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CNN Live At Daybreak

How Did Kmart Reach the State of Chapter 11?

Aired January 23, 2002 - 05:43   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.
CAROL COSTELLO, CNN ANCHOR: Discount giant Kmart has filed for Chapter 11 bankruptcy protection, as we told you it would. That makes it the biggest retailer in history to seek protection from creditors.

CNN's Sean Callebs takes a look at what went wrong.

(BEGIN VIDEOTAPE)

SEAN CALLEBS, CNN CORRESPONDENT (voice-over): The company known for its flashing blue light is awash in red. To seek protection from its creditors, Kmart is filing Chapter 11; becoming the largest retailer to seek shelter.

In Atlanta, customers for whom Kmart is their most convenient bargain choice, want to see the company back on its feet.

UNIDENTIFIED FEMALE: Shocked, because I thought they was doing so well, you know. I thought they was doing a lot of business. They remodeled and everything.

CALLEBS: Kmart's CEO says a number of factors brought the discount retailer to its position.

CHUCK CONAWAY, CEO, KMART: Internally, we face very intense competition across the board, and a very weak holiday sales period.

CALLEBS: It's been losing ground to Target and Wal-Mart. Kmart's stock prices tumbling. Talk of restructuring surfaced recently.

(on camera): The move really comes as no surprise. Many financial analysts believe Kmart needs to close its unproductive stores and streamline at the corporate level to be more competitive. But Kmart is vowing to keep all its 2,100 stores open, and hopes to emerge from bankruptcy protection in 2003.

(voice-over): The company hopes to win back consumers, in part, by a new merchandising initiative.

CONAWAY: Particularly, two new great brands: Joe Boxer, which I'm very excited with, as well as Disney. And they'll see a much more expanded Martha Stewart presence.

CALLEBS: Martha Stewart is Kmart's heavyweight, generating $1 billion in sales last year. Despite their current trouble, Kmart has suffered worse. In the mid 1990s the company closed many stores, laid off workers and suffered heavy losses. Analysts say it may be a new era, but basically the same concern. Finding a new way to breathe life into a sagging discounter.

Sean Callebs, CNN, Atlanta.

(END VIDEOTAPE)

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