Bankrupt retailer Kmart Corp is to slash 680 more jobs in an attempt to cut costs and avoid another spate of store closures as sales continue to slide.

Nearly 400 of the 2800 employees at the discount retailer's Troy, Michigan headquarters will go said chairman and chief executive officer James Adamson. Another 100 positions are to be left unfilled, and 130 IT contract positions are to be phased out he added.

Kmart said the move would save $66 million for the 2002 fiscal year and $130 million annually. It will cost the company about $15 million in severance pay.

Since it filed for Chapter 11 bankruptcy protection earlier this year Kmart already has closed 283 stores, resulting in 22,000 lost jobs. Sales at the discount retailer have failed to pick up, and last month Adamson warned positions were likely to be cut at corporate offices and 18 distribution centres.

Adamson said the cost-cutting plan "realigns the organisation to reflect the company's current business needs," following the closure of 283 stores earlier this year. The affected workers will be eligible for severance packages, including health-care subsidies and outplacement services to assist in career transitions, he said.

Last week, Kmart asked the bankruptcy court for permission to increase its line of credit by an amount not to exceed $500 million. The motion also sought permission to increase the size of a loss the company could report - before interest, taxes and depreciation - from $100 million to about $400 million.