August 14, 1997
Robert M. Burton
Divisional Vice President, Investor Relations
(248) 643-1040
Shawn M. Kahle
Vice President, Corporate Affairs
(248) 637-4201
KMART CORPORATION REPORTS 1997 SECOND-QUARTER RESULTS
TROY, Mich., August 14, 1997 -- Kmart Corporation (NYSE: KM) today reported net income from continuing operations of $31 million, or $0.06 per share, in the second quarter of 1997, compared with net income from continuing operations in the second quarter of 1996 of $23 million, or $0.05 per share.
Total sales in the second quarter were $7.846 billion, an increase of 3.7% from $7.566 billion from the second quarter of 1996. On a comparable store basis, consolidated sales for the quarter increased 5.5%.
Gross margin for the second quarter of 1997 was 21.0% of sales versus 22.3% last year, reflecting markdowns related to the clearance of women's apparel and other seasonal merchandise.
Selling, general and administrative (SG&A) expenses declined by $42 million for the quarter, resulting in an SG&A ratio for the second quarter of 19.1% of sales versus 20.3% for the comparable 1996 period.
"Sales in our U.S. Kmart stores increased 5.6% on a comparable store basis for the first six months of 1996, which meets our expectations. Most Kmart merchandise categories reported improved sales performance thus far this year, led by housewares and home decor, cosmetics and fragrances, and consumables," said Floyd Hall, chairman, president and chief executive officer. "Strong sales also helped expense ratios, which improved by 120 basis points in the second quarter. Total spending on SG&A improved both in the quarter and over the first half of 1997, totaling $70 million year-to-date. Gross margin rates for the second quarter were depressed by clearance of slow-moving inventory. Although we have been disappointed by the volume and margin in our women's apparel to date, we enter the third quarter with seasonal inventory levels below last year, and we expect improved softline performance in the second half of 1997."
On a continuing basis, the first half of 1997 resulted in earnings of $45 million, or $0.09 per share, as compared with a loss from continuing operations of $13 million, or $0.02 per share in the first half of 1996.
Net earnings for the first half of 1997 were $45 million, or $0.09 per share, as compared with a net loss for the first half of 1996 of $65 million, or $0.13 per share. Discontinued operations in 1996 included income from Builders Square of $9 million or $0.02 per share and a $61 million charge, or $0.13 per share, resulting from participation in the initial public offering of Thrifty PayLess Holdings, Inc. and the revaluation of the Company's remaining holding at that time.
Kmart Corporation serves America with 2,122 Kmart, Big Kmart, and Super Kmart retail outlets. Kmart Corporation common stock is listed on the New York, Pacific, and Chicago Stock Exchanges.
| (Millions U.S. $) | ||||||
| General Merchandise- | ||||||
| United States | $ 7,749 | $ 7,336 | ||||
| International (a) | 97 | 230 | ||||
| Total General Merchandise | $ 7,846 | $ 7,566 | ||||
| (Millions U.S. $) | |||||
| General Merchandise- | |||||
| United States | $ 151 | $ 168 | |||
| International (a) | 1 | (16) | |||
| Total General Merchandise | $ 152 | $ 152 | |||
(a) Kmart Corporation completed the divestiture of its remaining International operations in June 1997.
| (Millions U.S. $) | ||||||
| General Merchandise- | ||||||
| United States | $ 14,810 | $ 14,028 | ||||
| International (a) | 299 | 513 | ||||
| Total General Merchandise | $ 15,109 | $ 14,541 | ||||
| (Millions U.S. $) | |||||
| General Merchandise- | |||||
| United States | $ 290 | $ 226 | |||
| International (a) | (3) | (16) | |||
| Total General Merchandise | $ 287 | $ 210 | |||
(a) Kmart Corporation completed the divestiture of
its remaining International operations in June 1997.
| (Amounts in millions, except per share data) | |||
| Sales | $ 7,846 | $ 7,566 | |
| Cost of sales, buying and occupancy | 6,197 | 5,875 | |
| Gross margin | 1,649 | 1,691 | |
| Selling, general and administrative expenses | 1,497 | 1,539 | |
| Continuing income before interest, income taxes and dividends
on convertible preferred securities | 152 |
152 | |
| Interest expense, net | 92 | 107 | |
| Income tax provision | 17 | 16 | |
| Dividends on convertible preferred securities, net of income taxes | 12 | 6 | |
| Net income from continuing retail operations | 31 | 23 | |
| Income from discontinued operations, net of taxes | - | 11 | |
| Net income | $ 31 | $ 34 | |
| Earnings per common share: | |||
| Continuing operations | $ 0.06 | $ 0.05 | |
| Income from discontinued operations | - | 0.02 | |
| Net income | $ 0.06 | $ 0.07 | |
| Weighted average shares outstanding | 492.1 | 488.1 |
The consolidated statement of operations for the
prior period has been restated for discontinued operations.
