US grocery distributor Fleming said it may end its supply pact with bankrupt customer Kmart unless it can negotiate more favourable terms, in the wake of fourth quarter losses.

Fleming reported a fourth quarter net loss of $89.8m - after taking losses on its chain of discount supermarkets it is selling - compared to last year’s net income of $5.7m.

Sales in the period rose to $4.08bn from $3.46bn due to an expanded contract with discounter Target and a new supply deal with wholesaler CB Ragland.

However, Fleming is to talk to Kmart about modifying their two-year-old distribution deal after the discounter said last week it would close 326 more stores out of 1,800. Kmart shut 283 outlets.