Kmart Announces Re-Evaluation of Food Distribution Contracts With SUPERVALU and Fleming

Company strives to achieve best-in-class distribution

Kmart (NYSE: KM) today confirmed that as part of its on-going effort to achieve world-class distribution and efficiency, it is re-evaluating its grocery and consumables distribution arrangements with SUPERVALU and Fleming. The company will move forward with a single food distributor in a broader and deeper strategic partnership. Currently, SUPERVALU and Fleming provide distribution of all grocery and consumable products to more than 2,100 Big Kmart and Super Kmart stores nationwide.

SUPERVALU and Fleming have been notified that the current contracts will terminate on June 30, 2001. Both companies are being considered for Kmart's grocery and consumable supply and distribution business. The account is valued at approximately $3.7 billion annually.

Today's announcement supports Kmart's goal to leap-frog the competition in terms of its supply chain execution. With this move, Kmart will achieve cost of goods purchasing levels comparable to the largest food retailers. Kmart previously announced that it will invest nearly $2 billion between now and August 2002 to upgrade its information systems and dramatically improve its distribution and logistics network.

"Both SUPERVALU and Fleming are excellent companies," said Tony D' Onofrio, Kmart Executive Vice President, Chief Supply Chain Officer. "Harmonized distribution will accelerate our progress in driving efficiency, improving service and reducing cost. These improvements will ultimately benefit our customers and shareholders."

Kmart announced distribution arrangements with SUPERVALU and Fleming in July of 1999 to enhance the company's long-term objective of accelerating sales.

Kmart Corporation serves America with 2,106 Kmart, Big Kmart and Super Kmart retail outlets. In addition to serving all 50 states, Kmart operations extend to Puerto Rico, Guam, and the U.S. Virgin Islands. More information about Kmart is available on the World Wide Web, , under the "About Kmart" section.

SOURCE: Kmart Corporation

Contact: Stephen Pagnani of Kmart Corporation, 248-463-1021


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