the

The Decline of Kmart...What Happened?

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attention Kmart shoppers everyone think

back to the last time you went to a

Kmart chances are it wasn't a great

experience or it was well over a decade

ago for many people it used to be their

go-to store

that phrase attention Kmart shoppers

that was a very well-known phrase

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it was associated with their blue light

special which was a really cool idea for

its time at random moments the store

would light up a police car type light

and announce a discount for a special

item people would just hang around the

store waiting for the announcement it

kept people in their store longer it

allowed them to push the merchandise

they wanted to move and it did wonders

in getting the Kmart name and image in

everyone's heads I would say the idea

was genius and a huge success but this

isn't the case anymore nobody's hanging

around a camera waiting for the blue

light special announcement does Kmart

even still run the blue light specials

anymore you don't know do you

Kmart went from being the number-two

retail store and everyone's go-to place

to what we have today so what happened

the man who started the Kmart company

was named Sebastian s Kresge he started

the company at the end of the 19th

century in the beginning there were

stores that sold products for five and

ten cents which was cheap even for the

19th century the stores were named after

the founder and called Kresge it wasn't

until 1962 when the actual first Kmart

open it was in Garden City Michigan

interesting thing about this first

location it closed in 2017 it doesn't

come as a surprise to Jack he stopped

shopping there years

Paulie mr. Dyk they had I think it

changed over the earth but I haven't

bought anything there for quite some

time the Kmart stores expanded rapidly

and by 1977 they were responsible for

almost all of Kresge Company sales which

made the company change its official

name to the Kmart corporation by the

late 1980s the company consisted solely

of K Mart's in 1990 the Kmart logo that

we are more familiar with today came to

be soon after they opened Super K Mart's

and big K Mart's it was also around this

time period when Kmart made some big

acquisitions in 1990 they bought the

Sports Authority and 22% of OfficeMax in

1991 they increased their ownership of

OfficeMax to 90% and in 1992 they bought

borders bookstores though Kmart quickly

sold most of its investments by 1995 in

2002 the company filed for chapter 11

bankruptcy that's the reorganization

kind where the company continues to

exist well obviously in 2004 Kmart

Holdings Corporation became Sears

Holdings Corporation

it sounds like Sears purchased Kmart but

it was actually the other way around

Kmart acquired Sears but still called it

Sears Holding Corporation the corporate

headquarters moved to Hoffman Estates

Illinois before 1990 these were the two

largest retailers in the United States

the fact that they were even able to

merge like this without government

intervention in 2004 speaks to their

decline over those 14 years

another thing that speaks to the decline

of Kaymer over that time period is the

new logo they adopted during the merger

it's this this is their current logo one

that's been used for the past 13 years

but this logo is still more familiar to

you isn't it shouldn't the current logo

be the one everyone's more familiar with

that brings us to 2017 the company uses

this logo and still operate stores all

over the world so what happened to the

company

first let's take a look at the financial

state of the company I know that looking

at financial statements and SEC filings

could be boring but I already looked

through them and pulled out some of the

more interesting parts stick with me

these numbers tell a story obviously

there were problems even before the

merger enough to file bankruptcy in 2003

and to motivate them into the Sears

merger soon after but believe it or not

the real problems hadn't even started

yet I want to look at them starting in

2006 Kmart and Sears are now one company

so it's hard to separate Kmart from

Sears at times but here is a chart of

the number of Kmart stores from 2006 to

today and as a result of the number of

stores being cut nearly in half over

this time period here's their revenue

every year since 2006 it's been lower

every year and today it's well under

half of what it was in 2006 the revenue

isn't just decreasing because of the

reduced number of stores each store on

average is earning less as well this is

trouble 11 years of contraction and

let's not forget that these numbers of

2006 that seems so high actually aren't

let's add the single year of 1999 to the

chart to compare yes so from the time of

1999 to 2006 huge decline the time from

2006 to today huge decline so even if

you're not a professional analyst you

could probably conclude that Kmart isn't

doing great if you are a financial

analyst you're going to love this next

part we're going to start talking about

debt to equity ratios for the select few

of you who aren't analysts let me

explain what this is it's a very common

ratio that sounds much harder than it

actually is all it does is it takes the

company's debt you know like outstanding

loans and divides it by their equity

which is basically the money that would

be left over after all debts are paid if

you watch Shark Tank you know exactly

what this is it's used by almost all

creditors they want the company to have

low debt

hi equity therefore you generally want

this number to be low it varies in

different industries but a number below

two is generally considered pretty good

so high numbers mean too much debt if

you didn't follow that just know that

high numbers mean the company isn't

doing too well so let's see how Kmart is

doing in this department these are the

numbers that encompass the entire Sears

Holdings company so this includes Sears

and Kmart s-- among a few other things

up until 2010 the number was fine but

then see this is the issue for three

years it went up so high that I would

guess that most creditors wouldn't want

to touch this company remember we want

numbers around two or lower we're up to

seven point four then the next three

years so it turned negative what

happened what happened is the company

started having negative equity there's

another phrase that doesn't sound good

