The Great Atlantic & Pacific Tea Company (GAP, Financial) filed Amended Quarterly Report for the period ended 2009-09-12.
The Great Atlantic & Pacific Tea Company Inc. is engaged in the retail food business. The Company operated 1014 stores averaging 34200 square feet per store as of February 24 1996. In addition the Company began franchising its Canadian Food Basics stores in fiscal 1995. As of February 24 1996 the Company had 7 Food Basics Franchisee stores in Canada averaging 25400 square feet per store. The Company is one of the ten largest retail food chains in the United States and that it had the largest market share in metropolitan New York and Detroit. The Great Atlantic & Pacific Tea Company has a market cap of $491.4 million; its shares were traded at around $9.78 with and P/S ratio of 51.6. The Great Atlantic & Pacific Tea Company, Inc. Management's Discussion and Analysis - Continued OPERATING RESULTS ----------------- This quarter was challenging for our Company as the retail market continued to experience one of the most difficult economic environments in recent history. Consumers have continued to trade down to less expensive products, which resulted in increased competition and, as a result, our Company invested more in value driven pricing programs and offerings. In addition, the rate of inflation has decreased significantly with deflation in several categories. As a result, our comparable store sales, which include stores that have been in operation for at least one full fiscal year and replacement stores, declined by 3.8% this quarter. Our business operates in four formats, which enable us to service customers in every market we serve, with the following operating results: Fresh (A&P, Waldbaum's and SuperFresh) Our Fresh format continues to deliver strong year-over-year improvement in segment income, primarily driven by the higher gross margin rate in the second quarter of fiscal 2009 due to negotiated cost reductions with our vendors, partially offset by a decline in sales. Price Impact (Pathmark and Pathmark Sav-A-Center) Our Price Impact format continued to experience a year-over-year decline in segment income, which was driven by negative comparable store sales and lower gross margins, primarily resulting from higher promotional spending and reduction in everyday prices to stay competitive. Our consumers have been very value focused in this difficult economic environment and have continued to take advantage of our promotions, requiring us to invest more in value driven programs in order to stay competitive. Although, in the shorter term, this has negatively impacted our earnings, we believe that this strategic investment well-positions us to generate long-term growth over time and once the overall economy improves. Our eight stores that have been converted from the Fresh segment to the Price Impact format are performing very well because converted stores retain the more favorable A&P legacy cost structure, while taking advantage of the higher sales per square foot generated by the traditional Pathmark locations. Gourmet (The Food Emporium) Our Gourmet stores located in Manhattan continue to generate segment income growth despite the economic crisis, primarily due to an increased gross margin rate. We attribute this growth to the premium locations of our Gourmet stores and product offering selective to the neighborhood. Other (Food Basics, Best Cellars and A&P Liquors) The businesses comprising our Other format continued to perform well with a year-over-year increase in segment income due to positive comparable store sales and improved gross margin rate. The businesses within our Other segment traditionally perform well during recessionary economic times. The Great Atlantic & Pacific Tea Company, Inc. Management's Discussion and Analysis - Continued OUTLOOK ------- The current economic indicators including rising unemployment, increasing price competition and deflation have continued to create an even more challenging economic environment. These factors are having an increasingly negative impact on our operations. As a result, our Company has undertaken substantial business optimization initiatives designed to mitigate this downward pressure and improve our performance while taking advantage of the best practices between the legacy A&P and the acquired Pathmark businesses. The following key areas have been identified as business improvement opportunities: Improved private label penetration Private label penetration tends to increase during recessionary times. Our programs under this initiative are expected to increase gross margins offsetting more promotional investment. Our expansive private label program, which includes our Green Way organic product line, is a critical component of our long-term strategy and will enable us to continue to meet our customer's needs, while addressing their financial constraints with products comparable in quality to their national brand equivalents. Our private label penetration has improved by over 17% from last year in terms of overall sales. Store Conversions We are completing an evaluation of each neighborhood marketplace in which our stores operate and are assessing the best opportunities for our four formats within these neighborhoods. We are prioritizing the most cost-beneficial use of funds to convert stores from existing formats to the format that will best serve the neighborhood marketplace and return improved results. Operating expenses We plan to reduce our operating expenses by targeting the following areas: o Grocery Stock Losses - Stock losses tend to increase in periods of economic downturn. To combat this trend, we are continuing the rollout of our formal program to reduce stock losses, especially targeting our Price Impact business, which has the highest stock losses. We have implemented a formal program to reduce losses, including conducting internal theft and stock loss awareness training, increasing amount of security in high risk stores, upgrading in-store security cameras and implementing technology to reduce bottom of the basket losses. We are also planning strategic structural changes, such as reducing the amount of products subject to high theft, which should reduce future losses. o Trucking and Warehousing Costs - We continue to work with C&S and GHI to further reduce our costs by streamlining deliveries and optimizing trucking routes. o Productive labor - We are improving labor productivity by optimizing our formats and utilizing a variety of labor optimization processes. While these initiatives have been designed to improve the results of our operations, they are based on our management's assumptions in light of the currently available information and cannot guarantee future performance. Our future performance is subject to uncertainties and other risk factors that could have a negative impact on our business and cause actual results to differ materially from our expectations. Refer to Part II. - Item 1A for a description of our Risk Factors. The Great Atlantic & Pacific Tea Company, Inc. Management's Discussion and Analysis - Continued This year marks our Company's historic 150th anniversary. We believe that our strong strategic position in the Northeast, our successful format strategy and our resolve to implement strategic changes, positions us to efRead the The complete Report
The Great Atlantic & Pacific Tea Company Inc. is engaged in the retail food business. The Company operated 1014 stores averaging 34200 square feet per store as of February 24 1996. In addition the Company began franchising its Canadian Food Basics stores in fiscal 1995. As of February 24 1996 the Company had 7 Food Basics Franchisee stores in Canada averaging 25400 square feet per store. The Company is one of the ten largest retail food chains in the United States and that it had the largest market share in metropolitan New York and Detroit. The Great Atlantic & Pacific Tea Company has a market cap of $491.4 million; its shares were traded at around $9.78 with and P/S ratio of 51.6.
