Kmart: Fall of a Retailing Giant

The company's (the second-largest discount retailer and the third-largest general merchandise retailer in the US) losses amounted to $ 2.45 billion in 2001 (Refer Exhibit I for key financials). Since Kmart was the largest retailer in US history to declare bankruptcy (2114 stores at the time of the declaration), the announcement came as a major shock to industry observers, customers and employees alike. In March 2002, Kmart decided to close 284 stores throughout the US and lay off 9% of its employees (22,000) as part of its reorganization plan. The then Chairman, Chuck Conaway (Conaway) said, "The decision to close these under-performing stores, which do not meet our financial requirements, is an integral part of the company's reorganization effort."

Many senior executives were also laid off - reportedly, around 25%-35% of senior level positions were eliminated. Thousands of vendors dependent on Kmart for selling their merchandise were affected badly. Kmart's share prices reflected the company's uncertain future: while the stock traded at $ 13 in August 2001, it had reached an abysmal low of 11 cents in February 2003 - a loss of $ 6.7 billion in market capitalization in less than two years. In December 2002, the stock was even delisted from the New York Stock Exchange (Refer Exhibit II for Kmart's stock chart). The downfall of the once mighty company soon came to be seen as the result of problems on a number of fronts: strategic, operational, marketing, human resources and business ethics.