Kmart (sometimes styled as "K-Mart") is a chain of discount department stores in the United States, Puerto Rico, the U.S. Virgin Islands, and Guam which houses the largest Kmart in the world. The chain acquired Sears in 2005, forming a new corporation under the name Sears Holdings Corporation. Kmart also exists in Australia and New Zealand (see Kmart Australia), although it now has no relation to the American stores except in name, after U.S. equity in the Australian business was purchased in the late 1970s. Kmart is the third largest discount store chain in the world, behind Wal-Mart and Target; all three chains were founded in 1962.
As of January 30, 2010, Kmart operated a total of 1,327 (13 closing by late May) Kmart stores across 49 states, Guam, Puerto Rico, and the U.S. Virgin Islands. This store count included 1,361 discount stores, averaging 92,000 sq ft (8,500 m2), and 29 Super Centers, averaging 165,000 sq ft (15,300 m2).[2]
Kmart's world headquarters was located in Troy, Michigan, in a sprawling complex which, since Kmart's relocation to Illinois, has been slated for demolition.[3]
Kmart became known for its "Blue Light Specials." They occurred at surprise moments when a store worker would light up a mobile police light and offer a discount in a specific department of the store. At the height of Kmart's popularity, the phrase "attention Kmart shoppers" also entered into the American pop psyche, appearing in films and other media such as Troop Beverly Hills, Six Days Seven Nights, Beetlejuice, and Dawn of the Dead (1978).
Attention Kmart shoppers: Kmart is the #3 discount retailer in the US, behind Wal-Mart and Target. It sells name-brand and private-label goods (including its Joe Boxer and Jaclyn Smith labels), mostly to low- and mid-income families. It runs about 1,300 off-mall stores (including 35 Supercenters) in 49 US states, Puerto Rico, Guam, and the US Virgin Islands. About 275 Kmart stores sell home appliances (including Sears' Kenmore brand) and more than 1,020 locations house in-store pharmacies. The company also operates the kmart.com website, which includes merchandise from sister company Sears. Kmart is a subsidiary of Sears Holdings Corp., formed by the 2005 combination of ailing Sears, Roebuck and Kmart.
Kmart Corporation, which entered 2002 as the second largest U.S. discount retailer (behind Wal-Mart Stores, Inc.) with over 2,100 outlets in 50 states, Guam, Puerto Rico, and the Virgin Islands, once so dominated the discount store marketplace that few believed any competitor could shake its mighty grip. Yet too much diversification, too little attention to its core business, and brutal competition--particularly from the mighty Wal-Mart--led to a prolonged state of decline and ultimately to a filing for Chapter 11 bankruptcy protection in January 2002. The company soon announced a host of changes in upper management, the planned closure of hundreds of stores, and various efforts at improving operations in a massive turnaround effort that was far from guaranteed of success.
The company's orderly expansion changed after 1929, when the Depression-era stock market plunged the price of Kresge stock from $57.50 per share to an eventual low of $5.50. This was a severe blow to company management, which had pledged its support by taking turns to buy the deflated stock, gambling on its bottoming out at $26. Kresge found himself at a loss, having promised to buy 100,000 shares he could no longer afford, and the company took them off his hands. By 1936, however, the chairman had bought back at cost his own shares plus the 251,306 others owned by the management.
The Depression also brought falling sales as well as inventory losses through the failure of suppliers' businesses. Competition also increased; the scramble for the retail dollar fueled rivalry from Sears, Roebuck and prompted other chains to open department store "bargain basements." Forced to broaden its inventory to meet this threat, Kresge had to raise its prices, so that Green Front stores had many items selling for up to $3 despite their former $1 ceiling.
With the Depression over by 1940, there were 682 stores in 27 U.S. states, plus 61 in Canada. Together, the stores produced 1940 sales of $158.7 million. As the decade advanced, many homeowners moved out to the suburbs from inner-city locations; the retailers followed. Kresge management cautiously opened one suburban shopping center store in 1947, adding to the first one that had opened in 1929. Three more followed in 1948. By 1953 there were about 40 suburban stores in the United States, plus one in Canada.
In 1962 the company opened its first discount store in the Detroit suburb of Garden City, calling it Kmart. Within a year, there were 17 others. Unlike Kresge stores, Kmarts were not placed in shopping centers but were built in plazas by themselves, to avoid internal competition and also to provide ample parking. To ensure a 25 percent annual pretax return on investment, each store featured decor that was pleasant, though not extravagant, and each aimed for eight inventory turnovers per year. The Kmart stores were an instant success; by 1963, there were 63 facilities, 51 of which provided repair and maintenance service for automobiles. Three years later, the number of Kmarts had swelled to 122.
