March 3, 1999
Robert M. Burton
Shawn M. Kahle
KMART CORPORATION 1998 NET INCOME INCREASES 61 PERCENT
TROY, Mich., March 3, 1999--Kmart Corporation (NYSE:KM) today reported net income of $518 million, or $1.01 diluted earnings per share for the year ended January 27, 1999, compared with net income of $249 million, or $0.51 per share for the fiscal year ended January 28, 1998. Fourth quarter 1998 net income was $353 million, or $0.65 diluted earnings per share, compared with $186 million, or $0.35 diluted earnings per share in the 1997 fourth quarter.
Adjusting earnings for charges relating to two Voluntary Early Retirement Programs (VERPs) of $19 million pretax taken in the second quarter of 1998 and $114 million pretax taken in the fourth quarter of 1997, diluted earnings per share for fiscal 1998 were $1.03 per share, compared with $0.68 for fiscal 1997. Fourth quarter diluted earnings per share were $0.65 for fiscal 1998 compared with $0.50 per share for the same period in 1997.
"Kmart is on the right track and gaining speed," said Floyd Hall, Chairman, President and CEO. "Thanks to the hard work of our associates and the support of our customers and vendors, Kmart made significant progress on all fronts in 1998. We posted four quarterly earnings increases, bringing the string of earnings improvements to eleven consecutive quarters. Sales productivity reached record levels at $222 per square foot and net income before the voluntary early retirement charge increased 61 percent for the year. The keys to Kmart's improvement in 1998 were the successful performance of our 1,245 Big Kmart stores and the strong merchandising performance turned in by our key brands, including Martha Stewart Everyday home fashions, Route 66 apparel and accessories, Sesame Street children's apparel, and ladies apparel.
"In 1999, we will convert another 586 stores to the Big Kmart format, completing the conversion program. We will refine and expand our exclusive product lines to offer our customers a great combination of quality and price. Our 265,000 associates are dedicated to making Kmart more attractive than ever to our existing and prospective customers."
FISCAL YEAR 1998 RESULTS OF OPERATIONS
FOURTH QUARTER 1998 RESULTS OF OPERATIONS
Kmart Corporation serves America with 2,161 Kmart retail outlets. Kmart Corporation common stock is listed on the New York, Pacific, and Chicago Stock Exchanges.
KMART CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS
Divisional Vice President, Investor Relations
(248) 643-1040
Vice President, Corporate Affairs
(248) 637-4201
Comparable store consolidated sales rose 4.8% for the year ended January 27, 1999.
Total sales in U.S. Kmart stores increased 5.6% for the year. Gross margin for the year was 21.8% of sales, identical to gross margin rate during fiscal 1997. SG&A, as a percentage of sales, was 18.5% in 1998 versus 19.1% in 1997.
Comparable store consolidated sales rose 4.5% for the 13-week period ended January 27, 1999. Total consolidated sales were $10.401 billion for the period, up 6.6% from $9.759 billion for the 13-week period ended January 28, 1998. Gross margin for the fourth quarter of 1998 was 21.9% of sales versus 21.8% in the prior year. SG&A, as a percentage of sales, for the fourth quarter was 16.3% in 1998 versus 17.0% in 1997.
|
(Amounts in millions, except per share data) |
13 Weeks |
13 Weeks |
|
Sales |
$ 10,401 |
$ 9,759 |
|
Cost of sales, buying and occupancy |
8,121 |
7,635 |
|
Gross margin |
2,280 |
2,124 |
|
Selling, general and administrative expenses |
1,695 |
1,656 |
|
Voluntary early retirement program |
- |
114 |
|
Income before interest, income taxes and dividends on convertible preferred securities |
585 |
354 |
|
Interest expense, net |
73 |
77 |
|
Income tax provision |
147 |
79 |
|
Dividends on convertible preferred securities, net of income taxes |
12 |
12 |
|
Net income |
$ 353 |
$ 186 |
|
Basic earnings per common share |
$ 0.72 |
$ 0.38 |
|
Diluted earnings per common share |
$ 0.65 |
$ 0.35 |
|
Basic weighted average shares outstanding |
493.1 |
488.1 |
|
Diluted weighted average shares outstanding |
564.9 |
558.5 |
KMART CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
|
(Amounts in millions, except per share data) |
52 Weeks |
52 Weeks |
|
Sales |
$ 33,674 |
$ 32,183 |
|
Cost of sales, buying and occupancy |
26,319 |
25,152 |
|
Gross margin |
7,355 |
7,031 |
|
Selling, general and administrative expenses |
6,245 |
6,136 |
|
Voluntary early retirement program |
19 |
114 |
|
Income before interest, income taxes and dividends on convertible preferred securities |
1,091 |
781 |
|
Interest expense, net |
293 |
363 |
|
Income tax provision |
230 |
120 |
|
Dividends on convertible preferred securities, net of income taxes |
50 |
49 |
|
Net income |
$ 518 |
$ 249 |
|
Basic earnings per common share |
$ 1.05 |
$ 0.51 |
|
Diluted earnings per common share |
$ 1.01 |
$ 0.51 |
|
Basic weighted average shares outstanding |
492.1 |
487.1 |
|
Diluted weighted average shares outstanding |
564.9 |
491.7 |
The effect of LIFO adjustments on the fiscal year was a pretax credit of $50 million, compared with a charge of $17 million for 1997.
