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Monday, 21 January, 2002, 21:37 GMT
Suppliers desert Kmart
Kmart shop in Dallas, Texas
Shoppers are sparse at Kmart - as are suppliers
Bankruptcy-threatened retailer Kmart has come under additional pressure, after two key suppliers announced they would stop shipments to the US discount chain.

First Kmart's only grocery distributor, Fleming, said on Monday it would stop supplies, after the retailer failed to make its weekly payment for deliveries of food and other products.

We look forward to resuming our critical business relationship with Fleming once we... are able to provide Fleming with adequate assurance of payment

Charles Conaway
Kmart chief executive
Shortly afterwards Scotts, a maker of gardening products such as Miracle-Gro plant food, announced it would suspend shipments as well.

Kmart shares are currently trading at their lowest level since the 1960s.

The firm has been hit by weak sales and poor logistics, while its antiquated stores have found it difficult to compete with updated outlets operated by rivals such as Wal-Mart and Target.

Most worrying of all, Kmart urgently needs a cash injection - and so far the firm has failed to find the money.

The next step, some analysts say, could be a filing for chapter 11 bankruptcy protection.

Kmart is the second largest discounter in the US after Wal-Mart.

'Big deal'

Fleming said it would ship only certain perishable products already in transit to Kmart stores, while at the same time trying to reclaim products worth $78m that had been delivered but not paid for.

The distributor's chief financial officer, Neal Rider, said he was working with Kmart as "they navigate through their current financial problems.

"We intend to resume delivery of food and other consumable products to Kmart upon receiving satisfactory assurance of Kmart's performance."

Retail analysts described Fleming's move as "a big deal".

Just half a year ago, Fleming had muscled aside its rival Supervalu and negotiated a 10-year exclusive supplier relationship with Kmart.

Kmart chief executive Charles Conaway said he looked 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".

At Scotts' headquarters in Ohio, meanwhile, company spokesman Jim King said the suspension of deliveries would not have an immediate impact on either its business or its relationship with Kmart.

He pointed out that January was not a strong month for garden products.

The BBC's Sonali Gudka
"Analysts say Kmart urgently needs a cash injection"
See also:

17 Jan 02 | Business
Silence cuts third off Kmart's value
13 Jan 02 | Business
Kmart shares plunge
02 Jan 02 | Business
Kmart slumps on bankruptcy talk
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