November 10, 1999

Robert M. Burton
Divisional Vice President, Investor Relations
(248) 643-1040

Shawn M. Kahle
Vice President, Corporate Affairs
(248) 637-4201

KMART CORPORATION REPORTS 13 PERCENT INCREASE IN EARNINGS PER SHARE IN 1999 THIRD QUARTER
Earnings from Continuing Operations Up 37.1 percent year-to-date

TROY, Mich., November 10, 1999--Kmart Corporation (NYSE:KM) today reported a 13 percent increase in net income to $43 million, or $0.09 basic earnings per share, for the 13 weeks ended October 27, 1999, compared with net income of $38 million, or $0.08 basic earnings per share for the 13 weeks ended October 28, 1998.

"While our third quarter performance was softer than planned, the results extend our string of improved operating performance to 14 consecutive quarters, " said Floyd Hall, Chairman, President and CEO.

Total consolidated sales in the third quarter of 1999 were $8.057 billion, an increase of 5.4% from $7.642 billion for the third quarter of 1998. Comparable sales for the quarter increased 3.2%. The gross margin rate for the quarter was 21.6% of sales as compared with 22.1% last year. Selling, general and administrative (SG&A) expenses for the quarter were $1.581 billion compared with $1.540 billion for 1998, resulting in a SG&A to sales ratio of 19.6% for 1999 versus 20.1% for 1998.

Sales from consolidated operations for the first nine months of 1999 were $24.958 billion, up 7.2% from $23.273 billion for the first nine months of fiscal 1998. On a comparable store basis, consolidated sales rose 5.2% for the same period. Income from continuing operations was $244 million, or $0.49 per share, for the first nine months of 1999 as compared with net income before non-recurring items of $178 million, or $0.36 per share in the first nine months of 1998.

As previously reported, net income for the nine months of 1999 included a non-recurring, non-cash charge for discontinued operations of $230 million after tax, relating to the disposition of certain Builders Square operating leases. Net income for the second quarter 1998 included a non-recurring charge of $13 million after tax, relating to a Voluntary Early Retirement Program (VERP) in the Company’s distribution centers. Including the non-recurring charges, net income for the first nine months of 1999 was $14 million as compared with net income of $165 million for the comparable 1998 period.

Under FAS 128, preferred securities are not included in the calculation of diluted earnings per share for the third quarter of either 1999 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 $0.10 and $0.09 for the third quarters of 1999 and 1998, respectively.

Under the Company’s previously-announced share repurchase plan initiated in June 1999, at the close of the third quarter Kmart had acquired 10.1 million common shares through open market purchases for a total of $126 million.

Kmart Corporation serves America with 2,159 Kmart retail outlets. Kmart Corporation common stock is listed on the New York, Pacific, and Chicago Stock Exchanges.

KMART CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Amounts in millions, except per share data)	13 Weeks Ended 10-27-99	13 Weeks Ended 10-28-98

Sales	$ 8,057	$ 7,642
Cost of sales, buying and occupancy	6,317	5,954
Gross margin	1,740	1,688
Selling, general and administrative expenses	1,581	1,540
Income before interest, income taxes and dividends on convertible preferred securities	159	148
Interest expense, net	76	76
Income tax provision	27	21
Dividends on convertible preferred securities, net of income taxes	13	13
Net income	$ 43	$ 38

Basic / Diluted earnings per common share:	$ 0.09	$ 0.08

Basic weighted average shares (millions)	492.1	492.8
Diluted weighted average shares (millions)	562.2	564.0

The effect of LIFO adjustments on the third quarter of fiscal 1999 results was a pre-tax credit of $13 million, compared to a pre-tax credit of $2 million in 1998.

KMART CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Amounts in millions, except per share data)

39 Weeks
Ended
10-27-99

39 Weeks
Ended
10-28-98

Sales

$ 24,958

$ 23,273

Cost of sales, buying and occupancy
19,569

18,198

Gross margin

5,389

5,075

Selling, general and administrative expenses

4,762

4,550

Voluntary Early Retirement Program
-

19

Income before interest, income taxes and dividends on convertible preferred securities

627

506

Interest expense, net

206

220

Income tax provision

139

83

Dividends on convertible preferred securities, net of income taxes

38

38

Income from continuing operations 244 165
Disconinued operations, net of tax: Provision for lease obligations resulting from guarantee of previously owned Builders Square locations
(230)

-

Net income

$   14

$     165

Basic / diluted earnings per common share:



Income from continuing operations
$   0.49

$   0.34

Discontinued operations

(0.46)

-

Net income (loss)

$   0.03

$   0.34

Basic weighted average shares (millions)

493.8

491.7

Diluted weighted average shares (millions)

566.5

564.8

The effect of LIFO adjustments on the year to date fiscal 1999 results was a pre-tax credit of $10 million, compared with a charge of $8 million in 1998.

KMART CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in millions)	10-29-99	10-28-98
ASSETS
Current Assets:
Cash and equivalents	$ 345		$ 350
Merchandise inventories	8,486		8,060
Other current assets	865		844
Total current assets	9,696		9,254

Property and equipment, net	6,313		5,852
Other assets and deferred charges	489		443
TOTAL ASSETS	$ 16,498		$ 15,549

LIABILITIES AND EQUITY
Current Liabilities:
Long-term debt due within one year	$ 74		$ 60
Trade accounts payable	3,119		3,019
Accrued payrolls and other liabilities	1,324		1,242
Taxes other than income taxes	252		240
Total current liabilities	4,769		4,561

Long-term debt and notes payable	2,730		2,313
Capital lease obligations	1,031		1,114
Other long-term liabilities	1,057		928
Convertible preferred securities, net	985		983
Common stock	487		493
Capital in excess of par value	1,607		1,654
Retained earnings	3,832		3,503
TOTAL LIABILITIES AND EQUITY	$ 16,498		$ 15,549

KMART CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in millions)	39 Weeks Ended 10-27-99	39 Weeks Ended 10-28-98
CASH FLOW FROM OPERATING ACTIVITIES:
Income from continuing operations	$ 244	$ 165
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation and amortization	568	498
Cash used for store restructuring and other changes	(111)	(95)
Increase in inventories	(1,950)	(1,693)
Increase in accounts payable	1,072	1,096
Increase in accounts receivable	(181)	(176)
Increase in prepaids	(35)	(69)
Increase in sales tax payable	19	30
Deferred income taxes and taxes payable	73	166
Decrease in other long-term liabilities	(23)	(2)
Changes in certain assets and liabilities	(14)	9
Voluntary early retirement program	-	19
Net cash provided by operating activities	(338)	(52)

CASH FLOW FROM INVESTING ACTIVITIES:
Acquistion of Caldor leases	(86)	-
Proceeds from sale of Canadian operations	-	87
Capital expenditures	(997)	(722)
Net cash used for investing activities	(1,083)	(635)

CASH FLOW FROM FINANCING ACTIVITIES::
Proceeds from issuance of long-term debt	1,250	750
Payments on long-term debt	(61)	(180)
Purchase of common shares	(117)	(30)
Issuance of common shares	44	64
Payments on capital lease obligations	(60)	(65)
Net cash provided by financing activities	1,056	539

Net change in cash and equivalents:	(365)	(148)
Cash and equivalents at beginning of year	710	498
Cash and equivalents at end of period	$ 345	$ 350