Fleming's operates 127 low-priced food stores under names such as Food4Less and Yes!Less. The stores have been a drag on the performance of the rest of the company's businesses, hurt mainly by slowing sales and a loss of pricing power amid growing competition.
"(The company) is probably looking at possibly selling the retail (division), and if that's the case they may be able to pay down their debt, which would be a positive longer term," says Mark Wiltamuth, analyst at Morgan Stanley. At the end of the second quarter, the company says its outstanding debt totaled $2.16 billion.
Fleming attributed the sales drop at its retail division to heightened competition, deflationary prices in the meat category and disruptions from store overhauls.
Moderator Comment: Should Fleming get out of operating its Food4Less and Yes!Less stores?
Wall Street would like to see Fleming sell its retail stores to reduce debt. This may be the one instance when we agree with the street. Fleming is big on promoting itself for its distribution expertise. A total commitment to wholesaling would certainly give Fleming a different pitch than Supervalu, which also happens to be one of the largest grocery retailers in the domestic market. [George Anderson - Moderator]