Supermarket company Fleming to sell stores

By Rachel Katz
Bloomberg News

LEWISVILLE, Texas — Fleming Cos., the biggest U.S. grocery distributor, will sell its Food 4 Less and Rainbow Foods supermarkets to end competition with its distribution customers. The company may have a quarterly loss because of lower sales and higher costs at the distribution business.

Fleming expects to receive more than $450 million after taxes for the 110 stores. Excluding results from the supermarkets, the third-quarter loss may be as much as 5 cents a share.

The company has been expanding its distribution unit to include more convenience stores. Fleming shares have tumbled 72 percent this year amid concerns about bankrupt Kmart Corp., Fleming's biggest customer, and reports about disputes with vendors.

Profit at the retail unit, whose stores sell low-price groceries, fell 15 percent in the second quarter. Fleming focused on the low-price supermarkets after selling its traditional grocery stores, which were less profitable. The stores had sales of $516.6 million in sales in the latest quarter, or about 13 percent of Fleming's revenue.

Fleming shares rose 86 cents, to $5.18. The sale and profit forecast were announced after closing.