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RETAILING LEGEND IS BORN

More than one hundred years ago, Sebastian Spering Kresge opened a modest five-and-dime store in downtown Detroit ... and changed the entire landscape of retailing. The store that Kresge built has evolved into an empire.

When Kresge opened his first store in 1899, he sold everything for 5 and 10 cents. The low prices appealed to shoppers and allowed him to expand to 85 stores in 1912, with annual sales of more than $10 million.

War and financial depressions hit America hard over the next decades, but Kresge stores were always there to offer families products at prices they could afford. They also offered people what other businesses at the time could not -- jobs to support their families.

As time went on, prices may have changed, but the business philosophy stayed the same -- offer consumers products they need at prices they can afford -- and they'll keep coming back.

By the mid-1920s, the S.S. Kresge Company was opening locations that sold items for $1 or less, a precursor to the current discount store. These ''green-front'' stores often were right next to the traditional red-front five-and-dime Kresge stores.

Ten years later in 1937, Kresge opened a store in the country's first suburban shopping center -- Country Club Plaza in Kansas City, Missouri.
 

STAYING COMPETITIVE

The retail environment was getting more competitive, and again Kresge blazed the trail for future retailers by launching a newspaper advertising program to entice shoppers to its stores. Those print ads were the precursor to radio promotions, which followed 20 years later, and then TV commercials, which began to air in 1968. 

By the 1950s, it was evident that the company needed to change to continue to be a leader in the growing competitive retail environment. That change came through Harry B. Cunningham, who became Kresge President in 1959. Cunningham had been studying other discount houses and developed a new strategy for the Kresge organization.

Under Cunningham's leadership, the first Kmart discount department store opened in 1962 in Garden City, Michigan. Seventeen additional Kmart stores opened that year, leading to corporate sales of more than $483 million that year.

Just four years later in 1966, sales in 162 Kmart stores and 753 Kresge stores topped the $1 billion mark. In 1976, S.S. Kresge made history by opening 271 Kmart stores in one year, becoming the first-ever retailer to launch 17 million square feet of sales space in a single year.

In 1977, nearly 95 percent of S.S. Kresge Company sales were generated by Kmart stores. To reflect this dramatic impact, the company officially changed its name to Kmart Corporation. Ten years later, Kmart sold the remaining Kresge stores to fully concentrate on discount merchandising.
 

BACK TO BASICS

In 1990, Kmart unveiled a bold new logo and a bold new plan -- a five-year, $3.5 billion new-store opening, enlargement and modernization program to focus the business back on what mattered most -- its Kmart stores.

In 1991, as part of the new plan, Kmart opened the first Kmart Supercenter in Medina, Ohio, offering a full-service grocery along with general merchandise 24 hours a day, seven days a week.

In 1996, a complete redesign of the Kmart store was launched, making them cleaner, brighter and easier to shop. A ''Pantry'' department selling frequently purchased consumable goods was moved toward the front of the store and a new focus was placed on the Children's and Home Fashions departments. These ''big'' changes were signified by a new name for the remodeled stores -- ''Big Kmart.''

To further expand the reach of the company, in December of 1999 Kmart launched a new Internet presence, BlueLight.com. By initially offering free Internet service, BlueLight was able to register a record-breaking number of users in its first few months. Shoppers now know the e-commerce and information site as www.kmart.com.
 

MOVING FORWARD WITH DETERMINATION

On May 6, 2003, Kmart and 37 of its U.S. subsidiaries and affiliates emerged from the Chapter 11 reorganization process - 15 months after they filed for Chapter 11 in the United States Bankruptcy Court for the Northern District of Illinois on January 22, 2002. Under the leadership of President Julian C. Day, who was promoted to Chief Executive Officer in January 2003, the Company achieved several important objectives during its fast-track reorganization. The Company's accomplishments included strengthening its balance sheet and significantly reducing debt; securing $2 billion in exit financing; focusing its store portfolio on the most productive locations and terminating leases for closed stores; and developing a more disciplined, efficient organization and lowering its overall operating costs.

Kmart emerged from Chapter 11 as a new and vital enterprise focused on delivering value to customers and stakeholders alike. Its focus going forward will be on continuing to revitalize its business by driving profitable sales, identifying opportunities to further improve efficiency and reduce costs, and enhancing asset productivity. Kmart's associates are facing the future with new energy and enthusiasm -- and a renewed commitment to providing customers with compelling promotional values, great private brands and excellent service.