Reversing deep sales declines is key to Kmart’s long-term survival and perpetuating profits, and the door to the future is at 111 Eighth Avenue here, where the retailer quickly established design group offices for proprietary apparel and home merchandise.
Carving out a stronger niche for its own brands is an uphill battle for Kmart, considering the hunt for exclusive merchandise has become rampant across all retail formats, from department stores like Bloomingdale’s, J.C. Penney and Saks Fifth Avenue to mass chains like Wal-Mart, Target and Kohl’s.
Kmart’s design office, opened last March, is led by former Gap executive Lisa Schultz, Kmart’s senior vice president and chief creative officer, who works closely with John Goodman, Kmart’s senior vice president and chief apparel and home officer. Goodman, also a former Gap executive, is based out of Kmart’s Troy, Mich., headquarters.
In exclusive interviews, they explained they’re re-engineering Kmart’s proprietary fashion and home businesses, applying what they learned from specialty retailing to the mass channel, and that the upcoming fall season marks a turning point.
“We have really revamped the entire assortment,” said Goodman, who joined Kmart in January and formerly ran Gap Inc.’s outlet operation and earlier was a Bloomingdale’s women’s buyer. “Every brand was looked at from the point of view of age appeal, design and styling.”
According to market sources, Kmart fashion — women’s, men’s, kids, accessories and jewelry combined — is a $5 billion-plus business that has lost momentum and volume, at least $2 billion worth, due to the bankruptcy, store closings, years of not having fashion direction or point of view and trying to sell scratchy, low-grade merchandise.
Kmart, currently about a $20 billion business in total, posted profits of $93 million in the first quarter of fiscal 2004 and $276 million in the fourth quarter of fiscal 2003, but the profits primarily stemmed from overhead reductions and cleaner inventories, not from selling more merchandise. The company has been plagued by double-digit sales declines.