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Fleming cuts off Kmart
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January 21, 2002: 10:27 a.m. ET
Distributor halts shipments after its biggest customer misses payment.
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NEW YORK (CNN/Money) - Food distributor Fleming Companies Inc. said Monday it stopped shipping goods to Kmart Corp., its biggest customer, after the struggling discount retailer failed to make a scheduled payment.
Dallas-based Fleming, which operates a chain of grocery stores and distributes its own brand of food and other products, stopped shipments to all Kmart stores except for some perishable goods already in transit. Fleming said it would resume shipments once Kmart resumes weekly payments.
"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," Kmart CEO Charles Conaway said in a statement.
Just last week, Fleming said Kmart was current in its payments. Kmart, the No. 2 U.S. discount retailer, is considering filing for bankruptcy protection and closing several stores, according to industry analysts.
The company has not commented on the possibility of bankruptcy, but has said it is reviewing its liquidity and talking to lenders. Standard & Poor's recently cut its rating on Kmart's corporate debt to "low junk" status.
Fleming is just one of several companies with possible exposure in a Kmart bankruptcy, including shoe retailer Footstar (FTS: Research, Estimates) and home products maker Martha Stewart Living Omnimedia (MSO: Research, Estimates).
Another company suspending shipments to Kmart is Scotts Co. (SMG: Research, Estimates), maker of Miracle-Gro plant food and similar products.
"Given the uncertainty surrounding Kmart's financial situation, Scotts decided last week to delay shipments to the retailer until more information is known," the company said in a statement.
Scotts said it considered Kmart a "key strategic partner" and hoped to work out a way to resume shipments by its crucial spring selling season.
Kmart (KM: Research, Estimates) shares rose 18 cents to $1.74 in Friday trade, while Fleming (FLM: Research, Estimates) shares fell 45 cents to $17.27. 
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