It was originally founded as S.S. Kresge Corporation in 1899 by Sebastian S. Kresge in Detroit, Michigan. The first store was a five-and-ten-cent store similar to those operated by Frank Woolworth. The store grew into a chain known as S. Kresge. By 1912, the chain was operating 85 stores.
By the 1920s, Kresge was operating larger stores that offered a wider variety of merchandise and prices, which were precursors of the modern discount store. The first Kmart department store opened in 1962 in Garden City, Michigan. A total of 18 Kmart stores opened that year.
Kmart was known for its "blue light specials": at surprise moments, a store worker would light up a mobile police light and offer a discount at a part of the store. During the 1970s, Kmart put a number of competing retailers out of business.
In the 1990s, Kmart underwent a number of missteps. Unlike competitor Wal-Mart, it failed to invest in computer technology to manage its supply chain. Furthermore, Kmart has been faulted for continuing to maintain a high dividend which reduced the amount of money available for improving its stores. Many business analysts also fault the corporation for failing to create a coherent brand image. It was attempting to compete with Wal-Mart on price at the same time trying to move upscale with lines offered by Martha Stewart and Jaclyn Smith.
The stock scandals of Martha Stewart severely hurt the corporation's image. In addition, Kmart attempted to compete against Wal-Mart on price, which failed because Wal-Mart was able to meet and beat Kmart's price cuts.
On January 22, 2002, it filed for bankruptcy protection. It shut down more than 300 stores nationwide and laid off around 34,000 workers as part of a badly-needed restructuring measure. On May 6, 2003, Kmart officially emerged from bankrupcty protection as Kmart Holding Corporation and on June 10, 2003 it began trading on the NASDAQ National Market.