The bulk of the loss was due to a $700m charge related to inventory liquidation.
Analysts said the figures were no worse than expected for a company in the first stages of bankruptcy proceedings.
Kmart chief financial officer Al Koch said the heavy losses were in line with expectations.
"We're not pleased with where we are, but it's where we expected to be."
Most suppliers had now resumed shipments, improving availability at store level.
Net sales for the quarter fell from $8.34bn in 2001 to $7.64bn.
Like-for-like sales were down 8.8%.