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DALLAS - Fleming Cos. on Tuesday slashed its fourth-quarter earnings outlook, citing soft sales, inflated meat prices and higher employee-related costs such as pension, healthcare and insurance costs.
The wholesale-grocery distributor also said that it will take a charge of about $116 million for discontinued operations related to the pending sale of its retail operations. To date, the company said it has signed agreements to sell 32 price-impact retail stores.
Fleming now expects to report earnings from continuing operations between about $5 million to $6 million, or 10 cents to 12 cents a share, on sales of about $4.08 billion.
Besides soft sales, the food distributor said a "highly promotional" retail environment hurt earnings.
Fleming also commented on Kmart Corp., one of its key distribution customers, which will soon announce widely anticipated closings of a number of its retail locations. Fleming said that through the current analysis of Kmart's expected store closure announcement, the company will determine the appropriate adjustments required to optimize its distribution network and will make necessary refinements to the resources applied to support this customer. "Despite any necessary actions on Fleming's part in response to Kmart's store closures, the company is confident that Fleming's national distribution footprint will continue to provide opportunities to serve and grow the company's customer base throughout the country," Fleming said in a statement.
The food distributor announced in November it would sell 28 stores in California to Save Mart Supermarkets Inc. for $165 million. The company said Tuesday that it expects to receive regulatory approval this week for the sale of 19 of the 28 price-impact stores. The deal is expected to close in February.
The sale of the remaining nine California stores is subject to antitrust regulatory approval.
Fleming said it expects proceeds of about $175 million from the sales, including about $58 million attributable to the nine stores pending regulatory approval.