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MONTVALE, N.J. -- The Great Atlantic & Pacific Tea Co., Inc. here posted a net loss from continuing operations of $2.9 million, or seven cents per share, in the second quarter ended Sept. 8, vs. a loss of $2.2 million, or five cents per share, in the year-ago period, primarily as a result of losses from its now-discontinued Farmer Jack banner in the Midwest.
But the overall financial picture was far from bleak, as sales for the quarter were $1.3 billion vs. $1.2 billion last year, with comps up 3.2 percent, representing "the strongest comparable-store sales increase in six years," said c.f.o. Brenda Galgano during a conference call yesterday.
Sales for the 28 weeks year to date were $3.0 billion, compared with $2.9 billion in 2006. Comparable-store sales rose 1.9 percent. Net income from continuing operations for year to date 2007 was $58.5 million, or $1.38 per diluted share, which includes a gain of $78.4 million from the sale of Metro, Inc. shares, as opposed to a loss of $8.5 million, or 21 cents per diluted share, last year.
A&P officials were quick to emphasize those pluses. "A&P's strategic restructuring moved forward significantly in the second quarter as we exited our Midwest operations, and announced the divestiture of our Southern operations, which will be completed later this quarter," noted A&P executive chairman Christian Haub in a statement. "This fulfills our strategy to create a strong retail presence focused in our core Northeast markets, with improved profit and growth potential."
Added Haub: "Our Northeast presence will be significantly strengthened by the addition of Pathmark, which we now anticipate to achieve before the end of the calendar year. Alongside the ongoing improvement of our existing business, our primary objective is the completion of the Pathmark transaction, and commencement of the integration process."
"Our core operations in the Northeast achieved markedly improved year-over-year sales in the second quarter, primarily through better operating and merchandising execution, and the impact of our new store formats," said president and c.e.o. Eric Claus. "With our exit from noncore markets virtually completed from the operating standpoint, we will focus exclusively on our Northeast business. In addition to ongoing improvement of A&P, Waldbaum's, Food Basics, and the Food Emporium in New York and New Jersey, new fresh stores and strong marketing and customer service efforts have boosted customer traffic and sales in our Philadelphia and Baltimore Super Fresh operations, and we expect further improvement as those initiatives continue."
During the conference call Claus said that A&P had extended offers of employment to many Pathmark associates, including senior-level executives in charge of areas including center store.
He also gave an update on the progress of the retailer's lengthy logistics contract negotiations with Keene, N.H.-based C&S Wholesale Grocers, which aim to create "a long-term sustainable low-cost model."
Private label was another bright spot mentioned by Claus, who noted that its penetration rate was now 17 percent in fresh stores, and 20 percent in Food Basics discount stores - representing increases of about 200 basis points in both formats vs. last year. The company, which recently "rejigged" its private label look and packaging, now has plans to "marry" complementary A&P and Pathmark private label lines, he added.
Further, Claus pointed out that A&P's inflation factor for the quarter was significantly less than that of the market and the total industry, a fact he attributed to the retailer's new competitive pricing strategy of adjusting A&P prices to the price leader in the market, which rolled out during the second quarter. As proof of the strategy's success, he noted that numbers of items sold, customer count, and basket size were all up.
Galgano said during the call that the company had opened one fresh store and gourmet store during the quarter, and had plans for the remainder of the fiscal year to open seven fresh stores, two gourmet stores, and one liquor stores, with capital expenditures of about $70 million.
Claus mentioned that early results of the grocer's latest fresh store prototype, in Park Ridge, N.J., had "exceeded all expectations," proudly adding that there were a few more such stores "in the hopper" for the fourth quarter of fiscal 2007 and the first quarter of fiscal 2008.
In other format news, Claus briefly discussed the launch of a new grab-and-go concept with a coffee shop at the new 49th Street and 8th Avenue Food Emporium, and that Trump Palace Food Emporium would be opening next month. He also talked excitedly about A&P's "fantastic" new partnership with Starbucks, which will yield five inaugural locations this fall, with an additional 25 sites next year.
A&P operates 337 stores in eight states and the District of Columbia under the A&P, Waldbaum's, The Food Emporium, Super Foodmart, Super Fresh, Sav-A-Center and Food Basics banners.