Kmart to Shut Down 326 Stores

By Abigail Goldman and Roger Vincent

Jan. 15, 2003 12 AM PT

Times Staff Writers

Nicole Williams of Westchester has long counted on her local Kmart for toys, clothes and bedding. Above everything, the 34-year-old mother always came back to the retailer’s store in Inglewood because of the low-cost merchandise.

Now, Williams says, she doesn’t know where she’ll go to shop.

The Inglewood store was one of 19 in California -- and 326 across the country -- that Kmart Corp. said Tuesday would be shuttered as part of the company’s plan to emerge from Chapter 11 bankruptcy protection as soon as April 30.

“It’s not the greatest quality, and there’s always stuff on the floor,” said Williams, piling her three children into a minivan after buying more than $100 worth of kids’ clothes at the store. “But I still come here anyway because of the prices. It’s one step below Target, and that’s what I need.”

The closures announced Tuesday will result in 37,000 job cuts and represent the second wave of retrenchment for the retailer, which filed for bankruptcy protection last January and shut down 283 stores soon after. Kmart’s latest cutbacks will erase 2,287 positions in California, although the company still will have 129 stores in the state.

“Clearly, we continue to face many challenges, both within our organization and in a difficult economic environment that has not been kind to many retailers,” said James B. Adamson, Kmart’s chairman and chief executive.

The Troy, Mich.-based retailer has struggled in the last several years to find a niche in the discount store world that it helped create, battling Wal-Mart Stores Inc.’s image as the low-price leader and Target Corp.’s profile as the hipper discount store alternative. Analysts also have said that poorly stocked shelves and messy stores have hurt Kmart’s sales, and it didn’t help that this past Christmas season was a poor one for most merchants.

“The last thing Kmart needed this year was a bad holiday season, and they got it,” said Richard Giss, a retail consultant at Deloitte & Touche in Los Angeles.

Kmart hopes to get court approval for its store closings later this month, and it plans to close the doors in March or April. The company said it lined up $2 billion in financing.

The retailer is coming off a poor holiday season. It said Tuesday that Kmart’s same-store sales, a key measure of a retailer’s health because it excludes new and closed stores, were down 5.7% for the five weeks ended in January.

The retailer’s challenges have been evident in Inglewood.

The store, built a decade ago alongside the 405 Freeway, is now smack in the middle of low-price store wars. A Costco Wholesale Corp. warehouse store does brisk business just a few minutes away, three Target stores within a five-mile radius pack in shoppers from throughout the area and Wal-Mart executives are proposing a new store practically within shouting distance.

Kelli Salter, 33, and her 80-year-old grandmother, Delma Dean, drove from West Los Angeles to Inglewood because of an advertised sale on a steam cleaner -- otherwise, they said, they prefer to shop at the Target store just down the road.

“I hardly ever come here,” said Salter, a hair stylist. “Target is cleaner, closer and better organized.”

The closures will be felt by Kmart workers, who are facing a tough job market. And landlords who own the stores rented by Kmart may also get stung.

Under bankruptcy protection, Kmart can walk away from lease obligations, and some stores slated for closure have above-market rents that were signed in previous real estate booms. Yet Kmart also has the option to sublet stores and could even turn a profit on rents if it can find tenants willing to pay more than it does for the space.

But the closings aren’t likely to have a major effect on the economy or the Southland’s retail real estate market.

In Los Angeles and Orange counties, the stores being closed account for less than 1% of the shopping center space, said Greg Andrews, an analyst at Green Street Advisors in Newport Beach.

Another consultant said that other large-scale retailers may be eager to swoop in. “Look at Target and Wal-Mart and see how many stores they are opening and you will see a net gain,” said analyst Dean Schwanke of the Washington-based Urban Land Institute. “There is a demand for big-box retail.”

If Bankruptcy Court officials approve the closures, the affected stores will liquidate their inventory over the following two to three months and then lock their doors for the last time.

“While the number of people being laid off isn’t enough to have an impact on California’s economy, the Kmart closures may prick consumer confidence,” said Giss of Deloitte & Touche. “It’s a real high-profile company, and layoffs of any kind cause others to get nervous.”

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Kmart closings

Here are the stores Kmart is closing in California:

Aliso Viejo: Super Kmart, 26501 Aliso Creek Road

Antelope: Big Kmart, 8135 Watt Ave.

Bakersfield: Big Kmart, 2749 Calloway Drive

Buena Park: Big Kmart, 5885 Lincoln Ave.

Carson: Super Kmart, 500 Carson Town Center

Chino: Big Kmart, 4200 Chino Hills Parkway

Escondido: Big Kmart, 620 W. Mission Ave.

Inglewood: Big Kmart, 8801 S. La Cienega Blvd.

La Habra: Super Kmart, 1000 W. Imperial Highway