Kmart files for bankruptcy - Food Retailing - Brief Article

Eurofood, Jan 31, 2002

Following several weeks of rumours about financial problems, US food retailer Kmart finally declared itself bankrupt, with debts amounting to some US$10.3bn (11.6bn [euro]).

The group, the third largest food retailer with some 2 100 stores throughout the US, filed for chapter eleven bankruptcy protection and hopes to work its way through the problems.

Kmart hopes to emerge stronger and more profitable from its bankrupt state by 2003. An interim US$1.5bn package will allow Kmart stores to remain open, but Chuck Conaway has said the firm plans to close many stores and concentrate on its superstores.

Among the store closures and consolidation, job losses will be inevitable.

Many of Kmart's suppliers and other partners are unlikely to recover what they are owed fully.

According to the Financial Times, Kmart's collapse came about following a deterioration in the market for surety bonds.

COMPETITION

Also, severe competition in the sector, particularly from Wal-Mart, the US-based owner of UK chain Asda, has affected Kmart.

Recently, Kmart bought in James Adamson as chairman of the firm for his experience with companies undergoing massive transformation, a move which further fuelled the rumours of impending bankruptcy.

Kmart has annual sales of some US$37bn.