Troy, MI-based Kmart filed Chapter 11 in US Bankruptcy Court here for the Northern District of Illinois. Kmart plans to review sales performance and leases of all 2,114 stores in the first quarter. Unprofitable or underperforming stores will be closed, the company says.

"I know a lot of developers are worried about their exposure to Kmart," says Chicago-based retail expert John C. Melaniphy III. "It really will be difficult for them to survive…Their growth strategy was for the super-centers. That will be difficult with their food supplier cutting them off."

Grocery distributor Fleming Cos. stopped shipments to Kmarts Monday, claiming it was owed $78 million. Meanwhile, plans for at least one new urban super-center, a 150,000-sf store at North and Fond du Lac avenues on Milwaukee's North Side, has yet to be scrapped, Melaniphy notes.

Meanwhile, Kmart says it is seeking bankruptcy court approval to terminate 350 leases previously-closed stores or are being subleased at rates below Kmart's rate. That would save the company $250 million a year, officials say.

Before realizing those savings, and pending US Bankruptcy Court approval, Kmart has working capital today thanks to Credit Suisse First Boston, Fleet Retail Finance, Inc., General Electric Capital Corporation and JPMorgan Chase Bank. They will oversee Kmart's finances during reorganization. Kmart says it will be able to tap $1.15 billion immediately upon court approval.

"I am confident that, with our tremendous resources and dedicated supplier and associate communities, Kmart will emerge from this process as a stronger, more dynamic, more profitable enterprise with a well-defined position in the discount retail sector," says Kmart CEO Charles C. Conaway.

Melaniphy isn't so sure Kmart can reposition itself under fast-track reorganization. "It's so competitive out there," he says. "Target, Walmart and Kohl's have been clobbering them."

While REITs such as Bingham Farms, MI-based Malan Realty Investors Inc. work to sell properties in Milwaukee, Stevens Point, WI and Cape Girardeau, MO because of Kmart leases, there won't be an absence of buyers for such centers, Melaniphy predicts. He compares it to Kimco Realty Corp.'s acquisition of Montgomery Ward's assets following that retailer's bankruptcy last year. Target and Sears later swooped in on selected Ward's locations.

"I'm sure you're going to see the bottom-feeders out there for the good Kmart locations," Melaniphy adds.