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    Fleming to Divest Retail Operations, Focus on Wholesale Business

    DALLAS - Fleming Companies Inc. on Tuesday announced that it has decided to divest its 110 existing price-impact stores, which operate under the Food 4 Less and Rainbow Foods banners, in an effort to focus on its wholesaling business and further reduce its debt.

    DALLAS - Fleming Companies Inc. on Tuesday announced that it has decided to divest its 110 existing price-impact stores, which operate under the Food 4 Less and Rainbow Foods banners, in an effort to focus on its wholesaling business and further reduce its debt.

    The proceeds from the sale of the retail operations are anticipated to be in excess of $450 million net of taxes. Fleming said it has already initiated conversations with a number of potential buyers for these retail operations, among them both self-distributing chains and regional and independent supermarket operators. The actual dispositions of the retail assets are anticipated to occur in a series of sales to multiple buyers, beginning in the fourth quarter of 2002 and completed in 2003. Fleming said it is likely that it will retain a significant portion of the distribution volume for these stores.

    The Dallas-based company said its decision follows a strategic review initiated subsequent to the Core-Mark and Head Distributing acquisitions. Deciding factors included the advantages of focusing resources and investments completely on its supply chain distribution network; the greater return on invested capital opportunities that exist in the core wholesale distribution business as compared to the retail business; the increasingly competitive conditions in the retail environment; and the unique advantage that Fleming could gain from not competing with its distribution customers in the retail markets, the company said.

    "We concluded that by exiting the retail business, and not competing with the very customers with whom we are cultivating strong relationships, we would be in a unique position among our peers insofar as we would be the only independent, pure-play wholesale distributing company with a national footprint that covers all key retailing segments -- independent supermarkets, convenience stores, chain stores, supercenters, discount stores, and other retail outlets," said Mark Hansen, Fleming's chairman of the board and CEO. "This perspective was underscored by the fact that being in retail requires fuel centers today and we simply don't want to compete with our new and valuable convenience store customer base."

    Hansen said Fleming will continue to work toward a strategic repositioning by strengthening its balance sheet, continuing cost-cutting and right-sizing initiatives, implementing efficiency improvements in its centralized procurement functions and integrating its F1 technology.

    Fleming also said in a conference call on Tuesday that it recently cut about 350 executive jobs in response to soft sales, which will reduce expenses by about $40 million per year, according to Reuters.

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