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    Kmart's Troubles Deepen

    Fleming halts grocery shipments to fledgling discount chain.


    TROY, Mich. -- Kmart Corp.'s difficulties deepened yesterday when its sole grocery supplier suspended shipments to the troubled retailer after Kmart failed to make a regular weekly payment for deliveries of food and other goods.

    Fleming Cos., a major U.S. distributor of grocery products, said it stopped shipments to all Kmart stores except for certain perishable food products that were already in transit, the Associated Press reported.

    Scotts Co., a maker of lawn and garden products, also said it had halted shipments to Kmart, the number-two discount retailer behind Bentonville, Ark.-based Wal-Mart Stores Inc.

    Kmart's liquidity is being scrutinized by Wall Street amid concern that the company may be forced to file for bankruptcy. Kmart shares fell to 30-year lows last week but rose slightly to close at $1.74 earlier this week on the New York Stock Exchange.

    Fleming said it has submitted to Kmart a notice of failure to pay and is seeking to reclaim $78 million worth of goods already shipped but not paid for.

    "Fleming is working with Kmart as they navigate through their current financial problems and we intend to resume delivery of food and other consumable products to Kmart upon receiving satisfactory assurance of Kmart's performance," Neal Rider, Fleming's executive vice president and chief financial officer, said in a statement. "We are also taking the appropriate steps to protect Fleming's interest."

    Fleming said that its business with Kmart accounts for about $4.5 billion, or about one-fourth of its total annualized revenues of about $19.5 billion.

    Kmart Chief Executive Charles Conaway said in a statement, "We look forward to resuming our critical business relationship with Fleming once we work through these financial issues and are able to provide Fleming with adequate assurance of payment."

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