How Kmart Went Bankrupt

Sebastian S. Kresge opened his first store, regarded as a five-and-dime, in 1899. The low priced department store was appealing to the consumers and changed the retailing landscape for future department stores. By 1912, Kresge had expanded his network of stores to 85 and contributed to annual sales of $10 million. (Corporate History, 2013. www.searsholdings.com). The 1920’s posed significantly hard times for America, with the Great Depression and World War 1. During this time Kresge stores remained opened, provided Americans necessary items and jobs to support households across America.

In 1959, Harry B. Cunningham became the President for the Kresge Company. After studying other department stores, Cunningham realized that change was necessary to continue and grow this business and developed a new strategy for the future. His strategy would be to open a more fully developed department store, which in most cases would be situated right next to the Kresge stores. In 1962, the first Kmart discount department store opened in Garden City, Michigan. An additional 17 stores opened the same year and the corporate sales were in excess of $480 million. That same year, the competitive landscape would change as a new store and future contender opened a new store called Walmart, founded by Sam Walton in Roger, Arkansas. The strategy for this store was no-frills brick and mortar stores with discount priced items, everyday.

Kmart and Walmart stores continued to grow through the 1970’s and 1980’s. In the 1980’s, it became apparent that the Kmart stores were becoming outdated and their competition was changing their fortunes. In 1970, Walmart became a publically traded company, and in 1972, was traded on the New York Stock Exchange wi...

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...that the loan was really a bonus in disguise.

A jury of five men and five women found Charles Conway liable for misleading investors and outlining the cash flow problems at Kmart. Some of the issues lead to delayed vendor payments. Kmart vendors were able to monitor payments through an interface known as Partners Information Network (PIN). Conaway and other executives removed access to the payables system from PIN, stating there was a temporary data problem. No system or data problem existed as data was still made available to a handful or Accounts Payable managers. Those AP executives claimed that payments were occurring on a weekly basis however checks had to be cut by hand.

An employee, Boyer testified that after telling Conaway about the liquidity issue that he was fired, just before the November 2001 conference call with analysts. (Bloomberg, June 2, 2002).