Attention Kmart shoppers: Kmart is a leading US discount retailer, behind Wal-Mart, Target, and Kohl's. It sells name-brand and private-label goods (including its Joe Boxer and Jaclyn Smith labels), mostly to low- and mid-income families. It runs about 1,150 off-mall stores (including 17 Super Centers) in 49 US states, Puerto Rico, Guam, and the US Virgin Islands. About 270 Kmart stores sell home appliances (including Sears' Kenmore brand) and some 840 locations house in-store pharmacies. Poor sales have forced its parent, Sears Holdings Corp., to close more than 300 Kmart stores since merging Kmart with Sears in 2005. Kmart also operates the kmart.com website, which includes merchandise from Sears.
Kmart's sales continued their steady descent in fiscal 2014 (ended January), down 9% versus the prior year, to $13.2 billion. The retailer blamed its shrinking store count and competition from rival chains, including Target and Kohl's, for the decline. Falling same-store sales of 4% in fiscal 2014 reflected declines across most of its merchandise categories, most notably in the grocery and household, consumer electronics, pharmacy, and toy departments. Kmart was unprofitable in fiscal 2014, reporting an operating loss of $351 million, as compared to a profit of $5 million in fiscal 2013.
The pairing of Sears and Kmart in 2005 was intended to leverage the strengths of both chains by making their products, brands, and services available through more locations and distribution channels. Sears, which has long sought a way to diversify away from the shopping mall, was attracted to Kmart's off-mall locations. But the combination has proved disappointing. Both retailers have suffered from falling same-store sales as they fail to attract customers.
Indeed, the Kmart chain is shrinking, closing 70, 92, and 18 stores in fiscal years 2014, 2013, and 2012, respectively. Once the third-largest US discounter behind Wal-Mart and Target, the chain has lost ground to growing chains, such as Kohl's.
Sears, meanwhile, has taken advantage of cross-selling opportunities by offering proprietary Sears brands, including Craftsman, Diehard, and Kenmore products, in Kmart stores. The sale of Kenmore brand appliances is meant to help Kmart differentiate itself from its larger rivals, Wal-Mart and Target, which stock a more limited range of appliances. Kmart stores have been remodeled to offer Sears brand appliances and Sears plans to continue to roll out its home appliances to more Kmart stores. There are also about 15 Sears Auto Centers operating in Kmart stores.
To court customers, Kmart continues to offer its layaway program, and has expanded the way customers can receive their purchases, allowing them to buy online and pick up at more than 1,000 of its stores. Kmart also participates in its parent company's Shop Your Way program, a social shopping experience that allows members to earn points and benefits across a number of physical and digital formats.