The Kmart introduction still left the company with a number of older Kresge stores, still on long leases, which were too small to display Kmart's expanded merchandise lines. Numerous Kresge stores, mostly in deteriorating business areas, were renamed Jupiter Discount Stores and converted to facilities offering a limited variety of low markup, fast-moving merchandise such as clothes, drugstore items, and housewares. By 1966 there were almost 100 Jupiter stores in operation.
In 1965 the company underwent several changes. One involved the sale of longtime subsidiary Mount Clemens Pottery. Another was the acquisition of Holly Stores, a retailer of women's and children's clothing that had been a Kmart licensee since 1962, and was operating clothing departments in 124 Kmarts, Kresges, and Jupiters at the time of the acquisition. The same year, the company acquired Dunhams Stores Corporation, a sporting goods supplier already operating under license in 42 Kmarts. Dunhams then became Kmart Sporting Goods, Inc.
S.S. Kresge Company's sales for 1965 reached a record $851 million, representing a 23.6 percent gain from 1964. There were 895 stores, of which 108 were in Canada. Although discount retailing had gained momentum somewhat later in Canada than in the United States, the Canadian subsidiary had opened its first Kmart in London, Ontario, in 1963. At the same time, while inner-city deterioration in Canada had not reached the same level as in U.S. cities, the company turned some of its smaller, older Canadian stores into Jupiters.
The successful Canadian operations made a large contribution to the total sales figures for 1966, which topped $1 billion for the first time, reflecting a 28 percent rise over 1965. Company founder Sebastian Kresge did not live to see this triumph. He died in September 1966 at the age of 99, having retired from the company chairmanship only three months earlier. Also in 1966, the famous "Blue Light Special" was invented by a Kmart manager in Fort Wayne, Indiana, who was seeking a way to make it easier for his customers to find the Christmas wrapping paper that he was clearing; the Blue Light Special went on to be adopted chainwide and become an American icon. Meantime, spurred by its Canadian success, the company found another international opportunity in Australia, via a joint venture: Kmart (Australia) Limited, with retailer G.J. Coles & Coy, Limited. The 1968 undertaking, in which Kmart held 51 percent of the shares, produced five Australian Kmarts by 1970.
By 1969 S.S. Kresge Company had decided against purchasing the licensee of its automotive departments, instead opening another subsidiary called Kmart Enterprises, Inc., to operate the departments, now so popular that 56 had opened in that year alone. That year the number of company stores stood at 1,022, sales at $4.6 billion, and average profit per store at $42,358.
Sebastian S. Kresge, the founder of the company that would become Kmart, met variety store pioneer Frank Woolworth while working as a traveling salesman and selling to all nineteen of Woolworth's stores at the time.[4] In 1897 Kresge invested in two five and dime stores with his friend John McCrory; they were the first S.S. Kresge stores.[5] By 1907 Kresge had bought out McCrory. He continued in this for two years, then in 1899 founded his company with Charles J. Wilson with an $8,000 investment in two five-and-ten-cent stores, one in downtown Detroit, Michigan (for which he traded ownership in McCrory's).
In 1912, Kresge incorporated the S.S. Kresge Corporation with eighty-five stores. The company was first listed on the New York Stock Exchange on May 23, 1918. During World War I, Kresge experimented with raising the limit on prices in his stores to $1. By 1924, Kresge was worth approximately $375,000,000 (in 1924 dollars; around $5,000,000,000 in 2009 dollars) and owned real estate of the approximate value of $100,000,000 (see Farid-Es-Sultaneh v. Commissioner, 160 F.2d 812 (2d Cir. 1947)). Early century growth remained brisk, with 257 stores in 1924 growing to 597 stores operating in 1929. Kresge retired as president in 1925. The Great Depression reduced profitability and resulted in store closings, with the number reduced to 682 in 1940. Post-war retailing saw many changes in shopping patterns with many customers moving out of the cities into the suburbs. The Kresge company followed them and closed and merged many urban stores so that by 1954 the total number of stores in the US had declined to 616.[citation needed]
Under the leadership of executive Harry B. Cunningham, S.S. Kresge Corp. opened the first Kmart store on March 1, 1962, in Garden City, Michigan,[7] just a few months before the first Wal-Mart opened. This store is still in operation to this day. A total of eighteen Kmart stores opened that year. Kmart Foods, a now defunct chain of Kmart supermarkets, opened in that same decade. Company founder Kresge died on October 18, 1966.[8]
Around the time of the opening of the first Kmart, a number of the poorly performing S.S. Kresge stores were converted to a new "Jupiter" brand, which was conceived as a bare-bones, deep discount outfit. During the 1970s, Kmart put a number of competing retailers out of business. In 1977, S. S. Kresge Corporation changed its name to Kmart Corporation. In 1987, the Kmart Corporation sold its remaining Kresge and Jupiter stores in the United States to McCrory Stores, and the brands were almost entirely discontinued, although Canadian Kresge stores continued to operate until 1994.
