Kmart Corporation is a subsidiary of Sears Holdings Corporation is a discount retailer in America. The company sells international branded and private-label products to low and mid income families. The largest mass merchandise retailers operate in the United States, Puerto Rico and Guam. It provides customers quality products via a portfolio of brands and labels. Kmart as the third leading retailer in the United States enjoys a powerful brand equity. After filing for bankruptcy in 2002 and closing about 1300 stores, Kmart was merged into the new Sears holdings business in 2005. Kmart Corporation operates under retailing industry.
The company’s powerful market position gives it a competitive edge. However, growing competition from other leading players has severely affected the company’s margins and market share. Since the company operates in the US, Puerto Rico and the Virgin Islands, it lacks the benefits of diversification like Wal-mart. This is so because the Wal-mart has extensive international operations such as Asia, Europe and South America. Therefore, the Kmart’s limited presence limits its customer base, which gives Wal-mart a competitive advantage. In additional, the Kmart is experiencing stiff competition from other large number of companies in the retail market such as Tesco, Kohl, Home Deport and Carrefour. For instance, the Carrefour has been more successful doing business globally compared to Wal-Mart because it has the leading position in China.
The Kmart Corporation is a private company because it has neither issued its securities via IPO nor listed in the stock exchange. Kmart formed a merger with Sear Holdings Corporation in 2005, and became the third largest in the retail industry. During the merger, Sears the common stockholders were given the right to elect to receive 0.5 of a share of holdings. The Kmart stockholders received one share of holdings common stock for each of its common stock. Therefore, after the merger, the former Sear held about 37 Percent and former Kmart held 63 of the common stock of the holding.
The Kmart has not been performing well in the retail industry. This is so because the last time the company increased its year over year home textiles sales was 2000. The company’s performance has been slowly sliding down the rankings ever since. The poor sales have forced the company to close more than 250 stores since the merge with Sears in 2005. For instance, the company recorded revenues amounting to $19,094 million in the fiscal year ended 2005, a decrease of 3.8 percent over 2004. The operating profit of the Kmart was $ 767 million in 2005, a decrease of 57.9 percent over 2004 (Lehavy 412). This indicates that its decline in revenue affects the market share and pricing pressures. The product categories where sales decreased greatly in 2005 indicate inefficient marketing and promotion strategies to attract higher purchases in the company’s stores.
In additional, the sales performance of the Kmart Corporation is a deepening issue due to its struggling chain, which poses a threat to the survivability of the company in the global market. Its decreasing performance may cause its vendors to begin worrying about their exposure. Its poor performance is attributed to the 2001 bankruptcy scandal, which put the company into an unethical situation. Since the difficult economic conditions can affect most businesses, Kmart is spending its time creating a number of health and pharmacy initiatives to improve its market performance.
Lehavy , Reuven. "Kmart: Predicting Bankruptcy, Fresh Start Reporting, and Valuation of Distressed Securities." issues In Accounting Education 26.2 (2011): 391-419.