This always seems to confuse new users. "CMD K, CMD 1" is called a "sequence." To fold the text, you have to press "command+k," then without removing your finger from "command," press 1,2,3,etc. If you don't remove your finger from command after pressing k, nothing will be removed, and your tabs wont be cycled.
Sequences allow Sublime Text to add a lot more keybindings than other applications, making it a very powerful tool, but it is a bit confusing when you're new to the concept.
Hope that helps.