During the 1980s, the company's fortunes began to change; many of Kmart's stores were considered to be outdated and in decaying condition. In the late 1980s and into the 1990s, the corporate office shifted much of its focus from the Kmart stores to other companies it had acquired or created, such as The Sports Authority, Builders Square, and Waldenbooks.
In 1990, in an effort to change its image, Kmart introduced a new logo. They dropped the old-style italic "K" with a turquoise "mart" in favor of a red block letter K with the word "mart" written in script and contained inside the K. Kmart then began remodeling stores shortly thereafter, but most were not remodeled until the mid-1990s, and some have not been completely renovated to this day. This logo was replaced in 2004 with the current logo. In the early 1990s, Kmart also tried to reinvent itself by using the short-lived Today's Kmart name.
The company also began to offer exclusive merchandise by Martha Stewart, Kathy Ireland, and Jaclyn Smith. Other recognizable brands included Sesame Street and Disney. Rosie O'Donnell and Penny Marshall were among the company's most recognized spokespersons.
After closing 214 stores, disposing of its Czech, Slovak, and Singapore properties, and pledging to reduce expenses by $600-$800 million, Kmart was ready to prove its retail mettle. Its new merchandising credo centered around four simple words: brands, consumables, convenience, and culture. To help achieve its goals came a new advertising campaign featuring comedian Rosie O'Donnell and director Penny Marshall, a massive shakeup in upper management, and the launch of a multiyear $750 million remodeling program. The latter involved the introduction of the Big Kmart format, which was cleaner and brighter and featured wider aisles for easier shopping. Other key changes were the addition of a section of consumable goods conveniently located near the front of the stores and an increased emphasis on the children's and home furnishings departments. By the end of 1998, 1,245 of the company's stores (or 62 percent of the total) had been converted to the Big Kmart format.
Another important initiative was an expansion of popular brand-name and private-label lines, particularly the 1997 launch of the Martha Stewart Everyday line of bed and bath products through a strategic alliance between Kmart and Martha Stewart Living Omnimedia L.L.C., which Stewart had formed earlier that year to oversee her growing empire. The Martha Stewart line was expanded to include garden and patio products as well as baby products in 1999, and that year the line generated more than $1 billion in sales. Proving successful as well was the launch of a line of Sesame Street children's apparel and juvenile products.
Also in 1997, Kmart announced the sale of its remaining interest in Thrifty PayLess to Rite Aid, refinanced its debt load, started leasing out hundreds of its largest parking lots, and built a hip new three-story Kmart in Manhattan near Greenwich Village. The firm also sold its interest in its Mexican joint venture and sold Builders Square to Leonard Green & Partners for a mere $10 million. Further retrenchment came in February 1998 when Kmart sold its 112 stores in Canada to Hudson's Bay Company for US$167.7 million (the stores were either closed or converted to other formats, mainly Zellers).
Through these and other moves, Hall succeeded in saving Kmart from oblivion, and the firm returned to profitability in the fiscal year ending in January 1998, posting net income of $249 million on sales of $32.18 billion, and stayed in the black for the following two years. By 1999 Hall was confident enough of the company's future to announce plans to open 400 stores over the next five years, with half of the units to be Super Kmart Centers. About 100 new stores were opened in 1999, the same year that Kmart ventured into e-commerce with the formation of BlueLight.com, a joint venture formed by Kmart, Softbank Corp., Yahoo! Inc., and Martha Stewart Living Omnimedia. Kmart also signed agreements in 1999 with Fleming Companies, Inc. and SuperValu Inc. to distribute grocery items to its stores. Despite this string of positive developments, underlying and significant problems remained, and Hall's expansion program quickly proved to be premature.
Falling into Bankruptcy, Early 21st Century
Hall retired as chairman, president, and CEO in early 2000. Hired as the new chairman and CEO was 39-year-old Charles C. "Chuck" Conaway, who had been president and COO of CVS Corporation, the giant drugstore chain. Conaway moved quickly to implement major changes as Kmart's financial performance began to once again head south. He shook up senior management, announced that 72 underperforming stores would be closed, and launched a $1.7 billion program to improve the supply chain and attempt to resolve the chain's chronic problem of keeping items in stock. The new initiatives continued in 2001. The company inked a deal with Fleming, making that firm the exclusive supplier of food and consumables for Kmarts and Super Kmarts. The Martha Stewart Everyday line was expanded even further, and an agreement was reached to develop a new and exclusive line of Disney children's clothing. On the marketing side, Conaway brought back the Blue Light Special--which had been shelved in 1991--in an attempt to instill some excitement into the stores, and prices were permanently trimmed on 38,000 everyday items in a new "Blue Light Always" pricing strategy.
