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    A&P Cuts Losses in Q3 '05

    MONTVALE, N.J. -- The Great Atlantic & Pacific Tea Co., Inc. here is still in the red, but it was able to slow down the bleeding somewhat in its fiscal 2005 third quarter ended Dec. 3, 2005.

    MONTVALE, N.J. -- The Great Atlantic & Pacific Tea Co., Inc. here is still in the red, but it was able to slow down the bleeding somewhat in its fiscal 2005 third quarter ended Dec. 3, 2005.

    For the third quarter, A&P's U.S. sales were $1.58 billion, vs. $1.67 billion in the year-ago period, the company said last Friday. Fiscal 2004 third quarter total sales of $2.52 billion had included $850 million related to A&P Canada, which was sold last August.

    Total comparable-store U.S. sales grew 1.8 percent in the latest reported quarter compared with last year. Excluding New Orleans, however, comparable-store sales declined 0.3 percent vs. last year. Net loss for the quarter was $71 million, or $1.74 per diluted share this year, compared with a loss of $75 million, or $1.96 per diluted share, in the year-ago period.

    For the 40 weeks year to date, A&P's U.S. sales were $5.41 billion, as opposed to $5.61 billion in fiscal 2004. Total sales of $7.13 billion for the year to date and $8.29 billion in fiscal 2004 include $1.72 billion and $2.68 billion in sales, respectively, in connection to A&P Canada. U.S. total comparable-store sales were flat, but excluding New Orleans, U.S. comparable-store sales dipped 0.6 percent vs. the year-ago period. Net income for the 40 weeks was $432 million, or $10.62 per diluted share, which included the gain on the sale of Canada, vs. a loss of $182 million or $4.74 per diluted share for fiscal 2004.

    Noted A&P president and c.e.o. Eric Claus in a statement: "I'm very proud of our team's execution of key cost management, operating, and selling strategies in the third quarter. Our store-level initiatives are clearly resonating with customers, resulting in improved sales. These positive outcomes at such an early stage of our rebuilding process bode well for the achievement of ongoing sales momentum, and progress toward overall profitability by fiscal 2007."

    Added Claus: "Going forward, we plan to continue to improve operating results by further reducing costs, while marketing aggressively and investing to bring our store facilities to new quality standards both on the fresh and discount sides."

    In a conference call Friday, executive chairman Christian Haub said the company was interested in consolidation opportunities in the United States on a par with the recent consolidation of A&P Canada and Montreal-based grocer Metro, "should [such opportunities] materialize," and added that A&P's "revitalization" was "off to the best possible start."

    Also during the call, new c.f.o. Brenda Galgano said that the grocer was shifting its investment strategy to individual stores with the highest returns, rather than by cluster.

    In talking about cost-reduction strategies that have already been adopted by the company, Claus noted that A&P had consolidated or eliminated most of its banner administration, adding that its banners were now operating formats. The consolidation also included the closure of the Paterson, N.J. office and cutting the "lion's share" of expensive third-party relationships with consultants, couriers, and others. Claus said that all such administrative consolidation should be completed by the end of the present fiscal year.

    Among the grocer's "innovative but simple" programs, Claus cited its "very vendor-funded" Temporary Price Reduction (TPR) Program, a "revolving" initiative currently featuring 3,500 items, but which will probably be limited to 5,000. He also mentioned that the company's major campaign to reduce the cost of goods had resulted so far in a $19 million reduction in that area.

    Among other topics raised during the call were a profit-sharing strategy for unionized staff that A&P hopes to introduced "when profitability kicks in," and store concepts the company is working on, including a "lean and mean" fresh store, incorporating the best of American and Canadian locations, that now has a prototype in New Jersey and by fiscal year-end should encompass 70 units, up to five of them new builds; an evolving discount format that will be unveiled next month in two prototypes at locations that are currently dark; and a new, "very high-end" Food Emporium gourmet concept at selected Manhattan stores, to be rolled out this year.

    Claus further said that the new discount concept would include a private label line that would be introduced in about three months' time, and estimated that although the number of Food Basics stores in the United States would grow from its current count of 11, it would still be fewer than 20 next year.

    In response to analyst questions, the A&P officials said that they were confident that the company's Michigan stores would break even by next year, and that distribution of stores in that state would also be transitioned to Keene, N.H.-based C&S Wholesale Grocer, a process that had gone well at the retailer's other stores. The officials also said they were currently "not focused on selling" the Michigan stores.

    A&P operates 407 stores in nine states and the District of Columbia under the trade names A&P, Waldbaum's, The Food Emporium, Super Foodmart, Super Fresh, Farmer Jack, Sav-A-Center, and Food Basics.

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