Kmart Corp., an institution that used discounted prices and BlueLight Specials to reach out to blue-collar America, on Tuesday became the largest retailer to seek protection in bankruptcy court.
The bankruptcy filing, which listed $16.3 billion in assets and $10.3 billion in liabilities, is expected to eventually result in the closure of hundreds of stores and an unknown number of jobs lost.
The Troy, Mich.-based retailer, whose roots trace back to 1899, said it secured $2 billion in financing that will allow the company to operate while reorganizing. Kmart on Tuesday began determining which of its approximately 2,100 stores should close, said spokesperson Julie Fracker.
Kmart blamed the bankruptcy on increased competition, recessionary pressures, a series of unsuccessful sales and marketing initiatives and, most recently, an erosion of support among its vendors. The company suffered a particularly stinging blow last weekend when Fleming Cos., its only grocery supplier, halted shipments after Kmart Corp. failed to make a regular weekly payment.
Kmart's stock also has been driven to below $1 and rating agencies have repeatedly downgraded its shares. The financial strain is the result of Kmart's fierce battle against Wal-Mart Stores Inc. and Target Corp.
Analysts say both of those companies have created clearer brands.
\They don't have the market on trendy merchandise and the don't have the market cornered on cost,"" said Jeff Parkhurst, a director with Interbrand, a New York-based brand and corporate identity consulting firm. ""They don't have much of anything right now.""
Kmart is expected to use bankruptcy to shed many unprofitable leases and reduce other costs that are stalling its attempted restructuring. The $2 billion in financing secured as part of the bankruptcy filing will give Kmart cash needed to again stock its store shelves with merchandise.
