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TORONTO -- Fresh from discussing his company's $1.3 billion purchase of Pathmark Stores, A&P executive chairman Christian Haub addressed the CIBC Conference here with regard to A&P's recent past and the merged companies' future, which could include some A&P-owned stores and Pathmark units swapping banners.
Haub also intriguingly hinted at more acquisitions, when he spoke of working with The Yucaipa Cos.' investment wiz Ron Burkle, whose "very significant economic interest in the company" includes a 5 percent direct ownership, to "look for future opportunities." He also noted, near the end of his presentation, "[With] the changes that are hopefully underway now with this transaction, and potentially others, we will get to a much better place, similarly to where we are [in Canada]."
During his presentation Haub talked about how Pathmark, with its effective center store merchandising and understanding of urban ethnic consumers, neatly complemented A&P's success with a fresh format in suburban areas, and acknowledged that in a given area, "[a] Pathmark, considering the profile of the consumer and the marketplace, could probably be more productive, and have higher margins and higher profits, if we converted it to an A&P Fresh."
By the same token, he continued, there were some A&P units -- operating on Long Island, N.Y. as Waldbaum's, in Philadelphia as Super Fresh, and in New Jersey as A&P --that would "probably make more sense" as Pathmarks. "Now, they have to be big -- you can't take a 30,000-square-foot store and convert it to a Pathmark -- you'll never get that concept across," cautioned Haub, who added that there were 50,000-square-foot to 60,000-square-foot A&P stores that did well, "but if you could get the profitability that Pathmark gets into these stores, profitability would be significantly higher."
Such conversions "are opportunities we're going to be looking at" over the next six months, noted Haub. "Of course, we will test a couple of conversions to make sure that we really understand what's working and what's not working," he said. "We don't want to rush into that."
Meanwhile, Haub said, A&P "will continue to upgrade existing A&P and Waldbaum's stores to our fresh concept in the markets where we know it works," as well as roll out a "next-generation" fresh concept this spring that he described as "another step further" from the concept developed last year.
A&P will also work with Pathmark to determine the best ways to advance the Pathmark concept, observed Haub, "because that can't stand still, either."
In terms of store formats presenting the most potential for growth, however, Haub singled out the recently fine-tuned discount Food Basics banner, which he said provided A&P the "opportunity to capture business that we haven't captured before." In the United States Haub cited Wal-Mart as the only retailer to have had success with a comparable limited-assortment discount format, but mainly in more rural areas, not in the urban, densely populated Northeast markets A&P serves.
Haub later deftly deflected a query on whether A&P would sell off stores in its non-core markets, such as the financially moribund Farmer Jack locations in Michigan, by saying there was "plenty of time to think through all of these questions."