In this video we go over the epic rise and fall of Kmart. Kmart was once the second largest department store in US with over 2,000 locations. But competition from Walmart and later Amazon caused their business to decline precipitously. They filed for bankruptcy twice and there are currently only 17 stores left in operation.
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What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing today, we're going over the epic rise and fall of the kmart department store chain. As of the summer of 2021, kmart has gone through bankruptcy multiple times, and they only have 17 stores still operating in the united states. These stores will probably close within the coming years and kmart will be completely wiped off the retail map, but this was not always the case. Kmart was once one of the most successful and iconic retail brands in the united states.
So what went wrong and how did it all come? Grumbling now kmart can trace its roots. Back more than 100 years, when traveling salesman, ss kresge gathered together 6 700 of his life savings. He used this to establish the ss kresge retail chain and the first store opened in memphis tennessee. It operated as a so-called five and dime store, meaning they sold their products for either 5 or 10 cents.
You can think of it as equivalent to dollar stores. Today, the chain was extremely successful and they ipo'd on the new york stock exchange in 1918.. In 1977, they rebranded as kmart and by 1981 they operated more than 2 000 locations across the united states and canada. This made them the second largest retailer in the country.
Behind only sears, however, even by this point, the seeds of kmart's eventual destruction had already been sowed. In 1962, a young man by the name of sam walton opened the first walmart store in arkansas. Walmart stores were differentiated by their new sleek designs and wide array of product offerings. They represented a one-stop shop where consumers could buy everything they could ever need in comparison.
Kmart stores seemed outdated and not as attractive to younger customers in an effort to stay relevant kmart's management, thought of a creative marketing gimmick called the blue light special every day, blue lights would start flashing within the kmart store, indicating a limited time sale of certain products. The lights were made to replicate a police car siren and they would say attention all kmart shoppers on loudspeakers to let all customers know. These promotions were pretty popular and helped kmart hold on to its market share throughout the 70s and 80s, but by the 1990s it became clear that they were losing share to walmart. Walmart was opening thousands of new stores across the u.s walmart started, establishing super centers, which included grocery stores, in addition to general merchandise, they used their scale and logistics, expertise to source their products for cheap prices, often directly from foreign manufacturers.
This allowed them to undercut both kmart and sears on many products to combat this kmart introduced the super kmart center with their first location opening in 1991. In the small town of medina ohio, they tried to copy walmart super centers and included a wide variety of groceries, including fresh produce. When these super kmarts failed to gain traction, kmart's management desperately tried every new initiative that they could think of to turn things around. This included adding video rental services similar to blockbuster video. They also added kmart cafe food courts. In the end, all of these new ideas were failures and lost money for the company. By this point, walmart's logistics networks were far bigger and more efficient than kmart's. This allowed them to procure goods and transport them to the stores for far lower prices.
Kmart was no longer able to compete on prices, which was a huge problem. Remember kmart was originally founded as a discount store selling products between 5 and 10 cents. People didn't shop there because they thought the quality or shopping experience was good. They were just looking for the cheapest prices once they were no longer able to provide the best prices.
There was no reason for anyone to shop there. Their revenue peaked in 1993 at almost 38 billion dollars. It started to rapidly decline and by 2004 it was less than 20 billion in an attempt to turn things around. They signed agreements with a few brands to sell their products exclusively at kmart.
These included some of martha stewart's product lines and a few others. They also made some acquisitions, including the sports, retailers, sports authority and the construction retailer builder square and the book retailer border square. Unfortunately, kmart had no expertise in these niche retail industries and they just added to the company's already bloated cost bases. All of these new ideas were too little to overcome the fundamental lack of profitability of the business.
Their profitability turned negative with their net losses exceeding two billion dollars in 2001.. In 2002, they ran out of cash and were forced to file for chapter 11 bankruptcy protection during the bankruptcy. It was revealed that ceo, charles conway misled investors about the company's deteriorating financial condition. He also inappropriately used corporate money to buy private jets in luxury yachts for his own personal use, but in the chaos of the kmart bankruptcy, a billionaire hedge fund manager, by the name of eddie lampert, saw opportunity.
His hedge fund, esl investments, bought a 53 controlling stake in kmart, as it emerged from bankruptcy in 2005, eddy orchestrated, a merger between kmart and sears, with the combined entity called sears holdings, which would trade under the ticker symbol. Shld cirrus holdings would be the third largest retailer in the us with annual revenues of 60 billion dollars. But even at this point they were dwarfed and scaled by walmart. Walmart's revenue of 256 billion dollars was so big that they had to adjust the size of the bar chart.
