2 Grocery Distributors to Supply Kmart

Kmart Corp. has reached preliminary agreements with two major grocery distributors, Supervalu Inc. and Fleming Cos., to stock food and other goods in its stores. The discount retailer said it signed binding letters of understanding that will give the distributors responsibility to stock $3.9 billion worth of merchandise per year. The companies will provide dry groceries and other goods to Kmart’s 2,151 stores nationwide. They also will supply a broader assortment of food items and perishables at Super Kmart stores, which already contain full-service grocery departments. Kmart and competitor Wal-Mart Stores Inc. recently have been designing stores that combine groceries and discount goods under one roof. Although Wal-Mart, the nation’s largest discount retailer, has been successful with its sprawling Supercenters, some Wall Street analysts have said Kmart needed another company’s help to build a food distribution system. Supervalu is the largest food distributor to supermarkets in the country, supplying about 4,800 stores and running 350 stores of its own. The Eden Prairie, Minn., company will supply about 1,350 Kmart stores. Fleming, based in Oklahoma City, supplies about 3,000 stores. It will serve about 800 Kmarts. Kmart, based in Troy, Mich., said the distribution service plan will begin immediately and the companies expect to reach three-year agreements within 30 days. Kmart shares fell 19 cents to close at $15.63 on the NYSE.