It's beginning to look like KM is going to be headed for bankruptcy court soon.
January 21, 2002
Media & Marketing
Key Food Supplier Stops Shipments
After Kmart Misses Weekly Payment
A WALL STREET JOURNAL ONLINE News Roundup
DALLAS -- Fleming Cos., a key food supplier to Kmart Corp., joined the growing list of suppliers to cut off shipments for the struggling retailer.
Fleming said Monday that it suspended the shipments because Kmart had missed a weekly payment but that it is working with the chain as it navigates through its financial problems. "We intend to resume delivery of food and other consumable products to Kmart upon receiving satisfactory assurance of Kmart's performance," Fleming said.
Fleming signed a 10-year agreement nearly a year ago to provide Kmart with all the food and groceries in its supercenters.
Kmart, Troy, Mich., has declined to comment on speculation that it may file for bankruptcy-law protection, but the struggling retailer has been in talks to extend and enlarge its $1.5 billion revolving credit line to continue funding its operations.
People close to those talks said Kmart is trying to negotiate with banks, led by J.P. Morgan Chase & Co., for as much as $3 billion in new financing. The credit line would be secured by Kmart assets, mostly inventory.
Fleming's arrangement with Kmart includes a seven-day invoice-and-payment cycle. The company said it believes that the short payment terms for product shipments to Kmart put Fleming in a strong position to recover most of its approximately $78 million in merchandise receivables. Fleming added that it has ample capacity under its credit facility to address the nonpayment.
For its part, Kmart said it looks forward to resuming its business relationship with Fleming as it works through financial issues and is able to provide adequate assurance of payment.
Fleming follows a growing list of Kmart suppliers to suspend shipments. Scotts Co., maker of Miracle-Gro plant food and other garden products, has said it is postponing shipments until Kmart explains its survival strategy. Scotts received about $175 million in revenue from Kmart last year, representing about 10% of its business.
One retail consultant surveyed 15 to 20 Kmart vendors early last week and found that about one-third had ceased shipping to Kmart, another third were holding shipments pending further news, and the final third were shipping normally.
After a disappointing holiday season, Kmart's board last week announced sweeping management changes in an attempt to restore its credibility with bankers, vendors and investors. The retail giant took the chairmanship from Chief Executive Charles Conaway and handed it to James Adamson, a restaurant executive and outside director of Kmart since 1996. After the board meeting, Kmart's president, Mark S. Schwartz, left the company. |
