TROY, Mich. – Kmart Corp. emerged from bankruptcy Tuesday after more than 15 months of Chapter 11 protection.

The Troy-based retailer has 600 fewer stores and new leadership since filing for protection from its creditors in early 2002. It also has a $2 billion loan to help it compete against rivals like Wal-Mart and Target.

Company spokesman Jack Ferry confirmed the emergence from bankruptcy had been completed. The company’s reorganization plan had been approved by a federal bankruptcy judge April 21.

Investor Edward Lampert’s company, ESL Investments, is converting $2 billion in financial claims against Kmart into stock and will own a 49 percent stake in the company.

Kmart entered bankruptcy Jan. 22, 2002 after a poor holiday selling season and a reputation for having cluttered stores and items out of stock. It had 2,114 stores at the time, but now has about 1,500.

It has plans to become the “store of the neighborhood,” which means giving store managers more power to decide what items their stores should carry, and a destination for exclusive brands such as Martha Stewart (news – web sites) Everyday and Joe Boxer.

The company has rebuilt its corporate structure to streamline purchasing and ensure stores are stocked with popular items. Only 15 employees are now authorized to give final approval to orders, down from 220.

Kmart will issue new shares of its common stock, making current shares worthless. It also will have a new board of directors.

The company plans for this fiscal year to be a transition year for Kmart, with a profit not projected until 2004, under the plan of reorganization. The company lost $3.22 billion in fiscal 2002.

However, critics say Kmart, long known for its blue light special marketing tool, will have a tough road ahead, especially as Wal-Mart adds stores and Target strengthens its appeal to style-conscious consumers.

Kmart made itself a leaner company while in bankruptcy protection, shedding more than 60,000 employees as it closed unprofitable stores.

Julian Day was named president after the Chapter 11 filing, and added the chief executive title in January.

Many retail analysts said Kmart’s problems over the years were due in part to seat-of-the-pants management. Lampert said his company’s investment and involvement in Kmart will provide more direction.

He said Kmart will choose retailing strategies that make good economic sense and help establish loyal customers.