Fleming Mulls Its Future as a Retailer

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Jul 31, 2002
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Although Fleming, reports a second quarter profit after a loss a year earlier, the company says it is “carefully and thoughtfully evaluating” strategic alternatives related to its low-priced food stores. It expects to complete the evaluation some time in the current quarter, reports Reuters.

Fleming’s operates 127 low-priced food stores under names such as Food4Less
and Yes!Less. The stores have been a drag on the performance of the rest of
the company’s businesses, hurt mainly by slowing sales and a loss of pricing
power amid growing competition.

“(The company) is probably looking at possibly selling the retail (division),
and if that’s the case they may be able to pay down their debt, which would
be a positive longer term,” says Mark Wiltamuth, analyst at Morgan Stanley.
At the end of the second quarter, the company says its outstanding debt totaled
$2.16 billion.

Fleming attributed the sales drop at its retail division to heightened competition,
deflationary prices in the meat category and disruptions from store overhauls.

Moderator Comment: Should Fleming get out of operating its Food4Less and Yes!Less stores?

Wall Street would like to see Fleming sell its retail
stores to reduce debt. This may be the one instance when we agree with the street.
Fleming is big on promoting itself for its distribution expertise. A total commitment
to wholesaling would certainly give Fleming a different pitch than Supervalu,
which also happens to be one of the largest grocery retailers in the domestic
market. [George
Anderson – Moderator
]

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