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Why K Mart's Good News Isn't


In Business This Week

WHY K MART'S GOOD NEWS ISN'T

Despite a dismal Christmas shopping season, K mart came up with a surprising boost in fourth-quarter earnings. But the increase had more to do with an inventory-accounting change than lean operations. K mart earned $402 million for the quarter on sales of $9.7 billion. A year earlier, it reported earnings of $396 million--before a $416 million onetime charge for store renovations--on sales of $9.8 billion.

In early January, K mart predicted lower fourth-quarter earnings, but its new accounting method called for a full-year, $57 million pretax charge to adjust for inflation. Under the old formula, the charge would have been $216 million. Now for the really bad news: At yearend, archrival Wal-Mart Stores overtook K mart as the No. 2 retailer.EDITED BY HARRIS COLLINGWOOD


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