Contacts: Juli Musch, Divisional Vice President
Investor Relations
(248) 463-1040
FOR IMMEDIATE RELEASE
KMART CORPORATION REPORTS THIRD QUARTER 2001 RESULTS
TROY, Mich., November 27, 2001 -- Kmart Corporation (NYSE: KM) announced today that for the 13-week quarter ended October 31, 2001, net sales were $8.019 billion, a decrease of 2.2% from $8.199 billion for the 13-week period ended October 25, 2000. As previously reported, same-store sales decreased 1.5% in the third quarter of fiscal 2001. The Company reported a net loss of $224 million, or $0.45 per share, for the 13-week quarter ended October 31, 2001, versus a net loss of $67 million, or $0.14 per share, for the 13-week period ended October 25, 2000. Excluding non-comparable items, primarily related to the charge of restructuring the supply chain operations, the Company's net loss was $127 million, or $0.25 per share, for the third quarter of 2001.
"We continue to work at fixing our core business by being in-stock, pricing competitively and providing an excellent shopping experience for Kmart customers. We have made considerable progress in all of these areas but have a lot more work to do. During this past quarter, we completed all of our store resets, launched BlueLight Always everyday low pricing for our frequency categories and installed self-checkout registers in more than 1,000 stores," said Chuck Conaway, Chairman and CEO of Kmart Corporation. "We are committed to our long-term strategy to be the authority for Mom focusing on her two most emotional purchases by providing her value pricing on her everyday needs and a quality selection for her home and children's needs. We are focused on eliminating Kmart's liabilities and building a bridge of trust with Mom so that she can rely on us day in and day out."
Gross margin for the third quarter of 2001 was 20.6% of sales, compared to 20.5% last year excluding non-comparable items. The increase in gross margin is due to lower food and consumable distribution costs under the Company's arrangement with Fleming and the reduction of shrink, which offset the increase in sales of high frequency categories, which carry a lower margin rate. In addition, the reductions in promotional and clearance markdowns offset the price reductions attributable to the BlueLight Always program. Selling, general and administrative expense as a percentage of sales, was 21.6% in the third quarter of 2001 versus 20.8% in the same quarter in 2000, excluding non-comparable items. The increase was due primarily to additional investment in store labor that Kmart committed to last year to enhance customer service.
The third quarter 2001 results include a charge of $148 million ($94 million after tax) related to the restructuring of certain aspects of Kmart's supply chain operations. This restructuring program focuses on the supply chain infrastructure, including the reconfiguration of the distribution center network and implementation of new operating software across the supply chain.
The following is a table segregating operating income excluding non-comparable items from operating income as reported in the Consolidated Statements of Operations:
($ Millions)
13 Weeks
39 Weeks
Oct. 31, 2001
Oct. 25, 2000
Oct. 31, 2001
Oct. 25, 2000
Sales
$
8,019
$
8,199
$
25,274
$
25,392
Cost of sales, buying and occupancy
6,364
6,518
20,031
20,165
Gross margin
1,655
1,681
5,243
5,227
Selling, general and administrative expenses
1,731
1,709
5,161
5,016
Operating income (loss) excluding non-comparable items
(76)
(28)
82
211
Charge for supply chain restructuring
148
--
148
--
Charge for BlueLight.com
5
--
97
--
Charge for employee severance and VERP
--
--
23
--
Strategic actions charge
--
(12)
--
728
Operating loss as reported
$
(229)
$
(16)
$
(186)
$
(517)
Same-Store Sales %:
(1.5%)
1.4%
0.4%
0.7%
EPS excluding non-comparable items
$
(0.25)
$
(0.16)
$
(0.32)
$
(0.04)
EPS including non-comparable items
$
(0.45)
$
(0.14)
$
(0.70)
$
(1.00)
For the third quarter, Kmart opened two supercenters and two discount stores, closed four discount stores and converted ten discount stores into supercenters. As of October 31, 2001, Kmart operated 2,113 stores compared to 2,163 stores last year.
Kmart will hold a conference call today at 9:00 a.m. eastern standard time to discuss its third quarter financial results. For individuals interested in listening to the conference call, the phone number is (913) 981-5507. Callers are requested to dial in at least 15 minutes prior to the scheduled start time. A replay of the conference call will be available until December 11, 2001 at 8:00 p.m. eastern standard time. The dial in number for the replay is (719) 457-0820 with the confirmation code 576787. The call will also be simulcast at http://www.kmart.com/corp/investor/general/conference.stm
Cautionary Statement Regarding Forward-looking Information
Statements herein related to future performance are forward-looking statements and are subject to risks and uncertainties that are set forth in the Company's filings with the Securities and Exchange Commission, which are incorporated herein by reference. Actual results may materially differ from anticipated results described in such statements. Statements herein speak only as of the date of this release and the Company does not undertake to update such statements.
