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Kmart (sometimes stylized as K-Mart) is an American chain of discount department stores headquartered in Hoffman Estates, Illinois, United States. The chain purchased Sears for $11 billion in 2005, forming a new corporation under the name Sears Holdings Corporation.[3] The company was founded in 1962 and is the third largest discount store chain in the world, behind Walmart and Target,[4] with stores in the United States, Puerto Rico, the U.S. Virgin Islands, and Guam (which houses the world's largest Kmart).[5] It also previously operated stores in Canada, Mexico, and Eastern Europe. As of October 20, 2014, the company operated a total of 1,077 Kmart stores.[1] In 2013 it had operated 1,221 in 49 states, Guam, Puerto Rico, and the U.S. Virgin Islands, including 1,196 discount stores, averaging 94,000 sq ft (8,700 m2), and 25 Super Centers, averaging 168,000 sq ft (15,600 m2).[6]
Kmart became known for its "Blue Light Specials." They occurred at surprise moments when a store worker would light up a mobile police light and offer a discount in a specific department of the store. At the height of Kmart's popularity, the phrase "attention Kmart shoppers" also entered into the American pop psyche, appearing in films and other media such as Troop Beverly Hills, Six Days Seven Nights, Rain Man, Beetlejuice, Madea Goes to Jail and Dawn of the Dead.
Kmart's world headquarters was located in Troy, Michigan in Greater Detroit, but since the purchase of Sears, it has been relocated to Hoffman Estates in Greater Chicago, Illinois. Kmart also exists in Australia and New Zealand (see Kmart Australia), although it now has no relation to the American stores except in name, after U.S. equity in the Australian business was purchased in the late 1970s.
Sebastian S. Kresge, the founder of the company that would become Kmart, met variety store pioneer Frank Woolworth while working as a traveling salesman and selling to all nineteen of Woolworth's stores at the time.[7] In 1897 Kresge invested $8,000 (equivalent to $227 thousand in 2015) saved from his job in joint ownership with his friend John McCrory of a five and dime store in Memphis, to which they added another in downtown Detroit the following year; these were the first S.S. Kresge stores.[8][9][10] After two years of partnership, he paid McCrory $3,000 (equivalent to $85 thousand in 2015) and gave up his share in the Memphis store for full ownership of the Detroit store, and formed the Kresge & Wilson Company with his brother-in-law, Charles J. Wilson.[9][10]
In 1912, Kresge incorporated the S.S. Kresge Corporation with eighty-five stores. The company was first listed on the New York Stock Exchange on May 23, 1918. During World War I, Kresge experimented with raising the limit on prices in his stores to $1 (equivalent to $16.00 in 2015). By 1924, Kresge was worth approximately $375,000,000 (equivalent to $5.16 billion in 2015) and owned real estate of the approximate value of $100,000,000 (see Farid-Es-Sultaneh v. Commissioner, 160 F.2d 812 (2d Cir. 1947)). Early century growth remained brisk, with 257 stores in 1924 growing to 597 stores operating in 1929. Kresge retired as president in 1925. The Great Depression reduced profitability and resulted in store closings, with the number reduced to 682 in 1940. Post-war retailing saw many changes in shopping patterns with many customers moving out of the cities into the suburbs. The Kresge company followed them and closed and merged many urban stores so that by 1954 the total number of stores in the US had declined to 616.
Under the leadership of executive Harry Cunningham, S.S. Kresge Corp. opened the first Kmart store on March 1, 1962, in Garden City, Michigan,[11] just four months before the first Walmart opened. This store is still in operation to this day. A total of eighteen Kmart stores opened that year. Kmart Foods, a now defunct chain of Kmart supermarkets, opened in that same decade. Company founder Kresge died on October 18, 1966.[12]
Around the time of the opening of the first Kmart, a number of the poorly performing S.S. Kresge stores were converted to a new "Jupiter Discount Stores" brand, which was conceived as a bare-bones, deep discount outfit. During the 1970s, Kmart put a number of competing retailers out of business. Kresge, Jupiter and Kmart stores had their main competition from other variety chains such as Zayre, Ames, Hill's and those operated by MMG-McCrory Stores (McCrory, McLellan, H.L. Green,J.J. Newberry, S.H. Kress, TG&Y, Silver's and eventually G.C. Murphy Co.). In 1977, S. S. Kresge Corporation changed its name to Kmart Corporation. In 1987, the Kmart Corporation sold its remaining Kresge and Jupiter stores in the United States to McCrory Stores, and the brands were almost entirely discontinued, although Canadian Kresge and Jupiter stores continued to operate until 1994.
