Attention shoppers: Blue light still lit

Kmart’s blue light is still shining in Hollister, but it’s about
to flicker out in another of its area stores.
Kmart’s blue light is still shining in Hollister, but it’s about to flicker out in another of its area stores.

Kmart announced Tuesday that it would leave open its San Benito County business, but close 326 under-performing stores, including the Morgan Hill store, and eliminate 37,000 jobs nationwide as part of a plan to emerge from bankruptcy by the end of April.

If the bankruptcy court approves, the Troy, Mich.-based retailer will have about 1,500 stores remaining, a third fewer than when it declared bankruptcy Jan. 22, 2002. Though it closed 283 stores and cut 22,000 jobs last year, it still lost more than $2 billion.

Hollister’s Kmart survived closure for the second year in a row, and it was good news for many of its customers.

“They better not close Kmart,” Laura Baughman said. “I do most of my shopping here.”

The store holds “a special place” in the heart of Joan Matthews.

“I love Kmart,” she said. “It’s my favorite store.”

But Martha Jurc, leaving Kmart Tuesday morning with a shopping bag of her latest purchases, said if the store should ever close it would not make much difference to her.

“I wouldn’t be too disappointed,” she said. “But I do like looking for the deals.”

Kmart has asked a bankruptcy court to give final approval of the store closures at a hearing in Chicago scheduled for Jan. 28.

The new cuts still leave Kmart larger than discount competitor Target Corp., which has 1,148 stores in 47 states, but just over half the size of Wal-Mart Stores Inc., with more than 2,800 U.S. stores.

Some experts said the key for Kmart’s survival now is to stop trying to compete as a mega-store in a market that’s already been cornered.

“They want to have a store like Wal-Mart because they believe that’s the only way for them to succeed,” said Arun K. Jain, marketing professor at the University at Buffalo School of Management. “They have to adopt a more selective strategy. … Everybody’s going after these mega-stores.”

“Wal-Mart and Target are going to rip them up,” he said.

Kmart gave few clues Tuesday to what its future holds but said it would file a reorganization plan next week that is expected to explain what led to the bankruptcy and details of Kmart’s management review.

Kmart could choose to close its doors forever, said Jordan Kaplan, professor of managerial science at Long Island University.

Barring that, he said, the company may want to rethink its strategy.

“Maybe they want to be a bigger player in smaller margins,” Kaplan said. “They could become a very small player. … Maybe they’re going to reinvent themselves.”

Jain suggested Kmart focus on areas where it has already established itself, particularly urban areas with no Wal-Mart or Target stores, a strategy, he said, that has worked for Kmart in the past.

Anthony Sabino, associate professor of business at St. John’s University, said, “They’ve got to get beyond lean and mean.”

“They’ve got to get small, real small.”

Going-out-of-business sales will initially cut into the profits of Wal-Mart and Target, and even the smaller chains, said Kurt Barnard, president of Barnard’s Retail Trend Report in Upper Montclair, N.J.

“There will be a little bloodletting … and a little less competition,” Barnard said. “All of those competitors that are in the vicinity of the store that’s closing will certainly find that the market share will be wandering over to them.”

The Associated Press contributed to this report.

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