Kmart Corporation is a near-$40 billion company that serves all 50 states, the Caribbean Islands and Asia Pacific with more than 2,100 Kmart and Kmart Supercenter retail outlets. Kmart gives back to the communities it serves through Leaders in Learning, an aggressive corporate giving and community outreach initiative focused on supporting diverse education programs and promoting lifelong learning. Kmart associates also provide their most valuable resource - time - every day in their local communities. More information about Kmart is available at the company's e-commerce shopping site www.bluelight.com. under the "About Kmart" section.
KMART CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in millions, except per share data) (Unaudited)
13 Weeks
39 Weeks
Oct. 31, 2001
Oct. 25, 2000
Oct. 31, 2001
Oct. 25, 2000
Sales
$
8,019
$
8,199
$
25,274
$
25,392
Cost of sales, buying and occupancy
6,425
6,518
20,092
20,530
Gross margin
1,594
1,681
5,182
4,862
Selling, general and administrative expenses
1,818
1,697
5,248
5,379
Charges for BlueLight.com and other
5
--
120
--
Loss before interest, income taxes and dividends on convertible preferred securities of trust
(229)
(16)
(186)
(517)
Interest expense, net
96
71
267
205
Income tax benefit
(112)
(31)
(143)
(263)
Dividends on convertible preferred securities of subsidiary trust, net of income taxes of $6, $6, $18 and $18, respectively
11
11
34
34
Net loss
$
(224)
$
(67)
$
(344)
$
(493)
Basic/Diluted (loss) per common share:
$
(0.45)
$
(0.14)
$
(0.70)
$
(1.00)
Basic weighted average shares (millions)
497.8
482.1
492.4
481.9
KMART CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in millions) (Unaudited)
Octobert 31, 2001
October 25, 2000
January 31, 2001
Current Assets:
Cash and cash equivalents
$
366
$
285
$
401
Merchandise inventories
8,318
7,878
6,412
Other current assets
872
909
811
Total current assets
9,556
9,072
7,624
Property and equipment, net
6,968
6,481
6,557
Other assets and deferred charges
483
487
523
Total Assets
$
17,007
$
16,040
$
14,704
Current Liabilities:
Long-term debt due within one year
$
478
$
295
$
68
Trade accounts payable
3,273
2,555
2,093
Accrued payroll and other liabilities
1,438
1,515
1,525
Taxes other than income taxes
271
267
187
Total current liabilities
5,460
4,632
3,873
Long-term debt and notes payable
3,310
2,835
2,084
Capital lease obligations
881
956
943
Other long-term liabilities
612
911
834
Company obligated mandatorily redeemable convertible preferred
securities of a subsidiary trust holding solely 7¾% convertible
junior subordinated debentures of Kmart (redemption value
$898, $898 and $898, respectively)
890
886
887
Common stock, $1 par value, 1,500,000,000 shares authorized;
498,416,665, 483,391,211 and 486,509,736 shares outstanding,
respectively
498
483
487
Capital in excess of par value
1,682
1,567
1,578
Retained earnings
3,674
3,770
4,018
Total Liabilities and Shareholders' Equity
$
17,007
$
16,040
$
14,704
KMART CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in millions) (Unaudited)
October 31, 2001
October 25, 2000
CASH FLOW FROM OPERATING ACTIVITIES
$
(344)
$
(493)
Net loss from continuing operations
Adjustments to reconcile net loss from continuing operations
to net cash used for operating activities:
Restructuring, impairments and employee severance
268
728
Depreciation and amortization
618
584
Equity loss in unconsolidated subsidiaries
14
2
Dividends received from Meldisco
51
44
Cash used for store closings and other charges
(90)
(46)
Increase in inventories
(1,901)
(1142)
Increase in trade accounts payable
1,173
525
Deferred income taxes and taxes payable
(101)
(357)
Changes in other assets and liabilities
(131)
(134)
Changes in other liabilities
68
(34)
Net cash used for continuing operations
(375)
(323)
Net cash used for discontinued operations
(67)
(75)
Net cash used for operating activities
(442)
(398)
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures
(1,084)
(699)
Investment in BlueLight.com
(45)
(55)
Net cash used for investing activities
(1129)
(754)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of debt
1,887
1,366
Issuance of common shares
40
41
Purchase of convertible preferred securities of subsidiary trust
—
(84)
Purchase of common shares
—
(56)
Payments on debt
(275)
(61)
Payments on capital lease obligations
(62)
(58)
Payments of dividends on preferred securities of subsidiary trust
