Kmart Is in Worse Shape Than Sears

While Sears will have a difficult time surviving bankruptcy, Kmart is facing odds that are even worse. Heavy competition from Amazon and others have created big problems for many traditional department stores, yet some have remained profitable.

However, things are not that way with Kmart. It has competitors in the discount retail space that include Target, Walmart, Dollar General and Dollar Tree amongst others.

Sears and Kmart merged during 2005 to become Sears Holdings and things have never been that good. Last week Sears filed bankruptcy and intends to remain in business, but doubts exist by experts of the long-term viability of each brand.

Closings of Kmart locations have left it a small fraction of its size prior to 2005 and as bad as things are for Sears, they are far worse for Kmart.

Kmart has always operated on a thin gross profit margin that compares revenue from sales to cost of goods. Sears has brands such as Craftsman and Kenmore that were established, but Kmart only competed on price and nothing else.

During its best days Kmart was known for the blue light specials it had, which were sales announced inside stores and lasted for just 15 minutes.

In 2011 the losses started for Kmart just when other retailers began to emerge from the recession. It has shuttered stores, while its sales were declining since then. Sears suffered as well, but the Kmart decline was far steeper.

From 2010 to August of 2018, Kmart shuttered over 70% of its locations, with 360 remaining open, but 110 more will soon close or have already been shut.

The market budget at Kmart fell to close to $0.00 as Kmart quickly became an afterthought.

Kmart, just like Sears, started near the turn of the 19th century but its name was not used until 1962 and the chain expanded rapidly for a number of decades.

Kmart in the 1990s starting buying up businesses such as Sports Authority, a majority stake in OfficeMax and Borders the book retailer. It sold the three just a few years later with Borders and Sports Authority eventually going out of business following bankruptcies of their own.

Kmart, after losing to Walmart amongst other rivals that offered lower prices, filed in 2002 for bankruptcy with 2,100 stores. It used the bankruptcy to close 300 stores and dump large sums of debt to strengthen the balance sheet, but has never returned to prominence and is now on the brink of shutting down for good.