<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
- - EXCHANGE ACT OF 1934
For the quarterly period ended July 29, 1998
-------------
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- -----------
Commission File No. 1-327
------
KMART CORPORATION
-----------------
(Exact name of registrant as specified in its charter)
Michigan 38-0729500
- -------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3100 West Big Beaver Road - Troy, Michigan 48084
- ------------------------------------------ -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (248) 643-1000
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed, by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--------- -------
As of August 26, 1998, 493,232,408 shares of Common Stock of the Registrant were
outstanding.
1
<PAGE> 2
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Statements of Income -- 3
13 and 26 weeks ended July 29, 1998 and
July 30, 1997
Consolidated Balance Sheets-- 4
July 29, 1998, July 30, 1997 and
January 28, 1998
Consolidated Statements of Cash Flows -- 5
26 weeks ended July 29, 1998 and
July 30, 1997
Notes to Consolidated Financial 6
Statements
Item 2. Management's Discussion and Analysis of Results of 7 - 10
Operations and Financial Condition
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 11 - 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
KMART CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
13 WEEKS ENDED 26 WEEKS ENDED
----------------------------- ------------------------------
JULY 29, JULY 30, JULY 29, JULY 30,
1998 1997 1998 1997
--------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 8,116 $ 7,846 $ 15,631 $ 15,109
Cost of sales, buying and occupancy 6,336 6,197 12,244 11,834
--------- ----------- ------------ ------------
Gross margin 1,780 1,649 3,387 3,275
Selling, general and administrative expenses 1,561 1,497 3,010 2,988
Voluntary early retirement program 19 - 19 -
--------- ----------- ------------ ------------
Income before interest, income taxes and dividends on
convertible preferred securities of subsidiary 200 152 358 287
Interest expense, net 70 92 144 190
Income tax provision 38 17 62 28
Dividends on convertible preferred securities of subsidiary,
net of income taxes of $7, $7, $14, and $13 12 12 25 24
--------- ----------- ------------ ------------
Net income $ 80 $ 31 $ 127 $ 45
========= =========== ============ ============
Basic income per common share $ 0.16 $ 0.06 $ 0.26 $ 0.09
========= =========== ============ ============
Basic weighted average shares (millions) 492.9 487.1 491.3 486.2
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE> 4
KMART CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
JULY 29, JULY 30, JANUARY 28,
1998 1997 1998
------- ------- -------
<S> <C> <C> <C>
Current Assets:
Cash and equivalents $ 556 $ 253 $ 498
Merchandise inventories 6,808 6,819 6,367
Other current assets 673 889 611
------- ------- -------
Total current assets 8,037 7,961 7,476
Property and equipment, net 5,642 5,538 5,472
Property held for sale or financing 119 200 271
Other assets and deferred charges 328 595 339
------- ------- -------
Total Assets $14,126 $14,294 $13,558
======= ======= =======
Current Liabilities:
Long-term debt due within one year $ 51 $ 109 $ 78
Trade accounts payable 2,334 2,033 1,923
Accrued payroll and other liabilities 1,199 1,196 1,064
Taxes other than income taxes 241 244 209
------- ------- -------
Total current liabilities 3,825 3,582 3,274
Long-term debt and notes payable 1,636 2,191 1,725
Capital lease obligations 1,136 1,389 1,179
Other long-term liabilities 927 922 965
Company obligated mandatorily redeemable convertible preferred
securities of a subsidiary trust holding solely 7 3/4% convertible
junior subordinated debentures of Kmart (redemption value
$1,000 at July 29, 1998) 983 980 981
Common stock, 1,500,000,000 shares authorized; shares issued
493,284,068, 487,545,870, and 488,811,271, respectively 493 489 489
Capital in excess of par value 1,659 1,594 1,605
Retained earnings 3,467 3,147 3,340
------- ------- -------
Total Liabilitites and Shareholders' Equity $14,126 $14,294 $13,558
======= ======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE> 5
KMART CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
26 WEEKS ENDED
----------------------
JULY 29, JULY 30,
1998 1997
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 127 $ 45
Adjustments to reconcile net income to net cash
provided by operating activities:
Voluntary early retirement program 19 -
Depreciation and amortization 332 337
Increase in accounts receivable (65) (12)
Increase in operating supplies and prepaids (41) (53)
Increase in inventories (441) (465)
Increase in accounts payable 411 24
Deferred income taxes and taxes payable 160 16
Changes in certain assets, liabilities and other items (40) 127
----- -----
Net cash provided by operating activities 462 19
----- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from divestitures 87 129
Proceeds from real estate financing and other 22 43
Capital contributions from minority interests - (55)
Other - net (6) (88)
Capital expenditures (406) (178)
----- -----
Net cash used for investing activities (303) (149)
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in common stock 58 25
Proceeds from issuance of long-term debt and notes payable - 739
Reduction in capital lease obligations (43) (57)
Reduction in long-term debt and notes payable (116) (730)
----- -----
Net cash used for financing activities (101) (23)
----- -----
Net increase (decrease) in cash and equivalents 58 (153)
Cash and equivalents at beginning of period 498 406
----- -----
Cash and equivalents at end of period $ 556 $ 253
===== =====
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE> 6
KMART CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.) BASIS OF PRESENTATION
These interim unaudited consolidated financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission, and, in the opinion of management, reflect all adjustments
(which include normal recurring adjustments) necessary for a fair statement of
the results for the interim periods. These consolidated financial statements
should be read in conjunction with the financial statements and the notes
thereto included in the Company's 1997 Annual Report and Form 10-K filed for the
fiscal year ended January 28, 1998.
