TROY, Mich. and DALLAS, Feb. 7 /PRNewswire/ -- In a move that optimizes
the efficiency of the supply chain, Kmart Corporation (NYSE: KM) and Fleming
Companies, Inc. (NYSE: FLM) today announced they have signed a $4.5 billion
supply chain arrangement in which Fleming will provide substantially all of
the food and consumable products in all current and future Kmart and Kmart
supercenter stores. The agreement follows several months of discussions.
This new supply arrangement includes grocery, meat, produce, frozen foods,
dairy, and other grocery items. The agreement will vault Fleming to the
industry leadership position in total distribution revenue.
The consolidated procurement volume of this arrangement positions Kmart as
well as all of Fleming's retail customers with the economies and buying
efficiencies of the combined enterprises. The arrangement utilizes the
strength of Fleming's centralized procurement organization, a major strategic
initiative undertaken by the company in the past year.
The strategic alliance may be further expanded to include an agreement on
health and beauty products and related categories.
Strategic and Cultural Views Are Aligned
"What makes this alliance so advantageous is that it is a perfect blend of
strategies and cultures," said Charles C. Conaway, chairman of the board and
chief executive officer of Kmart. "Kmart has focused strategically on its
retail operations. Fleming, on the other hand, has focused strategically on
the procurement and logistics component of its business. And, we are both
building new, aggressive, innovative, and forward-looking cultures. Our
cultures connect and our core competencies fit 'hand-in-glove' and will allow
us to procure and distribute pantry and supermarket products in the most cost-
effective manner. This is a breakthrough for Kmart. Synergies will provide
Kmart best-in-class procurement and logistics in food and will establish a new
standard for best-in-industry performance. Everybody wins, especially our
customers."
Opening the way for the discussions was the significant strategic shift
made by Fleming over the past two years. During that time, Fleming
consolidated its distribution centers, initiated a centralized procurement
strategy that generated buying and logistics efficiencies, divested
underperforming retail stores, and focused its retail operations on the price-
impact food retail model. "Our nationwide network of 22 full-line food
distribution centers are well situated to assume the Kmart supply and
logistics business," said Mark Hansen, chairman of the board and chief
executive officer of Fleming. "By optimizing productivity in our distribution
centers, we effectively increased our capability to partner with Kmart, while
better serving our existing independents and other Fleming customers."
Fleming anticipates that it will add three new distribution facilities in
2001 to assume the added Kmart volume and fill out its distinct national
distribution footprint.
Significant Synergies
Key to the partnership are significant synergies and the cost savings
these synergies generate, which will benefit the customers of both
organizations. With anticipated combined savings in excess of $400 million by
the third year, Kmart and Fleming expect to reduce costs and increase
efficiency through their closely coordinated activity, consolidated purchasing
volumes, lower logistics and transportation costs, and improved service levels
and inventory turns.
"An important aspect to this partnership is that we will be consolidating
our purchasing power and speaking with one voice to the vendor community,"
said Mr. Hansen. "In doing so, we are helping vendors optimize manufacturing
and transportation while helping ourselves to improved turns and reduced
working capital."
Shared Strengths
One particularly unique aspect of the alliance is the opportunity for both
parties to learn from each other's strengths. Fleming, who successfully
operates price-impact retail stores under the Food 4 Less(R) banner, will be
able to share its expertise in this format with Kmart. The price impact
concept resonates well with Kmart's value-conscious shoppers and certain
aspects of it could be incorporated into Kmart's merchandising programs. Some
aspects of Fleming's distinct price-impact merchandising model include large
pallet-ready displays, warehouse racking, and refined assortments of the
highest turning stock keeping units.
At the same time, Kmart will offer Fleming access to Kmart's strengths in
general merchandise and seasonal goods, a move that will benefit many of
Fleming's independent retail customers.
Enabling Future Synergies
The alliance anticipates the creation of a supply chain "best practices
team" charged with pinpointing further, advanced supply chain opportunities.
