Kmart Updates Previously Announced Transaction With Sears

Kmart Holding Corporation (NASDAQ: KMRT) announced today the following update regarding the previously disclosed transaction with Sears, Roebuck and Co. (NYSE: S).

As reported on June 30, 2004, Kmart and Sears entered into an agreement that provided for the sale of up to 54 stores by Kmart to Sears for up to $621 million in cash. The exact number of locations to be sold was subject to certain conditions under the agreement.

Kmart will now sell 45 stores for cash proceeds totaling $524.45 million, subject only to customary closing conditions. The sale of up to another 6 stores remains subject to certain additional conditions required to be met within the next 15 days. The cash proceeds from these 6 additional stores would total up to $65.25 million.

Julian C. Day, President and Chief Executive Officer of Kmart, said, "The stores we are retaining from the originally announced transaction are operating profitably. As has always been contemplated, Kmart will continue to operate those stores for which certain conditions related to the assignment of the store leases to Sears have not been met. We look forward to providing continued service to our customers at these locations."

As previously announced, Kmart will continue to operate the stores that will be sold to Sears until March or April 2005. Sears has agreed to consider offering employment to any Kmart employee who desires a position at the converted stores. Specific locations of the stores affected will be available once the transaction is finalized in the coming weeks.

Kmart expects to receive 30% of the final sales proceeds from Sears no later than September 30, 2004. The remaining 70% of the final sales proceeds will be received by Kmart when Sears has taken occupancy of the properties, which shall occur no later than April 15, 2005.

About Kmart Holding Corporation

Kmart Holding Corporation (NASDAQ: KMRT) and its subsidiaries (together, "Kmart") is a mass merchandising company that offers customers quality products through a portfolio of exclusive brands that include Thalia Sodi, Jaclyn Smith, Joe Boxer, Kathy Ireland, Martha Stewart Everyday, Route 66 and Sesame Street. For more information visit the Company's website at http://www.kmart.com/.

Cautionary Statement Regarding Forward-Looking Information and Other Matters

Statements or reports made by or on behalf of Kmart which address activities, events or developments that we expect or anticipate may occur in the future are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect, when made, Kmart's current views with respect to current events and financial performance. Such forward-looking statements are based upon assumptions concerning future conditions that may ultimately prove to be inaccurate and involve risks, uncertainties and factors that could cause actual results to differ materially from any anticipated future results, express or implied, by such forward- looking statements. Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, factors relating to Kmart's internal operations and the external environment in which it operates; Kmart's ability to successfully implement business strategies and otherwise fund and execute planned changes in various aspects of the business; marketplace demand for the products of Kmart's key brand partners, as well as the engagement of appropriate new brand partners; changes in consumer spending and Kmart's ability to anticipate buying patterns and implement appropriate inventory strategies; Kmart's ability to reverse its negative same-store sales trend; competitive pressures and other third party actions, including pressures from pricing and other promotional activities of competitors, as well as new competitive store openings; the resolution of allowed claims for which Kmart is obligated to pay cash under the Plan of Reorganization; Kmart's ability to properly monitor its inventory needs in order to timely acquire desired goods in appropriate quantities and/or fulfill labor needs at planned costs; Kmart's ability to attract and retain customers; Kmart's ability to maintain normal terms with vendors and service providers; Kmart's ability to maintain contracts, including leases, that are critical to its operations; Kmart's ability to develop a market niche; regulatory and legal developments; general economic conditions; weather conditions, including those which affect buying patterns of Kmart's customers; other factors affecting business beyond Kmart's control; Kmart's ability to attract, motivate and/or retain key executives and associates; and other risks detailed in Kmart's Securities and Exchange Commission filings. Kmart undertakes no obligation to release publicly the results of any revisions to these forward-looking statements to reflect events or circumstances after the date such statements were made.

SOURCE: Kmart Holding Corporation

CONTACT: Kmart Media Relations, +1-248-463-1021

Web site: http://www.kmart.com/








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