Certain reclassifications of the January 28, 1998 and July 30, 1997
consolidated balance sheet and cash flows have been made to conform to current
year presentation.
2.) DIVESTITURE
In February 1998, the Company's minority interest in Kmart Canada Co.
was purchased by Hudson's Bay Co. Under the terms of the purchase, Kmart
received approximately $8 million for its remaining equity interest in Kmart
Canada Co., along with $79 million for repayment of its note and debentures.
3.) INVENTORIES AND COST OF MERCHANDISE SOLD
A substantial portion of the Company's inventory is accounted for using
the last-in, first-out (LIFO) method. Since LIFO costs can only be determined at
the end of each fiscal year when inflation rates and inventory levels are
finalized, estimates are used for LIFO purposes in the interim consolidated
financial statements. Inventories valued on LIFO at July 29, 1998, July 30, 1997
and January 28, 1998 were $467 million, $451 million and $457 million lower than
the amounts that would have been reported under the first-in, first-out (FIFO)
method, respectively.
4.) PENSION PLANS
In the second quarter of 1998, the Company announced a Voluntary Early
Retirement Program for certain Kmart distribution center associates. The Company
recorded a charge of $19 million ($13 million after tax) based on the acceptance
of the program by associates. Payouts under this program will be fully funded
through existing pension plan assets.
5.) LEASE ACQUISITIONS
On May 1, 1998, the Company entered into an agreement with Kimco Realty
Corporation to lease 46 stores previously operated by Venture Stores, Inc. These
stores are being converted to the Big Kmart format and are scheduled to be
operational in the fourth quarter of 1998.
6
<PAGE> 7
ITEM 2
KMART CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
<TABLE>
<CAPTION>
13 WEEKS % CHANGE
------------------------- ----------------------------
JULY 29, JULY 30, COMPARABLE
($ Millions) 1998 1997 ALL STORES STORES
-------- -------- ------------ -----------
<S> <C> <C> <C> <C>
SALES
General Merchandise
United States $ 8,116 $7,749 4.7 4.4
International - 97 (100.0) -
------- ------
Consolidated Sales $ 8,116 $7,846 3.4 4.4
======= ======
OPERATING INCOME
United States $ 200 $ 151
International - 1
------- ------
Consolidated Operating Income $ 200 $ 152
======= ======
</TABLE>
SALES and comparable store sales increased 3.4% and 4.4%, respectively
for the 13 weeks ended July 29, 1998. The increases were primarily due to:
improved merchandise assortments; continued roll out of the Big Kmart format,
with 134 store conversions during the quarter; and execution of the Company's
competitive pricing strategy. Divisions showing particular strength for the
quarter included apparel, pharmacy, consumables, home electronics and
appliances, health and beauty, and home fashions. The Company closed 8 stores
and opened 2 stores during the second quarter.
GROSS MARGIN, as a percentage of sales, was 21.9% and 21.0% for the 13
weeks ended July 29, 1998 and July 30, 1997, respectively. The increase in the
percentage reflects lower levels of apparel markdowns, partially offset by the
execution of the Company's competitive pricing strategy and growth in consumable
sales.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES, as a percentage
of sales, were 19.2% and 19.1%, for the 13 weeks ended July 29, 1998, and July
30, 1997, respectively. The 10 basis point increase, or $64 million, resulted
primarily from increased Year 2000 compliance expenses, net advertising
expenses and costs associated with closed stores.
