Online Encyclopedia
Kmart Corporation
The Kmart Corporation, based in Troy, Michigan, near Detroit, functions as a global retailer, based primarily in the United States of America.
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History
Sebastian S. Kresge founded the S.S. Kresge Corporation, the predecessor of Kmart, in 1899 in Detroit, Michigan. Kresge's first retail establishment, a five-and-ten-cent store, resembled those operated by Frank Woolworth. The store grew into a chain known as S. Kresge. By 1912, the chain operated 85 stores.
By the 1920s, Kresge operated larger stores that offered a wider variety of merchandise and prices -- precursors of the modern discount store. The first Kmart department store opened in 1962 in Garden City, Michigan. A total of 18 Kmart stores opened that year.
Kmart became known for its "blue light specials": at surprise moments, a store worker would light up a mobile police light and offer a discount in a part of the store. 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, Kmart Corporation sold its remaining Kresge stores.
In the 1990s, Kmart made a number of missteps. Unlike competitor Wal-Mart, it failed to invest in computer technology to manage its supply chain. Furthermore, Kmart maintained a high dividend, which reduced the amount of money available for improving its stores. Many business analysts also faulted the corporation for failing to create a coherent brand image. It attempted to compete with Wal-Mart on price, at the same time trying to move upscale with lines offered by Martha Stewart, Kathy Ireland and Jaclyn Smith. Other recognizable brands included Sesame Street and Disney.
In 2001, in a move to re-introduce the recognizable and historic "blue light special" image, which had 80% familiarity to Americans, Kmart introduced the ill-fated "Blue Light Always" marketing campaign. The original "blue light special" had disappeared in 1991 due to changing consumer habits and misuse by individual stores (according to the company's official explanation). The proposed new "blue light special" involved the manager announcing a promotion in-store every hour, on the hour -- said special lasting for twenty-five minutes. When the announcement of the special took place over the public address system, music would fill the store and all employees would stop their current actions, clap twice and pump their fists in the air, shouting "Blue Light, Blue Light!". This scheme aimed to generate more interest in Kmart from shoppers and the media, but failed because stores did not follow the procedure. No records exist of anyone actually shouting "Blue Light, Blue Light!"
The stock scandals involving Martha Stewart (from 2001) severely hurt the corporation's image. In addition, Kmart attempted to compete against Wal-Mart on price (for example, with deep discounts and round the clock opening), which failed because Wal-Mart contrived to meet and beat Kmart's price cuts.
On January 22, 2002, Kmart filed for bankruptcy protection. It shut down more than 300 stores in the United States of America and laid off around 34,000 workers as part of a badly-needed restructuring. On May 6, 2003, Kmart officially emerged from bankruptcy protection as Kmart Holding Corporation and on June 10, 2003 it began trading on the NASDAQ National Market (as "KMRT"). Kmart introduced a new prototype store with a new logo, layout and color scheme (lime green and gray) in 2002 in White Lake, Michigan. The new layout has wider aisles, better selection and better lighting. However, Kmart could not afford a full-scale rollout.
Once a major presence in Canada, Kmart stores there were either closed or sold to Zellers in the late 1990s. Like Target stores, Kmart-branded stores in Australia belong to Coles Myer; Coles Myer also holds the rights to the Kmart brand in New Zealand.
Merger
On November 17 2004, Kmart and Sears announced their intention to merge. The combined company would be the third largest retailer in the United States, behind Wal-Mart and Home Depot. The combined company will be known as Sears Holdings, with headquarters located in Hoffman Estates, Illinois. The new company will continue to operate two brands of stores under the existing names, though based on demographics they expect hundreds of Kmart stores to be converted into Sears.
The new company will be directed by a board of directors comprised of members from the current companies: seven members will come from Kmart's board, three from Sears'. The shareholders in Kmart will receive one share in the new company. Shares of Sears stock will be converted into a combination of 55% stock (at a ratio of 1 old to ½ new share) and 45% cash (at $50/share). Stockholders will have a choice of receiving either stock or cash, subject to the pre-defined ratio.
The companies announced that the combined company would be able to achieve greater profits together than either could separately, and greater than the one-time value based on their real estate. CBS News reports one shrewd stockholder made over $1 Billion as a result of the merger. The companies expect to close the transaction by March 2005.
Diversity
Kmart received a 57% rating on the 2004 Corporate Equality Index published by the Human Rights Campaign.
See also
External links
- Kmart Corporation website http://www.kmartcorp.com/corp/
- Column on Kmart's demise http://www.sptimes.com/2002/01/23/news_pf/Columns/_Rain_Man__character_.shtml
- FBI investigates Kmart (BBC) http://news.bbc.co.uk/1/hi/business/1992267.stm