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    Kmart to Distribute Groceries by Itself - For Now

    CHICAGO - Kmart Corp. on Tuesday said it would distribute groceries to its stores by itself for now after ending a supply deal with Fleming Cos. Inc. late on Monday.

    CHICAGO - Kmart Corp. on Tuesday said it would distribute groceries to its stores by itself for now after ending a supply deal with Fleming Cos. Inc. late on Monday.

    "Kmart has launched a previously prepared contingency plan that would immediately transition us to a self-distribution process," Kmart spokesman Jack Ferry said in a telephone interview with Reuters.

    He declined to comment on whether the retailer was considering supply arrangements with other companies once it emerges from bankruptcy, which it hopes to do by April.

    Fleming was Kmart's biggest supplier when the retailer filed for bankruptcy in January 2002, accounting for some $4.2 billion, or 11 percent of Kmart's annual sales, according to recent bankruptcy court filings.

    The two broke off what was supposed to be a 10-year, $4.5 billion supply agreement because they could not agree on new terms after Kmart decided to close more than 300 stores -- including 60 supercenters with full grocery stores.

    Kmart's newly named CEO Julian Day told reporters last week that the remaining supercenters would probably be concentrated in the Midwest, in a crescent shape stretching from Chicago through Detroit to Cleveland.

    Analysts have named a handful of other companies that could supply Kmart, including Nash Finch Co., former Kmart supplier Supervalu Inc., Unified Western Grocers and Roundy's Inc.

    Kmart's biggest competitor, Wal-Mart, owns a major distribution company -- McLane Co. Inc., which could be among those considered to replace Fleming, although analysts said it was a long shot.

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