Wednesday, January 16, 2002
Craig Management at the Big Kmart in Craig expressed confidence Wednesday that the store would survive the company's current financial crisis.
Kmart's stock reached a 36-year low Wednesday and analysts predicted the company would likely file for bankruptcy protection. Standard & Poor's cut the company's ratings to low junk grades, its second cut this week, and faulted management of the No. 2 U.S. discount retailer for a "lack of communication" about plans to invigorate its business, Reuters reported.
But amid reports that as many as 400 of the company's 2,100 stores might close, assistant store Manager Mark Curtis said things are business as usual for the Craig store and its 85 employees.
"We've been through tough times before, and we'll handle this well," Curtis said. "The reality of the situation is that the company will not go bankrupt. We're the second largest retailer in the nation with more than 300,000 employees. If anything, Kmart will restructure."
Kmart shares traded as low as $1.27 Wednesday afternoon before rebounding to close the day at $1.56, down more than 36 percent from where it started the day.
Kmart spokesman Jack Ferry confirmed that the company's board of directors was holding a previously scheduled meeting Tuesday and also held committee meetings Monday. Ferry declined to say what the board was discussing, but sources close to the company said board members were discussing the retailer's financial choices, including a bankruptcy filing, the Associated Press reported.
"I think they are looking at their liquidity options, and their options of closing stores," said Marie Driscoll, an analyst at August Research, an independent investment firm.
Driscoll and other analysts expect that Kmart could close as many as 400 of its approximately 2,100 stores. Kmart has 34 stores in Colorado, including Big Kmarts and Super Kmarts.
"Kmart will not go bankrupt flat out like Country General did," Curtis said. "They will explore other avenues of bankruptcy that wouldn't involve liquidation."
As far as the overall financial status of the company, very little is known according to Curtis.
"I really can't comment on the situation at the store level," Curtis said. "What I can tell you is that our employees are curious about what's going on, but the anxiety level isn't too high. I think our employees are confident that there is no risk at this store."
The Big Kmart in Craig is one of the highest volume retail stores in Moffat and Routt County.
S&P cut Kmart's senior debt three notches to "CCC-minus," its third lowest grade other than default, from "B-minus." It also cut several other Kmart ratings and warned it may cut the ratings again. Moody's Investors Service on Wednesday cut Kmart's senior unsecured debt to "Caa1," roughly two notches above S&P's new rating.
S&P said that since Monday, two companies, which it did not name, that provide intermediate financing for suppliers "have begun advising their clients to withhold shipments to Kmart."
"Management's lack of communication regarding the company's plans has increased Standard & Poor's concerns that the company could implement a financial strategy with high risk for creditors," it added.
Also on Wednesday, Martha Stewart Living Omnimedia said it is not currently looking to back out of its contract with Kmart, even if the company finds itself in bankruptcy.
"While we have the provision (to terminate the Kmart contract) ... we're just not looking to that provision at this time. We're waiting to get information by which we can intelligently manage our business," Sharon Patrick, president and chief operating officer of Martha Stewart Living, told Reuters. Kmart said it looks forward to "maintaining its mutually beneficial relationship with Martha Stewart and her team."
The Associated Press and Reuters News Service contributed to this report.