“Is Kmart Shutting Down?”

Chris Beytes

That’s not our question, that’s the headline from Seeking Alpha, an investment research website. But it’s an important question to ask yourself if you deal with the retailer.

Author Daniel Jennings writes, “It looks as if Sears Holdings could be getting ready to shut Kmart down. Chain Store Age reported that Sears is planning to close 68 Kmart and Super Kmart stores during summer and fall.

“These closings are in addition to the 30 Kmart and Sears closures scheduled earlier this year. When the numbers are tallied together, it looks as if Kmart could be shutting down 90 stores, or nearly 10% of its footprint, which is currently around 900 stores.”

Added Daniel, “It is hard to determine how many Kmarts are closing because Sears stopped sending out lists of closures a while back. Instead, the chain simply announces closing sales to the local media, although reporters are now onto that trick. This means that there could be even more closings that are not on the list.”

But is Kmart really going away? One might suspect it’s inevitable, given the competition and the changing retail environment. And some Kmart employees think so, based upon reports that stockroom merchandise has been moved to the sales floor, as if to clear it all out.

But a blog post by Sears rejected that claim, saying they’re rolling out a new project that puts merchandise on store shelves immediately rather than holding it in stock rooms. “We’re focused on giving our members a 'WOW' experience and this change is helping our stores operate more efficiently,” they wrote.

The big question is, if you sell to Kmart, how long should you continue to sell to Kmart? What signs do you watch for to know it’s time to end that relationship?

For some hints, I thought back to other retail bankruptcies we’ve reported on, like Frank’s Nursery & Crafts in 2004. Quite a few growers lost money, but some didn’t. At the time, one Midwest grower told us, “Three years ago you could see the handwriting on the wall. The marketplace has changed too much [for Frank’s to survive].” Still, he admitted to having been tempted to sell to Frank’s; only the growth of a promising new customer he’d just taken on allowed him to decline. As recently as two weeks prior to my interviewing him, Frank’s had called, looking to buy garden mums.

Another Midwest grower told me Frank’s demise was inevitable and growers should have known it.

“It’s unfortunate for Frank’s and for those who supplied them, but I feel those growers should have understood the risk,” he said. “This risk should have been in their price of product, and if it wasn’t, they have no one to blame but themselves. The problem for Frank’s: If growers were pricing this additional risk into the product, it made it all the more tough for [Frank’s] to survive because it continued to make them uncompetitive in the market.”

Another big hint: The poor financial reports coming from Sears, Kmart’s parent company. A Forbes headline says, “Quarterly Loss Says Sears is a Sinking Ship.”
CNN Money writes, “The slow, painful demise of Sears continues” and reports that the retailer may sell its flagship Kenmore, Craftsman and Diehard brands.

How did I end that item on Frank’s more than a decade ago? With the sentence, “The next retailer to keep your eyes on? Kmart.”  GT