Fitch Affirms Kmart's Ratings; Outlook Stable.Business Editors CHICAGO--(BUSINESS WIRE)--May 29, 2001 Fitch fitch: see polecat. has affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. its ratings of Kmart Corporation's (Kmart) $1.9 billion of notes and debentures at `BB+' and $887 million of convertible preferred securities at `BB'. The Rating Outlook is Stable. The ratings reflect Kmart's weakened weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. operations and
competitive position balanced against the expectation for improvement as
the company makes continued progress in implementing its strategic
initiatives. The ratings recognize the competitive and over-stored
nature of the retail industry and, in particular, the rapid growth of
Wal- Mart and Target. Maintenance of the Stable Outlook will depend upon
steady improvement in Kmart's operations and credit measures in the
face of this competition.
Kmart's turnaround Turnaround A situation where a company that has had poor performance for an extended period of time experiences a positive reversal. Notes: A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. lost momentum during 2000, as comparable store sales grew a modest 1.1% and margins were squeezed by inventory clearance activities, increased store labor hours and the operating losses operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of BlueLight.com. Weaker operations together with modestly higher debt levels pushed lease- adjusted debt/EBITDAR (before charge for strategic actions) to 3.7 times (x) in 2000 from 2.8x in 1999. Under the direction of CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Chuck Conaway and a revamped top management team, Kmart is making progress in improving its retail execution and customer service and has begun to implement new marketing initiatives. To address a major competitive shortfall, Kmart will be investing heavily in new systems and distribution infrastructure over the next couple of years. Implementing new systems could be disruptive disruptive /dis·rup·tive/ (-tiv) 1. bursting apart; rending. 2. causing confusion or disorder. over the short-run but should support longer-term improvement in the company's supply chain costs and in-stock position. This accelerated spending program is expected to be largely financed with internally generated cash flow. Fitch expects that free cash flow, supported by ongoing reductions in working capital, will permit some debt reduction beginning in 2002. As a result, Fitch expects leverage (lease-adjusted debt/EBITDAR) to decline to a range of 3.0x-3.5x over the medium term. Longer-term, cash flow will be directed to a combination of store growth and debt reduction. |
|
Printer friendly
Cite/link
Email
Feedback
Reader Opinion