negative equity well it's as bad as it

sounds the company does not have enough

money to pay off their debts how it

works is when most companies go out of

business they liquidate all their assets

take all their money from that and pay

off any outstanding debts and then

pocket the rest if Kmart were to go out

of business they would sell all their

assets then go to pay off all their

debts and find out they don't have

enough to do it and also there'd be

nothing left to pocket just for a second

pretend your job is to decide if

companies are approved for loans or not

you start reviewing Kmart and learn that

they can't even pay off their existing

loans would you grant them a new loan

this is why Kmart struggling to get

money here's their debt to equity ratio

compared to that of Target and Walmart I

compare them to Target and Walmart

because Kmart themselves mentioned them

as big competitors in their annual

report and I think we could all agree

these are probably the two largest

nationwide competitors when we compare

these numbers Target and Walmart are

actually comparable but then Kmart is

just kind of off the charts

we could take a look at their net income

as well cuz that's the bottom line all

right well it's bad as we would expect

and actually negative since 2011 which

is connected to their negative equity I

know we hear a lot of things on the news

like Kmart reported negative earnings

for the sixth consecutive year and we

just overlook it and think Oh bad news

for Kmart well this is really bad this

is the kind of stuff that almost

certainly leads to the death of a

company this stuff makes people

surprised that they still exist at all

here is a statement from a recent SEC

filing from Kmart themselves it says our

historical operating results indicate

substantial doubt exist related to the

company's ability to continue as a going

concern the company themselves doubts

that they can continue to exist based on

these kind of numbers Kmart is soon

going to be gone Sears as well these

stores are hanging on by a thread I

can't put a time period on it but if you

ever want to visit one of these stores

again I suggest you do it soon

so what happened to Kmart I'm actually

going to answer it this time it could

all be brought back to one thing people

don't want to go to Kmart anymore

back in the day if you needed to run out

and get an ingredient for a recipe

there's a good chance you will go

straight to Kmart if you wanted to make

a major purchase perhaps a new TV or a

new kitchen set camera would be the

first place to look but this isn't the

case anymore now if we need that

ingredient will go out to Walmart or the

local grocery store for bigger purchases

we'll go to places like Home Depot tour

Best Buy or we go straight to the

Internet the Internet is killing them

all but people still go to stores all

the time if I want to do some grocery

shopping I'm not going online I'm going

to the store but I'm not going to a

Kmart store honestly I don't even like

being in a Kmart

it feels depressing walking into camera

is like walking into a time machine

seriously if you want to blast from the

past and want to feel like you're

shopping in 1994 go to a Kmart they've

not updated the look or feels of their

stores as I showed you they don't have

any money to do it either but maybe back

when it was the 90s they should have put

some more focus into updating their

stores and investing in themselves

rather than purchasing other companies

they lost touch with the customer they

stopped caring about them the registers

they use can't be seen anywhere else

forget touchscreens they still use

monitors with an 8-inch screen that

only displays green text as you can

imagine these registers aren't quite as

fast and leave customers waiting in line

more than twice as long as any other

store this brings me to another issue

the talent working the register no

offense if you work at Kmart but you

should quickly start looking for

employment elsewhere a question for

anyone out there who works at Walmart or

Target or somewhere like this would you

quit your job if given a job offer to

work at a Kmart well I certainly hope

not

I'd hate to say it but this leaves Kmart

with people that the other stores have

refused and this isn't just the cashiers

and workers in the stores this goes all

the way up to corporate do you think any

executives from those same stores want

to leave their positions to work at

Kmart they would have to pay really well

and as we saw they can't afford to pay

really well now this issue is the result

of a spiral it didn't start the problem

but it just adds to it

what does Kmart have to offer I'd like

to know what do they have to offer

give me a reason I would go there over

their competitors the prices aren't any

better than most stores the environment

is worse the employees are generally

worse to deal with it takes longer they

have some exclusive products like the

Martha Stewart collection but Martha

Stewart needs to have some pretty

phenomenal products for me to go to

Kmart to get them so what happened to

Kmart the customer failed to come first

and the customer left

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in 1990 Walmart pass Kaymer to be the

second largest retailer and over the

last 17 years have left them in the dust

I do remember going to Kmart when I was

younger I'm not going to lie and say it

was a magical experience in the

highlight of my week I remember it is

just being another store there wasn't

much that stood out about it but it was

the place to go when you needed to buy

stuff some people remember the stores

being fantastic the blue light specials

were great and when they said attention

Kmart shoppers it was exciting

but even many of these people have given

up on the store

they've lost their Loyalists of

customers the Kmart that they remembered

doesn't exist anymore and probably won't

even exist in this capacity for much

longer

here's a statement I pulled from Kmart

2006 annual report it says our success

depends on our ability to differentiate

ourselves from our competitors with

respect to shopping convenience

a quality assortment of available

merchandise and superior customer

service

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in the end I'm not so sure they followed

this

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you

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