NEW YORK (CNN/Money) - Kmart Corp. is shutting 326 stores and cutting up to 35,000 jobs as it struggles to emerge from bankruptcy, the discount retailer said Tuesday.

The company said in a statement it will close 266 Kmart and Big Kmart stores and 60 Kmart SuperCenters in 44 states and Puerto Rico, as well as one of its 18 distribution centers. Kmart also said it expects the "fast-track" reorganization to enable the company to come out of bankruptcy by April 30, 2003.

CNNfn's Mary Snow takes a closer look at Kmart's store closings and job cuts. Play video (QuickTime, Real or Windows Media)

The retailer also plans to take a $1.7 billion charge, most of it in the recently ended fourth quarter, to pay for one-time costs from the moves. The retailer said the store closings would result in it cutting 30,000-to-35,000 positions.

At the same time, Kmart said it expects that the sale proceeds generated from store closings, net of expenses, will improve cash flow by about $500 million in 2003.

"This was a difficult and painful decision, particularly in light of its impact on thousands of dedicated associates who have worked so hard to help the company. But this is a necessary and important step for Kmart as we prepare for our imminent emergence from Chapter 11 protection," said James B. Adamson, Kmart chairman and CEO.

Kmart said the plan is subject to approval by a federal judge overseeing its bankruptcy case. It is set to appear in U.S. bankruptcy court in Chicago on Jan. 28.

Troy, Mich.-based Kmart, which filed for Chapter 11 bankruptcy protection back in January 2002, has struggled to win customers in a cutthroat discount sector dominated by low-price leader Wal-Mart Stores (WMT: up $0.13 to $51.41, Research, Estimates). In Chapter 11, a company is protected from creditors while it tries to reorganize.

The second round of store closures and job cuts come nearly a year after the retailer slashed 22,000 jobs and closed 284 stores last March.

Kmart said it will continue to operate 1,500 stores across the United States, the Caribbean and Guam.

Meanwhile, Kmart Tuesday reported a profit for December of $349 million, although it said same-store sales for the month -- or sales at stores open at least a year -- fell 5.7 percent.