A&P's Restructuring Takes Toll on Q1 Performance
MONTVALE, N.J. -- A&P's path to restructuring and regained profitability continues to twist and turn. In the shadow of the big news earlier last week that it had found a buyer for its Canadian division, the Great Atlantic & Pacific Tea Co. on Friday posted a loss of $89 million, or $2.27 per share, for its first quarter of fiscal 2005, as opposed to a loss of $41 million, or $1.08, in last year's first quarter.
According to A&P, the current year's results were impacted by charges totaling $68 million, including $50 million in restructuring costs associated with the sale of the U.S. distribution operations to C&S; $15 million related to Midwest exit costs, and $3 million related to a Canadian dollar hedge. Last year's results included a $1 million restructuring charge. Excluding these items, EBITDA was $101 million for the first quarter of fiscal 2005, vs. $81 million for the same period of fiscal 2004.
The company also reported first quarter sales of $3.4 billion, compared with $3.3 billion for the year ago period. Comparable-store sales declined 0.3 percent.
A&P chairman and c.e.o. Christian Haub painted the quarterly results in a positive light. "Our company's improvement continued in the first quarter," he said. "A&P Canada's fresh marketing initiatives, improving discount Food Basics operation, and cost controls contributed to excellent results in Ontario. In the U.S., our fresh store development continued to generate excellent customer response, while the Food Basics stores produced a good sales trend as our improvement of that format continued."
"We now look forward to the formation and development of The New A&P, as augmented by our major strategic accomplishments since the end of the quarter, namely the recently announced transfer of distribution operations, the pending sale of A&P Canada to Metro, Inc., and our executive leadership change going forward in the U.S."
During a conference call with analysts on Friday, Haub noted that the company had made 19 Fresh store conversions, bringing the total number to 42. He said the rollouts taught A&P that full-scale conversions costing around $1.5 million worked better, with overall sales increases for the larger conversions averaging in the high teens. He added that the company would have to examine its learnings to decide whether to step up the pace of such conversions in the third and fourth quarters. For that reason, fewer conversions are scheduled for the second quarter, he said.
Haub was particularly enthusiastic when it came to the strong performance of the Canadian business. Noting that the first-quarter results were probably the last time full results of A&P Canada would be reported by the company, he remarked that the operation was "going out with a bang." He also referred to the sale of A&P Canada to Metro as "a breakthrough accomplishment for A&P."
Speaking of the ongoing Midwest divestiture, Haub said that the company had determined that the best way to exit the market was to close and dispose of all noncore operations and sell the remaining core operations intact. Currently A&P still has about 70 of the 100 Farmer Jack stores it had before the divestiture began; the plan is to sell the remaining 70 together, with the disposition scheduled to be complete by the end of the year.
Haub projected that A&P would return to sustainable profitability by the latter part of 2006, placing much of the credit for the company's continued recovery on its employees: "I am really confident that because of our people, A&P will continue to persevere and thrive."
Haub's enumerated aims for the second quarter and beyond were:
--To accelerate the improvement of A&P's operating trends,
--To complete the Canadian transaction and realize the de-leveraging of the company's balance sheet,
--To complete the remainder the company's divestitures,
--To continue rolling out A&P U.S. Fresh stores and bettering the company's discount operations, and
--To keep pursuing significant cost-reduction opportunities and shaping the organization of the "New A&P."
A&P operates 637 stores in 10 states, the District of Columbia, and Ontario, Canada, under the A&P, Waldbaum's, The Food Emporium, Super Foodmart, Super Fresh, Farmer Jack, Sav-A-Center, Dominion, The Barn Markets, Food Basics, and Ultra Food & Drug banners.
According to A&P, the current year's results were impacted by charges totaling $68 million, including $50 million in restructuring costs associated with the sale of the U.S. distribution operations to C&S; $15 million related to Midwest exit costs, and $3 million related to a Canadian dollar hedge. Last year's results included a $1 million restructuring charge. Excluding these items, EBITDA was $101 million for the first quarter of fiscal 2005, vs. $81 million for the same period of fiscal 2004.
The company also reported first quarter sales of $3.4 billion, compared with $3.3 billion for the year ago period. Comparable-store sales declined 0.3 percent.
A&P chairman and c.e.o. Christian Haub painted the quarterly results in a positive light. "Our company's improvement continued in the first quarter," he said. "A&P Canada's fresh marketing initiatives, improving discount Food Basics operation, and cost controls contributed to excellent results in Ontario. In the U.S., our fresh store development continued to generate excellent customer response, while the Food Basics stores produced a good sales trend as our improvement of that format continued."
"We now look forward to the formation and development of The New A&P, as augmented by our major strategic accomplishments since the end of the quarter, namely the recently announced transfer of distribution operations, the pending sale of A&P Canada to Metro, Inc., and our executive leadership change going forward in the U.S."
During a conference call with analysts on Friday, Haub noted that the company had made 19 Fresh store conversions, bringing the total number to 42. He said the rollouts taught A&P that full-scale conversions costing around $1.5 million worked better, with overall sales increases for the larger conversions averaging in the high teens. He added that the company would have to examine its learnings to decide whether to step up the pace of such conversions in the third and fourth quarters. For that reason, fewer conversions are scheduled for the second quarter, he said.
Haub was particularly enthusiastic when it came to the strong performance of the Canadian business. Noting that the first-quarter results were probably the last time full results of A&P Canada would be reported by the company, he remarked that the operation was "going out with a bang." He also referred to the sale of A&P Canada to Metro as "a breakthrough accomplishment for A&P."
Speaking of the ongoing Midwest divestiture, Haub said that the company had determined that the best way to exit the market was to close and dispose of all noncore operations and sell the remaining core operations intact. Currently A&P still has about 70 of the 100 Farmer Jack stores it had before the divestiture began; the plan is to sell the remaining 70 together, with the disposition scheduled to be complete by the end of the year.
Haub projected that A&P would return to sustainable profitability by the latter part of 2006, placing much of the credit for the company's continued recovery on its employees: "I am really confident that because of our people, A&P will continue to persevere and thrive."
Haub's enumerated aims for the second quarter and beyond were:
--To accelerate the improvement of A&P's operating trends,
--To complete the Canadian transaction and realize the de-leveraging of the company's balance sheet,
--To complete the remainder the company's divestitures,
--To continue rolling out A&P U.S. Fresh stores and bettering the company's discount operations, and
--To keep pursuing significant cost-reduction opportunities and shaping the organization of the "New A&P."
A&P operates 637 stores in 10 states, the District of Columbia, and Ontario, Canada, under the A&P, Waldbaum's, The Food Emporium, Super Foodmart, Super Fresh, Farmer Jack, Sav-A-Center, Dominion, The Barn Markets, Food Basics, and Ultra Food & Drug banners.