Fleming Will Stick with Kmart
NEW YORK - Fleming Companies reported improved fourth-quarter earnings on Wednesday, but the distributor said in a conference call that the impact of Kmart's restructuring won't be fully known until the company announces plans for store closings on March 20.
"It's way too early in the restructuring process to comment on the status of our contract," said Bill Marquardt, the chief information officer for Fleming and the company's point man on the Kmart deal. "But Kmart does face many structural impediments if they decide to shift away from the contract with Fleming. There is a big incentive for us to continue to work together to drive their business."
Marquardt said the impact on Fleming will be minimized if Kmart shifts its business focus to making its Supercenter concept the centerpiece of a restructuring plan, since it receives about five times more products from Fleming than the typical Big K format. "We believe the Supercenter plays a key role in Kmart's recovery," Marquardt said.
Fleming has suspended shipments to Kmart prior to its Chapter 11 bankruptcy filing on Jan. 22. Since then, Fleming has been named a critical vendor by the bankruptcy court and received a $76 million payment against the total owed by Kmart. Fleming also took a $19.8 million charge in the fourth quarter to cover additional shortfalls from the Kmart filing.
"We resumed shipping on Jan. 23, the day after we received our payment, and we caught the backlog up in less than a week," Marquardt said. He told investors that the company had a seven-day invoice/seven-day payment agreement in place with Kmart now, and the first two February payments arrived from Kmart on time and in full. "We're back in sync," Marquardt said.
Overall, Fleming finished with a strong fourth quarter, with overall growth up 20 percent for the quarter and 10 percent for the year, largely on the strength of Kmart-related business. But non-Kmart business also showed solid gains, up 5.2 percent for the fourth quarter and 6.5 percent for the year.
Reuters said on Wednesday that Fleming's stock was dragged down by the news of a one-time charge related to the company's dealings with Kmart. Fleming's shares have fallen about 18 percent during the past two months.
"It's way too early in the restructuring process to comment on the status of our contract," said Bill Marquardt, the chief information officer for Fleming and the company's point man on the Kmart deal. "But Kmart does face many structural impediments if they decide to shift away from the contract with Fleming. There is a big incentive for us to continue to work together to drive their business."
Marquardt said the impact on Fleming will be minimized if Kmart shifts its business focus to making its Supercenter concept the centerpiece of a restructuring plan, since it receives about five times more products from Fleming than the typical Big K format. "We believe the Supercenter plays a key role in Kmart's recovery," Marquardt said.
Fleming has suspended shipments to Kmart prior to its Chapter 11 bankruptcy filing on Jan. 22. Since then, Fleming has been named a critical vendor by the bankruptcy court and received a $76 million payment against the total owed by Kmart. Fleming also took a $19.8 million charge in the fourth quarter to cover additional shortfalls from the Kmart filing.
"We resumed shipping on Jan. 23, the day after we received our payment, and we caught the backlog up in less than a week," Marquardt said. He told investors that the company had a seven-day invoice/seven-day payment agreement in place with Kmart now, and the first two February payments arrived from Kmart on time and in full. "We're back in sync," Marquardt said.
Overall, Fleming finished with a strong fourth quarter, with overall growth up 20 percent for the quarter and 10 percent for the year, largely on the strength of Kmart-related business. But non-Kmart business also showed solid gains, up 5.2 percent for the fourth quarter and 6.5 percent for the year.
Reuters said on Wednesday that Fleming's stock was dragged down by the news of a one-time charge related to the company's dealings with Kmart. Fleming's shares have fallen about 18 percent during the past two months.