Kmart experimented with co-branding in 1985, when the in-store cafeteria at the store in Canton, Michigan was converted to a Wendy's.[13][14]
Until November 1990, when it was passed by Walmart, Kmart was the second largest retailer in the US, after Sears.[15] During the 1980s, the company's fortunes began to change; many of Kmart's stores were considered to be outdated and in decaying condition. In the late 1980s and into the 1990s, the corporate office shifted much of its focus from the Kmart stores to other companies it had acquired or created, such as The Sports Authority, Builders Square, and Waldenbooks.
The original Blue Light Special, first introduced in 1965,[16] was retired in 1991.[17] The company brought back the Blue Light Special in 2001, but again discontinued it in 2002. The concept was briefly revived in 2005, though Kmart at that time had no plans to use the concept long-term.[18] Blue Light Specials were revived again in 2009 on Saturdays, offering surprise hour-long sales on selected merchandise.[16]
In 1990, in an effort to update its image, Kmart introduced a new logo. It dropped the old-style italic "K" with a turquoise "mart" in favor of a red block letter K with the word "mart" written in script and contained inside the K. Kmart then began remodeling stores shortly thereafter, but most were not remodeled until the mid-1990s, and some have not been completely renovated to this day. This logo was replaced in 2004 with the current logo. In the early 1990s, Kmart also tried to reinvent itself by using the short-lived name Today's Kmart.
The company also began to offer exclusive merchandise by Martha Stewart, Kathy Ireland, Jaclyn Smith, Lauren Hutton, and Thalía. Other recognizable brands included exclusively licensed merchandising of products relating to Sesame Street and Disney. Actress and television personality Rosie O'Donnell and actor/director and producer Penny Marshall became among the company's most recognized spokespersons.
Kmart Super Center (Super Kmart) opened a 147,000 sq ft (13,700 m2) location in 1991 in Medina, Ohio, featuring a full-service grocery store and general merchandise.[19] However, this location was downsized in 2011 and was one of a number of Kmarts closed in early 2012.[20] The second ground-up Kmart Super Center opened in Montrose, Ohio, featuring the chain's first full-scale video rental center and a carryout Chinese menu.[21] This location has also closed. Most Kmart Super Centers range in size from 140,000 sq ft (13,000 m2) to 190,000 sq ft (18,000 m2). Current locations feature in-house bakeries, fresh meats and seafood, and a full delicatessen.[22]
Big Kmart opened in Chicago, Illinois, on April 23, 1997. The format focuses on home fashions, children's apparel and consumables (Pantry).[22] Most Kmart stores were remodeled to this format during the 1990s and most of them have been converted back to regular Kmart stores with the new logo introduction.
The Sports Authority was acquired by Kmart in 1990 and spun off 5 years later.
In 1994, Kmart closed 110 stores. Unlike its competitors Walmart and Target, it had failed to invest in computer technology to manage its supply chain. Furthermore, Kmart maintained a high dividend, which reduced the amount of money available for improving its stores. Many business analysts also faulted the corporation for failing to create a coherent brand image.
On January 22, 2002, Kmart filed for Chapter 11 bankruptcy protection under the leadership of its then-chairman Chuck Conaway and president Mark Schwartz.[23][24] Conaway, who had had success building up the CVS Corporation, had accepted an offer to take the helm at Kmart along with a loan of some $5 million (equivalent to $6.56 million in 2015). In a scandal similar to that involving Enron, Conaway and Schwartz were accused of misleading shareholders and other company officials about the company's financial crisis while making millions and allegedly spending the company's money on airplanes, houses, boats and other luxuries. At a conference for Kmart employees January 22, Conaway accepted "full blame" for the financial disaster. As Kmart emerged from bankruptcy, Conaway was forced to step down and was asked to pay back all the loans he had taken.
