Which Kmarts are actually open, who still shops there?

Earnest Travis recently visited one of Michigan's few remaining Kmart stores.

But after failing to find pantyhose in the style and size his wife wanted, he left empty-handed from his neighborhood Kmart in Waterford feeling more pessimistic than ever about the money-losing retailer's future.

"Whoever is taking charge of inventory, they're not keeping up on it," said Travis, 71, who regularly shops at Kmart and has encountered similar difficulty in the past finding his size in Russell Brand jeans in the store. "That's chasing a lot of customers away."

These are precarious times for the fast-shrinking Kmart chain, which got its start 55 years ago as the big-box brand of the Detroit-based S.S. Kresge Co. It was for decades one of southeast Michigan's biggest employers and the nation's second-largest retailer. The company once had 134 locations in Michigan and was headquartered from 1972 until 2006 in Troy, employing close to 5,000 people there at its peak.

Now paired with Sears and headquartered outside Chicago, Kmart's downward sales spiral and accelerating store closures this year raise the possibility that the iconic retail brand for the Everyman and Everywoman consumer could be approaching an end.

In Michigan, it becomes harder each month to find a Kmart that's still open. Even the original Kmart store in Garden City shut its doors this spring.

Nearly 750 Kmart locations have closed across the U.S. in the past five years, according to corporate filings and a Free Press analysis. Once the most recent wave of closures is done, 516 Kmarts will be left nationwide.

In Michigan, 22 Kmarts will be left  once stores on the latest closures list — those in Traverse City, West Branch, Cheboygan, Escanaba and Monroe — shut their doors. There were 38 at the start of the year.

By comparison, competitors Walmart, Meijer and Target now have 93, 114 and 55 Michigan stores, respectively, according to corporate filings and the retailers' websites.

The combined Kmart-Sears corporate entity — Sears Holdings — has been hemorrhaging cash while shedding all these stores because Sears is also losing money. The corporation is now smaller  than either retail chain had been before their 2005 merger. Sears Holdings has reported $10.2 billion in net losses since 2011, and some analysts anticipate the entire company's demise.

"These kinds of losses are completely unsustainable over the long run," said Ken Perkins, president of research firm Retail Metrics. "There just doesn't seem to be any end in sight."

Howard Riefs, Sears Holdings' director of corporate communications, said in a statement to the Free Press that the corporation has been taking actions to "enhance our liquidity and financial flexibility."

"We remain committed to improving our financial position and restoring the long-term profitability of Sears Holdings," Riefs said.

The Free Press recently visited some of metro Detroit's remaining Kmarts and spoke with several dozen shoppers. They cited old shopping habits, geographic convenience, good sales deals and the shorter lines and quicker checkouts found in uncrowded stores as reasons why they continue to be Kmart shoppers.

"I know this store from way back when I was a kid. We'd like to see it stick around," said Mark Thornton, who was shopping at the St. Clair Shores Kmart with his 17-year-old son, Maki.

Several also cited a personal dislike for Walmart. "I will not give that family my money — period," said Cathy Ross of Lapeer.

A few shoppers said they feel sorry for Kmart and want to help the long-struggling chain stay in business.

"This is one of the only Kmarts that are left open and we're trying to keep it open," said Anna Simpson of Madison Heights, who was shopping with her teenage daughter at the Warren Kmart on 10 Mile. "That's the reason we are here."

None of the stores the Free Press visited appeared to have been renovated in years.

"I guess I understand them not putting money in when they're not doing that well," Sarah Bleich, 59, of Royal Oak, said at the St. Clair Shores Kmart. "It feels old, dated."

The outside and inside of the Warren Kmart looked especially tired. Half of the store's overhead lights were off and there was minimal air-conditioning turned on during a particularly hot June day. Several shoppers remarked about the warm temperature in the store while standing in the checkout line.

A store manager said the lighting situation was to save money, but referred comment regarding the air-conditioning to Sears Holdings' corporate office, which didn't respond.

Since its merger with Sears, the Kmart brand has been headquartered in Hoffman Estates, Ill. Kmart's predecessor was founded in Detroit in 1899 under the  S.S. Kresge Co. name. Kresge officially changed its name to Kmart in 1977.

Sears Holdings has kept afloat in recent years by selling assets and undertaking complex financial maneuvers, including lease-back arrangements in which the company sells stores for the quick cash, then starts leasing back the space.

Sears Holdings also closed a roughly $900-million deal this year to sell Sears' Craftsman tools brand to Stanley Black & Decker and negotiated a six-month extension for nearly $500 million in lending that was due this month.

Still, Sears Holdings acknowledged earlier this year that "substantial doubt exists" about its ability to survive. Many retail experts and analysts are in agreement on that.

 A report last month by CreditRiskMonitor.com highlighted how some suppliers are limiting their exposure to potential problems at Sears and Kmart by selling less merchandise for the stores. "Sears has managed to pay its bills thus far, but risk is discernibly high," the report said. "Overall, it appears that Sears’ supplier base will determine whether the company’s financial condition experiences a moderate or accelerated decline."