OPERATING INCOME for the 13 weeks ended July 29, 1998 was $200 million,
or 2.5% of sales, as compared to operating income of $152 million, or 1.9% of
sales, for the same period of the prior year. This increase was the result of
increased sales volumes and the increased profitability of the apparel division.
NET INTEREST EXPENSE for the 13 weeks ended July 29, 1998 was $70
million as compared to $92 million for the same period of the prior year. Net
interest expense decreased as a result of lower levels of borrowings and
increased investment income. See "Liquidity and Financial Condition".
7
<PAGE> 8
KMART CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
<TABLE>
<CAPTION>
26 WEEKS % CHANGE
--------------------------- ---------------------------
JULY 29, JULY 30, COMPARABLE
($ Millions) 1998 1997 ALL STORES STORES
-------- -------- ---------------------------
<S> <C> <C> <C> <C>
SALES
General Merchandise
United States $ 15,631 $ 14,810 5.5 5.2
International - 299 (100.0) -
-------- --------
Consolidated Sales $ 15,631 $ 15,109 3.5 5.2
======== ========
OPERATING INCOME
United States $ 358 $ 290
International - (3)
-------- --------
Consolidated Operating Income $ 358 $ 287
======== ========
</TABLE>
SALES and comparable store sales increased 3.5% and 5.2%, respectively
for the 26 weeks ended July 29, 1998. The increases were primarily due to:
improved merchandise assortments; continued roll out of the Big Kmart format,
with 252 store conversions during the period; and execution of the Company's
competitive pricing strategy. Divisions showing particular strength included
apparel, consumables, pharmacy, home electronics and appliances, health and
beauty, and home fashions. The Company operated a total of 2,114 stores as of
July 29, 1998 compared to 2,122 stores for the same period of the prior year.
The Company closed 24 stores and opened 2 stores during the period.
GROSS MARGIN, as a percentage of sales, was 21.7% for both the 26 weeks
ended July 29, 1998 and July 30, 1997. This is attributable to increased margin
due to lower levels of apparel markdowns offset by the execution of the
Company's competitive pricing strategy and growth in consumable sales.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES, as a percentage
of sales, were 19.3% and 19.8%, for the 26 weeks ended July 29, 1998, and July
30, 1997, respectively. The 50 basis point decrease, or $22 million, resulted
primarily from the sale of international operations and increased leverage
given additional sales volume offset by increased Year 2000 compliance
expenses and costs associated with closed stores.
OPERATING INCOME for the 26 weeks ended July 29, 1998 was $358 million,
or 2.3% of sales, as compared to operating income of $287 million, or 1.9% of
sales, for the same period of the prior year. This increase was the result of
increased sales volumes, improved profitability of the apparel division,
continued leveraging of SG&A expenses and the sale of the remaining interest in
Kmart Canada Co.
NET INTEREST EXPENSE for the 26 weeks ended July 29, 1998 was $144
million as compared to $190 million for the same period of the prior year. Net
interest expense decreased as a result of lower levels of borrowings, primarily
attributable to the payoff of the Term Loan and increased investment income. See
"Liquidity and Financial Condition".
8
<PAGE> 9
KMART CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
LIQUIDITY AND FINANCIAL CONDITION
Kmart's primary sources of working capital are cash flows from
operations and borrowings under its credit facilities. The Company had working
capital of $4,212, $4,379 and $4,202 million at July 29, 1998, July 30, 1997,
and January 28, 1998, respectively. The Company's working capital fluctuates in
relation to profitability, seasonal inventory levels net of trade accounts
payable and the level of store openings and closings.
In March, 1998, the collateral securing the Company's borrowings under
the Revolving Credit Agreement was released. The Company continued to be in
compliance with all covenants contained in the Agreement during the second
quarter of 1998.
Net cash provided by operating activities for the 26 weeks ended July
29, 1998 was $462 million as compared to $19 million for the same period in
1997. The increase in cash was primarily the result of increased earnings,
improved inventory leverage and receipt of federal tax refunds.
Net cash used for investing activities was $303 million for the 26
weeks ended July 29, 1998 compared to $149 million for the same period in 1997.
The increase in cash used by investing activities was primarily the result of
increased capital expenditures.
Net cash used for financing activities was $101 million for the 26
weeks ended July 29, 1998 compared to $23 million for the same period in 1997.
Cash used for financing during 1997 was the result of paying down the Company's
remaining balance on the Term Loan as well as payments on certain mortgages and
medium term notes. These amounts were partially offset by the issuance of $335
million in Commercial Mortgage Pass Through Securities.
