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TROY, Mich. -- Kmart, based here, said it will shutter three Super Kmart stores in the Memphis, Tenn. area, but industry observers say it could only be a matter of time before the discount chain, which completed a merger with Sears in March, does away with its ailing food-retailing business altogether.
"No surprises here," Richard D. Hastings, v.p. - senior retail sector analyst at Bernard Sands, LLC in New York, told Progressive Grocer. "Many of the larger-format Kmarts are being converted into Sears Essentials, and the remaining Kmart stores are focused primarily on gross margin, and that means apparel, not food. I would not be surprised to see the eventual discontinuation of all Super Kmarts in future." Hoffman Estates, Ill.-based Sears has said it plans to convert 400 Kmart stores into Sears stores.
Since launching the Super Kmart concept back in 1991, the company has experienced stiff competition from Wal-Mart supercenters and Costco. Kmart currently has almost 60 Super Kmart locations in the United States, in contrast to Wal-Mart's hundreds of supercenters across the country.
"When it comes to food retailing, replenishment, transportation, promotional events, and pricing are deeply integrated issues," noted Hastings. "If there is a weakness in one phase of this chain, then the rest will likely underperform. In the case of Wal-Mart, there was and remains a perfect synchronization of these functions, something that Kmart never achieved. For this reason, Kmart's historical ventures into supercenters and supermarkets were never competitively favored, especially against the greatest distribution and logistics company in the world, Wal-Mart."
The three Super Kmarts, which are located in Memphis and Cordova, Tenn., and just over the Tennessee border in Southaven, Miss., will close by the end of September, resulting in the elimination of 350 jobs, according to the company. One Super Kmart store will stay open in Memphis.
The stores are being shut because of they are "not profitable," company spokesman Stephen Pagnani told Progressive Grocer, adding that there were no further store closures scheduled. A Big Kmart in Carbondale, Ill. is already slated to close at the end of the summer, affecting about 75 employees.