Asked whether Kmart was having inventory issues, the Sears Holdings spokesman said the firm has longstanding relationships with tens of thousands of vendors and suppliers.

"Despite the speculation and rush to report the negative, we have always paid our vendors for orders we have placed," Riefs said in an e-mail. "We are focused on returning the company to profitability and recognize that mutually beneficial relationships with our vendor partners are critical to our success."

Eddie Lampert, a hedge fund manager who is Sears Holdings' chairman and CEO, has sought to quell concerns about Kmart's financial condition. In a statement posted last October that the company says still holds true, Lampert said there were no plans to shutter the Kmart brand and denounced "the frequent false and exaggerated claims surrounding our Kmart business."

"In fact, we’ve been working hard to make Kmart a more fun, engaging place to shop, powered by our integrated retail innovations and Shop Your Way (loyalty program)," Lampert said. "To report or suggest otherwise is irresponsible and is likely intended to do harm to our company to the benefit of those who seek to gain advantage from posting these inaccurate reports."

Yet business experts and analysts say there are now few scenarios under which Kmart can survive. A major problem is that the retailer's long and highly visible decline has eroded the Kmart brand and left consumers with few positive experiences.

"It's hard to imagine Kmart surviving," said Erik Gordon, a professor at the University of Michigan's Ross School of Business. "Who needs a Kmart? You can go a little higher end to a Target, you can go into a Walmart, you can go lower end into a dollar store."

In a possible harbinger of what's to come, last month Sears Canada initiated a deep restructuring under court protection that was widely seen as a bankruptcy and said it will close 59 Canadian locations and cut about 2,900 jobs. Sears Holdings partially spun off Sears Canada in 2012.

While Sears and Kmart have both suffered precipitous sales declines in the U.S., Kmart is widely considered the weaker of the two businesses and more difficult to revive. Kmart represented just under 40% of the firm's business last year, according to corporate filings.

"I think Kmart is going to have to completely go under, unfortunately," said Perkins of Retail Metrics. "I don't know how Sears avoids that. But if they do, it's going to be a small core of stores that they somehow are able to run and do it more efficiently."

Kmart was once the second-largest retailer in the U.S. after Sears, but fell behind Walmart in 1990 and never regained form.

Kmart tried spiffing up its image in the late 1980s and broadening its shopper demographics, bringing in home design maven Martha Stewart as a product consultant and expanding into Martha Stewart-branded towels, bedding, furniture, plateware and other goods.

The Stewart-Kmart partnership, which lasted until 2009, was a sales hit for years and did attract higher-income shoppers, according to news reports. But Martha on her own couldn't turn around Kmart's business.

During a visit last year to Detroit, Stewart said one of her regrets is not buying Kmart years ago.

"We thought about buying it ... I should have," Stewart told the audience at a business conference. 

Kmart itself went on buying sprees of other retailers in the 1980s and 1990s, acquiring and later selling now-defunct Builders Square, now-defunct Borders books and now-defunct the Sports Authority, among other questionable acquisitions.

But Kmart might have been better off investing that money on supply-chain logistics like Walmart and updating its stores, said Ken Nisch, chairman of Southfield-based brand strategy and retail design firm JGA.

"They became the me too or me three or me four in a lot of these (retail) categories," Nisch said. "They spent all their money, and at the end of it they didn't get much for it."

Walmart and Target so far have avoided Kmart's fate by making continual investments in their stores, product lines and business strategies, according to Perkins. Both chains have been investing in their grocery items offerings — a proven way to increase customers — while Kmart has been retrenching on groceries.

Perkins noted how Target launched a new children's clothing line last year, Cat & Jack, which has proven popular and generated strong sales. And this year Target announced plans to spend $7 billion to improve its stores and e-commerce.

Walmart, for its part, has been spending billions to increase its workers' pay and training. "And I've noticed going into Walmart stores the morale is definitely up, the stores are cleaner and they tend to be more knowledgeable of where things are, which has always been an issue going into Walmart," Perkins said.

Tracy Millar, 42, of Warren, is among the Kmart shoppers who say they would miss the retail chain if it ever disappeared. The Warren Kmart is one of the few places where she can find 12-packs of her favorite Vintage brand sparkling water, which was on sale last month during her visit.

"I would miss it from a nostalgia point of view because it's one more thing going away that's kind of been around forever," she said.

Detroit resident Robert Ford, 83, used to shop at the old Kresge on Woodward in downtown before that store closed years ago. He then shopped at the two Kmart stores in Detroit, but both have since closed as well.

Now he visits the Kmart in St. Clair Shores that is nearest to his house. He made a special trip there one afternoon last month for his usual brand of dog food. But this time, he couldn't find it. 

"They not stocking the dog food like they used to," Ford said. "They used to have a bigger variety of choice, but they don't have it no more. I'm thinking they must be going out of business."

© 2017 Detroit Free Press


JOIN THE CONVERSATION

To find out more about Facebook commenting please read the
Conversation Guidelines and FAQs

Leave a Comment