Content area
Full text
TROY, MICH. -Kmart's expanded supply partnership with two grocery distributors indicates that the company plans to strengthen its commitment to food retailing, despite its inability so far to link up with a national supermarket chain.
The retailer was expected to finalize a three-year agreement this month with Supervalu and Fleming to supply $3.9 billion in food and other consumables annually to the chain's 2,151 stores.
The deal saves Kmart the expense of maintaining and building its own food distribution network and frees up capital for the chain to grow its Super Kmart concept. It will cut inventories by about $150 million, should improve the chain's buying ability and will enable Kmart to improve its regional and local grocery assortments.
"It will improve our in-stock position in the store to have them doing the distribution and replenishment. That is a pretty high priority for Kmart-to enhance overall customer satisfaction," said Mary Lorencz, Kmart's director of corporate relations.
Supervalu and Fleming, the nation's largest food wholesalers, have already been supplying food to the chain's 102 Super K units. The new agreement expands their contract to grocery and consumable products for the Pantry departments in all Big Kmart stores.
Chairman, president and ceo Floyd Hall has said previously that the chain was seeking some type of partnership with a national supermarket chain. Analysts have heard Albertson's and Safeway were reportedly approached, but no alliance had been forged.
Lorencz said the supply contract with Fleming and Supervalu does not negate such a deal in the future.
"[We] still have an...