Kmart, the bankrupt US retailer, has confirmed it will cut up to 35,000 more jobs and close 326 stores in a bid to emerge from bankruptcy.

"Kmart this morning began the process of notifying affected associates about its plan to close additional stores," said Kmart spokesman Jack Ferry.

Analysts said the closures and redundancies were the most significant since Kmart started Chapter 11 bankruptcy proceedings a year ago.

We're all upset. I helped build this store up Sharon Knight, Detroit Kmart employee

The news came as the US Commerce Department reported weaker December retail sales than hoped, as consumers held back on festive spending.

Survival tactics

Kmart's job cuts mark the company's second cull in less than a year. Last March, it closed 283 stores, meaning the loss of 22,000 jobs.

The latest closures, which include one distribution centre in Texas, allow Kmart to get out of expensive leases while under bankruptcy protection, but are subject to court approval.

"We're all upset," said Sharon Knight, an employee at the Detroit Kmart store.

"I've been here since 1998. I helped build this store up."

Kmart last year became the largest retailer to file for bankruptcy after failing to generate enough profit to pay its suppliers.

Kmart is scheduled to appear before the US bankruptcy court in Chicago on 28 January and aims to emerge from Chapter 11 protection by the end of April.

But the retailer also revealed on Tuesday that December sales in its stores open for more than a year were down 5.7% on 2001, despite round the clock opening and deep discounts.

Investigations

Clearly 2002 ended with an almost inaudible whimper Anthony Chan, Banc One Investment Advisors

Kmart's downfall is now the focus of three federal investigations.

Also underway is an internal review of managers, some of whom pocketed millions of dollars in loans days before the group went bankrupt.

Kmart has already cut 22,000 jobs and put an end to perks such as company jets and luxury hire cars.

But stiff competition from discount rivals such as Wal-Mart and Target have dampened Kmart's recovery efforts and some analysts have suggested it may not survive.

Tighter purse strings

Kmart's closures follow poor December retail sales and the smallest US retail sales gain in 2002 for at least nine years.

The US Commerce Department said retail sales rose 1.2% in December, but that they were flat when the strong figures for car sales were removed.

"These retail sales numbers are telling us that the economy of course ended the year on shaky ground," said Anthony Chan, chief economist at Banc One Investment Advisors.

"Clearly 2002 ended with an almost inaudible whimper."

For the year as a whole, retail sales grew by 3.4%, the slowest rise since 1993.