Shares at US discounter Kmart plunged to new lows as dire Christmas sales, a profit warning and an exit from the Standard & Poor 500 Index sent investors reeling. Kmart directors have been locked in discussions about the company's cashflow problems all week as speculation mounted that the number two general merchandise retailer in the US was heading for the bankruptcy courts. Kmart's like-for-like sales in the run up to Christmas were down 1%, compared to an 8% rise at rival Wal-Mart during December. The lacklustre figures were accompanied by a warning that profits for the fiscal year ending this month would fall short of Wall Street estimates. The bad news followed a downgrade from a Prudential Securities analyst in the new year accompanied by a note saying it "would not be surprised if the company were to file for Chapter 11 bankruptcy if trends do not improve". Top grocery wholesaler Fleming moved to calm concerns by reiterating its own earnings estimates for the fourth quarter and reassuring investors and suppliers that Kmart ­ its largest customer ­ was paying its bills on time. Fleming last year struck a $4.5bn supply deal with Kmart in a move that was designed to combine the buying power of the two grocery giants and provide added leverage with suppliers. However, Kmart has struggled to compete with the colossal buying clout of Wal-Mart and recent margin eroding attempts to close the price differential with the Arkansas based giant failed to boost its market share and dented profits further. Kmart is now widely expected to close a tranche of underperforming stores in a bid to generate some cash and streamline its operations. Michigan-based Kmart is in the middle of a major refurbishment programme to convert its 2,100 strong store portfolio to the Big Kmart fascia, which features a wider selection of groceries alongside its general merchandise offer. {{NEWS }}