Why did Kmart go bankrupt while other retailers such as Target Corporation flourished?
Walmart has maintained a consistent relationship between cost of sales; and sales, administrative, and selling costs; to sales, even as sales have grown from $50 billion to $250 billion. 95.3% of each additional sales dollar has gone to these costs. Target Corporation also has maintained a consistent relationship between these costs and sales, but only 87.8% of each additional sales dollar has gone to these costs. Kmart had a similarly consistent relationship for cost of sales through 2000, although the sales, general, and administrative relationship had some variability. Unfortunately, 103.7% of each additional sales dollar went to these costs. This means income actually declined as sales grew from $28 billion to $37 billion per year. When sales declined in 2001 and 2002, costs of sales did not decrease as much as expected given the prior relationship. Kmart entered bankruptcy in early 2002 and emerged in quarter 2 of 2003. Sales rebounded in 2003, and cost of sales was a little bette
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