This last maneuver, an ill-advised attempt at beating Wal-Mart at its own game that was launched in August 2001, proved to be a critical mistake. Not only did Wal-Mart move quickly and ruthlessly to match or undercut the prices, but Kmart also compounded its mistake by simultaneously and drastically cutting back its distribution of expensive advertising circulars. Customers used to the circulars simply stopped shopping at Kmart, and same-store sales fell throughout the final months of 2001, including during the crucial holiday selling season. The declining sales resulted in a liquidity crisis and halts in shipments from major vendors, leading the company to file for Chapter 11 bankruptcy protection on January 22, 2002, becoming the largest retailer ever to do so.
Just prior to the filing, James B. Adamson was named Kmart chairman, with Conaway remaining CEO. Adamson had been a Kmart director since 1996 and had previously served as chairman and CEO of Advantica Restaurant Group, Inc., owner and operator of mid-priced restaurant chains, such as Denny's. In March 2002 Conaway resigned and Adamson took on the position of CEO as well. That month, Kmart announced that it would close 284 underperforming stores, resulting in the elimination of 22,000 jobs and a charge of more than $1 billion. As the company attempted to emerge from bankruptcy by mid-2003, its biggest challenge was to find a niche to occupy. Many observers were doubtful that a major discount chain could find such a niche given the strengths of the two main rivals: Wal-Mart with its rock-bottom prices and extensive grocery aisles and Target with its discount prices for slightly upscale products. In February 2002 Kmart launched a new advertising campaign featuring television commercials directed by Spike Lee and sporting a "family values" theme and the tagline "Kmart. The Stuff of Life." In a company press release, Steven Feuling, a senior marketing vice-president, said that "Kmart's goal with this campaign is to build an emotional bond with the consumer by re-establishing the role Kmart plays in its shoppers' lives." Whether this campaign and the company's other initiatives would be enough to save Kmart remained to be seen.
Principal Competitors: Wal-Mart Stores, Inc.; Target Corporation.
Financial Highlights
Fiscal Year End: January
Revenue (2009): 16219.00 M
Revenue Growth (1 yr): (-6.00%)
Employees (2009): 133,000
Employee Growth (1 yr): 0.00%
Statistics:
Public Company
Incorporated: 1912 as S.S. Kresge Company
Employees: 252,000
Sales: $37.03 billion (2001)
Stock Exchanges: New York Pacific Chicago
Ticker Symbol: KM
NAIC: 452910 Warehouse Clubs and Superstores; 452990 All Other General Merchandise Stores; 454110 Electronic Shopping and Mail-Order Houses
Key Dates:
1897: Sebastian Spering Kresge and John McCrory form partnership to open five-and-dime stores in Detroit and Memphis.
1899: Partnership is dissolved, and Kresge takes over the Detroit stores, forming S.S. Kresge Company.
1912: S.S. Kresge Company, with 85 stores and $10.3 million in sales, is incorporated.
1918: Company goes public with a listing on the New York Stock Exchange.
1929: First store in Canada opens; a Kresge store is opened in the first suburban shopping center in United States; store total reaches 597 and sales hit $156.3 million.
1962: First discount store, called Kmart, opens in the Detroit suburb of Garden City.
1977: With Kmarts accounting for almost 95 percent of sales, the company changes its name to Kmart Corporation.
1984: Diversification into specialty retailing begins with purchase of Home Centers of America (renamed Builders Square) and Walden Book Company.
1985: First celebrity product line is introduced--the Jaclyn Smith line of clothes.
1987: Martha Stewart's association with Kmart begins; most U.S. Kresge and Jupiter stores are sold to McCrory Corporation.
1989: PACE Membership Warehouse Inc. is acquired.
1990: Wal-Mart surpasses Kmart in sales.
1991: First Super Kmart opens in Medina, Ohio, featuring a full-service grocery store and general merchandise; 90 percent stake in OfficeMax is acquired.
1992: Borders book superstore chain is acquired.
1994-95:Numerous noncore assets are shed, including PACE, OfficeMax, Sports Authority, Borders Group, and 860 auto service centers.
1995: More than 200 U.S. stores are closed.
1997: The Big Kmart format debuts; the Martha Stewart Everyday line of bed and bath products is launched.
1998: Kmart sells its stores in Canada to Hudson's Bay Company.