To make the comparison. Look more favorable eddie said that the new entity could use its scale to reduce costs and finally compete with walmart. Unfortunately, the opposite happened. Their revenue declined by 94 from 2006 to 2020.. In an effort to reduce costs, they decided to close the money losing kmart locations to increase the entire group's profitability. To this end, they started closing hundreds of locations per year, but this had some unintended consequences. At the same time, kmart and sears were shutting down stores. Walmart was opening thousands of new stores by the mid-2010s.
More than 90 percent of americans lived within a 10-minute drive of the closest walmart route density is one of the most important concepts in the retail space. If you have a high density of stores, you can invest in a wide array of distribution centers across the country. This means each delivery truck doesn't have to drive that far to reach the store from the closest distribution center after the store closures, the density of kmarts declined substantially. This means that each semi truck had to drive a longer distance to deliver new inventory to the store.
The adverse effect of decreased route density made previously profitable stores unprofitable. They would then close these doors, creating a vicious cycle of lower route density and less profitable stores, while walmart is kmart's biggest direct competitor, they were also losing market share to online retailers such as amazon. They launched kmart.com in an attempt to compete, but they lacked the necessary scale. Their high delivery costs made their products uncompetitive with amazon.
By the mid-2010s, it became clear that eddie lampert's experiment had been a complete and total failure by combining two failing retailers. All he did was accelerate their declines. There was never any real prospect of a turnaround, as neither company could ever have a competitive advantage over walmart or amazon by 2018 sears holding stock had lost close to 100 of its value after posting tens of billions of dollars. In net losses they ran out of cash and had to file for bankruptcy.
This would be kmart's second bankruptcy proceeding as part of the bankruptcy. The majority of kmart's remaining stores were liquidated with the proceeds going to sears holdings creditors. All that was left was 202 kmart stores, which would be owned by a new entity called transform. Holdco, unfortunately, transform holdco had almost no money to invest in e-commerce or even give their existing stores a facelift.
The remaining stores became dilapidated and were an eyesore within their communities. The pandemic further accelerated the closures and there are now just 17 active locations in the u.s. Any chances of a turnaround have now been completely exhausted. It's possible that they can stay afloat for a couple more years if they're lucky, but they will eventually join the other 2 000 kmart stores in the retail graveyard. The fall of kmart shows how difficult it is to be successful as a generic retailer without having their own brands. The only way they can attract customers is to offer the lowest prices, but offering low prices requires scale which they no longer have. This is why the behemoths like walmart and amazon have been able to drive their smaller competitors like kmart out of business, alright, guys that wraps it up for this video. What do you think about the rise and fall of kmart? Do you think there was ever a chance that they could have turned things around? Let us know in the comments section below if you enjoyed this content, please consider subscribing to the channel, so you don't miss future uploads as always.
Thank you so much for watching and we'll see you in the next one wall, street millennial, signing out.
Logic Dictates Common Cents:
There is a unique pathway to profitability & prosperity for SHLD but it requires Common Sense, a quality no longer available @Sears or @Kmart. SHLD could dominate an existing $700+ Trillion marketplace
Kmart is not totally out of business, they still have some remaining in select markets in the USA. Also, there is a separate and very successful Kmart found in Australia and New Zealand. Here are all of the non liquidating Kmarts in the USA and US territories as of September 26, 2021: 1. Tauming, Guam 2. Grass Valley, California 3. Key West, Florida 4. Miami, Florida 5. Hamilton, Montana 6. Avenel, New Jersey 7. Westwood, New Jersey 8. Bridgehampton, New York 9. Bronx, New York (The Shops at Bruckner) 10. Bronx, New York (Bay Plaza Shopping Center) 11. Hato Rey, Puerto Rico 12. St. Croix, U.S. Virgin Islands (Sunshine Mall) 13. St. Croix, U.S Virgin Islands (Sunny Isle Shopping Center) 14. St. Thomas, U.S. Virgin Islands (Tutu Park Mall) 15. St. Thomas, U.S. Virgin Islands (Lockhart Gardens Shopping Center). Liquidating Kmarts that are temporarily still open are 1. White Plains, New York 2. Brooklyn, New York (located on the ground floor of a liquidating Sears) and 3. Marshall, Michigan
I remember those flashing blue police lights here in Canada in the 80s. They were on white trolly and wheeled them around the store to the products they were having a sale on. Forgot all about that W$M. Thanks for the memory.
shit thought k mart was well never heard round no mores any ways guess bezos go ing with it now funny
Seems like every business KMart touched went belly up. Boarders Books, Sports Authority (which I really liked) and Builders Square all went belly up. Then Sears.
