Supermarket chain A&P is being restructured following an ongoing slide in sales.
The Great Atlantic & Pacific Tea Co. will sell off Michigan chain Farmer Jack and Food Basics stores in Ohio, and may put A&P Canada on the block. A&P will focus on its core Northeast markets (from Washington, DC to Connecticut) with new fresh-food and discount formats.
Farmer Jack and A&P Canada have performed well; their sale will give A&P the money to improve its remaining stores. Montvale, NJ-based A&P will keep 250 stores in the Metropolitan New York area, expanding its fresh format under the A&P, Waldbaum’s and The Food Emporium banners; and its discount format via Food Basics. It also keeps 75 stores in the mid-Atlantic region, with fresh stores under the SuperFresh banner and Food Basics discount stores in Philadelphia and Baltimore. A&P also keeps 28 Sav-A-Center stores in New Orleans, with no expansion plans.
A&P also will work to improve labor productivity and cut operating, supply chain and administrative costs. The company last month began the process of selling its distribution facilities in order to focus on its stores.
Fiscal 2004 sales hit $10.85 billion, down 0.5% from fiscal 2003 (which had one more week than fiscal 2004, ended Feb. 26). Same-store sales were up a mere 0.1%. Fourth-quarter sales fell 6% to $2.56 billion (again, the quarter was a week shorter); same-store sales were flat.
CEO Christian Haub credits fourth-quarter improvements in part to profit growth at A&P Canada, “driven by our ‘Fresh Obsessed’ food marketing initiatives and the disciplined execution of our discount Food Basics operations,” he said in a statement. Haub also credits “stronger sales and significant bottom line improvement in the U.S., set in motion by our reorganization of the U.S. business implemented last November, and our continued emphasis on cost management throughout the organization. … All of those factors contributed to our Company’s best quarterly performance in almost three years, and successfully concluded a year of solid progress toward our goal of sustainable profitability.”
Farmer Jack President Mike Carter said, “We respect A&P’s decision and will work closely with corporate management and its financial advisors to create a new ownership structure for Farmer Jack that will ensure our continued presence and vitality as a leading grocery chain serving the southeastern Michigan market.”
“Now they need to convince packaged goods manufacturers that investments in A&P over the long term is worthwhile,” said Ken Harris, partner with retail consultancy Cannondale Associates. “If A&P is smart, they’ll rely on manufacturers to help with consumer research.”
A&P has had an inconsistent reputation among CPGs. “Lately, they’ve been more collaborative, but they haven’t been consistent with any one thing long enough to have the strategic base to succeed, Harris said.
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