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Also in the third quarter K Mart's inventories swelled by 5.6% as sales fell. Hood estimates that for each 1% increase in inventory this year, K Mart's cash flow will drop some $40 million. That's money the company needs to continue its program to remodel old stores and build new Super K supermarket-discount stores. If K Mart had been as efficient in selling as Wal-Mart, it could have earned $200 million in the third quarter instead of losing $224 million.
Meanwhile, Wal-Mart is looking for other markets to conquer. It would like to offer low-cost checking and savings accounts and other financial services in branches, managed by a division of Canada's Toronto Dominion Bank but staffed at least partly by Wal-Mart employees. Wal-Mart figures that perhaps 20% of its customers do not have bank accounts. It is trying to work its way around U.S. banking regulations that currently forbid entities such as retailers from running banks. That's where partner TD comes in. Who knows? Maybe K Mart will apply for a loan.
--With reporting by Bernard Baumohl/New York and Joseph R. Szczesny/Detroit