| (Amounts in millions, except per share data) | |||
| Sales | $ 15,109 | $ 14,541 | |
| Cost of sales, buying and occupancy | 11,834 | 11,273 | |
| Gross margin | 3,275 | 3,268 | |
| Selling, general and administrative expenses | 2,988 | 3,058 | |
| Continuing income before interest, income taxes and dividends
on convertible preferred securities | 287 |
210 | |
| Interest expense, net | 190 | 220 | |
| Income tax provision (credit) | 28 | (3) | |
| Dividends on convertible preferred securities, net of income taxes | 24 | 6 | |
| Net income (loss) from continuing retail operations | 45 | (13) | |
| Income from discontinued operations, net of taxes | - | 9 | |
| Loss on disposal of discontinued operations, net of taxes | - | (61) | |
| Net income (loss) | $ 45 | $ (65) | |
| Earnings (loss) per common share: | |||
| Continuing operations | $ 0.09 | $ (0.02) | |
| Income from discontinued operations | - | 0.02 | |
| Loss on disposal of discontinued operations | - | (0.13) | |
| Net income (loss) | $ 0.09 | $ (0.13) | |
| Weighted average shares outstanding | 491.2 | 484.7 |
The consolidated statement of operations for the
prior period has been restated for discontinued operations.
| (Amounts in millions) | |||
| Cash Flows From Operating Activities: | |||
| Net income (loss) from continuing retail operations | $ 45 | $ (13) | |
| Adjustments to reconcile net income (loss) to net cash used for
operating activities: | |||
| Depreciation and amortization | 337 | 325 | |
| Deferred income taxes and taxes payable | 16 | 136 | |
| Undistributed equity income and dividends received | 22 | 50 | |
| Decrease in other long-term liabilities | (34) | (177) | |
| Increase in inventories | (465) | (733) | |
| Increase in accounts payable | 90 | 243 | |
| Changes in certain assets and liabilities | 6 | (5) | |
| Net cash provided by (used for) continuing operations | 17 | (174) | |
| Discontinued operations | 2 | 83 | |
| Net cash provided by (used for) operating activities | 19 | (91) | |
| Cash Flows From Investing Activities: | |||
| Capital expenditures | (269) | (124) | |
| Decrease (increase) in property held for sale | 91 | (600) | |
| Proceeds from real estate financings and other | 43 | 3 | |
| Proceeds from divestitures, net | 129 | 177 | |
| Decrease in minority interest | (55) | (1) | |
| Increase in notes receivable | (75) | - | |
| Other, net | (13) | 4 | |
| Net cash used for investing activities | (149) | (541) | |
| Cash Flows From Financing Activities: | |||
| Proceeds from long-term debt and notes payable | 754 | 1,461 | |
| Refinancing costs related to long-term debt and notes payable | (15) | (190) | |
| Payments on long-term debt and notes payable | (730) | (2,225) | |
| Net proceeds from issuance of convertible preferred securities | - | 971 | |
| Payments on capital lease obligations | (57) | (58) | |
| Other, net | 25 | 27 | |
| Net cash used for financing activities | (23) | (14) | |
| Net change in cash and equivalents | (153) | (646) | |
| Cash and equivalents at beginning of year | 406 | 1,083 | |
| Cash and equivalents at end of period | $ 253 | $ 437 | |
| (Amounts in millions) | |||||
| ASSETS | |||||
| Current Assets: | |||||
| Cash and equivalents | $ 253 | $ 437 | $ 406 | ||
| Merchandise inventories | 6,819 | 6,753 | 6,354 | ||
| Other current assets | 955 | 1,253 | 973 | ||
| Net current assets of discontinued operations | - | 642 | - | ||
| Total current assets | 8,027 | 9,085 | 7,733 | ||
| Property and equipment, net | 5,538 | 5,079 | 5,740 | ||
| Property held for resale | 200 | 918 | 200 | ||
| Other assets and deferred charges | 595 | 438 | 613 | ||
| TOTAL ASSETS | $ 14,360 | $ 15,520 | $ 14,286 | ||
| LIABILITIES AND EQUITY | |||||
| Current Liabilities: | |||||
| Long-term debt due within one year | $ 109 | $ 124 | $ 156 | ||
| Trade accounts payable | 2,099 | 2,035 | 2,009 | ||
| Accrued payrolls and other liabilities | 1,196 | 1,037 | 1,298 | ||
| Taxes other than income taxes | 244 | 280 | 139 | ||
| Total current liabilities | 3,648 | 3,476 | 3,602 | ||
| Long-term debt and notes payable | 2,191 | 3,041 | 2,121 | ||
| Capital lease obligations | 1,389 | 1,531 | 1,478 | ||
| Other long-term liabilities | 922 | 1,118 | 1,013 | ||
| Net long-term liabilities of discontinued operations | - | 136 | - | ||
| Convertible preferred securities, net | 980 | 980 | 980 | ||
| Common stock | 489 | 487 | 486 | ||
| Capital in excess of par value | 1,624 | 1,611 | 1,608 | ||
| Retained earnings | 3,150 | 3,261 | 3,105 | ||
| Treasury shares and restricted stock | (30) | (53) | (37) | ||
| Foreign currency translation adjustment | (3) | (68) | (70) | ||
| TOTAL LIABILITIES AND EQUITY | $ 14,360 | $ 15,520 | $ 14,286 |
