Kmart employees believe the company is nearing bankruptcy and is in the process of shutting down all its stores.

The chain has closed one-third of its stores in the last decade, and sales have been cut in half in the same time period.

Store-level employees who spoke to Business Insider said many of the remaining 941 Kmart stores now appear to be in the midst of liquidation.

Stores are being entered into numbered phases — such as Phase 1 and Phase 2 — employees said.

The company has told employees that the phases are part of a "P2P" or "path to profitability" strategy to make stores more profitable.

But employees say it's a liquidation plan, with each phase triggering different cost-cutting measures such as layoffs and labor-hour reductions.

The phases have also triggered stock-room purges, meaning all merchandise in the stock rooms must be moved to the sales floor. If there's not enough room on the sales floor for the items, stores will add new overhead shelving.

Once the stock rooms are purged, stores typically have no more than nine months before they shut down, according to chatter on employee message boards.

Kmart parent company Sears Holdings denies claims that it's liquidating all its stores.

“Sears Holdings is highly focused on restoring profitability to the company, and Kmart remains a key piece of our asset portfolio," Sears spokesman Howard Riefs said.

The stock-room clearances are meant to improve inventory management and keep employees on the sales floor, he said.

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But Kmart employee Mandi Spoolman said the store where she works in Chesapeake, Virginia, is languishing.

"There are baskets upon baskets of returns," she said. "Freight still in boxes, pilling up because we have nowhere to put them. Racks of clothes just sitting in the back room."

An employee of a Port Charlotte, Florida, store said his store "is like a flood zone."

"There are damaged walls and ceiling tiles missing," he said.

A 30-year Kmart worker in Poughkeepsie, New York, said her store is also suffering from structural issues. She asked not to be identified for fear of losing her job.

"Ceilings leak when it rains, floor is uneven and cracked... Our air conditioning and heating systems suck... freeze in winter, roast in the summer. Registers are outdated. They keep upgrading system with ancient technology which in turn causes system to crash every now and then. I've been there for 30 years and we have had one remodel in 1997. Fixtures are broken, dented, [and] rusted, which doesn't look nice when new layouts are instituted... The list goes on."

In addition to speaking with employees, Business Insider also reviewed an online message board that workers said they use to communicate with employees at other stores.

On the message board, there was a lot of recent chatter about stock-room purges.

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"Stock room getting cleaned out, putting stock on overheads — which before was a big NO... No hours for part timers, full timers are getting 40 [hours]," one person wrote.

Another wrote, "We cleaned out the stock room about 3 months ago... We let most of the full timers go around 4 months ago... We still have our 2 [assistant] managers but we haven't had a store manager in almost a year."

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