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Photo Industry Gauges
Ramifi-K-tions of Kmart Collapse

by Dan Havlik

eactions from the photo industry to news that Kmart has filed for bankruptcy ranged from cautious optimism to nervous uncertainty as imaging companies with a stake in the discount giant's in-store photo centers assessed the damage from the collapse.
"We don't really know what the restructuring (of Kmart) is going to be at this point, so it's hard to say right now how it will affect us," said Joe Leach, executive vice president of Noritsu America, which leases some 650 onsite minilabs to Kmart's approximately 2,100 stores.
"If they restructure and don't close a lot of stores, it may not affect us at all. As far as we know, the photo departments are doing quite well, so it wouldn't make sense to walk away from their commitment to photo processing on site," Leach added.
Kmart announced in late January that it had filed for bankruptcy protection, making the Troy, Michigan-based company the nation's largest retailer to seek protection from creditors under Chapter 11.
The bankruptcy filing comes in the middle of what has become a fierce battle for retail dollars between Kmart and two of its closest rivals, Wal-Mart and Target. As part of the filing, Kmart will restructure its stores in an effort to better compete in a retail market that has seen the company increasingly squeezed in recent years.
"We are committed and determined to complete our reorganization as quickly and smoothly as possible, while taking full advantage of this chance to make a fresh start and reposition Kmart for the future," said Kmart CEO Charles Conaway.
Analysts predict Kmart will close 250 to 500 of its stores as a result of the bankruptcy.
In addition to Noritsu, Eastman Kodak Co., through its subsidiary, Qualex, leases approximately 400 minilabs in Kmart's stores. Kodak also sells film, cameras and photo accessories through K-Mart, as well as handling the retailer's overnight processing.
A spokesperson for Kodak was optimistic, though guarded, about how the bankruptcy will affect the imaging company.
"Kmart is a valued customer of Kodak's and we wish them well in their restructuring effort," said Kathy Rauschenberg of Kodak. "We don't expect this to have a material effect on Kodak." Rauschenberg would not elaborate on the issue.
A Qualex official contacted by PTN declined to be interviewed on the bankruptcy, deferring to Rauschenberg.
According to the Rochester Business News, in Rochester, New York where Kodak is based, Kodak has set up a cash reserve to cover "doubtful accounts" associated with Kmart.
Noritsu's Leach said the Kmart bankruptcy, while discouraging, didn't come as a complete surprise.
"It's disappointing but these days it's almost expected. Nobody should be shocked," he said. "I expect to have some positive answers in the next few weeks about how Kmart's restructuring is going to go. I'm pretty upbeat."
Noritsu had planned to add minilabs to approximately 2000 of Kmart's stores, but since the bankruptcy filing, that number will probably be scaled back, Leach added.