Management believes the funds generated by operations, together with
funds available under existing credit arrangements, are sufficient to meet the
Company's currently anticipated funding requirements.
YEAR 2000
The Company's Year 2000 compliance program consists of four phases,
(1) inventory and assessment, (2) remediation and unit testing, (3) return to
production and (4) integration testing. The Company has completed the inventory
and assessment phase for essentially all of its computer systems and
applications with the goal of having substantially all business critical
applications returned to production during the fourth quarter of 1998.
Integration tests are planned for the second and third quarters of 1999.
The Company has initiated formal communication with significant
suppliers to evaluate their Year 2000 compliance. Most of these parties have
stated their ability to supply the Company will not be affected by the Year
2000 issue. However, the Company cannot assure timely compliance of third
parties and may be adversely affected by failure of a significant third party
to become Year 2000 compliant.
The total costs of modifying the Company's current systems are not
expected to have a material adverse impact on the Company's financial position,
results of operations or cash flows in future periods. Should the Company not
successfully complete a significant portion of its Year 2000 compliance program
its financial condition may be materially adversely impacted; however,
management does not consider the possibility of such an occurence to be
reasonably likely. Should the outlook for completion of the compliance program
change, management will develop appropriate contingency plans to address any
non-compliance issues.
9
<PAGE> 10
KMART CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -- CONTINUED
OTHER MATTERS
As of the end of 1997, the board of directors approved the repurchase
of up to 2,000,000 shares of the Company's common stock to be used to fund the
Company's employee benefit plans. During the first half of the year, the Company
purchased approximately 437,700 shares at an average price of $18.44 per share.
Effective April 3, 1998, the American Institute of Certified Public
Accountants' Accounting Standards Executive Committee issued Statement of
Position ("SOP") No. 98-5, "Reporting on the Costs of Start-Up Activities",
which requires that pre-opening costs and related organization costs be expensed
as incurred. This statement does not have a material effect on the Company's
financial position or results of operations.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Statements, other than those based on historical facts, including the
discussion of management expectations for Year 2000 compliance, which address
activities, events, or developments that the Company expects or anticipates may
occur in the future are forward-looking statements which are based upon a number
of assumptions concerning future conditions that may ultimately prove to be
inaccurate. Actual events and results may materially differ from anticipated
results described in such statements. The Company's ability to achieve such
results is subject to certain risks and uncertainties, including, but not
limited to, economic and weather conditions which affect buying patterns of the
Company's customers, changes in consumer spending and the Company's ability to
anticipate buying patterns and implement appropriate inventory strategies,
continued availability of capital and financing, competitive factors and other
factors affecting business beyond the Company's control. Consequently, all of
the forward-looking statements are qualified by these cautionary statements and
there can be no assurance that the results or developments anticipated by the
Company will be realized or that they will have the expected effects on the
Company or its business or operations.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following information is furnished with respect to the Annual Meeting of
Shareholders of Kmart Corporation held during May 1998:
(a) Annual Meeting was held on May 19, 1998.
(b) Not Applicable
(c) Proposal 1
At such meeting all of the nominees for election as directors were
elected for the term of office set forth below:
The votes cast with respect to each nominee for election as a director
were as follows:
<TABLE>
<CAPTION>
Votes to Withhold
Year When Term of Votes for Authority to Vote for
Nominee Office Expires the Nominee Nominee
------- -------------- ----------- -------
<S> <C> <C> <C>
Lilyan H. Affinito 2001 427,979,688 9,119,853
Richard G. Cline 2001 428,153,810 8,945,731
Willie D. Davis 2001 428,042,475 9,057,066
Joseph P. Flannery 2001 427,915,731 9,183,810
</TABLE>
A plurality of the votes cast were in favor of all nominees, and they
were therefore elected.
Proposal 2
The votes cast to ratify the appointment of Price Waterhouse LLP* as
independent accountants of the Company for the 1998 fiscal year, were
as follows:
For -- 433,564,235
Against -- 1,941,183
Abstain -- 1,594,122
A majority of the votes cast were in favor of proposal 2 and,
therefore, it was passed.
Proposal 3
The votes cast for a stockholder proposal to prepare a report on vendor
monitoring describing the Company's actions to ensure that it does not
and will not do business with foreign suppliers who manufacture items
for sale in the United States using forced labor, convict labor or
illegal child labor, or who fail to satisfy all applicable laws and
standards protecting their employees' wages, benefits, working
conditions, freedom of associations and other rights, were as follows:
For -- 29,360,824
Against -- 303,503,574
Abstain -- 28,176,818
No Vote -- 76,058,324
A majority of the votes cast were not in favor of proposal 3 and,
therefore, it was not passed.
