NEW YORK (CNNfn) - In an effort to improve its sales and earnings, discount merchant Kmart hired two grocers Wednesday to stock $3.9 billion of food and related products at all its stores, effective immediately.
Supervalu Inc. (SVU) and Fleming Companies Inc. (FLM) will distribute approximately 3,250 items, such as certain dry groceries, pet food, paper products and cleaning supplies.
Both Supervalu and Fleming distribute food and run supermarket chains.
Troy, Mich.-based Kmart (KM), the nation's third largest retailer, said the agreement will save money by pooling buying power.
"We will be able to decrease the number of cartons we process in our distribution centers, reduce our capital expenditure needs and cut our inventory by about $150 million," said Floyd Hall, chairman, president and CEO of Kmart .
As specified in the signed agreement, Supervalu, based in Eden Prairie, Minn., will supply approximately 1,350 stores in the Northeast, Northwest and Southeast. Oklahoma City-based Fleming will supply approximately 800 stores primarily in the Southwest and central regions, as well as in Florida, California, Hawaii, Guam and the Caribbean.
The deal is effective immediately, in order to show results in the second half of the fiscal year, Kmart said. Within the next 30 days, the companies expect to reach definitive, three-year agreements effective in fiscal 2000.
Kmart shares fell 1/16 to 15-3/4 in early afternoon trading Wednesday.