Kmart Stronger, Not Yet Strong

May 04, 2004
George Anderson

By George Anderson

Kmart has managed to emerge from bankruptcy protection more quickly and adeptly than many industry observers thought possible.

While this is good news, the company still has a long way to go if it is to truly turn its business around, reports the Detroit Free Press.

“I think Kmart has, on balance, been successful in its first year out of bankruptcy. More so than many of us would have expected,” said Kurt Barnard, president of Retail Consulting. “At this point, I would credit them with staying power. How long that staying power stretches into the future remains to be seen.”

The retailer has managed to improve bottom line performance through cost controls and savings from store closings, but its same-store sales are still lagging despite the retailer concentrating on keeping stores open in areas where there are few other shopping alternatives.

UBS retail expert Gary Balter wrote in a report last month, “Our analysis of closings point to a strategy of keeping stores open where the competitor wasn’t. This planning by Kmart to exit those competitive markets was a wise decision, in our view, and allows the company to push ahead with its focus on cash generation without entering into a price competition with Wal-Mart.”

The retailer is in the process of trying to upgrade its product offerings in areas such as home furnishings and fashion with proprietary brands in an attempt to create a buzz around the company.

Moderator’s Comment: Please answer the question asked by Will Ander, senior partner at the retail consulting firm
of McMillan/Doolittle, in the Detroit Free Press article. “Is there a strategic reason for Kmart’s existence?” What will it take to create such a strategic imperative?

As David Livingston and other members of the greater RetailWire community have pointed out in the past, Wal-Mart has begun targeting areas with a Kmart
store for development. Kmart same-store sales are way off and the chain doesn’t have a lot of time to catch a genie in a bottle.

George Anderson – Moderator

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