* Effective July 1, 1998, Price Waterhouse LLP merged with Coopers and
Lybrand LLP to form PricewaterhouseCoopers LLP.
11
<PAGE> 12
Proposal 4
The votes cast for a stockholder proposal to amend the Articles of
Incorporation of Kmart, Inc. to eliminate the classification of the
directors of the Company, were as follows:
For -- 150,937,458
Against -- 205,379,506
Abstain -- 4,728,874
No Vote -- 76,053,703
A majority of the votes cast were not in favor of proposal 4 and,
therefore, it was not passed.
ITEM 5. OTHER INFORMATION
Pursuant to Article I, Section 8 of the Company's Bylaws, proposals of
stockholders intended to be presented at the 1999 Annual Meeting of
Stockholders (other than stockholder proposals set forth in the
Company's proxy statement) must be received by the Secretary of the
Company on or before February 17, 1999 unless the Meeting is not held
within eight days of May 18, 1999. In the latter case, if less than 100
days notice or public disclosure of the Annual Meeting date is given,
notice of the proposal must be received by the Secretary not later than
the tenth day following the date notice or public disclosure of the
Meeting date is given to stockholders.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as a part of this report:
Exhibit 11 - Information on Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K: No reports were filed on Form 8-K by the
Registrant during the 13 weeks ended July 29, 1998.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
The signatory hereby acknowledges and adopts the typed form of his name in the
electronic filing of this document with the Securities and Exchange Commission.
Date: September 14, 1998
Kmart Corporation
------------------------------------
(Registrant)
By: M.E. Welch, III
------------------------------------
M.E. Welch, III
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(Duly Authorized Officer,
Principal Accounting and
Financial Officer)
13
<PAGE> 14
Exhibit Index
-------------
Exhibit No. Description
- ----------- -----------
11 Information on Computation of Per
Share Earnings
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 11
KMART CORPORATION
INFORMATION ON COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
($ Millions, except per share data) 13 Weeks Ended 26 Weeks Ended
---------- ----------- --------- ----------
July 29, July 30, July 29, July 30,
1998 1997 1998 1997
---------- ----------- --------- ----------
<S> <C> <C> <C> <C>
I. Basic earnings per common share:
(a) Net income $ 80 $ 31 $ 127 $ 45
========== =========== ========= ==========
(b) Weighted average common shares outstanding $ 492.9 487.1 491.3 486.2
========== =========== ========= ==========
Basic earnings per common share:
Net income (a)/(b) $ 0.16 $ 0.06 $ 0.26 $ 0.09
========== =========== ========= ==========
II. Earnings per common and common equivalent share
assuming dilution:
Income from operations $ 80 $ 31 $ 127 $ 45
Add: Dividends Preferred Stock, Net 12 12 25 24
---------- ----------- --------- ----------
(c) Net income $ 92 $ 43 $ 152 $ 69
========== =========== ========= ==========
Weighted average common shares outstanding 492.9 487.1 491.3 486.2
Weighted average trust convertible preferred securities outstanding 66.7 66.7 66.7 66.7
Stock Option Activity 11.0 5.0 10.2 5.0
---------- ----------- --------- ----------
(d) Applicable common shares, as adjusted 570.6 558.8 568.2 557.9
========== =========== ========= ==========
Diluted earnings per common and common equivalent share:
Net income (c)/(d) $ 0.16 $ 0.08 $ 0.27 $ 0.12
========== =========== ========= ==========
(1) (1) (1)
</TABLE>
(1) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is contrary to paragraph 13 of SFAS 128 because it
produces an anti-dilutive result.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-27-1999
<PERIOD-START> JAN-29-1998
<PERIOD-END> JUL-29-1998
<CASH> 298
<SECURITIES> 258
<RECEIVABLES> 420
<ALLOWANCES> 0
<INVENTORY> 6,808
<CURRENT-ASSETS> 8,037
<PP&E> 8,303
<DEPRECIATION> 3,652
<TOTAL-ASSETS> 14,126
<CURRENT-LIABILITIES> 3,825
<BONDS> 1,636
983
0
<COMMON> 493
<OTHER-SE> 5,128
<TOTAL-LIABILITY-AND-EQUITY> 14,126
<SALES> 8,116
<TOTAL-REVENUES> 8,116
<CGS> 6,336
<TOTAL-COSTS> 6,336
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 70
<INCOME-PRETAX> 118
<INCOME-TAX> 38
<INCOME-CONTINUING> 80
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 80
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
