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The news of Kmart's bankruptcy has several potential consequences for Hawaii, and may impact the planned opening of a new store near Ala Moana Center.
Kmart bankruptcy puts
Chain must set itself apart
land deal in jeopardy and
makes suppliers jitteryBy Tim Ruel and Lyn Danninger
truel@starbulletin.com ldanninger@starbulletin.comKmart, which has four stores on Oahu in Iwilei, Aiea, Kapolei and Waikele, announced plans in September to buy the 10-acre site of the Keeaumoku superblock and open a fifth store. The purchase of the vacant property is under contract and has not yet closed, said Eric Tema of the MacNaughton Group, a local development company that has been working with Kmart on the purchase.
"It is under review as all of our projects are and all of our stores," said Michele Jasukaitis, a corporate spokeswoman for Kmart.
Kmart had been scheduled to make a presentation of its proposal yesterday at a monthly meeting of the Ala Moana/Kakaako Neighborhood Board. But Kmart canceled the appearance on Monday, saying that it was not ready to give an update, said John Breinich, chairman of the neighborhood board.
When asked if the MacNaughton Group could develop the land without Kmart as a tenant, Tema said, "that remains to be seen."
The bankruptcy filing would definitely raise a red flag for the seller of the land, the Wichman Family Trust, said Mike Hamasu, director of consulting and research for Colliers Monroe Friedlander. Both buyer and seller would probably want to step back and review the purchase as well as its financing, said Hamasu, who is not involved in the sale of the superblock.
At current prices for the area, the land would sell for about $30 million, according to real estate observers. Kmart has said it would spend as much as $20 million on construction and planning to build a 175,000-square-foot superstore.
Development plans for the superblock have come and gone in the past decade. Home Depot and Wal-Mart have both announced plans recently to open stores there, only to abandon them because of the prohibitive land price.
It's possible that the deal could be reworked for Kmart to take less of an interest in the purchase, Tema noted. The next step in the development is a public hearing scheduled for Feb. 5 on a special district permit application that is pending with the city Department of Planning and Permitting.
If Kmart opened at the superblock, it would compete with Daiei as well as tenants at Ala Moana Center. Elsewhere on Oahu, Kmart already faces stiff competition from Wal-Mart, which has stores in Mililani and Waipahu; and Costco, which has outlets in Waipio and Hawaii Kai and is moving its Salt Lake store to Iwilei. Kmart also has stores on all the major neighbor islands.
For the time being, it's not clear what Kmart stores could close in the bankruptcy reorganization. Hawaii store managers have been told not to comment to the media. The corporate message is that all stores remain open, and operations are under review.
Dale Fishell, district manager for Kmart in Hawaii, said the firm is talking with its local employees and suppliers to reassure them.
Texas-based grocery distributor Fleming Cos. recently suspended shipments of food and consumer products to all Kmart outlets, including Hawaii's stores, after Kmart missed a $78 million payment. However, Fleming is still shipping products to its district offices in Hawaii in anticipation that the supply will resume to Kmart, said Randy Hatcher, a Fleming spokesman. The current shipments do not include perishable products, he noted.
Meanwhile, the supply stoppage will have some impact on vendors that deliver to Kmart through Fleming.
Mauna Loa Macadamia Nut Corp., for one, supplies mainland Kmart stores through Fleming, although in Hawaii, Mauna Loa works directly with Kmart. Mauna Loa is monitoring the bankruptcy and is discussing the relationship, said Darrell Askey, chief executive of Mauna Loa. He noted that Kmart's accounts were current with Mauna Loa, and represent a relatively small portion of overall sales.
Mauna Loa, purchased from C. Brewer & Co. in September 2000 by the Shansby Group of California, has been supplying Kmart for more than 10 years, Askey said.
Honolulu candy maker Hawaiian Host Inc. also supplies Kmart as a vendor, but not through Fleming, a spokes-woman said. Hawaiian Host is reviewing the contracts and the bankruptcy.
"We need to look at what we need to do," said Sara Muraoka, marketing manager.
GRAND RAPIDS, Mich. >> Larry Guydon remembers when Kmart was the premier discount retailer in town, long before Target and Wal-Mart stores began to multiply across America. But stiff competition in the increasingly cutthroat retail environment caused Kmart to lose its foothold on the sector and slip into bankruptcy. Kmart’s biggest challenge
is to set itself apartBy Anne D'Innocenzio
Associated Press"I figured it's the new stores doing it to them, like Wal-Mart and Target," said Guydon, a 48-year-old machine operator from Grand Rapids and longtime Kmart customer. "There wasn't that much competition when Kmart started."
With the bankruptcy filing yesterday, Troy, Mich.-based Kmart Corp. becomes the nation's largest retailer to seek shelter from creditors under Chapter 11. The company, which has about 275,000 employees, said it hopes to emerge from bankruptcy in 2003. But many analysts believe Kmart's strategy still lacks clarity.
"They continue to be pressed by the expansion of Target and Wal-Mart. In order to compete going forward, they need to find some point of focus," said Kevin Murphy, a research director of retail operations at Gartner G2, a research firm.
Wal-Mart Stores Inc., the world's largest retailer, has successfully carved out a niche as the lowest-price operator, while No. 2 Target Corp. is known for fashion and home furnishings. Kmart has tried to stay competitive by joining in powerful licensed partnerships with Martha Stewart, Walt Disney and Sesame Street. Speculation has swirled in recent days about whether Martha Stewart would exercise a contract option to pull her line of home and garden products from Kmart stores. Today, she said she is sticking with the retailer "for the foreseeable future."
Frequent Kmart customer Jim Hudson says "Kmart needs to keep (its) prices lower than all the rest of the stores."
