K mart to Sell 2 Ailing Units, Write Off Loss

TROY, Mich. — K mart Corp. said Thursday that it will sell two money-losing operations and set up a provision of at least $200 million to cover potential losses on the transactions.

The nation’s second-largest retailer said it will divest itself of Astra S.A., a joint venture with Gentor S.A. of Mexico, and of its insurance subsidiary, K mart Insurance Services.

“Although various options are under consideration, it is estimated that the after-tax loss provision will be not less than $200 million, which would be equivalent to approximately $1.50 per share, and not more than $250 million, which would be equivalent to approximately $1.90 per share,” K mart Chairman Bernard M. Fauber said.

Losses Covered

The amount, to be taken off of fourth-quarter earnings, will cover all potential future losses, including any related to debt guarantees, K mart said.

For fiscal 1986 ending Jan. 29, operating losses from the discontinued operations are estimated at $20 million, equivalent to 15 cents per share.

K mart is not scheduled to release its 1985 operating results until March. In the third quarter, the company had net income of $77.4 million, or 60 cents per share.

K mart, which ranks second in retail sales after Sears, Roebuck & Co. of Chicago, acquired its 44% stake in Astra in September, 1981, for $50 million.

The next year, K mart guaranteed $100 million in Astra notes due in 1992 and a $12-million bank loan to Astra.

The joint venture to develop a chain of discount department and food stores in Mexico has never been profitable, K mart said, estimating its losses over the past four years at more than $29 million.

Losses Estimated

The company estimated that it has lost $6.2 million in the venture through the third quarter of 1985.

K mart Insurance services, acquired in 1974, showed modest profits until 1985, but “it never reached the company’s profit expectations,” Fauber said.

The subsidiary lost $5.9 million the first three quarters of 1985, K mart said.

“In divesting itself of its insurance subsidiary, K mart has not changed its strategic plan to have financial centers in at least 1,000 K mart stores,” Fauber said. “Our role will continue as a landlord and not as an investor.”

K mart operates more than 3,800 retail stores in the United States, Puerto Rico and Canada.