What Factors Could Lead to Kmart Closing a Store?


Quick Answer

Some of the factors that lead to Kmart closing a store include the need to cut expenses, redistribute assets and make changes to fit the company's new business model, as of 2015. The company primarily closes under-performing stores, but may also close branches during lucrative real estate deals.

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What Factors Could Lead to Kmart Closing a Store?
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Full Answer

Most of Kmart's store closures are motivated by financial distress. Since the company filed for bankruptcy in 2002, it has failed to increase sales. In 2000, Kmart brought in $36 million in sales; in 2014, the total came to just $12 billion. In response, the company has switched to a less asset-heavy business model that involves closing its lowest-performing branches. Since 2003, the company has closed nearly 680 stores.

Retail competition often factors into the decision to close Kmart branches. Stores that compete directly with Walmart often fail, due in part to the larger chain's lower prices. Target stores also draw customers away from Kmart.

Sears Holdings Corporation, Kmart's parent company, occasionally decides to close stores based on real estate. Many Kmart locations hold inexpensive leases of up to 100 years. If a real estate developer offers to take over the space for a sum that surpasses the store's expected profits, Kmart may opt to close the branch and cut its losses.

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