Kmart’s New Bluelight Special Is Real Estate

Jul 01, 2004

By George Anderson

Kmart’s got an aggressive sales push going on. No, it isn’t on its exclusive Martha Stewart Everyday or Joe Boxer lines. It’s on the retailer’s property holdings.

Yesterday’s announcement that Kmart would sell 54 of its locations to Sears for up to $620 million has many questioning whether the company is in the retailing or real estate business.

Howard Davidowitz, chairman of Davidowitz & Associates, a retail consulting and investment banking firm, however, doesn’t have any question about what’s taking place at Kmart.

“He [Kmart chairman Edward Lampert] is in the process of liquidating Kmart and turning Kmart into an investment company like Berkshire Hathaway — exactly what Warren Buffett did,” said Mr. Davidowitz. “Eddie Lampert was smart enough to know that this was a cadaver and his job is to maximize the value of this cadaver.”

Not all agree with Mr. Davidowitz’s assessment.

Gary Ruffing, a former Kmart executive who is now a retail consultant at BBK Ltd. told the Associated Press, “With the hiring of operations people, merchants, marketing people … there’s a belief that there’s a core group of stores that Kmart can do very well with. I don’t think it’s all about the real estate.”

Moderator’s Comment: What are your thoughts on Kmart selling 54 stores to Sears? Do you see any problem with the deal
knowing Kmart’s chairman, Edward Lampert, is also a large shareholder in Sears?

We’re not sure about where Kmart is heading but we do agree with Marisa Lenhard, a retail analyst at Sigma Investment Counselors. “At roughly $11 million
a store, I’m glad to see Kmart taking the opportunity… anything’s for sale at the right price.”

George Anderson – Moderator

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