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1.0 Introduction
More than one hundred years ago, Sebastian Spering Kresge opened a modest five-and-dime store in downtown Detroit and changed the entire landscape of retailing. The store that Kresge built has evolved into an empire of more than 2,114 stores and an Internet presence that reaches millions of customers. The Kmart name has become a symbol of Americana, standing for quality products at low prices. Yet too much diversification, too little attention to its core business, and brutal competition particularly from the mighty Wal-Mart and Target led to a prolonged state of decline and ultimately to a filing for Chapter 11 bankruptcy protection in January 2002 by the U.S third largest discounter and the termination of 57,000 employees (USA Today 2003).
Kmart emerged from Chapter 11 bankruptcy protection in May 2003 and now has 1,500 stores. The retailer has 600 fewer stores and new leadership since filing for protection from its creditors in January 2002. It also has a US $2 billion loan to compete against bigger retailers like
Wal-Mart and Target. Investor Edward Lampert's company, ESL Investments, is converting US $2 billion in financial claims against Kmart into stock and will own a 49% stake in the company
(KBTX 2004). In March 2004, Kmart posted its first profitable quarter in 3 years. Kmart, in recent years, has been shedding many of its underperforming stores, a strategy that has helped the once-struggling discount retailer bounce back after it emerged from bankruptcy. In 2004, Kmart agreed to sell 50 stores to Sears for US $575 million as part of that strategy. At the end of 2004, Kmart posted a fourth straight quarterly profit. On March 24, 2005, The merger of K ...