Kmart in-stocks strong, but pricing weak - Special Reports & In-Store Surveys

DSN Retailing Today, March 8, 2004

NEW YORK -- If ever there was a hint that Kmart's behind-the-scenes operations were taking a turn for the better, it's the recent shift in in-store performance that the editors of DSNRT have noted while tracking in-stocks over the last 16 months.

From November 2002, the time we first conducted an in-stock survey based on Kmart's weekly circular, until February of this year, the chain's in-stock position on 12 randomly selected promotional items has improved from a dismal 58% to a very respectable 88% (by way of 78% in February 2003.)

To put this score (as well as the corresponding jump of 30 basis points) into perspective, consider that rival discounter Wal-Mart, largely considered the industry benchmark for efficiency, scored an 86% in-stock rating during a virtually identical survey this past winter.

The one caveat to our findings (which, in addition to the chart below, are available for free download on the DSNRT Web site) is that improvements in one's in-stock status are no guarantee for a well-run store. What these results don't fully reveal is that many of the promotional items at Kmart are either hard to find (due to poor signage, inaccurate signage or simply no signage) or in-store pricing does not correspond to that of the circular.

Furthermore, the results also demonstrate that certain stores fare better than others. Or stated another way, some stores are still underperforming. In the case of one Chicago location, 11 of the 12 items on our list were inaccurately priced--a fact that further fans the flames of speculation that Kmart still needs to close more units.

THE EDITORS OF DSN RETAILING TODAY VISITED 9 KMART STORES ON TUESDAY,
FEBRUARY 10. ARMED WITH THE LATEST CIRCULAR, WHICH FORMED THE BASIS OF
OUR PRE-DETERMINED, RANDOMLY SELECTED 12-ITEM SHOPPING LIST, WE HIT
THE STORES IN SEARCH OF PRODUCT.

The following chart outlines the results of our in-stock survey.
(A [check] means the item was available at the time the store was
visited. An X means the item was either sold out or never reached
the store.) In addition to measuring an individual item's in-stock
status, the chart gauges how well each of the 9 stores fared on the
basis of in-stock percentage, as well as how each of the 12 items
from the circular

                     Diamond        Dream         Joe Boxer
                     Heart          Pillow        Women's
                     Pendant                      Monogram
                     1/4 ct. T.W.                 Handbags
                     10-kt. Gold

STORE
LOCATION             $79.99         $15.99 *      $6.99-$9.09

Oceanside, Calif.    [check]        X             [check]
San Diego, Calif.    [check]        [check]       [check]
Brandon, Fla.        [check]        X             [check]
Lutz, Fla.           [check]        X             X
Chicago              [check]        [check]       X
  (Addison St. &
  Kimball Ave.)
Chicago              X (1)          [check] (1)   X (1)
  (Ashland &
  North Avenues)
White Plains, N.Y.   [check]        [check] (2)   [check]
NYC (Penn Station)   X              X             [check] (1)
Hanover, PA          [check]        X             [check]

% IN-STOCK           81.8%          54.5%         63.6%
BY PRODUCT

                     Home          Knightsbridge   Route 66
                     Essentials    Men's Solid     Boy's or
                     100% Cotton   or Striped      Girl's Basic
                     Bath Towels   Golf Polos      Jeans
                                                   Sizes 4 to 6

STORE
LOCATION             4/$7          $7.99           $11.99

Oceanside, Calif.    [check]       [check]         [check]
San Diego, Calif.    [check]       [check]         [check]
Brandon, Fla.        [check]       [check]         [check]
Lutz, Fla.           [check]       [check]         [check]
Chicago              [check]       [check]         [check]
  (Addison St. &
  Kimball Ave.)
Chicago              [check] (1)   [check] (1)     [check] (1)
  (Ashland &
  North Avenues)
White Plains, N.Y.   [check]       [check] (2)     [check] (2)
NYC (Penn Station)   [check] (1)   [check] (1)     [check]
Hanover, PA          [check]       [check]         [check]

% IN-STOCK           100%          100%            100%
BY PRODUCT

                     Hamilton      Sony MP3      Suave
                     Beach         Personal      Shampoo,
                     12-Cup        CD Player     Conditioner
                     Programable                 or Hair
                     Brewstation                 Styling
                                                 Products

STORE
LOCATION             $49.99        $59.99        4/$5

Oceanside, Calif.    [check]       [check]       [check]
San Diego, Calif.    [check]       [check]       [check]
Brandon, Fla.        [check]       [check]       [check]
Lutz, Fla.           [check]       [check]       [check]
Chicago              [check]       [check]       [check]
  (Addison St. &
  Kimball Ave.)
Chicago              [check] (1)   [check]       [check] (1)
  (Ashland &
  North Avenues)
White Plains, N.Y.   [check]       [check] (2)   [check]
NYC (Penn Station)   [check] (1)   X             [check]
Hanover, PA          [check]       [check]       [check]

% IN-STOCK           100%          90.9%         100%
BY PRODUCT

                     Lion King           Kellogg's     Charmin
                     1/1/02              Apple Jacks   Bath Tissue
                     DVD and VHS         or Fruit      or Bounty
                                         Loops         Paper Towel

STORE
LOCATION             $19.99 ([dagger])   $1.99         2/$10

Oceanside, Calif.    [check]             [check]       [check]
San Diego, Calif.    X                   X             [check]
Brandon, Fla.        [check]             [check]       [check]
Lutz, Fla.           [check]             [check]       [check]
Chicago              [check]             [check]       [check]
  (Addison St. &
  Kimball Ave.)
Chicago              [check] (1)         [check] (1)   [check] (1)
  (Ashland &
  North Avenues)
White Plains, N.Y.   [check]             [check]       [check]
NYC (Penn Station)   [check]             [check] (1)   [check] (1)
Hanover, PA          [check]             [check]       [check]

% IN-STOCK           90.9%               90.9%         100%
BY PRODUCT

STORE                % IN-STOCK
LOCATION             BY STORE

Oceanside, Calif.    91.7%
San Diego, Calif.    83.3%
Brandon, Fla.        91.7%
Lutz, Fla.           83.3%
Chicago              91.7%
  (Addison St. &
  Kimball Ave.)
Chicago              83.3%
  (Ashland &
  North Avenues)
White Plains, N.Y.   100%
NYC (Penn Station)   75%
Hanover, PA          91.7%

% IN-STOCK
BY PRODUCT

FOOTNOTES (1) Wrong price (2) No sale signage * Advertised as
"Quantities Limited" ([dagger]) Prices may vary per location