After dismissing Conaway and Schwartz, Kmart closed more than 300 stores in the United States, including all the Kmart stores in Alaska, and laid off around 34,000 workers as part of the restructuring process.[25] Kmart introduced five prototype stores with a new logo, layout, and lime green and gray color scheme, one in White Lake Township, Michigan, a quasi-rural community near Detroit, Michigan, and four in central Illinois: (Peoria, Pekin, Morton and Washington). The new layout was touted as having wider aisles and improved selection and lighting, and the city or town's name was featured under the new Kmart logo at the front entrance. However, Kmart could not afford a full-scale rollout. The lime green prototype was abandoned for the new Kmart "orange" concept that rolled out at nine test stores throughout the United States.
While the company was in bankruptcy, a significant amount of Kmart's outstanding debt was purchsed by ESL Investments; a hedge fund controlled by Edward Lampert. Lampert worked to accelerate the bankruptcy process, and on May 6, 2003 Kmart emerged from bankruptcy protection as Kmart Holdings Corporation. On June 10, 2003, it began trading on the NASDAQ with the ticker symbol KMRT with Lampert as chairman and ESL Investments controlling 53% of the new company.[26] Lampert dismissed concerns that the smaller company would be at a disadvantage stating "The focus that a lot of people have in retail revolves around sales, but sales without profit do not allow a business to be successful in the long term."[27] He began to improve the company's balance sheet by reducing inventory, cutting costs, and closing underperforming stores. By the fourth quarter of 2003, Kmart posted its first profitable quarter in three years, although it has since returned to an operating loss.
On November 17, 2004, Kmart announced its intention to purchase Sears. As a part of the merger, the Kmart Holdings Corporation would change its name to Sears Holdings Corporation. The new corporation announced that it would continue to operate stores under both the Sears and Kmart brands.[28] Around this time, Kmart changed its logo from a red K with the script "mart" inside to a red block letter K with the chain's name in lowercase letters below it. Kmart's headquarters were relocated to Hoffman Estates, Illinois, and the sprawling headquarters complex in Troy, Michigan, was recently acquired by the Forbes Company, which owns the nearby upscale mall, Somerset Collection.[29] No concrete plans for redevelopment of the site have been announced.
In 2005, the company began renovating some Kmart stores and converting them to the Sears Essentials format, only to change them later to Sears Grands.[30]
Kmart started remodeling stores to the "Orange" prototype in 2006. The typical white and blue interior of the stores was changed to orange and brown, and shelf heights were lowered to create better sightlines. The remodeled stores contain an appliance department with Kenmore Appliances and most have hardware departments that sell Craftsman tools, which prior to the merger had been exclusive to Sears stores.[31] Some auto centers left vacant by Penske after Kmart filed for bankruptcy have been converted to Sears Auto Centers.[32] 280 stores as of 2009 have been remodeled to this new prototype. For most of these stores, Kmart retired the "Big Kmart" logo and replaced it with the current logo. In some of the larger stores the old logo is still in use.
In July 2009, Sears Holdings opened its first Sears-branded appliance store inside a Kmart.[33] The 4,000 sq ft (370 m2) store-within-a-store opened inside the former garden department of a Birmingham, Alabama, Kmart. It is two-thirds the size of the appliance department in most Sears stores, but larger than the 2,500 sq ft (230 m2) appliance department in remodeled Kmart stores.
