Fleming Sees Blue Light at End of the Tunnel

Fleming Cos. (Dallas), the food distribution giant whose refusal to ship goods to Kmart stores helped trigger the retailer's decision to file for Chapter 11 bankruptcy protection, said it will resume shipments once it has assurance it will be paid the money due it.

Kmart (Troy, Mich.), Fleming's largest single customer, was owed $78 million for its merchandise shipments last week.

“The Kmart filing (and its) debtor in possession financing gives it the critical liquidity needed to fund its operations during the reorganization process, a necessary first step in resuming our relationship,” said Mark Hansen, Fleming chairman and ceo. “Additionally, Kmart's reorganization can be an opportunity to close underperforming, high-cost-to-serve stores and redirect capital toward efficient, highly productive discount stores and supercenters. We believe today's filing provides Kmart the opportunity to better focus company resources on these top performing assets.”

Hansen noted the powerful and positive impact of Kmart supercenters for Fleming. “It is our belief that store closures may be a component of Kmart's plan,” noted Hansen. “Our analysis indicates that the least productive 10 percent of the Kmart store base likely constitutes less than 6 percent of Fleming revenues attributable to Kmart and no more than 2 percent of total Fleming revenues.” Fleming typically delivers approximately five times the volume of merchandise to a Kmart supercenter than to a traditional discount store.