A big problem with KMart was how long it took to get through the register. The cashiers had no sense of urgency and would sometimes even wander way from their registers even though they had customers waiting. Also, in the later years they would waste time trying to sign people up for promotions. You could have five people in line, each with 3 times and it would take 20 minutes to ring them up. Meanwhile a grocery store could ring up 15 people, each with 20 products in less time. If they could have run their registers like a grocery store they would have lasted a lot longer.
Kmart was never going to be as big as Walmart, but their end wasn't inevitable. Target still exists using a lot of the ideas Kmart was trying to implement. The big problem is that their management was legendarily corrupt and stupid.
Today I went to the KMart still open in San Juan (Hato Rey), Puerto Rico to buy a microwave oven. To my surprise they still have a lot of then, mostly Kenmore brand, quite cheap. There is still a lot of merchandise, although not much variety, just a few brands. This is not the standard KMart, it is a 2 story building, with a multilevel parking. The structure and the interior is in good condition, so there is a good chance this will be the last one.
A couple retired K Mart executives were interviewed recently and said that unlike Walmart they did not do much research on wheter the locations had good access or traffic.
The rise of the pandemic and government lock-downs will have a depreciating effect on the Wallmart and Amazon behemoths in the medium to long term as our politicians trash our economies.
Very important lesson. It may be subjective but a dead dog turd asset that is losing value everyday will still be dogturd at the end of the day. And when the next round of buyer holding these remaining dogturd, pray to god they don’t continue to burn their own money on the same dogturd
They should have gone back to their roots. Door-to-door sales is the wave of the future!
Omg all Kmarts have been gone from existence since 2014, because the one in my hometown area of Georgia Hiram, Georgia was gone by 2014, I am amazed it lasted that long considering there was Walmart across the street and Super Target right down the street from both of those locations. 😂 Now living in Panama City Beach Florida the Kmart was already gone it’s a storage place now, and the 15th Street location just closed in 2016, now it’s demolished it was a storage place, the Callaway Florida location is a Grocery Outlet, Sears just basically made Kmart look like a Goodwill and Big Lots combined with a Fred’s and Dollar Tree, except with higher prices, definitely don’t miss Kmart at all, ever since Little Caesars left those locations hasn’t been the same. 😳 And lastly Sears is just now gone from most areas the one in my hometown area of Georgia which wasn’t in the county I lived in, but near it was Douglasville Georgia at Arbor Place closed down in February of 2020, and the one in Panama City Florida at the former Panama City Mall was destroyed by Hurricane Michael and still is abandoned as of this year, and it was scheduled to liquidate through bankruptcy as well. 🤔 So honestly I think if Walmart didn’t update every year and kept low prices Target would have put Walmart out of business, because every Walmart I have gone to old or new they are all rundown just like Kmart actually, even with the pandemic they don’t keep there stores clean like Target at all, they treat the employees and customers like absolute crap, and it’s always busy, never enough help to open a register only few registers open, and Walmart has raised there prices over the years as well, people say Target is expensive, they can’t stand they support LGBT people, but Walmart does the same thing they just don’t know about it. 😅 But in reality Target is cheaper than Walmart on some things not everything but either way as long as Target stays in business and Walmart continues improving then I don’t care honestly what happens to Kmart? 😁
I tried going to Kmart in the 2000s. I would find the products I wanted and then go to the checkout lines. The problem was that Kmart was promoting their loyalty program to customers. When a customer in line agreed to sign up, the cashier asked for the customer's name and address, and then tried entering that info into the POS terminal. That slowed the checkouts to a crawl. I and other shoppers would get frustrated, put the products we wanted down on a nearby shelf, and leave. Not only was Kmart not making our sales, but then their workers also had to do more work to return the unpurchased products back to the correct shelves. Talk about shooting yourself in the foot, Kmart.
No chance to turn it around. Eddie Lambert companies plan was never to turn it around. They did the same thing in Canada with Sears ownership
I stopped shopping k-mart in the 90's, just like i stopped shopping walmart a year ago
Last time i was in one they could not even keep the lights on. So sketchy and smelled bad
Builders Square…died, they had some Shady business practices for which my dad had quite the conversation about at one of the stores in the early 2000s. He said they were going to go under and they did.