In October 2009, it was reported that Kmart and Martha Stewart Living Omnimedia failed to come to a new agreement. This came after Stewart made remarks on CNBC that her line at Kmart had deteriorated, particularly after the Sears merger.[34]
In November 2009, Kmart reported its first year-over-year sales increase of 0.5% since 2005, and only the second such increase since 2001.[35]
On December 27, 2011, after a poor showing from holiday shoppers, Sears Holdings announced that 100 to 120 of Sears/Kmart stores would close.[36]
In 2014, news reports indicated that Kmart was closing dozens of stores across the United States.[37] Kmart's parent company Sears Holdings Corporation saw ongoing financial distress throughout the year, sparking an unspecified number of closings to Sears and Kmart locations amid vendors and lenders concerns about its liquidity.[38] Along with store closings, measures included the spinning off its Lands' End division, selling most of its stake in Sears Canada, issuing debt and taking on loans that cumulatively put it on track to raise $1.445 billion in cash in 2014.[38] Howard Riefs, a company spokesman who has often spoken on behalf of Kmart, has said: "Store closures are part of a series of actions we're taking to reduce on-going expenses, adjust our asset base and accelerate the transformation of our business model."[39][40]
On October 10, 2014, Kmart (along with Dairy Queen) was victim of a data breach concerning customers' credit and debit card information.[41] Kmart confirmed on October 19, "Based on the forensic investigation to date, no personal information, no debit card PIN numbers, no email addresses and no social security numbers were obtained by those criminally responsible. There is also no evidence that kmart.com customers were impacted. This data breach has been contained and the malware has been removed. I sincerely apologize for any inconvenience this may cause our members and customers."[42]
The Kmart Foods logo used during the 1960s
Kmart's original logo used until 1990. It is still used at some older stores. This logo was also used by Kmart Australia from 1969 until 1991.
Kmart's red classic logo (1990–2004). It is still in use at some older Kmart stores.
Kmart's lime green logo that was only used at five prototype locations.
Super Kmart logo used in the early 1990s
Big Kmart logo
Second Super Kmart logo, modeled after the Big Kmart logo
Current Kmart logo (2004–present)
The KDollar logo (November 2012–present)
In May 2007, Sears Holdings Corporation and Kmart named a new mascot and spokesperson for Kmart called Mr. Bluelight. Named after Kmart's well-known "Blue Light Specials", Mr. Bluelight is a talking cartoonish blue light bulb who gives customers ideas to help them make the most of their Kmart experience. Mr. Bluelight has appeared in several television commercials. Specials associated with Mr. Bluelight inside Kmart stores are advertised as "Blue Light Finds" (marked-down merchandise) and "Best of Blue" (higher-end products, often brand-name).
The owner of Kmart, Sears Holdings Corporation, has had its headquarters in Hoffman Estates, Illinois in Greater Chicago since 1993 when it moved out of the Sears Tower in downtown Chicago.[43] Kmart has been in the Hoffman Estates Headquarters since Kmart bought Sears in 2004.
The headquarters were previously located in the Kmart International Headquarters at 3100 W. Big Beaver Road in Troy, Michigan in Greater Detroit.[44][45] The facility had 23 interconnected modules. Each had three stories, except for one module, which was one story. Based on the layout, Norm Sinclair of DBusiness concluded that it was "a study in inefficiency".[44]
Kmart for Kids is the umbrella program for Kmart's philanthropic initiatives. The program helps children across the country live happier, healthier lives through the support of: March of Dimes, St. Jude Children's Research Hospital, and American Diabetes Association.[56] Kmart is March of Dimes' number 1 corporate sponsor, having raised $114 million for the charity over more than 30 years.[57][58]
On July 29, 2008, Don Germano, SVP/GM of Kmart stores, was elected to a five-year term on the national Board of Trustees of the March of Dimes Foundation.[59]
Kmart for Kids supports St. Jude's Children's Research Hospital through its annual Thanks and Giving campaign, an opportunity for Kmart customers to give thanks for the healthy children in their lives and give to help those who are not. Kmart has been a partner of the campaign since 2006 and as of December 2008 had raised more than $59.2 million (equivalent to $64.8 million in 2015) for St. Jude's.[60] A record $21.9 million (equivalent to $22.2 million in 2015) was donated for the tenth annual fundraising campaign during the 2013 holiday season.[61]
In 2008, Kmart earned the "Outstanding Corporate Citizen" Award for its support of the American Diabetes Association's "Step Out: Walk to Fight Diabetes" program.[62] The tribute honors Kmart for the most well-developed, proactive program in the areas of charity, community Development, Diversity, philanthropy, and associate development. In 2008 Kmart became a national sponsor of "Step Out: Walk to Fight Diabetes" and over the past two years, Kmart's customers and associates have raised approximately $1.5 million (equivalent to $1.75 million in 2015) through its in-store campaigns.
