[an error occurred while processing this directive] [an error occurred while processing this directive] press release

May 17, 2001


Contacts
John McDonald, Vice President & Treasurer
Juli Musch, Divisional Vice President
Investor Relations
(248) 463-1040


FOR IMMEDIATE RELEASE

KMART CORPORATION REPORTS FIRST QUARTER 2001 FISCAL RESULTS

TROY, Mich., May 17, 2001 - Kmart Corporation (NYSE: KM) today reported its financial results for the first quarter of 2001, highlighted by positive trends in same-store sales, merchandise in-stock position and customer service.

For the 13-week period ended May 2, 2001, Kmart's net sales were $8.337 billion, an increase of 1.7% from $8.195 billion for the 13-week period ended April 26, 2000. As reported, same-store sales increased 1.7% in the first quarter of fiscal 2001. The company reported a net loss of $25 million, or $0.05 per share versus net income of $22 million, or $0.06 per share, for the 13-week period ended April 26, 2000. Excluding a charge for employee severance and Voluntary Early Retirement Program (VERP), the company reported a net loss of $10 million, or $0.02 per share.

"These results are in-line with our plan to fix our business by taking decisive, aggressive, and focused steps to transform our company," said Chuck Conaway, Chairman and CEO of Kmart Corporation. "We continue to strive to provide world-class execution, deliver superior customer service and differentiate ourselves from our competitors."

Mr. Conaway added, "We are making strong progress on several key operating metrics. The company's in-stock levels have improved from 79% in October 2000 to 88% at the end of the first quarter of 2001. Likewise, Kmart's Super Service Index (SSI), our measure of service excellence, has increased from 40% last fall to 57% today."

Gross margin for the first quarter of 2001 was 20.7% of sales, compared to 20.8% last year. Selling, General and Administrative expense, as a percentage of sales, was 19.7% excluding the charge for employee severance and VERP in the first quarter of 2001 versus 19.3% in the same quarter in 2000.

For the first quarter, Kmart opened ten new discount stores, one supercenter and closed three discount stores. As of May 2, 2001, Kmart operated 2,113 stores.

Cautionary Statement Regarding Forward-looking Information

Statements, other than those based on historical facts, which address activities, events, or developments that the Company expects or anticipates may occur in the future are forward-looking statements which are based upon a number of assumptions concerning further conditions that may ultimately prove to be inaccurate. Actual events and results may materially differ from anticipated results described in any forward-looking statements. The Company's ability to achieve such results is subject to certain risks and uncertainties, including, but not limited to, economic and weather conditions which affect buying patterns of the Company's customers, changes in consumer spending and the Company's ability to anticipate buying patterns and implement appropriate inventory strategies, continued availability of capital and financing, competitive factors, and other factors affecting business beyond the Company's control. Consequently, all of the forward-looking statements are qualified by these cautionary statements and there can be no assurance that the results or developments anticipated by the Company will be realized or that they will have the expected effects on the Company or its business or operations.

Kmart Corporation is a near-$40 billion company that serves America with more than 2,100 Kmart and Kmart supercenter retail outlets. In addition to serving all 50 states, Kmart operations extend to the Caribbean Islands and Asia Pacific. More information about Kmart is available on the World Wide Web at www.bluelight.com under the "About Kmart" section.



KMART CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
(Dollars in millions, except per share data)
 		 13 Weeks
Ended
May 2, 2001		 13 Weeks
Ended
April 26, 2000
 
Sales   $ 8,337    $ 8,195 
Cost of sales, buying and occupancy    6,608     6,494 
 
Gross margin   $ 1,729    $ 1,701 
Selling, general and administrative expenses    1,643     1,581 
Charge for employee severance and Voluntary
  Early Retirement Program (VERP)		    23     — 
 
Income before interest, income taxes and dividends
  on convertible preferred securities of subsidiary trust		 63  120 
Interest expense, net 83  69 
Income tax provision (benefit) (6) 18 
Dividends on convertible preferred securities of
  subsidiary trust, net of income taxes		 11  11 
 
Net income (loss)   $ (25)   $ 22 
 
 
Basic / diluted earnings (loss) per common share   $ (0.05)   $ 0.06 
 
 
Basic weighted average shares (millions) 488.5  481.3 
Diluted weighted average shares (millions) 552.6  545.9 


KMART CORPORATION
CONSOLIDATED BALANCE SHEETS
 
(Dollars in millions) May 2, 2001 April 26, 2000
 
ASSETS
Current Assets:
Cash and cash equivalents		   $ 415    $ 350 
Merchandise inventories    7,363     7,290 
Other current assets    770     735 
 
Total current assets    8,548     8,375 
 
Property and equipment, net    6,660     6,356 
Other assets and deferred charges    384     417 
 
TOTAL ASSETS   $ 15,592    $ 15,148 
 
 
LIABILITIES AND EQUITY
Current Liabilities:
Long-term debt due within one year		   $ 315    $ 67 
Trade accounts payable    2,637     2,575 
Accrued payroll and other liabilities    1,277     1,314 
Taxes other than income taxes    245     234 
 
Total current liabilities    4,474     4,190 
 
Long-term debt and notes payable    2,448     1,844 
Capital lease obligations    922     995 
Other long-term liabilities    778     907 
Convertible preferred securities    887     891 
Common stock    490     481 
Capital in excess of par value    1,599     1,554 
Retained earnings    3,994     4,286 
 
TOTAL LIABILITIES AND EQUITY   $ 15,592    $ 15,148 
 


KMART CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(Dollars in millions)
 		 13 Weeks
Ended
May 2, 2001		 13 Weeks
Ended
April 26, 2000
 
CASH FLOW FROM OPERATING ACTIVITIES          
 Net income (loss) from continuing operations   $ (25)   $ 22 
 Adjustments to reconcile net income (loss) from continuing
 operations to net cash (used for) provided by operating activities:		      
    Charge for employee severance and VERP    23     — 
    Depreciation and amortization    200     196 
    Equity loss in BlueLight.com    23     17 
    Cash used for store restructuring and other charges    (26)    (17)
    Increase in inventories    (951)    (189)
    Increase in accounts payable    350     371 
    Decrease in accounts receivable    39     22 
    Deferred income taxes and taxes payable    75     (59)
    Decrease in other long-term liabilities    (27)    (32)
    Changes in other assets and liabilities    61     (107)
 
 Net cash (used for) provided by continuing operations    (258)    224 
 Net cash used for discontinued operations    (20)    (26)
 
Net cash (used for) provided by operating activities    (278)    198 
 
 
CASH FLOW FROM INVESTING ACTIVITIES      
 Capital expenditures    (262)    (141)
 Investment in BlueLight.com    (15)    — 
 
Net cash used for investing activities    (277)    (141)
 
 
CASH FLOW FROM FINANCING ACTIVITIES      
  Proceeds from issuance of debt    592     91 
  Issuance of common shares    22     17 
  Purchase of convertible preferred securities    —     (80)
  Purchase of common shares    —     (36)
  Payments on long-term debt    (6)    (5)
  Payments on capital lease obligations    (21)    (19)
  Payments of dividends on convertible preferred securities    (18)    (19)
 
Net cash provided by (used for) financing activities    569     (51)
 
 
Net change in cash and cash equivalents    14     6 
Cash and cash equivalents, beginning of year    401     344 
 
Cash and cash equivalents, end of year   $ 415    $ 350 
 

 



Back to Investor Relations