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MONTVALE, N.J. -- Hard on the heels of the confirmation that it's Farmer Jack stores in Michigan were up for sale, and a month after the acquisition of rival grocer Pathmark, the Great Atlantic & Pacific Tea Co., Inc. here reported a still improving financial picture yesterday.
Sales for both the latest quarter and the year were essentially flat, while losses for both periods were reduced from the year-ago periods. Comps were a mixed bag.
"Going forward in fiscal 2007, we anticipate a year of both continuity and dynamic change," noted executive chairman Christian Haub. "Management's commitment to the strategies and practices underlying our current improving trends will remain fully in place. Alongside that focus, we are assembling a careful and comprehensive plan for the integration of the Pathmark operations, upon the anticipated completion of that transaction in the second half."
During a conference call yesterday, Haub said the "landmark" Pathmark acquisition "marks the next major step in our strategic transformation," and added that the company's "goal of total and sustainable profitability from operations is now in sight."
S.v.p. and c.f.o. Brenda Galgano, who's heading up the A&P-Pathmark integration effort, said during the call that the integration would be "led by a multifunctional group of business leaders," organized into 10 internal teams that would focus on "the realization of synergies as quickly as possible." Galgano also mentioned that the regulatory approval process was underway, and added that the company would provide periodic updates on that score.
Sales for the 12 weeks ended Feb. 24, 2007 were $1.6 billion, flat compared with the year-ago period, the chain said.
Comparable-store sales decreased 1.5 percent vs. the year-ago, primarily because of last year's sales lift in the retailer's New Orleans stores post-Hurricane Katrina; and its financially struggling Midwest operations.
Comparable-store sales in its core Northeast operations grew 0.9 percent in the fourth quarter, and net loss for the quarter was $7 million, or 17 cents per share, vs. a loss of $39 million, or 95 cents, last year.
Full-year U.S. sales for the 52 weeks ended Feb. 24 were $6.9 billion, compared with $7.0 billion in 2005. Total sales of $8.7 billion for last year included sales of $1.7 billion related to A&P Canada, which was sold in August 2005. Total U.S. comps declined 0.5 percent for the year, while comps for the Northeast inched up 0.6 percent.
Net income for fiscal 2006 was $27 million, or 64 cents per diluted share, vs. income of $393 million, or $9.64 per diluted share for 2005, including the gain on the sale of the company's Canadian business.
During fiscal 2006, A&P completed 27 remodels, mostly to the Fresh format, and opened four new stores-two Fresh markets and two Food Basics locations, according to Galgano. For 2007 the cap ex budget was adjusted to $150 million, with the number of scheduled major projects (those costing over $1 million) cut back to 20.
"Overall, our positive results were in line with internal forecasts in most key measurements," said president and chief executive officer Eric Claus. "With continued focus on current strategies and the successful integration of Pathmark, we are confident of accelerated improvement in fiscal 2007."
Also on tap for fiscal 2007 is the new fresh prototype, due to bow in the second quarter, which Claus promised would be "even more exciting than the last one." He added that the prototype had already moved into the construction phase.
Claus was also hopeful that negotiations with Keene, N.H.-based C&S Wholesale Grocers would enable the separate contracts A&P and Pathmark each have with the distributor to "come together as one."
As for the divestment of the Farmer Jack stores, Claus expressed confidence that A&P would be able to sell off the "lion's share" of locations, and Galgano said there was a "good chance" that those stores not sold would be shut down during the first quarter of fiscal 2007.
When the subject of the fate of the New Orleans stores came up, Haub noted that, as sales were steady in that market, the company was "under no stress or pressure to act," but that since, in the long term, the grocer's focus would continue to be on its core Northeast markets, divesting those stores as well was a possibility.
Also during the call, Claus noted that the retailer would shortly be launching a revamped pricing policy designed to make A&P more competitive "in highly impressionable items, and also in fresh," and that the company was about to expand its Internet, phone, and fax ordering service to New York's Westchester County and the balance of New Jersey.
A&P operates 406 stores in nine states and the District of Columbia under the A&P, Waldbaum's, The Food Emporium, Super Foodmart, Super Fresh, Farmer Jack, Sav-A-Center, and Food Basics banners.