Kmart Holding Corporation that, as a result of strong inventory management and the reduction of unprofitable promotions, the Company expects a significant profit for the first two months of its fiscal fourth quarter,
November and December 2003.

Income before interest and income taxes for November and December is expected to be in excess of $350 million, not including gains on real estate transactions of approximately $75 million. After interest expense (including
the accelerated amortization of credit facility fees due to the reduction in
its credit facility) and income taxes, Kmart is expected to generate net
income of over $200 million for the first two months of its fourth quarter,
not including gains on real estate transactions of approximately $50 million
after taxes. Including gains on real estate transactions, income before
interest and income taxes is expected to be in excess of $425 million and net
income is expected to be in excess of $250 million.

The Company's same-store sales for the first two months of its fiscal
fourth quarter declined by 13.5% from the prior year. The Company's total
sales for the first two months of the fourth quarter of fiscal 2003 were
approximately $5.1 billion compared to $6.9 billion in fiscal 2002. The
decrease in total sales is attributable to the decrease in same-store sales
referred to above as well as the closure of 316 stores during the first
quarter of fiscal 2003.

Julian C. Day, President and Chief Executive Officer of Kmart, said,
“We are managing the business to restore profitability. Much of the
promotional activity in prior years resulted in generating unprofitable sales.
By being more thoughtful in our approach this year, we have improved the
profitability of our market basket. I am pleased with the efforts of our
store associates and store managers to improve customer service and the
commitment of our headquarters employees to support the store experience. By
continuing to offer our customers attractive values in a way that allows Kmart
to generate profitable sales, we should be able to continue to invest in our
business to serve customers better in the future.”

Day added, “Kmart's inventory position has been appropriately managed
through the holidays, ending the month of December at a level below
$3.5 billion, which reflects a reduction of over 20% relative to the prior
year on a comparable store basis. The prudent management of our inventory has
not only improved our cash position, but has allowed us to reduce the large
markdowns required in prior years and improve profitability.” Based on
performance to-date and its projected working capital position, Kmart expects
to have in excess of $1.8 billion in cash and cash equivalents and
approximately $470 million in long-term debt (including $60 million of 9.00%
Convertible Subordinated Notes (the “Convertible Subordinated Notes”) issued
to affiliates of ESL Investments, Inc. (collectively, the “Holders”) at
emergence, $40 million of mortgages and approximately $370 million of long-
term capital lease obligations) at its fiscal 2003 year-end of January 28,
2004. The Holders have provided Kmart with notice necessary to exercise their
rights under the terms of the Convertible Subordinated Notes to extend their
maturity to May 6, 2006.

Kmart continues to monetize the balance of its non-core real estate. In
addition, Kmart will continue to manage and evaluate its store base with a
focus on long-term profitability. Kmart anticipates that it will complete
over $100 million of fee and leasehold real estate sales during the fourth
quarter of fiscal 2003.

As previously announced, in light of its favorable liquidity position the
Company voluntarily reduced the size of its credit facility by $500 million to
$1.5 billion on December 1. In addition, also in December, Kmart executed an
amendment to its credit facility providing for reduced fees on letters of
credit, reduced interest rates on borrowings and a reduction in the unused
line fee from 75 basis points to 50 basis points. Kmart has not borrowed
under its facility other than for letters of credit since emerging from
bankruptcy on May 6, 2003.

Kmart has executed a vendor lien program in conjunction with its exit from
bankruptcy. Due to the limited participation in this program, the willingness
of suppliers to provide Kmart with market terms, and Kmart's improved
financial position, Kmart has given the necessary notice to terminate this
program effective May 6, 2004.