2001: Declining sales amid intense competition leads to liquidity crisis and halts in shipments from major vendors.
2002: Kmart files for Chapter 11 bankruptcy protection, becoming the largest retailer ever to do so; company announces that it will close 284 stores.
Contact Information
Address: 3333 Beverly Rd.
Hoffman Estates, IL 60179
As of January 30, 2010, Kmart operated a total of 1,327 (13 closing by late May) Kmart stores across 49 states, Guam, Puerto Rico, and the U.S. Virgin Islands. This store count included 1,361 discount stores, averaging 92,000 sq ft (8,500 m2), and 29 Super Centers, averaging 165,000 sq ft (15,300 m2).[2]
Kmart's world headquarters was located in Troy, Michigan, in a sprawling complex which, since Kmart's relocation to Illinois, has been slated for demolition.[3]
Kmart became known for its "Blue Light Specials." They occurred at surprise moments when a store worker would light up a mobile police light and offer a discount in a specific department of the store. At the height of Kmart's popularity, the phrase "attention Kmart shoppers" also entered into the American pop psyche, appearing in films and other media such as Troop Beverly Hills, Six Days Seven Nights, Beetlejuice, and Dawn of the Dead (1978).
Attention Kmart shoppers: Kmart is the #3 discount retailer in the US, behind Wal-Mart and Target. It sells name-brand and private-label goods (including its Joe Boxer and Jaclyn Smith labels), mostly to low- and mid-income families. It runs about 1,300 off-mall stores (including 35 Supercenters) in 49 US states, Puerto Rico, Guam, and the US Virgin Islands. About 275 Kmart stores sell home appliances (including Sears' Kenmore brand) and more than 1,020 locations house in-store pharmacies. The company also operates the kmart.com website, which includes merchandise from sister company Sears. Kmart is a subsidiary of Sears Holdings Corp., formed by the 2005 combination of ailing Sears, Roebuck and Kmart.
Kmart Corporation, which entered 2002 as the second largest U.S. discount retailer (behind Wal-Mart Stores, Inc.) with over 2,100 outlets in 50 states, Guam, Puerto Rico, and the Virgin Islands, once so dominated the discount store marketplace that few believed any competitor could shake its mighty grip. Yet too much diversification, too little attention to its core business, and brutal competition--particularly from the mighty Wal-Mart--led to a prolonged state of decline and ultimately to a filing for Chapter 11 bankruptcy protection in January 2002. The company soon announced a host of changes in upper management, the planned closure of hundreds of stores, and various efforts at improving operations in a massive turnaround effort that was far from guaranteed of success.
The company's orderly expansion changed after 1929, when the Depression-era stock market plunged the price of Kresge stock from $57.50 per share to an eventual low of $5.50. This was a severe blow to company management, which had pledged its support by taking turns to buy the deflated stock, gambling on its bottoming out at $26. Kresge found himself at a loss, having promised to buy 100,000 shares he could no longer afford, and the company took them off his hands. By 1936, however, the chairman had bought back at cost his own shares plus the 251,306 others owned by the management.
The Depression also brought falling sales as well as inventory losses through the failure of suppliers' businesses. Competition also increased; the scramble for the retail dollar fueled rivalry from Sears, Roebuck and prompted other chains to open department store "bargain basements." Forced to broaden its inventory to meet this threat, Kresge had to raise its prices, so that Green Front stores had many items selling for up to $3 despite their former $1 ceiling.
With the Depression over by 1940, there were 682 stores in 27 U.S. states, plus 61 in Canada. Together, the stores produced 1940 sales of $158.7 million. As the decade advanced, many homeowners moved out to the suburbs from inner-city locations; the retailers followed. Kresge management cautiously opened one suburban shopping center store in 1947, adding to the first one that had opened in 1929. Three more followed in 1948. By 1953 there were about 40 suburban stores in the United States, plus one in Canada.
In 1962 the company opened its first discount store in the Detroit suburb of Garden City, calling it Kmart. Within a year, there were 17 others. Unlike Kresge stores, Kmarts were not placed in shopping centers but were built in plazas by themselves, to avoid internal competition and also to provide ample parking. To ensure a 25 percent annual pretax return on investment, each store featured decor that was pleasant, though not extravagant, and each aimed for eight inventory turnovers per year. The Kmart stores were an instant success; by 1963, there were 63 facilities, 51 of which provided repair and maintenance service for automobiles. Three years later, the number of Kmarts had swelled to 122.
The Kmart introduction still left the company with a number of older Kresge stores, still on long leases, which were too small to display Kmart's expanded merchandise lines. Numerous Kresge stores, mostly in deteriorating business areas, were renamed Jupiter Discount Stores and converted to facilities offering a limited variety of low markup, fast-moving merchandise such as clothes, drugstore items, and housewares. By 1966 there were almost 100 Jupiter stores in operation.
