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QUALITY MARKETS' STORES NOT EXPECTED
TO BE HURT BY HALT IN VENDOR SHIPMENTS

Quality Markets' stores will continue to operate as usual, even though vendors have stopped shipping groceries to its parent company, Penn Traffic, a spokesman said Thursday.

Syracuse-based Penn Traffic announced Tuesday that it might file for Chapter 11 bankruptcy protection, prompting its vendors to halt their shipments.

Marc Jampole, a Penn Traffic spokesman, said the company's stores and warehouses are well stocked. He said the supermarkets' operations won't be disrupted by the vendors' cutoff.

Quality Markets operates seven stores in Western New York. Penn Traffic also operates several other chains.

Joseph Fisher, Penn Traffic's president and chief executive officer, hasn't yet said whether the company would file for Chapter 11. Jampole declined to say when a decision would be announced.

"We have enough (grocery) supply to get us through while we finalize a decision on what we're going to do," Jampole said.

Mark Hamstra, editor of Supermarket News, said Penn Traffic needs to be attentive to keeping its shelves full. "Customers won't be too happy when they start seeing the shelves empty out."

He noted that grocery distributor Fleming Co., which recently filed for bankruptcy, struggled with fulfillment problems when vendors stopped supplying Fleming or were demanding up-front payments.

"Penn Traffic, I think, has to demonstrate to vendors that it has some financial backers in order to get the vendors on its side," Hamstra said.

Jampole said companies routinely halt their shipments when a customer might file for Chapter 11. That's because unpaid bills from before a bankruptcy filing are delayed until a reorganization plan is approved.

In contrast, if a shipment is received after a bankruptcy filing, the bill is paid promptly, he said.

The company's annual report, for the fiscal year that ended Feb. 1, is long overdue. It missed the original deadline to file the report with the Securities and Exchange Commission, as well as a 15-day extension.

Because of the tardy report, Nasdaq on Thursday threatened to "delist" Penn Traffic's stock beginning May 30, unless Penn Traffic requests a hearing. Penn Traffic said it will decide by the end of business on May 28 whether to request that hearing. That was the deadline given by Nasdaq.

Penn Traffic's stock has plunged this week since the company announced it was mulling a bankruptcy filing. On Thursday, its stock closed at 52 cents per share, down 11 cents.

Penn Traffic lost more than $324 million between 1994 and 1998 before reorganizing under bankruptcy protection in 1999 and 2000. In a prearranged plan with creditors, the company closed more than four dozen stores and shed $1.13 billion in debts by selling them majority ownership.

Penn Traffic, which employs 16,000 workers, lost $2.5 million in the first three quarters of its current fiscal year.

e-mail: mglynn@buffnews.com

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