The team, comprised of members from both Fleming and Kmart, will be based in
Kmart's offices. The team will also take responsibility for uncovering a
broad range of synergies, such as a paperless payment process, a fuel supply
program, and savings on non-merchandise goods, such as supplies and utilities.
Consolidated Private Label Program
It is planned that Kmart will adopt Fleming's best-in-class BestYet(R)
private label program in its Kmart and Kmart supercenter stores. The BestYet
label, known for its superior quality and value, has received high marks from
Fleming's independent retail customers and provides retailers with an
outstanding product that meets or exceeds the comparable national brand.
Investor Conference Webcast and Replay
Fleming:
A one-hour long conference call for shareholders and analysts will be
broadcast on the world wide web beginning today at 11:00 a.m. Eastern Standard
Time. To listen, log on to http://www.fleming.com . A replay of the conference call
will also be available beginning at 2:00 p.m. Eastern Standard Time on
February 7, 2001, and will continue until February 14, 2001 at 8:00 p.m.
Eastern Standard Time. The dial-in phone number for the replay is
719.457.0820, confirmation code 723307.
Kmart:
A thirty-minute conference call will be held, beginning at 12 noon Eastern
Standard Time. The conference call can be accessed by dialing 913.981.5533,
confirmation code 691008, and can be accessed at http://www.bluelight.com . A replay
of the conference call will be available until February 14, 2001, at 8:00 p.m.
Eastern Standard Time. The dial-in phone number for the replay is
719-457-0820, confirmation code 691008.
Kmart Corporation is a near $40 billion company that serves America with
more than 2,100 Kmart and Kmart supercenter retail outlets. In addition to
serving all 50 states, Kmart operations extend to the Caribbean islands and
Asia Pacific. More information about Kmart is available on the World Wide Web
under the "About Kmart" section.
Fleming is a $15 billion company and industry leader in distribution and
has a growing presence in value retailing. Fleming's primary business is
buying and selling merchandise. The company serves approximately
3,000 supermarkets including more than 800 North American stores of global
supermarketer IGA, 3,000 convenience stores and nearly 1,000 supercenters,
discount, limited assortment, drug, specialty, e-tailers and other businesses
across the country. To learn more about Fleming, visit http://www.fleming.com .
Safe-Harbor Statement
This release includes statements that:
(a) predict or forecast future events or results;
(b) depend on future events for their accuracy, or
(c) embody projections and assumptions that may prove to have been
inaccurate, including expectations for years 2001 and beyond.
These projections, forward-looking statements and the respective company's
business and prospects are subject to a number of factors that could cause
actual results to differ materially, including: the ability of the companies
to achieve expected synergies and anticipated cost savings; unanticipated
transition and start-up costs; the ability of Fleming to obtain required
capital or obtain it on acceptable terms; unanticipated problems in the supply
chain due to increased volume; the ability to successfully generate new
business; adverse effects of the changing industry environment and increased
competition, sales declines and loss of customers; exposure to litigation and
other contingent losses; and negative effects of indebtedness and the
limitations imposed by restrictive covenants contained in debt instruments.
These and other factors are described in each company's periodic reports
available from the Securities and Exchange Commission.
KMART CONTACTS:
(Media) Mary Lorencz 248.463.1021
(Investors) Juli Musch 248.463.1040
FLEMING CONTACTS:
(Media) Shane Boyd 972.906.8824
(Investors - Equity) Meredith Anderson 972.906.8592
(Investors - Debt) Alan McIntyre 972.906.8126
SOURCE Fleming
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Related links:
http://www.bluelight.com
http://www.fleming.com
CONTACT:
media, Shane Boyd, +1-972-906-8824, or
investors - equity, Meredith Anderson, +1-972-906-8592, or
investors - debt, Alan McIntyre, +1-972-906-8126, all of Fleming;
or media, Mary Lorencz, +1-248-463-1021, or investors, Juli
Musch, +1-248-463-1040, both of Kmart Corporation
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