NEW YORK — Kmart Corp., struggling to strengthen its discount store division, said it will take a $1.3 billion charge ($850 million after-tax) to substantially enlarge its store modernization program.

The charge excludes after-tax charges of $350 million on the loss on the disposition of Pace Membership Warehouse stores and a $100 million from the sale of Payless Drug Stores Northwest Inc. subsidiary stores.

All charges will be taken in the fourth quarter of 1993.

To raise cash, Kmart said it will spin off from 20 percent to 30 percent of its four remaining specialty store businesses — Borders-Waldenbooks, Builders Square, OfficeMax, and The Sports Authority — in initial public offerings.

Kmart also said earnings in the fourth quarter and year ended Jan. 26 will be “well below” year-ago profits of $1.15 a share in the quarter and $2.06 in the year.

Antonini said earnings at the Kmart division were dragged down by flat sales in most apparel merchandise lines and a consumers tendency to buy low-margined hard goods. Also depressing overall earnings was a decline in Builders Square profits, an $87 million operating loss at PACE, and higher interest costs.

Antonini said the renewed Kmart stores continued to perform well and the 17 Super Kmart Centers have exceeded Kmart’s expectations.

The new modernization program will now encompass a total of 800 U.S. Kmart relocated stores, 700 expansions, and 670 refurbishments. The original program called for 300 relocations, 620 expansions, and 1,250 refurbishments.

The overall program will result in the closing of 150 stores between 1990 and 1996, more than half of which are already closed.

Wall Street reacted coolly to the news, with Kmart shares up 1/2 to 21 on the New York Stock Exchange.