Kmart Files for Chapter 11 Protection
Virtually all the merchandise, both food and dry goods, carried to a retailer like Kmart, moves in trucks, which would lose important business if such a large company were to halt or curtail operations.
Kmart also announced that, in an effort to fund its continuing operations and turnaround, the retailer has secured $2 billion in financing from four institutions. The cash infusion remains subject to court approval, the company said, and will be used to augment Kmart’s existing cash flow during the reorganization.
The second largest discounter in the United States was expected to make the move, the Wall Street Journal reported. The Troy, Mich.-based company is expected to close its underperforming stores and restructure its $4.7 billion debt.
In recent days, other suppliers have stopped or delayed shipments to the company, but analysts believe the move by Fleming could be the last straw for Kmart, the AP said.
Kmart said that all of its 2,114 stores will remain open and it continuing honoring its credit cards, checks, gift certificates and store credits, along with its financial and benefit obligations to its employees.
lthough the Journal also cited disappointing holiday sales as a reason for Kmart’s difficulties, the AP noted that analysts believe that grocery offerings drive consumer traffic in the store, saying that shortages in other items are not as noticeable as perishable foodstuffs.
"We are committed and determined to complete our reorganization as quickly and as smoothly as possible, while taking full advantage of this chance to make a fresh start and reposition Kmart for the future,” said Charles C. Conaway, chief executive officer. “We deeply regret any adverse effect today's action will have on our associates, vendors and business partners.”
(Click here for the full press release.)
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