(Feb. 5) LEWISVILLE, Texas — The nation’s leading grocery wholesaler has severed its supply relationship with bankrupt retailer Kmart. The Dallas-area based Fleming Cos. Inc. announced Feb. 3 that continuing the supply agreement was in neither company’s interests.

“The basis on which the parties entered into the agreement have substantially changed, warranting an end to the relationship,” Fleming’s chairman and chief executive officer Mark Hansen said in a statement.

Fleming’s rejection of the $4.5 billion, 10-year supply deal it had won over rival Supervalu Inc., Eden Prairie, Minn., in early 2001 was keeping with the company’s expectations it had announced in January, company officials said.

Meanwhile, officials of Kmart Corp., Troy, Mich., say they plan to temporarily distribute groceries to their stores. Kmart spokesman Jack Ferry, quoted in a Reuters report, said the retailer plans to handle its own distribution.

Ferry would not say if the chain was considering supply arrangements with other distributors once it emerges from bankruptcy. Kmart officials say they are hoping to leave bankruptcy in April.

Kmart, however, was never able to perform as promised, said Fleming spokesman Shane Boyd said.

“Kmart’s status certainly has changed over the last two years,” Boyd said. “Two years ago we signed an agreement with an aggressive company that had aggressive growth plans. Despite their underperformance and bankruptcy, we have consistently continued to work with them and try to support them through the (bankruptcy) process. We feel this outcome is the right one.”

Fleming’s contract with Kmart, which accounted for 15% to 20% of Fleming’s revenues, called for Fleming to be the sole supplier of grocery items, including fresh produce, to 1,300 Big Kmart and Super Kmart stores.

Fleming tried to renegotiate its agreement after Kmart announced Jan. 23 that it would close an additional 326 of its 1,800 stores.

“I think people realize this (action) was not a big surprise,” Boyd said. “We will continue to focus and diversify our distribution business even without the Kmart business.”

Boyd cited Fleming’s winning contracts to supply groceries to 1,100 regular Target stores and Albertson’s stores in Oklahoma and Nebraska, announced last summer, as progress in that diversification.

Fleming’s stock fell to new lows shortly after the announcement. Fleming shares closed at $2.62 on Feb. 4, falling $1.06 or 28.8% from the day before. Fleming stock had been as high as $37.89 in 2001.