Kmart Holding (NASDAQ:KMRT), now the parent of Kmart's post-bankruptcy operations, announced third-quarter results this morning. While the discount retailer's net loss shrank, questions about Kmart's competitive standing versus Wal-Mart (NYSE:WMT) and Target (NYSE:TGT) remain.
Kmart's total sales dropped 21% to $5.09 billion from $6.5 billion. Some of that dip was caused by its closure of 316 stores. The effect of the retailer's 8.6% decline in same-store sales can't be overlooked, though. its net loss narrowed to $23 million versus $383 million in the prior quarter.
Kmart's limiting its markdowns and is trying to drive what it calls "profitable sales," a seemingly novel concept for the retailer. Customers used to seeing everything at Kmart as a Bluelight Special are surprised to find the company offering up lots more full-price merchandise. It looks like shoppers aren't yet buying into Kmart's new image, though, judging by the same-store sales results. Still, holding the line on pricing allowed Kmart to produce a profit for the month of November.
Before getting terribly excited, consider that Kmart's still banking on its stable of brands as one way to differentiate itself from Wal-Mart and Target. It's even running snappy holiday ads to show off the goods. Kmart's exclusives include Martha Stewart Everyday, Joe Boxer, and the Thalia Sodi line, among others.
Can Martha, Joe, and Thalia really compete against Target's Michael (Graves), Isaac (Mizrahi), and Cynthia (Rowley)? I remain unconvinced. Target's already established itself as the chic cheap place to shop. Whether it's still warranted or not, Kmart doesn't spring readily to mind when picturing a hip, cool, and clean store.
As for Wal-Mart, it's near delusional at this point to imagine Kmart competing effectively against the giant. What does Kmart offer that Wal-Mart doesn't? Even Wal-Mart's trying to get in on the quality housewares game, improving the quality and look of its products. And though its apparel department doesn't get as much praise as Target's does, Wal-Mart's no slouch there, either. It boasts a line of Levi's jeans now in addition to its popular George brand. Let's not leave out cuties Mary-Kate and Ashley Olsen either, who have their own Wal-Mart line of clothes.
Put it all together and you still have questionable turnaround prospects for Kmart, regardless of its piecemeal financial improvements. Shareholders were burned last time around with this one. Why anyone would go back for seconds of Kmart is beyond me.
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