Kmart was America's second-largest retailer — then Walmart and Target ate its lunch

Kmart was founded in 1899 as S.S. Kresge Corporation, a five-and-dime store in Detroit. It pioneered the discount department store concept, opening its first Kmart in 1962 in Garden City, Michigan — the same year Walmart and Target were founded. By the 1970s, Kmart was the second-largest retailer in America, operating 2,000 stores and dominating small-town retail. Its suburban expansion strategy and aggressive store openings in the 1970s and 1980s made it a household name.

Kmart's decline was slow and self-inflicted. While Walmart invested billions in supply chain technology and inventory management, Kmart failed to computerize its systems. It maintained a high dividend that starved stores of renovation capital. The company had no coherent brand identity — it was neither the cheapest (Walmart) nor the most stylish (Target). In August 2001, Target sued Kmart for false advertising over its 'Dare to Compare' campaign. Kmart's sole food distribution deal with Fleming, signed in 2001 for $4.5 billion, collapsed when Fleming could not reliably supply the stores.

On January 22, 2002, Kmart filed for Chapter 11 bankruptcy protection with 2,114 stores and 275,000 employees — the largest retail bankruptcy filing in U.S. history. CEO Charles Conaway and president Mark Schwartz were dismissed. The company closed more than 300 stores and laid off 34,000 workers. Kmart emerged from bankruptcy in May 2003, but in November 2004 it announced it would acquire Sears for $11 billion, creating Sears Holdings. The merged company continued to decline, and Sears Holdings filed for bankruptcy in 2018. By 2026, only three Kmart stores remained.