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The New York Times this morning describes Kmart as “a true retail oddity: simultaneously losing ground with the American shopper and generating cash like a slot machine.”

The description is based on the fact that even though the company just reported a 15 percent drop in revenue for the just-completed quarter, it also said that it has an extra $2.6 billion in its bank account. The reason: Kmart may have sub-par stores, but it has some terrific real estate, with leases that often are at prices below that being paid by the likes of Wal-Mart and Home Depot.

By selling off its leases – done deals include 54 stores to Sears for $621 million, as well as 13 to 19 others to Home Depot for as much as $288.5 million – Kmart almost doesn’t need customers and store personnel. It really just needs a good real estate agent.

Kmart also is generating cash by charging vendors for late shipments at a higher rate than in previous years, and by cutting costs wherever possible.

Skeptical analysts say that the only problem Kmart could have is that sales declines could suggest to other retailers that its locations, though cheap, may not be optimal. And even as Kmart restructures itself and approach to the marketplace, the persistent question that seems unanswered is whether Kmart is a retailer with a legitimate and credible future.
KC's View:

We continue to believe that the new ownership at Kmart is doing precious little to create a compelling shopping experience that will compare favorably with what people are finding at Wal-Mart and Target.

Not that these new owners and managers are doing anything wrong. They are optimizing their own investment, and making the most money they can for shareholders. (Though not, of course, for shareholders in the old Kmart who got completely abused by previous management. But that’s a different story.)

But Kmart’s days as a plausible US retailing power are over.