The Columbus, Ohio-based retailer said it will record a fourth-quarter after-tax charge of $350 million-$400 million in connection with selling KB Toys to an unnamed bidder with whom it has already signed a letter of intent.

``It is a deal with a financial buyer in conjunction with KB management,'' Joe Cooper, Consolidated's treasurer, told Reuters. ``Current KB management is a part of the combined group.''

KB Toys has generated profits for Consolidated, but the chain has found it increasingly difficult to compete against large toy merchants like Toys R Us Inc. and Wal-Mart Stores Inc., said Lee Backus, an analyst with Buckingham Research Group.

``It's hard to make a comment at this point until we have more specific terms, but I think the positive thing is that they have an agreement,'' Backus said.

Shares of Consolidated were off 3/16 at $10-7/16 in late morning trade on the New York Stock Exchange, after touching a fresh 52-week low of $10-5/16 earlier in the session.

In June, the retailer said it intended to separate its toy and close-out businesses by divesting its KB operations, which include 1,314 KB Toys, KB Toy Works, KB Toy Outlets stores and the company's Internet operations.

Consolidated will focus on its close-out operations, which include Odd Lots, Mac Frugal's and Pic 'N' Save stores.

The sale of KB Toys is expected to close in the fourth quarter, but the $300 million price is based on an assumed closing date of Oct. 28. Consolidated bought KB Toys in 1996 for $315 million.

Consolidated said the final purchase price of KB would depend on the actual closing date of the deal because the buyer will receive the net income generated by KB Toys between Oct. 28 and closing. That is the division's most profitable period due to holiday sales.

After the deal was announced, credit rating agency Standard & Poor's said would affirm the company's triple ``B'' corporate credit rating and assign a negative outlook.

Consolidated Stores third-quarter earnings from continuing operations dropped to $6.57 million, or 6 cents per share, on sales of $733.5 million. That compares with $7.72 million, or 7 cents, in the same period last year, when sales came in at $673.5 million.

The results fell short of the average forecast of analysts, who had called for the company to earn 7 cents per share, according to data compiled by market research firm First Call/Thomson Financial.

Looking forward, Consolidated Stores said it expected to report fourth-quarter earnings in the range of 62-66 cents per share, below the current First Call consensus estimate of 67 cents per share. Total sales for the fourth quarter should rise ''in the low double-digits,'' the company added.

The company cautioned that the scenario could change if the recent slowdown in customer traffic seen over the last several months continued.

SOURCE: Reuters

[Posted 11/15/2000]