Kmart’s Comeback Plan: Selling Bankrupt Companies’ Stuff

February 18, 2016, 7:46 PM UTC
Shoppers outside the Kmart store in Broomfield
Shoppers outside the Kmart store in Broomfield, Colorado November 19, 2009. Sears Holdings Corp posted a smaller-than-expected quarterly loss on Thursday, but analysts questioned whether the company led by hedge fund manager Edward Lampert was relying too deeply on cost cuts, and its shares fell 3 percent. REUTERS/Rick Wilking (UNITED STATES BUSINESS) - RTXQXO0
Photograph by Rick Wilking — Reuters

In a bid to revive its long flagging sales, Kmart has unveiled a peculiar plan: selling stuff from companies that have gone out of business.

The retailer, which is a unit of Sears Holdings (SHLD), announced its plan this week, saying the strategy would help Kmart regain its luster.

“The path to making Kmart great again starts with sourcing truly brag-worthy deals,” said Kmart President Alasdair James, touting the move’s “extreme value proposition.”

Making Kmart great again will be quite a task. During the recent holiday season quarter, comparable sales at Kmart fell 7.2%. Years of sales declines have severely depleted its store fleet: Kmart is now down to 950 locations from 1,309 just five years ago. (Kmart hasn’t reported an annual increase in comparable sales since 2010.) It’s hard to believe that a quarter of a century ago, Kmart was bigger than Walmart (WMT).

Apparently, selling closeout items from bankrupt companies will do the trick. As an example, Kmart said it would soon offer those “truly brag-worthy deals” on outdoor cookers, smokers, outdoor lighting, and hand-held lighting made by Brinkmann, which filed for Chapter 11 bankruptcy protection in October. (Some may see an irony in this given the severe liquidity pressures on Sears Holdings, and the questions about its long term viability.)

But maybe Kmart is onto something. According to a recent survey by Prosper Insights & Analytics, Kmart is on par with Goodwill among women’s clothing shoppers. So maybe a turn to liquidated goods is right on time.