Troubled US retailer Kmart said full-year turnover fell 15% as sparse shelves and distribution problems saw shoppers move to rivals Wal-Mart and Target.

For the year to January 29 turnover dropped to $30.8bn from $36.2bn in 2002, while like-for like sales fell 10.1%.

However, Kmart said that in the fourth quarter it had narrowed its net loss to $1.1bn compared to $1.7bn last year, due to “progress on controlling costs and improving gross margin".

President and chief executive Julian Day said: “We disappointed a significant number of customers particularly early last year and many of them have not yet resumed shopping at our stores.”

While Day admitted that the company was “not fixed” he added that he was cautiously optimistic as most recent results offered a few encouraging signs for the company’s turnaround effort.

Kmart’s February like-for-like sales declined 2.5% compared to a 10.8% drop a year earlier. Net loss was $54m on sales of $2.7bn.

The firm aims to emerge from bankruptcy by the end of April and to return to profitability this year.