Fleming Posts Second-quarter Profit

DALLAS - Fleming Co. today reported a second-quarter profit, reversing a loss a year earlier, due in part to cost-cutting and sales from new contracts.

Net income in the second quarter was $2.2 million, or 5 cents per share, compared with a loss of $13.5 million, or 31 cents per share, a year earlier.

The No. 1 grocery supplies distributor forecast profits for the third and fourth quarters, and said it is "carefully and thoughtfully evaluating" strategic alternatives related to its low-priced food stores. It said it expects to conclude the evaluation process some time in the quarter just begun.

The company's retail segment, which consists of about 127 stores under names such as Food4Less and Yes!Less stores, has lagged the performance of the rest of the company's business.

Excluding a charge connected to the early repayment of debt, Fleming, which saw big customer Kmart Corp. file for bankruptcy projection in January, earned $10.1 million, or 21 cents per share.

Quarterly sales rose 14.1 percent to $3.93 billion from $3.45 billion. Sales from its retail segment increased 0.8 percent compared with the prior year, but the segment's comparable store sales -- generated from outlets open at least a year -- fell 4.7 percent. Fleming attributed the sales drop at its retail segment to heightened competition, deflationary prices in the meat category and disruptions from store overhauls.

Fleming added that its outlook depends on its retail stores' earnings returning to more normalized levels relative to last year, and Kmart's ability to continue as a going concern.

The company, which recently closed down two distribution plants, said it also expects 2002 capital expenditures of about $185 million, down from an original estimate of $200 million, with $85 million of the spending coming in the second half.
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