May 13, 1998
Robert M. Burton
Divisional Vice President, Investor Relations
(248) 643-1040
Shawn M. Kahle
Vice President, Corporate Affairs
(248) 637-4201
KMART CORPORATION AVVOUNCES FIRST QUARTER 1998 EARNINGS; NET INCOME INCREASES 236 PERCENT TO $0.10 PER SHARE
TROY, Mich., May 13, 1998-- Kmart Corporation (NYSE:KM) today reported net income of $47 million, or $0.10 basic earnings per share, for the first quarter of 1998 compared with net income of $14 million, or $0.03 basic earnings per share for the first quarter of 1997.
Total consolidated sales in the 1998 first quarter were $7.515 billion, an increase of 3.5% from $7.263 billion for the first quarter of 1997. Total sales in U.S. Kmart stores increased 6.4%, while comparable sales for the quarter increased 6.1%. The gross margin rate for the period was 21.4% of sales versus 22.4% last year. Selling, general and administrative (SG&A) expenses for the quarter were $1.449 billion compared with $1.491 billion for the 1997 period, resulting in a SG&A to sales ratio of 19.3% versus 20.5% for the comparable 1997 period.
"With our eighth consecutive quarter of increased earnings per share, we continue to feel good about the turnaround momentum at Kmart," said Floyd Hall, Chairman, President and CEO. "Strong increases in our apparel and consumables areas, together with improvement in interest expense, enabled Kmart to record a 236 percent increase in net earnings over first quarter 1997.
"Throughout the quarter, we have seen continuing strength in Kmart’s key merchandise areas, including Sesame Street children’s apparel and Martha Stewart Everyday home fashions. These businesses were joined by our resurgent ladies apparel division, which reported double-digit sales increases, particularly in our Jaclyn Smith and Kathy Ireland lines," Hall said. "Our inventories are reduced from a year earlier, and in terms of seasonal content, Kmart is well positioned for the remainder of the year."
Under FAS 128, preferred securities are not included in the calculation of diluted earnings per share for either the first quarter of 1997 or 1998 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 would have been $0.11 and $0.05 for the first quarters of 1998 and 1997, respectively.
Kmart Corporation serves America with 2,118 Kmart retail outlets. Kmart Corporation common stock is listed on the New York, Pacific, and Chicago Stock Exchanges.
KMART CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
13 Weeks
Ended |
13 Weeks
Ended |
| (Amounts in millions, except per share data) |
4-29-98 |
4-30-97 |
| Sales |
$ 7,515 |
$ 7,263 |
| Cost of sales, buying and occupancy |
5,908 |
5,637 |
| Gross margin |
1,607 |
1,626 |
|
|
|
| Selling, general and administrative expenses |
1,449 |
1,491 |
| Continuing income before interest, income taxes and dividends on convertible preferred securities |
158 |
135 |
| Interest expense, net |
74 |
98 |
| Income tax provision |
24 |
11 |
| Dividends on convertible preferred securities of subsidiary, net of income taxes |
13 |
12 |
| Net income |
$ 47 |
$ 14 |
|
|
|
| Basic / diluted earnings per common share |
$ 0.10 |
$ 0.03 |
|
|
|
| Basic weighted average shares outstanding |
489.7 |
485.3 |
KMART CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
13 Weeks
Ended |
13 Weeks
Ended |
| (Amounts in millions) |
4-29-98 |
4-30-97 |
| Cash Flows From Operating Activities: |
|
|
| Net income from continuing operations |
$ 47 |
$ 14 |
| Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
| Depreciation and amortization |
165 |
170 |
| Increase in inventories |
(517) |
(909) |
| Increase in accounts payable |
666 |
888 |
| Changes in certain assets and liabilities and other items |
(49) |
41 |
| Net cash provided by operating activities |
312 |
204 |
|
|
|
| Cash Flows From Investing Activities: |
|
|
| Proceeds from divestitures |
87 |
- |
| Proceeds from real estate financing and other |
22 |
113 |
| Other, net |
(5) |
(27) |
| Decrease (increase) in property held for sale or financing |
(24) |
88 |
| Capital expenditures |
(145) |
(128) |
| Net cash provided by (used for) investing activities |
(65) |
46 |
|
|
|
| Cash Flows From Financing Activities: |
|
|
| Changes in common stock |
39 |
19 |
| Proceeds from long-term debt and notes payable |
- |
335 |
| Payments on capital lease obligations |
(21) |
(26) |
| Payments on long-term debt |
(30) |
(668) |
| Net cash used for financing activities |
(12) |
(340) |
|
|
|
| Net change in cash and cash equivalents |
235 |
(90) |
| Cash and cash equivalents at beginning of year |
498 |
406 |
| Cash and cash equivalents at end of year |
$ 733 |
$ 316 |
KMART CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
|
| (Amounts in millions) |
April 29,
1998 |
April 30,
1997 |
January 28,
1998 |
| ASSETS |
|
|
|
| Current Assets: |
|
|
|
| Cash and cash equivalents |
$ 733 |
$ 316 |
$ 498 |
| Merchandise inventories |
6,884 |
7,263 |
6,367 |
| Other current assets |
643 |
903 |
611 |
| Total current assets |
8,260 |
8,482 |
7,476 |
|
|
|
|
| Property and equipment, net |
5,558 |
5,667 |
5,472 |
| Property held for resale |
120 |
200 |
271 |
| Other assets and deferred charges |
313 |
490 |
339 |
| TOTAL ASSETS |
$14,251 |
$14,839 |
$13,558 |
|
|
|
|
| LIABILITIES AND EQUITY |
|
|
|
| Current Liabilities: |
|
|
|
| Long-term debt due within one year |
$ 77 |
$ 104 |
$ 78 |
| Trade accounts payable |
2,589 |
2,897 |
1,923 |
| Accrued payroll and other liabilities |
1,034 |
1,212 |
1,064 |
| Taxes other than income taxes |
227 |
232 |
209 |
| Total current liabilities |
3,927 |
4,445 |
3,274 |
| Long-term debt |
1,696 |
1,839 |
1,725 |
| Capital lease obligations |
1,158 |
1,450 |
1,179 |
| Other long-term liabilities |
968 |
960 |
965 |
| Convertible preferred securities, net |
982 |
980 |
981 |
| Common stock |
492 |
488 |
489 |
| Capital in excess of par value |
1,648 |
1,614 |
1,620 |
| Retained earnings |
3,390 |
3,119 |
3,343 |
| Treasury shares and restricted stock |
(7) |
(26) |
(15) |
| Foreign currency translation adjustment |
(3) |
(30) |
(3) |
| TOTAL LIABILITIES AND EQUITY |
$14,251 |
$14,839 |
$13,558 |
U.S. KMART
STATEMENTS OF OPERATIONS
EXCLUDING INTERNATIONAL OPERATIONS
(UNAUDITED)
|
|
13 Weeks
Ended |
13 Weeks
Ended |
| (Amounts in millions) |
4-29-98 |
4-30-97 |
| Sales |
$ 7,515 |
$ 7,061 |
| Cost of sales, buying and occupancy |
5,908 |
5,481 |
| Gross margin |
1,607 |
1,580 |
| Selling, general and administrative expenses |
1,449 |
1,441 |
| Continuing income before interest, income taxes and dividends on convertible preferred securities |
$ 158 |
$ 139 |
|
|
|
| Balance Sheet: |
|
|
| $ Inventory (LIFO cost) |
$ 6,884 |
$ 7,068 |
The above amounts are provided for information only. The 1997 period excludes sales and operating results for all Kmart international operations. Actual disposition dates for international operations are as follows:
| Mexico |
April 1997 |
| Canada |
June 1997 |
