CHICAGO – Kmart Holding Corp. (KMRT ) on Monday reported its third consecutive quarterly profit despite slumping sales as it cut jobs and reduced advertising and discounts, boosting its cash pile to $2.6 billion.
Kmart earned $155 million, or $1.54 per share, in the second quarter ended July 28. That compares with a loss of $5 million, of 6 cents per share, in the same period last year.
The earnings offered the first "apples-to-apples" comparison since Kmart emerged from bankruptcy as a restructured company in May of last year.
Total revenue, however, dropped 15.3 percent to $4.8 billion from $5.6 billion in the year-ago period. Same-store sales, considered the best indicator of a retailer's health, continued to decrease, falling 14.9 percent from a year ago. Same-store sales are sales at stores opened at least a year and take store closings out of the mix.
In January 2002, Troy, Michigan-based Kmart became the largest U.S. retailer ever to file for bankruptcy following a poor holiday shopping season and a failed attempt to match prices with Wal-Mart Stores Inc. (WMT).
Kmart, whose critics predicted it would be left for dead, has won the praise of investors for its quick financial turnaround, bidding shares up since this past March. Shares have more than quadrupled since the retailer emerged from bankruptcy in May 2003.
The No. 3 U.S. discount retailer has cut back on advertising, markdowns, payroll and store investments in recent quarters. The retailer posted double-digit sales declines in the latest quarter, but cash and cash equivalents rose by $400 million to $2.6 billion as of July 28.
Kmart has also agreed to sell dozens of its stores in recent weeks, moves that will likely boost its cash holdings to nearly $3 billion. Analysts and investors have been pressing the company for details on how it plans to spend the cash.
Several Wall Street analysts have written research reports saying that Kmart's real estate is worth far more than its stores, and questioning whether the company plans to sell its roughly 1,400 stores. Kmart has repeatedly denied such speculation, and said it is committed to improving the stores.
"We are pleased with our continued progress and ability to deliver consistent profit," chief executive Julian Day said in a statement. "We have continued to focus on process changes that simplify the operations of our stores and distribution centers, including improving merchandise flow and lowering inventory levels which result in lower shrink expense, lower clearance and promotional markdowns and lower payroll expenses."
Skepticism remains about Kmart's viability as a retailer. The company continues to lose market share to powerhouses Wal-Mart Stores Inc. and Target Corp.
Kmart is hoping its redesigned clothing lines, launched this summer in time for the back-to-school season, will help distinguish it from its competitors.
Reuters and the Associated Press contributed to this report.