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    Restructuring Costs Ate Into Fourth-quarter Profits, but A&P's Ready for Consolidation

    MONTVALE, N.J. -- Citing restructuring costs, the Great Atlantic & Pacific Tea Co., Inc. (A&P) here yesterday posted a net loss for the 12-week fourth quarter ending Feb. 25 of $39.1 million, or 95 cents per diluted share, this year, vs. a loss of $5.7 million, or 15 cents per diluted share, last year. U.S. sales for the fourth quarter were $1.6 billion, compared with $1.7 billion in the year-ago period. Fiscal 2004 fourth-quarter total sales of $2.6 billion include $853 million related to A&P Canada, which was sold in August 2005. U.S. total comparable-store sales grew 1.4 percent over last year.

    MONTVALE, N.J. -- Citing restructuring costs, the Great Atlantic & Pacific Tea Co., Inc. (A&P) here yesterday posted a net loss for the 12-week fourth quarter ending Feb. 25 of $39.1 million, or 95 cents per diluted share, this year, vs. a loss of $5.7 million, or 15 cents per diluted share, last year. U.S. sales for the fourth quarter were $1.6 billion, compared with $1.7 billion in the year-ago period. Fiscal 2004 fourth-quarter total sales of $2.6 billion include $853 million related to A&P Canada, which was sold in August 2005. U.S. total comparable-store sales grew 1.4 percent over last year.

    U.S. sales for the 52 weeks of fiscal 2005 were $7.0 billion, as opposed to $7.3 billion in fiscal 2004. Total sales of $8.7 billion for this year and $10.8 billion for last year include sales of $1.7 billion and $3.5 billion, respectively, connected with A&P Canada, which was sold in August 2005. U.S. total comp-store sales went up 0.5 percent, and net income for the year was $393 million, or $9.64 per diluted share, which included the gain on the sale of the Canadian arm of the business, vs. a loss of $188 million, or $4.88 per diluted share, for fiscal 2004.

    During a company conference call yesterday, s.v.p. and c.f.o. Brenda Galgano attributed the decline in net sales to the closure of 49 stores, most of them in the company's ailing Midwest market.

    Overall, A&P officials were encouraged by the results. In a statement executive chairman Christian Haub said: "Our reduction of overheads and improved operating and merchandising execution positively impacted fourth-quarter results, and combined with exciting store development plans, set the stage for continuing financial progress through this fiscal year and beyond. In addition, our improved performance and financial resources also present the opportunity to participate in the expected consolidation of our industry."

    During yesterday's conference call Haub expanded on this last topic, saying that A&P was now "in a favorable position to actively participate" in what he sees as the "inevitable rationalization" of the grocery industry in the Northeast. Objectives included establishing A&P in a "strong shared leadership position" in its core markets and realizing "substantial synergies." Although he mentioned "several opportunities," Haub declined to name any specific retailers with which A&P might merge, but much speculation has centered on Pathmark as a prime candidate. Even Haub himself mentioned the Carteret, N.J.-based chain as a possibility during the CIBC Retail Conference in Toronto in March.

    Noted president and c.e.o. Eric Claus: "In executing our new strategic plan, we will accelerate development of the outstanding fresh and discount store prototypes we recently launched successfully in the Northeast, and introduce a significantly improved gourmet format in New York City. In the Midwest our improving Farmer Jack operations will be further revitalized with a quality and value emphasis refreshing its great tradition in the marketplace, while in New Orleans our Sav-A-Center team goes forward after its remarkable and successful rebuilding effort in the wake of Hurricane Katrina.

    "In fiscal 2006 our team will maintain an unwavering focus on profitable store operations, including both development and strict cost management, as we further intensify the drive toward our goal of profitability in Fiscal 2007, and dynamic growth thereafter," continued Claus.

    During the conference call, however, Claus cautioned that although "the ship has started to change direction," the company "still [has] a long way to go on our road to profitability."

    The company noted during the call that in 2006 it planned to open 75 stores in its new fresh format, including ground-up stores, enlargements, conversions, and mini remodels; 10 discount Food Basics upgrades and conversions, including renovations of dark stores; and one Food Emporium gourmet store in New York City.

    In answer to a question, Claus noted that the Food Basics concept was essentially a "cookie cutter" format in which right-sizing was key. He added that the optimal size of a Food Basics store was 35,000 square feet, and that converted stores larger than that would have the extra space taken up by either a discount liquor or clothing operation. Claus said that A&P had "partnered with a couple of people," but did not give specific names of retail partners.

    A&P operates 405 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.

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