KMART CORP. Discount chain to close 326 more stores
Kmart needs a new strategy to compete with Wal-Mart and Target, experts say.
DETROIT (AP) -- Trying to emerge from bankruptcy protection by April and boost cash flow, struggling discount giant Kmart Corp. said it will shutter 326 stores and slash 37,000 jobs.
None of the closings is in the Mahoning or Shenango valleys.
If the bankruptcy court approves the store closings, Kmart will have about 1,500 stores, a third less than when it declared bankruptcy Jan. 22, 2002.
The Troy-based discounter would still be larger than its discount competitor Target Corp., which has 1,148 stores in 47 states. Wal-Mart Stores Inc. operates more than 2,800 stores in the United States and 52 in Puerto Rico.
In announcing the cuts Tuesday, Kmart also gave a few clues to what its future holds. It announced plans to emerge from bankruptcy by April 30, months earlier than previously reported. It also plans to file its plan of reorganization with the bankruptcy court next week.
Kmart said its board approved the plan Monday. A disclosure statement the company will file Jan. 24 is expected to include the reorganization plan, along with an explanation of what led to the bankruptcy and details of Kmart's review of its former management. Kmart said the review was nearly complete.
But experts said Kmart should stop trying to compete as a mega-store in a market that's already been cornered.
"They want to have a store like Wal-Mart because they believe that's the only way for them to succeed," said Arun K. Jain, marketing professor at the University at Buffalo School of Management. "They have to adopt a more selective strategy. ... Everybody's going after these mega stores."
"Wal-Mart and Target are going to rip them up," he said.
Jordan Kaplan, professor of managerial science at Long Island University, said the retailer faces several possibilities.
"Number one, they could close their doors forever," Kaplan said. "Number two, they may want to rethink their strategy. Maybe they want to be a bigger player in smaller margins. The third is they could become a very small player. ... Maybe they're going to reinvent themselves."
The company's future will have to involve a new strategy, analysts said.
"As Kmart approaches its one-year anniversary [since declaring bankruptcy], there are serious questions as to whether they'll emerge," said Anthony Sabino, associate professor of business at St. John's University.
Kmart filed for Chapter 11 after disappointing holiday sales and a stock dive. The company closed 283 stores last year, affecting 22,000 jobs.
It's possible Kmart will end up "a mere shadow of their former selves," Sabino said.
Jain said Kmart should focus on areas where it has already established itself as the only option.
"I think they will succeed in urban areas where there is no Wal-Mart and there is no Target and they sort of draw customers from the neighborhood," Jain says. "It's more in tune with the community. That format has helped them in the past."