Aug 20, 2002 2 min read

ROYAL OAK, Mich. (AP) – Kmart Corp. is eliminating nearly 700 more jobs in an effort to cut costs and avoid another spate of store closures as it tries to dig its way out of bankruptcy. The cuts include 400 employees at Kmart’s Troy headquarters and 50 jobs that provide corporate support, Kmart chairman and CEO James Adamson said. Another 100 positions will be left unfilled and 130 contract positions, mainly from the information and technology department, will be phased out.

“These decisions were not made lightly and we are committed to treating our associates with dignity and respect through this difficult process,” Adamson said. He said some of the employees have worked for Kmart for nearly 40 years.

“We had no alternative but to take this action,” he said.

Kmart said cuts will save $66 million for the 2002 fiscal year and $130 million annually. It will cost Kmart about $15 million in severance. The affected employees will be notified this week.

Kmart already has closed 283 stores, resulting in 22,000 lost jobs, since it filed for Chapter 11 bankruptcy protection on Jan. 22. Monday’s announcement follows 23 job cuts made last week at its headquarters and 35 last month from the discount retailer’s accounting division. There are about 3,000 employees at Kmart’s headquarters.

Analysts said the move was necessary.

“Aside from closing stores, this is certainly the place where you have to continue making cutbacks,” said Mike Porter, a retail stock analyst with Morningstar Inc.

Analyst Eric Beder with Ladenburg, Thalmann & Co. Inc., said cutting positions is a better option than closing stores.

“You want to keep as many stores as you can because that’s where you’re going to make you money – if you’re going to make any,” Beder said.

Adamson said no more stores will be closed this year. He also said he hoped this would be the last such cost-cutting measure.

Monday’s announcement was not wholly unexpected. Last month, Adamson said that disappointing sales would force positions to be cut at corporate offices and 18 distribution centers.

Last week, Kmart asked the bankruptcy court for permission to increase its line of credit by an amount not to exceed $500 million.

The motion also sought permission to increase the size of a loss the company could report – before interest, taxes and depreciation – from $100 million to about $400 million.

Kmart shares gained 4 cents Monday to close at 60 cents each on the New York Stock Exchange.

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