Kmart: Some Vendors Resuming Shipments

CHICAGO – Bankrupt retailer Kmart Corp. said Tuesday a significant number of its vendors had resumed shipments on normal payment terms, allowing the discount chain to operate with fewer disruptions.

Kmart, which filed a voluntary Chapter 11 bankruptcy petition last week, has received interim court approval for $2 billion in financing, some of which will be used to pay suppliers.

Some of Kmart's vendors had stopped shipping to the retailer earlier this month amid worries about Kmart's ability to pay. Grocery distributor Fleming Cos. Inc. suspended shipments after Kmart failed to make a regular weekly payment, but it resumed shipments after the retailer paid it $76 million.

Shares of Troy, Michigan-based Kmart were up 24 cents, or about 26 percent, at $1.16 on the New York Stock Exchange at midday Tuesday.

Handleman Co., the retailer's music supplier, said it started shipping to Kmart's 2,100 stores and it expects to be paid the $60 million it is owed. Both Handleman and Fleming were ruled "critical vendors" by the court, meaning their products are necessary for Kmart to continue operating.

Calls to Kmart were not immediately returned.

"We are pleased with the prompt approval by the court of our 'first day motions,' which, taken together, will enable the company to operate without interruption and meet normal business obligations," Kmart Chief Executive Chuck Conaway said in a statement.

But battery maker Rayovac Corp. , which said last week its exposure to Kmart wiped out nearly all of its first-quarter profits, said it is still watching the situation.

"January is typically a slow month, so we haven't shipped anything since their (bankruptcy) announcement," John Daggett, a spokesman for Rayovac, said. "We will look at the situation and see what is in the pipeline in terms of what inventory they have of ours right now and see what type of orders are coming from them, and see what type of financing they get."

A spokesman for lawn and garden products company Scotts Co. said nothing was barring the company from shipping to Kmart, although demand for lawn products is low in the winter. Scotts had stopped shipping goods to Kmart stores before the retailer filed for bankruptcy.

At Kmart's bankruptcy hearing in Chicago Jan. 22, the court approved the retailer's plan to cancel leases on about 350 stores that it had closed or that were currently being leased by others.