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Friday, 8 March, 2002, 14:54 GMT
Kmart to axe 22,000 jobs
Kmart shop in Dallas, Texas
Kmart pins its hopes on restructuring
Bankrupt US retail giant Kmart is to axe thousands of jobs in an attempt to return to profitability.

The company said on Friday that it would close 284 stores in the United States and Puerto Rico, with the loss of about 22,000 jobs, or 9% of its total workforce.

"The decision to close these underperforming stores, which do not meet our financial requirements going forward, is an integral part of the company's reorganisation effort," said Kmart chief executive Chuck Conaway in a statement.

Kmart shares, which fell heavily last year amid investor concerns over the company's financial health, rose 19 cents on the news, but later fell back to trade just 4 cents higher at $1.28.

Fallen giant

Kmart, the US' second-biggest discount retailer after Wal-mart, filed for bankruptcy protection in January, citing lower than expected sales during the Christmas season.

Under US bankruptcy laws, failed companies are given temporary protection from their creditors so as to allow them to restructure.

Analysts had predicted that Kmart would close between 200 and 700 of its 2,100 stores as part of its restructuring plan.

The downsizing strategy, which requires the approval of a US bankruptcy court, is expected to boost Kmart's profits before taxes and charges by about $31m a year.

However, it will cost up to $1.3bn to push through.

Kmart secured a $2bn restructuring loan in January.

Cash crunch

Analysts have said Kmart's collapse was due in part to its failure to modernise its stores, which allowed arch-rival Walmart to boost its share of the market.

Loss-making Kmart also found itself unable to match its competitors' discounts last year, when the economic downturn was making shoppers more cost-conscious.

Several suppliers stopped serving Kmart late last year amid mounting fears that the company would be unable to pay its bills.

Analysts have said they expect Kmart to remain in business in the long term.

But the company's financial woes have allowed rival retailer Walmart, owner of the UK's third-biggest supermarket chain Asda, to pull further ahead.

See also:

22 Jan 02 | Business
Kmart: Death of a retailing icon?
21 Jan 02 | Business
Suppliers desert Kmart
17 Jan 02 | Business
Silence cuts third off Kmart's value
13 Jan 02 | Business
Kmart shares plunge
02 Jan 02 | Business
Kmart slumps on bankruptcy talk
23 Jan 02 | Business
Kmart files for bankruptcy
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