Kmart decision is indicator of local economy

The announcement this week that Kmart Corp. will keep its Cape Girardeau store open was good news in many ways.

For its 100 employees and all of its customers here, Kmart's decision to keep selling in this market was particularly good news.

Shoppers at 326 other stores, along with 37,000 employees, weren't so fortunate. With this second round of cuts since filing for bankruptcy a year ago, Kmart is shutting 609 stores affecting 59,000 employees.

The company hopes its remaining 1,500 stores and 191,000 employees are positioned to generate enough cash flow to pull it out of bankruptcy supervision by the end of April.

That's an ambitious goal, one that leaves few options.

The company says there won't be another round of cuts, which can be taken as very good news if the company's financial strategy succeeds.

But Kmart, with falling sales last year, faces stiff competition, mostly from Wal-Mart and Target -- both of which posted sales increases during 2002, and the company could be forced to close all of its stores under a worst-case scenario.

While all the reasons for keeping the Cape Girardeau store open have not been made public, Kmart provided some indication of the factors that were considered in making the latest round of closings. A Kmart spokeswoman at the company's Troy, Mich., headquarters said sales, growth margins and cash flows were key factors.

Kmart's decision to stay open in Cape Girardeau and other indicators, such as an increase in local sales-tax revenue for December's crucial holiday shopping season, suggest that this area's economy is showing strength -- in spite of doldrums on the national level and reports that Missouri is one of the states affected the most by the recession of the past two years.

While the news that Kmart's performance here has matched solid sales by other local stores, not all retailers are giving rosy reports.

Merchants from this area who made their annual buying trip to the merchandise mart in Atlanta last week heard reports from both extremes. Some retailers said 2002 had been a strong year for sales, while others were making cautious buying decisions based on lackluster sales that lasted right through the holidays.

Obviously, Kmart isn't the only retailer that will be paying close attention to how much money customers are spending in 2003.

Every business owner is watching the mood of consumers and waiting to see what impact budget and tax plans on the national and state levels will have on the overall economy.

For now, retailers can take Kmart's decision in Cape Girardeau as an indication that the local economy still has some muscle.