FLEMING TO SHUTTER OKLAHOMA DEPOT

DAVID GHITELMAN

DALLAS -- Fleming here said last week it is closing its full-line Oklahoma City distribution center and its general merchandise distribution center in Dallas, and consolidating their operations into the Tulsa, Okla., distribution center it is purchasing from Albertson's, Boise, Idaho.

During a conference call with analysts following the release of Fleming's results for the first quarter ended April 20, Neil Rider, Fleming's chief financial officer, said, "Oklahoma City is among our least profitable facilities. Over time, you will always see us make moves to higher volume, lower cost, more efficient distribution facilities, and that's what Tulsa represents to us."

Mark Hansen, Fleming's chairman and chief executive officer, said the Tulsa center "makes our supply chain stronger and more relevant to other classes of trade. It will reduce transit time into western Missouri and northwest Arkansas by two hours."

Other topics discussed during the conference call included:

Fleming said it plans to begin franchising its Yes!Less price-impact format. "There is a strong appetite among consumers for Yes!Less," Hansen told the analysts. "We are moving toward the early stages of accepting franchise proposals this fall.

"I am almost giddy at the progress we are making in this arena.

"I would look for us to have very specific geographic development agreements with sophisticated operators, much more in line with what you see in fast food than with this kind of retail franchises in our business."

Hansen added that the number of franchise stores could total "hundreds over a period of time."

The company said it still expects its sales to Kmart Corp., Troy, Mich., to be $3.6 billion this year, up from $3.1 billion last year, and for them to stay at the $3.6 billion level in 2003.

Commented Hansen, "Ironically, in spite of all the activity going on in the financial world, our merchants have reported they feel they are making substantial progress with Kmart in terms of working to correctly assort stores. That might be one of the drivers as to why we're making our sales numbers now with them.

However, Rider acknowledged that Kmart is accounting for a diminishing share of Fleming's sales. He said sales to the discounter will supply less than 17% of Fleming's total revenues.

The company said it is raising its earning guidance for 2003 by 15 cents per share.

In the 16-week quarter, sales rose 13.3% to $4.7 billion, net income increased 59.1% to $24.6 million (before an extraordinary charge for the early retirement of debt in 2001), and earnings per share were 52 cents, compared with 37 cents in last year's first quarter (before last year's extraordinary charge).

In the distribution segment, net sales for the quarter increased 22% to $4 billion. In the retail segment, net sales for the quarter declined 20.7% to $669.3 million, and comparable-store sales were flat.