KMART CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Amounts in millions, except per share data) |
52 Weeks |
52 Weeks |
||
|
Cash Flow From Operating Activities: |
||||
|
Net income |
$ 518 |
$ 249 |
||
|
Adjustments to reconcile net income to net cash used for operating activities: |
||||
|
Voluntary early retirement charge |
19 |
114 |
||
|
Cash used for store restructuring and other charges |
(94) |
(105) |
||
|
Depreciation and amortization |
671 |
660 |
||
|
Increase in inventories |
(169) |
(31) |
||
|
Increase in accounts payable |
124 |
(86) |
||
|
Deferred income taxes and taxes payable |
308 |
72 |
||
|
Decrease in other long-term liabilities |
(138) |
(27) |
||
|
Changes in certain assets and liabilities |
(2) |
(5) |
||
|
Net cash provided by operating activities |
1,237 |
841 |
||
|
Cash Flow From Investing Activities: |
||||
|
Proceeds from divestitures |
87 |
133 |
||
|
Decrease (increase) in property held for sale or financing and other |
99 |
420 |
||
|
Capital expenditures |
(981) |
(678) |
||
|
Other, net |
- |
(60) |
||
|
Net cash used for investing activities |
(795) |
(185) |
||
|
Cash Flow From Financing Activities: |
||||
|
Proceeds from issuance of long-term debt and notes payable |
- |
337 |
||
|
Change in common stock and treasury stock |
46 |
37 |
||
|
Refinancing costs related to long-term debt and notes payable |
- |
(15) |
||
|
Payments on capital lease obligations |
(88) |
(112) |
||
|
Payments on long-term debt and notes payable |
(188) |
(811) |
||
|
Net cash used for financing activities |
(230) |
(564) |
||
|
Net change in cash and equivalents: |
212 |
92 |
||
|
Cash and equivalents at beginning of year |
498 |
406 |
||
|
Cash and equivalents at end of period |
$ 710 |
$ 498 |
||
KMART CORPORATION
CONSOLIDATED BALANCE SHEETS
|
(Amounts in millions) |
1-27-99 |
1-28-98 |
|
|
ASSETS |
|||
|
Current Assets: |
|||
|
Cash and equivalents |
$ 710 |
$ 498 |
|
|
Merchandise inventories |
6,536 |
6,367 |
|
|
Other current assets |
584 |
611 |
|
|
Total current assets |
7,830 |
7,476 |
|
|
Property and equipment, net |
5,914 |
5,472 |
|
|
Other assets and deferred charges |
422 |
610 |
|
|
TOTAL ASSETS |
$ 14,166 |
$ 13,558 |
|
|
LIABILITIES AND EQUITY |
|||
|
Current Liabilities: |
|||
|
Long-term debt due within one year |
$ 77 |
$ 78 |
|
|
Trade accounts payable |
2,047 |
1,923 |
|
|
Accrued payrolls and other liabilities |
1,359 |
1,064 |
|
|
Taxes other than income taxes |
208 |
209 |
|
|
Total current liabilities |
3,691 |
3,274 |
|
|
Long-term debt and notes payable |
1,538 |
1,725 |
|
|
Capital lease obligations |
1,091 |
1,179 |
|
|
Other long-term liabilities |
883 |
965 |
|
|
Convertible preferred securities, net |
984 |
981 |
|
|
Common stock |
493 |
489 |
|
|
Capital in excess of par value |
1,667 |
1,605 |
|
|
Retained earnings |
3,819 |
3,340 |
|
|
TOTAL LIABILITIES AND EQUITY |
$ 14,166 |
$ 13,558 |
|
 |