On May 9, 2007, Kmart was penalized $102,422 (equivalent to $116 thousand in 2015) for violations of federal hazardous waste, clean water, emergency planning and preparation regulations at 17 distribution centers.[63] Kmart corrected the violations by preparing and implementing spill prevention control and countermeasure plans, applying for appropriate storm water permits, complying with hazardous waste generator requirements, and submitting reports to state and local emergency planning and response organizations informing them of the presence of hazardous substances.[64] The Environmental Protection Agency also accused Kmart of not maintaining adequate information and failing to act in accordance with hazardous waste storage and disposal requirements.[65] For instance, the EPA reported having discovered improperly labeled oil storage drums at a location in Falls, Pennsylvania.[65]
Out of concern for the environment, Kmart promoted battery recycling.[66] In 1990, Kmart even proposed spending about $80 million (equivalent to $144 million in 2015) on full-page newspaper advertisements offering to recycle junk batteries for $2 (equivalent to $4.00 in 2015) each.[67]
In 2012, Kmart and Sears began allowing customers who are members of their Shop Your Way Rewards program to receive receipts by e-mail, eliminating paper waste and cutting down on the usage of ink.[68]
In 2012, Walmart, and Costco, obtaining hidden-camera footage of pigs confined in small gestation crates and cruelty to piglets.[69] In response to Mercy For Animals' infiltration, Kmart announced it would begin requiring its pork suppliers to phase out gestation crates.[70]
Kmart was a prominent sponsor in NASCAR and the now defunct CART series. They were a longtime sponsor of Newman/Haas Racing, owned by actor Paul Newman and former racer Carl Haas. Their CART drivers included Nigel Mansell and the father-son duo of Michael and Mario Andretti. Mansell and Michael Andretti won championships under Kmart sponsorship, in 1991 and 1993, respectively. The store also sponsored the NASCAR-sanctioned Kmart 400 at Michigan and North Carolina Speedway. Lake Speed garnered Kmart's first win in NASCAR in 1988 at the Darlington Raceway. K-Mart sponsored three time champion Darrell Waltrip in 1999 and 2000, his last two full time seasons. Most recently, in NASCAR, the store sponsored Boris Said's #60 No Fear Ford Fusion in 2006.[71][72]
Kmart was also once a major presence in Canada, with its first Kresge store opening in 1929. Kmart closed 5 Montreal stores and several other Quebec stores in 1983 due to the company restructuring. However, as a result of Kmart's ongoing financial difficulties, the Canadian division comprising 112 stores was sold to competitor Zellers of the Hudson's Bay Company in May 1998, after which the stores were either closed or converted to Hudson's Bay Company brands, mostly Zellers. A store in Saint-Laurent, Quebec (now Montreal) became a Canadian Tire instead because of the mall that used to house Kmart already having a Zellers.
Like Target stores, Kmart-branded stores in Australia belonged to Coles Myer before being acquired by Wesfarmers in 2007, which also holds the rights to the Kmart brand in New Zealand. There are currently fifteen Kmart stores in operation in New Zealand with the newest located in Richmond, Nelson.
In 1992, Kmart purchased several communist-era department stores in Eastern Europe, including 13 in the former Czechoslovakia that were bought from the former Czechoslovak government. One of those stores was the old MAJ department store on Národní Třída in Prague. Many of these outlets were quite profitable, with the Bratislava location setting a single store sales record for the company. But Kmart's larger troubles in the United States caught up with its European operations later in the decade. In March 1996, The Kmart Corporation announced that it had agreed to sell the six Kmart stores in the Czech Republic and the seven in Slovakia to Tesco P.L.C. of Britain for about $117.5 million (equivalent to $177 million in 2015), to focus on its core operations in North America.
Also in the 1990s, Kmart opened four stores in Mexico, in partnership with the Mexican retailer Liverpool. All were supercenters, and the locations were all suburbs of Mexico City. About half of the store area was devoted to groceries, and this part of the stores resembled those in the US with some adjustments to the local market.[73] These plus an unfinished store were sold in 1997 to the Mexican hypermarket chain Mega (part of Comercial Mexicana).
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