Kmart: Fewer Newspaper Ads Meant Lower Sales In Q2

By: Mark Fitzgerald In announcing Monday that it recorded a quarterly profit for the third time in a row during the second quarter, Kmart Holding Corp. partly blamed declining sales and revenues at its discount stores on its decision to cut back on newspaper ads.

Sales at stores open at least a year were down 14.9% from the same period a year ago, Kmart said. Total revenue was down 15.3% to $4.8 billion from $5.6 billion in the second quarter of 2003. Still, Kmart stock shot up in early trading on the news that the company earned $155 million, or $1.54 per share, in the second quarter, compared with a loss of $5 million, or 6 cents per share, in the same period a year ago.

One reason for the profit, Kmart said, was a program that slashed "selling, general and administrative expenses" some $186 million to $1.04 billion. "The decline resulted from a reduction in store payroll and related expenditures due to increased operating efficiencies and reduced sales volume at our stores, and to reductions in the company's weekly and mid-week circular advertising, partially offset by an increase in electronic media advertising," the discounter said in a statement.

In addition to citing reduced newspaper advertising and promotional events, Kmart said same-store and total sales were affected by unseasonably cool weather that depressed the sales of summer seasonal products such as lawn and garden merchandise, as well as "a transition in our apparel lines leading up to back-to-school product launches."