Is K Mart Fading Away? Who knows!

Is Kmart fading? The super-popular discount department store has just revealed its full finances for the last 12 months, and there’s a worrying development.

Kmart profit is down sharply to its lowest level in five years. Kmart used to be the golden child of Australian retail. Everyone loved it and it made heaps of money.

But now, as the next graph shows, profit has slipped.

The latest results made me concerned about Kmart. I was especially concerned because profit probably should have gone up.

Kmart’s fall happened at a time other retailers were rising. JB Hi-Fi increased its profit by 32 per cent. The supermarkets were killing it. Even The Reject Shop did really well, turning last year’s losses into a welcome profit.

Kmart is famous for selling wildly popular homewares, many of which become Instagram famous. During the pandemic lockdown, sales of homewares went through the roof as the next graph, from Commonwealth Bank, shows. Spending on household items was up as much as 50-70 per cent compared to the year before in various states.

Kmart should have been perfectly positioned to turn the pandemic into the biggest sales event of its life. Instead they grew annual sales by a pitiful 5 per cent.

That’s because the shelves at Kmart were almost bare during May and June.

THE BIG BLUNDER

On Thursday, when they revealed their financial results, Kmart’s boss explained he had made a terrible blunder. Instead of stocking up for the pandemic, Kmart chose to delay orders from its suppliers.

“With many retailers around the world suffering excessive inventory … Kmart adjusted demand forecasts down in anticipation of similar outcomes. In New Zealand this proved to be accurate,” said Kmart boss Ian Bailey.

However, in Australia, it was a big whoopsie. By June, when people were shopping like their lives depended on it, Kmart looked like a hurricane had gone through. That cost Kmart a lot of sales it could have won.

“May … was extraordinary. They shopped with a vengeance in that period and they cleaned our shelves out,” Mr Bailey admitted.

The problem of having too much stock for retailers is if they don’t sell them. They then need to put things on sale to get rid of them. Not only do they make less money on those items, but the clearance racks drag down the vibe of the whole store.

“Too much inventory is a difficult problem for us to manage and it lasts for a long time,” Mr Bailey explained.

But the other side matters too. If people find everything is sold out, they get frustrated.

Kmart claims to have put in big orders with its suppliers and sorted out their mistakes. They claim to have stuff back on the shelves.

But my online shopping shows plenty of things not available from my local Kmart store. Others are saying the same. (And how annoying is it when they don’t tell you it’s not available until the checkout!)