USA: Fleming "pleased" by Kmart store closure plan
Dallas-based distribution giant Fleming has said it is "pleased" by today's [Monday] announcement by grocery chain Kmart that it will close 284 stores in 2002 as part of its financial objectives review.
"We are pleased by today's announcement from Kmart," said Mark Hansen, chairman of the board and CEO of Fleming: "Based on our historical sales to Kmart, it is readily apparent that Kmart has, indeed, selected its least productive stores for closure. And because these stores were not performing to their full potential in sales and order volume, they are the most costly for Fleming to serve. Now we can focus our full efforts on serving the most efficient segment of the Kmart store base."
Kmart's announced closures target 14% of its store base but only 9%, or approximately US$400m annualized, of sales by Fleming to Kmart and less than 2.5% of Fleming's projected total sales for 2002. Twelve supercenters are targeted for closure, less than 10% of Kmart's total number of supercenters.
Fleming continues to deliver food and other consumable products to Kmart on the seven-day invoice and seven-day payment cycle originally negotiated between the two companies. The companies also continue to operate under the terms and conditions spelled out in the agreement announced in February 2001.
Because the closures are geographically spread throughout the Kmart store operating base, Fleming will continue to serve Kmart from its national base of warehouses, including its two most recent additions in Ft. Wayne, Indiana and South Brunswick, New Jersey.
Fleming is currently in the process of analyzing the overall financial impact of the Kmart store closures and will determine updated earnings guidance for 2002 and 2003 by 11 March 2002.
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