Clear Vision Consulting Presents: Kmart SFA Presentation

1
Clear Vision Consulting PresentsKmart SFA
Presentation

• Steve Derwent
• Neal Laabs
• Jennifer Steinriede
• Meghan Thompson

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Company Background

• Opened first discount store as Kmart in Detroit
  in 1962
• Operates 1,821 stores as of March 8, 2002
• 17 of market share of discount stores and
  supercenters, 10 years ago 30
• 40 billion sales annually
• Employees 225,000

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Historical Position

• Kresge and McCrory, Kmarts founders, opened
  their first discount retailer in 1897, a five
  and dime
• Always been a discount retailer
• 1991 opened first Supercenter, SuperK
• 1997 launched a full line of Martha Stewart
  products

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Company Deterioration

• Financial
• Identity and Advertising
• Operations and Technology

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Ratio Explanation
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Ratio Explanation

• Gross Margin
• High cost of goods
• Inventory System
• Estimated 77 in 2002 from 80 in 2001
• Effect of 1 more drop in COGS to 76, increase
  Gross Margin to competitive 23
• Return on Assets
• Low because of Gross Margin
• Inventory Management
• Order mistakes 15, Wal-Mart 0.5
• Inventory Turnover
• Below Industry Avg.
• Inventory Control
• Sales levels not too bad
• COGS is major problem

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Future Position

• Differentiation
• Create own identity
• Exclusive brands
• Mom Market

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Re-position Justifications

• Continue offering exclusive brands
• Target more of Kmarts goods towards Moms
• Utilize funds from store closings to follow other
  recommendations
• Increase vendor support and alliances
• Look for outside investors

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Reposition Justifications cont.

• Follow the technological upgrade process that has
  been recently laid out
• Hire a CIO. Currently, Kmart is operating
  without this essential corporate position
• Spend money on research and development before
  implementing new technology

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Future Financials

• 550 million increase of cash flows
• Sales should increase 4 by 2003 and 7 by 2004
• Cost of Sales should decrease by 1 in 2002 and
  remain constant
• Net Income will increase 340 by 2002 and 463 by
  2004

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Athens Kmart

• The arrival of Wal-Mart, sales drop of 15
• 10 year rule
• Customer Service, 5 foot rule
• Advertising
• Target Market
• Big Bear Speculation

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The blue light is still on, but it may be
flickering.-Laabs, Neal
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Thank you

• Questions?