A&P Sales Drop 7 Percent in Quarter, New CEO Takes Helm

Despite a new pricing policy that it hoped would improve results in its stores, The Great Atlantic & Pacific Tea Company had a disappointing first quarter of fiscal 2010, with sales of $2.6 billion for the period ending June 19, 2010 compared to $2.8 billion in sales for the same period in 2009. This 7.1% decline was accompanied by a 7.2% decline in comparable store sales for the same periods.

The company, which operates 429 stores under banners including A&P, Waldbaum's, Pathmark, Super Fresh and The Food Emporium, has initiated a turnaround strategy and installed a new President and CEO to carry it out. Sam Martin, a 30-year food retailing veteran, replaces Ron Marshall, a former Borders Group executive who has been in the A&P job only since January.

A&P executive chairman Christian Haub says the company's turnaround will consist of four key elements:

> Improve the company's customer value proposition through merchandising
> Enhance the customer experience and drive clear brand identity
> Lower structural and operating costs
> Implement new financing initiatives to augment first quarter liquidity of $253 million

During a recent conference call, Haub cited some progress the retailer has made, saying that A&P's recent price initiatives had enabled it to become price competitive in its legacy banner stores. "The new lower price project in A&P has been fully implemented in all key center store categories," said Haub. "We're seeing some very positive results and we're fine-tuning the program to increase its effectiveness. The next phase of the lower price project has now been launched in the perishable departments."

In its Pathmark stores, the company plans to introduce an entry price line of private label products during the second quarter.
Haub insists that even though the retailer is expanding its lower price initiatives, it is not changing its business model from high/low to EDLP (everyday low price). However, pricing remains a key part of A&P's strategy. Haub said the retailer's pricing investments have created "significant uplift in units" in certain categories, and that "traffic has improved already during the first part of the second quarter."

However, he acknowledged that there was much work that remained to be done: "There's a lot more we can do with assortments, with customer service, with in-stock and with all of those things."
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