In 1965 the company underwent several changes. One involved the sale of longtime subsidiary Mount Clemens Pottery. Another was the acquisition of Holly Stores, a retailer of women's and children's clothing that had been a Kmart licensee since 1962, and was operating clothing departments in 124 Kmarts, Kresges, and Jupiters at the time of the acquisition. The same year, the company acquired Dunhams Stores Corporation, a sporting goods supplier already operating under license in 42 Kmarts. Dunhams then became Kmart Sporting Goods, Inc.
S.S. Kresge Company's sales for 1965 reached a record $851 million, representing a 23.6 percent gain from 1964. There were 895 stores, of which 108 were in Canada. Although discount retailing had gained momentum somewhat later in Canada than in the United States, the Canadian subsidiary had opened its first Kmart in London, Ontario, in 1963. At the same time, while inner-city deterioration in Canada had not reached the same level as in U.S. cities, the company turned some of its smaller, older Canadian stores into Jupiters.
The successful Canadian operations made a large contribution to the total sales figures for 1966, which topped $1 billion for the first time, reflecting a 28 percent rise over 1965. Company founder Sebastian Kresge did not live to see this triumph. He died in September 1966 at the age of 99, having retired from the company chairmanship only three months earlier. Also in 1966, the famous "Blue Light Special" was invented by a Kmart manager in Fort Wayne, Indiana, who was seeking a way to make it easier for his customers to find the Christmas wrapping paper that he was clearing; the Blue Light Special went on to be adopted chainwide and become an American icon. Meantime, spurred by its Canadian success, the company found another international opportunity in Australia, via a joint venture: Kmart (Australia) Limited, with retailer G.J. Coles & Coy, Limited. The 1968 undertaking, in which Kmart held 51 percent of the shares, produced five Australian Kmarts by 1970.
By 1969 S.S. Kresge Company had decided against purchasing the licensee of its automotive departments, instead opening another subsidiary called Kmart Enterprises, Inc., to operate the departments, now so popular that 56 had opened in that year alone. That year the number of company stores stood at 1,022, sales at $4.6 billion, and average profit per store at $42,358.
Sebastian S. Kresge, the founder of the company that would become Kmart, met variety store pioneer Frank Woolworth while working as a traveling salesman and selling to all nineteen of Woolworth's stores at the time.[4] In 1897 Kresge invested in two five and dime stores with his friend John McCrory; they were the first S.S. Kresge stores.[5] By 1907 Kresge had bought out McCrory. He continued in this for two years, then in 1899 founded his company with Charles J. Wilson with an $8,000 investment in two five-and-ten-cent stores, one in downtown Detroit, Michigan (for which he traded ownership in McCrory's).
In 1912, Kresge incorporated the S.S. Kresge Corporation with eighty-five stores. The company was first listed on the New York Stock Exchange on May 23, 1918. During World War I, Kresge experimented with raising the limit on prices in his stores to $1. By 1924, Kresge was worth approximately $375,000,000 (in 1924 dollars; around $5,000,000,000 in 2009 dollars) and owned real estate of the approximate value of $100,000,000 (see Farid-Es-Sultaneh v. Commissioner, 160 F.2d 812 (2d Cir. 1947)). Early century growth remained brisk, with 257 stores in 1924 growing to 597 stores operating in 1929. Kresge retired as president in 1925. The Great Depression reduced profitability and resulted in store closings, with the number reduced to 682 in 1940. Post-war retailing saw many changes in shopping patterns with many customers moving out of the cities into the suburbs. The Kresge company followed them and closed and merged many urban stores so that by 1954 the total number of stores in the US had declined to 616.[citation needed]
Under the leadership of executive Harry B. Cunningham, S.S. Kresge Corp. opened the first Kmart store on March 1, 1962, in Garden City, Michigan,[7] just a few months before the first Wal-Mart opened. This store is still in operation to this day. A total of eighteen Kmart stores opened that year. Kmart Foods, a now defunct chain of Kmart supermarkets, opened in that same decade. Company founder Kresge died on October 18, 1966.[8]
Around the time of the opening of the first Kmart, a number of the poorly performing S.S. Kresge stores were converted to a new "Jupiter" brand, which was conceived as a bare-bones, deep discount outfit. During the 1970s, Kmart put a number of competing retailers out of business. In 1977, S. S. Kresge Corporation changed its name to Kmart Corporation. In 1987, the Kmart Corporation sold its remaining Kresge and Jupiter stores in the United States to McCrory Stores, and the brands were almost entirely discontinued, although Canadian Kresge stores continued to operate until 1994.
