Kmart Loses $28 Million in 1st Quarter; New Product Mix Cited

Kmart Corp. lost $28 million in its fiscal first quarter as it felt the effects of a new inventory system and a product mix heavily weighted toward lower-profit merchandise, the company said Monday.

“What happened is that consumers cherry-picked their mix and bought the promotional items,” said analyst N. Richard Nelson Jr. of Duff & Phelps Inc. in Chicago.

The loss amounted to 6 cents a share, contrasted with a profit of 4 cents a share in the same quarter of 1994, when net income was $18 million. The earnings figures reflect a one-time gain of 18 cents a share from the replacement of the company pension plan with a profit-sharing plan, and a loss of 14 cents a share from the effects of a new inventory accounting system.

The third-largest U.S. retailer said sales for the quarter ended April 26 were $7.8 billion, up 8.1% from $7.2 billion a year ago. But its gross profit margin declined because of the product mix and higher promotional expenses. Contributing were operating losses for Builders Square and high start-up costs and currency problems at its Kmart Mexico joint venture.