Foggy Strategy Clouds Kmart’s Future

Jan 26, 2002

Troy, Mich.-based Kmart Corp. is the nation’s largest retailer to seek shelter from creditors under Chapter 11 with its bankruptcy filing on January 22. Analysts doubt that closure of under-performing stores will be enough to pull the company, which employs about 275,000 workers, from bankruptcy by 2003 as it projects. Kmart attempted to stay competitive with Wal-Mart Stores Inc. and Target Corp. by joining in powerful licensed partnerships with Walt Disney, Sesame Street and Martha Stewart, who reportedly won’t pull her line of revenue-producing home and garden products from its stores “for the foreseeable future.”

Moderator Comment: Where does Kmart go from here?

Kmart has many obstacles to overcome if it is to emerge successfully from Chapter 11.

  1. Clearly, under-performing stores need to be shuttered. The chain operates roughly 2,100 stores and only 25% of those are probably worth operating. The top 500 stores represent more than 50% of the chain store’s revenues.

  2. The Kmart brand name had negative connotations with consumers before the Chapter 11 filing. The reason was not named was because the name has more negative than positive associations. Kmart might be better off killing itself off (in name only) and starting a “new” group of stores under another brand.

  3. Speaking of another brand, many of the folks in Troy are probably hoping for a white knight to appear. European hypermarket operators such as Carrefour have been rumored for quite a while as prospective buyers for the chain. Fleming is also usually mentioned largely because of the interconnectedness of the Fleming and Kmart businesses. [George Anderson – Moderator]
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