No offense, but where did you get your facts? Way off on so many counts. Kresge's were 5 and 10 stores. K-Mart was a totally new format introduced decades later and a complete departure. It was one of the first stores of its kind (along with Korvettes and a few other early full-line discounters) It was not a 5 and dime. As the 5 and dime market died and K-Mart took off rapidly in the 60's, they slowly shuttered their dying stores. Their K-Mart business was booming, hence the much later corporate renaming you noted – but no stores were renamed. K-Mart stocked EVERYTHING Walmart did (at the time). Walmart was a small market retailer. Sam ran a tighter ship as K-Mart was becoming bloated and less in touch with their customers. Sam also invested massive amounts of money in technology, giving Walmart information K-Mart did not possess. Walmart also invested massive sums in logistics, further edging out K-Mart. As Walmart entered larger and larger markets, they gave K-Mart a tougher run. Only later did Walmart add food, beginning with shelf-stables and snacks, though becoming, over the course of two decades, the largest grocer in the US (and the first national grocer). A bit more research would add more value for your viewers. There is much more I skipped over. Perhaps do an update sometime. Thanks.
I think you need more research. You have a lot of inaccuracies. You may be right about parts but your timelines are all off. Kmart always had their diner/cafe and it was wildly popular. They DID convert many cafes to Little Ceasers in the 90's. WalMart was certainly on Kmarts tail in the 90's but the turning point was WalMarts popular Made in America campaign, after which they dropped that campaign and focused on low prices.
Kmart was launched in 1962, the same year as Target and WalMart. They continued to operate under S.S. Kresge until 1977.
Kmart was done in 1994 or earlier. They were pulling decade old product out of the back rooms then. Those mid 1990s stores didn’t help. Then they went bankrupt and would have liquidated. Eddie bought them and tried to cost cut them back to profitability. They were too run down, out modded and outdated. Sears was heading in the same direction, all combining the two did was hasten Sears and delay Kmart.
A local Trader Joe's became K Mart, which became Big K Mart, which is now Aldi's, which is like Trader Joe's. Very confusing. I do remember "Attention all shoppers! Blue light special on aisle 7 for the next ten minutes! THE NEXT TEN MINUTES!" Maybe the best use of FOMO in retail, ever.
What happened? Eddie Lambert happened. He was only interested in the real estate side of Kmart & Sears, not the retailer or it's employees and customers. Two wrongs don't make a right, so putting 2 failing retailers together won't make them better.
Kmart was deliberately run into the ground and bankrupted. The CEO and board of directors should have faced jail time. From that point there was no hope. Kmart could have competed the same way Target competes not directly against Walmart but in quality and price, just not the lowest price overall. The reason to merge Kmart and Sears was to load them up on debt and strip out their valuable real estate, it was never to save them. Unfortunately for that to work real estate needed to hold it's value and Amazon, not Walmart killed that off, leading to the decline of malls and strip malls, sure some of that land was sold for other uses for a profit, but not as much as it was worth at the time of the merger.
By the year 2000, Kmart fell behind Walmart as the top retailer. After Kmart bought Sears, they never updated their stores or the technology. While Walmart & Target remodeled and introduced self checkout, Kmart did not. Some stores begin too look run down and the ceiling leaks were never repaired.
Kmart was a dump. even before their 'downfall' you could see it during the bigkmart era. most stores were old got as cheap renovation and a newish logo that sounded so dumb. and compered to Walmart and Target they never had any identity.
K-Mart used to actually sell interesting stuff in the 1990's, especially clothing like jackets but they went more and more generic selling crap from China. At the end of the day, the products sucked.
Edddy is still in charge bcuZ no one else wants it. Used to shop at Kmart in New York. Cuz there was no Walmart there. It’s factually pretty 🤩 good. Roast chicken 🐔 yum 🤤
they look like the guys running OCP in Robocop just full of good ideas & lots of coke up thier noses with dumb strippers
Ahhh, I always thought Woolworths was the original 5and10.. It was that darn Kresge!!! what a great drama name.
Where I live (Australia) Kmart is still a big thing then again we don’t have Walmart or anything
I still shop at Kmart, also when you gonna ask for your check mark. Do more undervalued shit pls.
Kmart didn't change their name to Kmart in 1977. I know this cause my mother use to work there in 1973-1974. Best Christmas ever cause she was staffed in the toy department. 🙂