Why Did Kmart File Bankruptcy ?
Kmart Corporation ruled as the third largest retail stores in the United States for nearly 40 years. It recently filed for bankruptcy protection under Chapter 11. The main reason why Kmart filed for bankruptcy was the price of its stock, which first fell to $5 a share, and then it declined further to a measly 68 cents a share. |
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Kmart’s loss is a very peculiar case and has become the latest subject of study in the retail sector.
So far, Kmart is the biggest chain to collapse and face bankruptcy in US retail history. Kmart had over $16.3 billion in assets prior to the bankruptcy. Way back in 1990, other departmental stores chains like Macy's and Burdines had assets worth $8 billion when they filed for bankruptcy.
Kmart is one of the oldest retailers in America. It started its business in 1899, and was known as the S.S. Kresge Company. It was also called the "Five and Ten Cent Store.” Kmart became a discount chain in 1962. Today, Kmart operates nearly 2,114 stores all over the United States, and has about 275,000 employees.
Initially analysts were contemplating that around 250 stores would be shut but now nearly 750 stores are likely to be shut as a result of the bankruptcy. That would also mean that thousands of people will lose their jobs.
Kmart’s bankruptcy clearly indicates the gravity of the recession, and the decreasing consumerism. The decrease in consumerism is primarily due to the recession as it has affected mostly the lower and middle income group more than anyone else in the US. And, most of Kmart’s customers are people from the lower middle class.
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