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Kmart Bankruptcy Essay

2722 words - 11 pages

Sebastian S. Kresge opened his first store, regarded as a five-and-dime, in 1899. The low priced department store was appealing to the consumers and changed the retailing landscape for future department stores. By 1912, Kresge had expanded his network of stores to 85 and contributed to annual sales of $10 million. (Corporate History, 2013. www.searsholdings.com). The 1920’s posed significantly hard times for America, with the Great Depression and World War 1. During this time Kresge stores remained opened, provided Americans necessary items and jobs to support households across America.

In 1959, Harry B. Cunningham became the President for the Kresge Company. After studying other department stores, Cunningham realized that change was necessary to continue and grow this business and developed a new strategy for the future. His strategy would be to open a more fully developed department store, which in most cases would be situated right next to the Kresge stores. In 1962, the first Kmart discount department store opened in Garden City, Michigan. An additional 17 stores opened the same year and the corporate sales were in excess of $480 million. That same year, the competitive landscape would change as a new store and future contender opened a new store called Walmart, founded by Sam Walton in Roger, Arkansas. The strategy for this store was no-frills brick and mortar stores with discount priced items, everyday.

Kmart and Walmart stores continued to grow through the 1970’s and 1980’s. In the 1980’s, it became apparent that the Kmart stores were becoming outdated and their competition was changing their fortunes. In 1970, Walmart became a publically traded company, and in 1972, was traded on the New York Stock Exchange with symbol WMT. In the 1980’s Walmart opened its first Sam’s Club, focusing on small business needs and bulk items for individuals. In 1988 the first Walmart Supercenter opened in Washington, MO, and for the first time, combined department store items with groceries. This strategy would redefine the consumer shopping experience by including convenience. During this time, Walmart invested heavily in the acquisition of data and replaced all cash registers with computers.

During the 1990’s, Kmart, feeling the pressures of the competitor, changed the strategy of growth and began to diversify within the retail space. KMart began to focus its attention to acquisitions with companies such as Sports Authority, Builder’s Square and Waldenbooks. In an effort to change their image, Kmart began a new strategy with a five-year plan, $3.5 billion to remodel their stores and change their image. This would significantly increase their debt on the balance sheet. Part of the strategy would be placed on the Children’s and Home Fashions departments. As part of the five-year plan, Kmart opened the first Kmart Supercenter in Medina, Ohio, in 1991, offering a full-service grocery along with general merchandise 24 hours a day, seven days a...

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