EARNINGS : K mart Profit Falls 10.9% in Quarter; Lower Sales Cited

DETROIT — K mart Corp., faced with increased competition from such sources as Wal-Mart Stores Inc., on Monday reported a 10.9% decline in its second-quarter profit.

The company said lower-than-expected sales in May and higher interest payments led to the drop.

The nation’s second-largest retailer behind Sears, Roebuck & Co. said its second-quarter profit came to $145 million on revenue of $7.01 billion during the period ended July 26. That compared to earnings of $162.8 million on revenue of $6.68 billion during the same time last year.

For the six months ended July 26, the company’s profits were down 15.7%, falling to $239.1 million from $283.6 million during the same time last year.

Revenue for the period this year totaled $13.07 billion, up 4.4% from last year.

‘Tough Market’

“In the first quarter, we were disappointed by K mart’s earnings and we attributed it to Sears Roebuck and the heavy promotion they had for their new everyday pricing,” said analyst Sally Schaadt of Fourteen Research in New York City.

“This whole area (of discount retailing) has become extremely competitive,” she said. “It’s a tough market.”

K mart Chairman Joseph E. Antonini said his company’s sales in May fell below expectations and the cost of borrowing money was higher in the period.

He said things should pick up in the second half of the fiscal year, as the company develops stronger merchandising programs and increases the use of a companywide computer link to monitor sales.

K mart operated 4,135 outlets at the end of the period, including K mart discount stores, Waldenbooks, Builders Square and Pay Less Drug stores.