November 27, 2001 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.htm
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.
