Troy, MI, Jan. 15-Kmart plans to close 326 stores and cut 37,000 jobs as part of a plan to pull itself out of bankruptcy by the end of April. If the bankruptcy court approves the store closings, Kmart will have about 1,500 stores, a third less than when it declared bankruptcy January 22, 2002.
The discounter would still be larger than its discount competitor Target, which has 1,148 stores in 47 states. Wal-Mart Stores operates more than 2,800 stores in the U.S. and 52 in Puerto Rico.
In announcing the cuts, Kmart also gave a few clues to what its future holds. It 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's board approved the plan Monday. A disclosure statement the company will file January 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."
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, and cut 22,000 jobs.
It's possible Kmart will end up "a mere shadow of their former selves," Sabino said.
"I think they've got to get beyond lean and mean. They've got to get small, real small," he 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."
