahead of the critical holiday shopping season. And Kmart also tried to wage an unsuccessful price war with Wal-Mart that certainly cut into the company's bottom line.

Now, suppliers have increasingly grown concerned with Kmart's situation. For example Fleming, their grocery supplier, halted shipments this weekend after Kmart failed to pay a $78 million bill -- Scotts, the lawn and garden supplier, also halting shipments as well.

But the biggest question is about perhaps Kmart's biggest supplier. And that is Martha Stewart. Will she terminate her relationship with the company now that Kmart has filed for bankruptcy protection? That remains up for debate -- and Martha Stewart not reachable today, but last week did say that she has no plans to terminate her relationship with Kmart and pledged loyalty to the company.

Now, analysts expect Kmart to close up to 500 money-losing stores sometime this year. Now, which stores those are and how many of Kmart's 250,000 employees could be laid off as a result of that remains to be seen. Kmart is not commenting on that. Now, Kmart does also say that it plans to emerge from bankruptcy protection sometime next year. Analysts say that could be difficult unless Kmart comes up with a strategy to distinguish itself and compete against Wal-Mart's rock-bottom prices and Target's trendy image -- Judy.

WOODRUFF: All right, Lisa Leiter of CNN Financial News.

And, Lisa, you're right. If Martha Stewart were to pull out, that would get attention. Thanks very much -- Lisa Leiter joining us from Chicago.

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