Kmart's period in bankruptcy has been its darkest hour, revealing a pattern of mismanagement and botched strategies that brought this once-mighty retailer to its knees. But now with emergence in sight, hope has returned. With a little luck and lots of hard work, ceo Julian Day just might be the magician who transforms Kmart into a viable, profitable retailer again.

Though the odds may not be in Day's favor, given the industry's long list of casualties t at have failed to survive bankruptcy, the new ceo has embraced a game plan that makes sense for Kmart--remain a high-low promotional retailer,. Emphasize exclusive brands as a point of differentiation and create a positive store experience that caters to core shopper groups.

Despite the best of intentions, the question remains whether this strategy is sufficient to regain customer loyalty. A history of disappointing shoppers has haunted Kmart for years and damaged its reputation, while its principal competitors Wal-Mart and Target keep getting stronger.

And while Kmart's sales were growing just two years ago, the bankruptcy filing an d two rounds of store closures set off a downturn in same-store sales that has yet to reverse.

Unwilling to give up, Kmart managed to secure $2 billion in exit financing and funding by two outside investors that nearly assures the retailer will emerge from bankruptcy in April as planned. Kmart's an of reorganization lays out a financial forecast that calls or a return to profits in 2004 after a loss of $286 million for the current year.