During the 1980s, the company's fortunes began to change; many of Kmart's stores were considered to be outdated and in decaying condition. In the late 1980s and into the 1990s, the corporate office shifted much of its focus from the Kmart stores to other companies it had acquired or created, such as The Sports Authority, Builders Square, and Waldenbooks.
In 1990, in an effort to change its image, Kmart introduced a new logo. They dropped the old-style italic "K" with a turquoise "mart" in favor of a red block letter K with the word "mart" written in script and contained inside the K. Kmart then began remodeling stores shortly thereafter, but most were not remodeled until the mid-1990s, and some have not been completely renovated to this day. This logo was replaced in 2004 with the current logo. In the early 1990s, Kmart also tried to reinvent itself by using the short-lived Today's Kmart name.
The company also began to offer exclusive merchandise by Martha Stewart, Kathy Ireland, and Jaclyn Smith. Other recognizable brands included Sesame Street and Disney. Rosie O'Donnell and Penny Marshall were among the company's most recognized spokespersons.
After closing 214 stores, disposing of its Czech, Slovak, and Singapore properties, and pledging to reduce expenses by $600-$800 million, Kmart was ready to prove its retail mettle. Its new merchandising credo centered around four simple words: brands, consumables, convenience, and culture. To help achieve its goals came a new advertising campaign featuring comedian Rosie O'Donnell and director Penny Marshall, a massive shakeup in upper management, and the launch of a multiyear $750 million remodeling program. The latter involved the introduction of the Big Kmart format, which was cleaner and brighter and featured wider aisles for easier shopping. Other key changes were the addition of a section of consumable goods conveniently located near the front of the stores and an increased emphasis on the children's and home furnishings departments. By the end of 1998, 1,245 of the company's stores (or 62 percent of the total) had been converted to the Big Kmart format.
Another important initiative was an expansion of popular brand-name and private-label lines, particularly the 1997 launch of the Martha Stewart Everyday line of bed and bath products through a strategic alliance between Kmart and Martha Stewart Living Omnimedia L.L.C., which Stewart had formed earlier that year to oversee her growing empire. The Martha Stewart line was expanded to include garden and patio products as well as baby products in 1999, and that year the line generated more than $1 billion in sales. Proving successful as well was the launch of a line of Sesame Street children's apparel and juvenile products.
Also in 1997, Kmart announced the sale of its remaining interest in Thrifty PayLess to Rite Aid, refinanced its debt load, started leasing out hundreds of its largest parking lots, and built a hip new three-story Kmart in Manhattan near Greenwich Village. The firm also sold its interest in its Mexican joint venture and sold Builders Square to Leonard Green & Partners for a mere $10 million. Further retrenchment came in February 1998 when Kmart sold its 112 stores in Canada to Hudson's Bay Company for US$167.7 million (the stores were either closed or converted to other formats, mainly Zellers).
Through these and other moves, Hall succeeded in saving Kmart from oblivion, and the firm returned to profitability in the fiscal year ending in January 1998, posting net income of $249 million on sales of $32.18 billion, and stayed in the black for the following two years. By 1999 Hall was confident enough of the company's future to announce plans to open 400 stores over the next five years, with half of the units to be Super Kmart Centers. About 100 new stores were opened in 1999, the same year that Kmart ventured into e-commerce with the formation of BlueLight.com, a joint venture formed by Kmart, Softbank Corp., Yahoo! Inc., and Martha Stewart Living Omnimedia. Kmart also signed agreements in 1999 with Fleming Companies, Inc. and SuperValu Inc. to distribute grocery items to its stores. Despite this string of positive developments, underlying and significant problems remained, and Hall's expansion program quickly proved to be premature.
Falling into Bankruptcy, Early 21st Century
Hall retired as chairman, president, and CEO in early 2000. Hired as the new chairman and CEO was 39-year-old Charles C. "Chuck" Conaway, who had been president and COO of CVS Corporation, the giant drugstore chain. Conaway moved quickly to implement major changes as Kmart's financial performance began to once again head south. He shook up senior management, announced that 72 underperforming stores would be closed, and launched a $1.7 billion program to improve the supply chain and attempt to resolve the chain's chronic problem of keeping items in stock. The new initiatives continued in 2001. The company inked a deal with Fleming, making that firm the exclusive supplier of food and consumables for Kmarts and Super Kmarts. The Martha Stewart Everyday line was expanded even further, and an agreement was reached to develop a new and exclusive line of Disney children's clothing. On the marketing side, Conaway brought back the Blue Light Special--which had been shelved in 1991--in an attempt to instill some excitement into the stores, and prices were permanently trimmed on 38,000 everyday items in a new "Blue Light Always" pricing strategy.
