By Maxine Shapiro, KERA 90.1 commentator
Dallas, TX – It's not easy when accusations are given and denials are made. The current corporate climate calls for truths to be revealed either by an outside source or more ethically from within. But when a company flatly rebuffs what has been exposed, who do you believe? I'm Maxine Shapiro with KERA Marketplace Middays.
Regrettably, this scenario is being played out on Wall Street. The players: Lewisville-based Fleming Companies, the Wall Street Journal, and Fleming stockholders. Fleming is a food wholesale distributor. Remember, it is the sole food distributor to now bankrupt Kmart. Last week, some Fleming stockholders filed a class-action lawsuit. It alleges after the first of the year, Fleming made numerous positive statements in regard to its "price-impact supermarkets," discount supermarkets. The suit claims these statements were made strictly to show a good front to inflate its stock prices.
For on July 30th the suit charges, Fleming announced these supermarkets were doing so poorly they were thinking of abandoning the business. Fleming immediately said the suit was "baseless and completely without merit."
Yesterday, the unconfirmed rumors that Fleming's debt would be downgraded sent the stock plummeting. It closed down 14 percent. This would mean borrowing costs would increase. Some say Fleming is already struggling to maintain cash flow.
Then today's Wall Street Journal reports that suppliers for the food distributor will stop shipment because of thousands of dollars of erroneous deductions on their bills. The Journal explains that deductions for "incomplete or damaged orders, is a time-honored practice of wholesalers and retailers." Suppliers accept this in order to keep the customer. But for Fleming's suppliers, it's out of hand, as told by an ex-executive of the company to the Journal. As I listened to today's conference call to analysts, Fleming argued the Journal has "grossly overstated" the numbers. And only one-tenth of one percent of the vendors are questioning the deductions.
With everyone on the defensive, who knows when the facts will come out? For KERA Marketplace Middays, I'm Maxine Shapiro.
Marketplace Midday Reports air on KERA 90.1 Monday - Friday at 1:04 p.m. To contact Maxine Shapiro, please send emails to mshapiro@kera.org.