Kmart is an American
chain of discount retail stores, roughly equivalent to
Wal-mart and
Target.
A Century of Success
Kmart was founded when Sebastian Spering Kresge opened a five and dime store in downtown Detroit in 1899, selling all items for either 5 or 10 cents. Kresge's store was a dramatic success, and he began expanding his operation, such that by 1912 he had 85 Kresge stores and annual sales of $10 million.
The company kept growing. In 1962, Krege president Harry Cunningham decided to get into the discount retail market, opening the first "Kmart" discount store in the Detroit suburb of Garden City, MI. By 1966, 162 Kmart stores and 753 Kresge broke the $1 billion mark in annual sales.
In 1977, with nearly 95 percent of S. S. Kresge Company sales coming from Kmart stores, the company decided to officially change its name to "Kmart Corporation." In 1987, the last of the old Kresge stores were sold so the company could fully concentrate on discount merchandising.
From 1899 through the 1980s, Kresge/Kmart was one of the most successful retail chains in America - so successful, that from 1984 to 1992, the company went on a shopping spree, buying several businesses including Builders Square (1984), The Sports Authority (1990), a 90 percent stake in OfficeMax (1991), and the Borders chain of bookstores (1992).
Hard Times
But in the 1990s and 2000s, Kmart has run into financial trouble. Heavy competition from Wal-mart and Target exposed weaknesses in Kmart's antiquated restocking system. While customers still flocked to the stores, Kmart was slowly killing itself because stock was sitting on the shelves too long or not arriving in time, as opposed to the "just-in-time" computerized restocking systems pioneered by companies like Wal-mart. As Kmart tried to keep prices low, despite higher internal costs, it began to lose money - losses it could no longer cover due to a cash shortfall from the buying spree.
A 1994-1995 brush with bankruptcy amid falling earnings forced Kmart to sell or spin off its new acquisitions and close more than 200 stores, affecting about 10,000 employees. CEO Joseph Antonini got the axe as well, and was replaced by Floyd Hall.
But modernizing the internal beauracracy of a chain of almost 2000 stores has proved easier said than done, and Kmart has continued to struggle financially. In 2000, the company closed another 72 stores and with its stock price hovering at a dismal $3 per share through the 2001 fiscal year, Kmart opted to file for restructuring under Chapter 11 of the US Bankruptcy Code in January of 2002.
In some ways Kmart's success was responsible for its downfall. As other stores were spending cash on hand to update aging inventory systems, Kmart did not, instead going on an irresponsible buying spree. Perhaps because the chain had always been so successful, throughout its entire history, Kmart executives lost sight of what had been responsible for that success in the first place - a constant effort to improve and become more profitable. In the late 1980s, Kmart must have seemed like an unassailable giant in the retail world, but it was a giant that was rotting from the inside.
Today Kmart is still a massive and potentially successful chain of over 1,800 stores. Many companies have recovered from chapter 11 bankruptcy in the past, and it remains to be seen whether Kmart and its executives will have the vision and tenacity to return to their successful ways of old.