This last maneuver, an ill-advised attempt at beating Wal-Mart at its own game that was launched in August 2001, proved to be a critical mistake. Not only did Wal-Mart move quickly and ruthlessly to match or undercut the prices, but Kmart also compounded its mistake by simultaneously and drastically cutting back its distribution of expensive advertising circulars. Customers used to the circulars simply stopped shopping at Kmart, and same-store sales fell throughout the final months of 2001, including during the crucial holiday selling season. The declining sales resulted in a liquidity crisis and halts in shipments from major vendors, leading the company to file for Chapter 11 bankruptcy protection on January 22, 2002, becoming the largest retailer ever to do so.
Just prior to the filing, James B. Adamson was named Kmart chairman, with Conaway remaining CEO. Adamson had been a Kmart director since 1996 and had previously served as chairman and CEO of Advantica Restaurant Group, Inc., owner and operator of mid-priced restaurant chains, such as Denny's. In March 2002 Conaway resigned and Adamson took on the position of CEO as well. That month, Kmart announced that it would close 284 underperforming stores, resulting in the elimination of 22,000 jobs and a charge of more than $1 billion. As the company attempted to emerge from bankruptcy by mid-2003, its biggest challenge was to find a niche to occupy. Many observers were doubtful that a major discount chain could find such a niche given the strengths of the two main rivals: Wal-Mart with its rock-bottom prices and extensive grocery aisles and Target with its discount prices for slightly upscale products. In February 2002 Kmart launched a new advertising campaign featuring television commercials directed by Spike Lee and sporting a "family values" theme and the tagline "Kmart. The Stuff of Life." In a company press release, Steven Feuling, a senior marketing vice-president, said that "Kmart's goal with this campaign is to build an emotional bond with the consumer by re-establishing the role Kmart plays in its shoppers' lives." Whether this campaign and the company's other initiatives would be enough to save Kmart remained to be seen.
Principal Competitors: Wal-Mart Stores, Inc.; Target Corporation.
Financial Highlights
Fiscal Year End: January
Revenue (2009): 16219.00 M
Revenue Growth (1 yr): (-6.00%)
Employees (2009): 133,000
Employee Growth (1 yr): 0.00%
Statistics:
Public Company
Incorporated: 1912 as S.S. Kresge Company
Employees: 252,000
Sales: $37.03 billion (2001)
Stock Exchanges: New York Pacific Chicago
Ticker Symbol: KM
NAIC: 452910 Warehouse Clubs and Superstores; 452990 All Other General Merchandise Stores; 454110 Electronic Shopping and Mail-Order Houses
Key Dates:
1897: Sebastian Spering Kresge and John McCrory form partnership to open five-and-dime stores in Detroit and Memphis.
1899: Partnership is dissolved, and Kresge takes over the Detroit stores, forming S.S. Kresge Company.
1912: S.S. Kresge Company, with 85 stores and $10.3 million in sales, is incorporated.
1918: Company goes public with a listing on the New York Stock Exchange.
1929: First store in Canada opens; a Kresge store is opened in the first suburban shopping center in United States; store total reaches 597 and sales hit $156.3 million.
1962: First discount store, called Kmart, opens in the Detroit suburb of Garden City.
1977: With Kmarts accounting for almost 95 percent of sales, the company changes its name to Kmart Corporation.
1984: Diversification into specialty retailing begins with purchase of Home Centers of America (renamed Builders Square) and Walden Book Company.
1985: First celebrity product line is introduced--the Jaclyn Smith line of clothes.
1987: Martha Stewart's association with Kmart begins; most U.S. Kresge and Jupiter stores are sold to McCrory Corporation.
1989: PACE Membership Warehouse Inc. is acquired.
1990: Wal-Mart surpasses Kmart in sales.
1991: First Super Kmart opens in Medina, Ohio, featuring a full-service grocery store and general merchandise; 90 percent stake in OfficeMax is acquired.
1992: Borders book superstore chain is acquired.
1994-95:Numerous noncore assets are shed, including PACE, OfficeMax, Sports Authority, Borders Group, and 860 auto service centers.
1995: More than 200 U.S. stores are closed.
1997: The Big Kmart format debuts; the Martha Stewart Everyday line of bed and bath products is launched.
1998: Kmart sells its stores in Canada to Hudson's Bay Company.
2001: Declining sales amid intense competition leads to liquidity crisis and halts in shipments from major vendors.
2002: Kmart files for Chapter 11 bankruptcy protection, becoming the largest retailer ever to do so; company announces that it will close 284 stores.
Contact Information
Address: 3333 Beverly Rd.
Hoffman Estates, IL 60179
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