Giant discount retailer Kmart Corp. Thursday said it expects earnings to fall short of Wall Street forecasts for the fiscal year ending Jan. 30 and said it was in discussions with its lenders regarding existing and supplemental financing.

Kmart shares were off 39 cents, or 8 percent, at $4.41 in early trading on the New York Stock Exchange.

The company, the No. 2 U.S. discount chain behind Wal-Mart Stores Inc., said it was reviewing its liquidity position and financing plan.

Kmart also reported a 1.0 percent decrease in December sales at stores open at least a year. It said total net sales for the five weeks ended Jan. 2 fell slightly, to $5.524 billion from $5.539 billion a year earlier.

Kmart has been battered by a spate of bad news recently, including a series of credit downgrades. Its stock fell to a 30-year low last week after a Wall Street analyst said he would not be supervised to see the company file for bankruptcy.

In December, Moody's Investors Service downgraded Kmart's unsecured debt to "junk" status. Standard & Poor's downgraded the debt in November.

Last Wednesday Prudential Securities analyst Wayne Hood cut his rating on Kmart shares to "sell" from "hold" and said he "would not be surprised if the company filed for bankruptcy if trends did not improve."

Kmart shares tumbled on Hood's comments, reaching a low of $3.89 on Jan. 3, their lowest level since July 1970, according to Standard & Poor's.

On Dec. 26, Kmart said that for the holiday period Nov. 22 to Dec. 26, sales at its stores open at least a year came in at the low end of its growth target of nil to 2 percent.