March 4, 1998

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

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

KMART CORPORATION ANNOUNCES 1997 RESULTS; EARNINGS FROM CONTINUING OPERATIONS INCREASED 43 PERCENT FOR THE YEAR

TROY, Mich., March 4, 1998-- Kmart Corporation (NYSE:KM) today reported net income from continuing operations of $249 million, or $0.51 basic earnings per share for the year ended January 28, 1998, including a non-recurring fourth quarter charge of $114 million ($81 million aftertax, or $0.17 per share) related to a previously announced Voluntary Early Retirement Program (VERP). Before the charge, net income from continuing operations for the year was $330 million compared with net income from continuing operations of $231 million for the year ended January 29, 1997, an increase of 43 percent. Basic earnings per share from continuing operations, adjusted for the VERP charge, were $0.68 for fiscal 1997, compared with $0.48 for fiscal 1996.

Fourth quarter 1997 net income from continuing operations was $186 million, or $0.35 diluted earnings per share. Adjusting for the VERP charge, net income from continuing operations was $267 million compared with net income from continuing operations of $235 million for the quarter ended January 29, 1997, an increase of 14 percent. Fourth quarter diluted earnings per share from continuing operations, adjusted for the VERP charge, were $0.50, compared with $0.45 diluted earnings per share for the same period in 1996.

"With our seventh consecutive quarter of increased earnings per share, the turnaround at Kmart continues solidly on track," said Floyd Hall, Chairman, President and CEO. "Despite difficulties with women’s apparel merchandise during the year, Kmart made significant progress on all fronts. Sales productivity increased approximately 5 percent to $211 per square foot and operating expenses were reduced by $138 million over the prior year. Together with improvement in interest expenses, Kmart reported a 43 percent increase in earnings from continuing operations over fiscal 1996.

"It’s clear that our focus on strengthening our merchandise offering, particularly Martha Stewart Everyday home fashions, Sesame Street children’s apparel, Route 66, BenchTop and American Fare is paying dividends. We are also seeing encouraging customer response to improvements in merchandise in our Jaclyn Smith and Kathy Ireland lines, indicating that we are rebuilding our softlines sales appeal," Hall said.

"While we are satisfied with our financial gains, we are most encouraged by the momentum we have established through our product line enhancements and improved shopping environment during 1997," Hall continued. "We will continue to make Kmart more attractive than ever to our existing and prospective customers through revitalized stores, great new product offerings, and enthusiastic associates."

FISCAL YEAR 1997 RESULTS OF OPERATIONS
Total sales for 1997 were $32.183 billion, an increase of 2.4 percent from $31.437 billion in the preceding year. On a comparable store basis, consolidated sales increased 4.8 percent. Gross margin rate for the year was 21.8 percent of sales versus 22.4 percent during 1996. Selling, general and administrative expense (SG&A) was 19.1 percent of sales in 1997 versus 19.9 percent in 1996. Net income of $249 million, or $0.51 basic earnings per share, compares with a net loss of $220 million, or $0.45 basic loss per share for 1996. The effect of LIFO adjustments on the fiscal year was a pretax charge of $17 million, compared with a credit of $45 million for 1996.

FOURTH QUARTER 1997 RESULTS OF OPERATIONS
For the fourth quarter, Kmart reported net income of $186 million, or $0.35 diluted earnings per share, compared to a net loss of $164 million, or $0.27 diluted loss per share for the fourth quarter of 1996.

Adjusting for the VERP charge, Kmart reported net income for the fourth quarter of $267 million, or $0.50 diluted earnings per share. In the fourth quarter of 1996, Kmart reclassified its Builders Square subsidiary as a discontinued operation and recorded a non-cash charge of $385 million, net of tax, or $0.70 per share on a diluted basis, for the estimated loss on its disposition. Adjusting for discontinued operations, net income in the fourth quarter of 1996 was $235 million, or $0.45 diluted earnings per share.

For the quarter, comparable store consolidated sales were up 3.8 percent. Gross margin for the fourth quarter of 1997 was 21.8 percent of sales versus 21.6 percent in the prior year. SG&A was 17.0 percent of fourth quarter sales in 1997 versus 17.4 percent in 1996. The effect of LIFO adjustments on the 1997 fourth quarter was pretax charge of $10 million, compared with a credit of $52 million for the fourth quarter of 1996.

VOLUNTARY EARLY RETIREMENT PROGRAM
As previously announced, Kmart offered a voluntary early retirement program in the fourth quarter of 1997 to 28,785 associates. Of those, 11,587, or approximately 40 percent, accepted the program. The resulting fourth quarter pretax charge to earnings of $114 million ($81 million aftertax) will be met out of existing pension funds and will have no effect on the liquidity of the Company. Kmart expects to recoup this charge through lower operating expenses in the future.

ANTICIPATED RELEASE OF SECURITY INTEREST IN KMART ASSETS
As part of its extensive refinancing in June 1996, Kmart agreed to provide collateral to the lending group of banks, subject to certain restrictions and covenants. The security was to release upon the meeting of specific fixed charge coverage and leverage ratios. Management expects that the fiscal year performance reported here will result in the release of the security interest.

Kmart Corporation serves America with 2,136 Kmart retail outlets. Kmart Corporation common stock is listed on the New York, Pacific, and Chicago Stock Exchanges.