TROY, Mich., March 13, 2001-Kmart Corporation (NYSE: KM) today reported its financial results for the fourth quarter and 2000 fiscal year, ending the year with positive trends in same-store sales, market share, customer visits, merchandise in-stock position and other key operating metrics.

For the 14-week period ended January 31, 2001, Kmart’s net income was $249 million, or $0.48 per share, exceeding analysts’ consensus earnings expectations for the quarter. Kmart reported net income of $412 million, or $0.77 per share, for the 13-weeks ended January 26, 2000. Net income, excluding the impact of special charges as defined below, was $219 million, or $0.47 per share, for the 53-week fiscal year ended January 31, 2001, compared with $633 million, or $1.22 per share, for the 52-week fiscal year ended January 26, 2000.

''We finished the fiscal year with solid evidence that we are building momentum and making progress in the implementation of our three key strategic imperatives,'' said Chuck Conaway, Chairman and CEO. ''With our same-store sales increasing over the past four months, it is clear that the new Kmart is closing the gap with our competition, and in some cases moving ahead. With a heightened sense of urgency, we are properly focused on the massive structural and cultural transformation necessary to convert these gains into a strong and sustainable improvement in our financial performance. After only 215 days of operating under aggressive new metrics and management, we have generated significant strides in sales growth, merchandise in-stock position, customer satisfaction and other key measures.''

As reported, same-store sales increased 2.1% in the fourth quarter of fiscal 2000, followed by an increase of 3.3% in February 2001. Net sales for the 14-week period ended January 31, 2001 were $11.636 billion, an increase of 4.8% from $11.105 billion for the 13-week period ended January 26, 2000.

''We have seen a major change in customer perception in recent months as evidenced by the increase, from 40% to 55%, in our Super Service Index -- the percentage of customers rating their overall shopping experience as excellent,'' said Conaway. ''Our customer service has been enhanced by our improved in-stock levels which have increased from 79% to 86% since we began measuring this key metric in October 2000. Our non-negotiables --no more than three in a checkout line, clean stores and clear aisles-- also contributed as we pursue our goal of world-class execution.''

Since August 2000, Kmart has been focusing on its strategic imperatives: 1) to achieve world-class execution; 2) to create a customer centric culture; and 3) to aggressively pursue sales and marketing opportunities to differentiate the company from its competitors.

2000 Results

During the second quarter of 2000, the company recorded a strategic actions charge of $463 million after tax, designed to enhance the productivity of its store base, inventory and information systems. During 1999, the company recorded a non-recurring non-cash charge for discontinued operations of $230 million after tax, relating to the disposition of certain Builder’s Square operating leases. Including the charges, the company reported a net loss of $244 million, or $(0.48) per share in 2000 and net income of $403 million, or $0.81 per share, in 1999.

Same-store sales increased 1.1% in fiscal year 2000. Net sales in 2000 were $37.028 billion, an increase of 3.1% from $35.925 billion in 1999. Exclusive of the charge, gross margin in 2000 was 20.9% of sales compared with 21.8% during fiscal 1999 and SG&A, as a percentage of sales, was 19.1% in 2000 versus 18.2% in 1999. The impact of LIFO on pre-tax earnings in 2000 was a credit of $8 million versus a credit of $47 million in fiscal 1999.

Gross margin for the fourth quarter of 2000 was 21.6% of sales compared to 22.2% last year. SG&A, as a percentage of sales, for the fourth quarter was 17.5% in 2000 versus 15.8% in 1999.

Gross margin in the fourth quarter and full year of 2000 was affected by the company’s initiatives to return inventory to appropriate levels. SG&A was impacted by Kmart’s commitment to increase store labor hours to provide superior customer service.

Impact of Financial Accounting Standard #128

Under FAS 128, preferred securities are not included in the calculation of diluted earnings per share for the full year in 2000 due to their anti-dilutive effect. However, consistent with disclosure required by the Securities and Exchange Commission, if such securities were included in the calculation, diluted earnings per share, exclusive of the charge, would have been $0.51 for fiscal year 2000.

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 in the ''About Kmart'' section.

KMART CORPORATION