A&P to 'Refresh' Pathmark Units, Merge Store Brand Programs

MONTVALE, N.J. - Fresh from a completed merger that its execs said has made their company a player of consequence in a "hot" Northeast market, A&P execs said yesterday they are is taking advantage of their purchase of ex-rival Pathmark to "refresh" the latter's "Plain Jane" stores and create a new combined private label program.

The A&P execs talked about the Pathmark integration during a conference call about its third quarter results, which saw sales for the 12 weeks ended Dec. 1, 2007 of $1.3 billion, vs. $1.2 billion last year. Comparable-store sales grew 3.1 percent.

Third-quarter net income from continuing operations was $73.1 million, or $1.73 per diluted share, compared with income of $32.3 million, or 77 cents per diluted share, in the year-ago period, the chain said.

Sales for the 40 weeks year to date were $4.2 billion, vs. $4.1 billion last year. Comparable-store sales went up 2.3 percent. Net income from continuing operations for year to date 2007 was $131.5 million, or $3.11 per diluted share, compared with income of $23.7 million, or 57 cents per diluted share, for 2006.

Executive chairman Christian Haub said the results were proof of the retailer's "solid progress" in integrating the Pathmark merger. During the conference call, president and c.e.o. Eric Claus referred to A&P as "now truly a Northeast company" since its acquisition of Pathmark just after the close of the quarter, on Dec. 3. "The [Northeast] market is hot, and we're a big part of that," he added.

Among the expected fruits of the of the merger, according to Claus: a new combined privatge label program expected to integrate in the first part of fiscal 2008, and a cost-efficient "store refresh program" for Pathmark units that will enhance fresh departments while hewing to a price-impact format.

Although he noted that the Pathmark stores weren't in as bad condition as the pre-renovation A&P locations a few years ago, Claus characterized them "a little Plain Jane," explaining that they were in need of a facelift. Although the exact number of stores to be remodeled hasn't been determined yet, Claus said he hoped all of them would be revamped in the next three years.

"With operations focused exclusively in the Northeast, and the addition of Pathmark establishing our market leadership in metropolitan New York and improving our Mid-Atlantic presence, our strategic transformation is now completed, and our comprehensive plan for the integration of the Pathmark business over the next 18 to 24 months is well underway," noted Haub in a statement. "The achievement of all financial synergies through that process, the addition of Pathmark's substantial sales and customer base, and the ongoing positive momentum of the A&P business now positions our company to achieve breakthrough performance and sustainable profitability."

C.f.o. Brenda Galgano said during the call that the integration process of the two companies was "on track," with A&P poised to achieve $150 million in synergies.

Also upcoming: two more stores along the lines of the Park Ridge, N.J. fresh prototype, and the roll out of an additional 25 Starbucks units in stores, joining the initial four units that have already opened.

A&P operates 455 stores in eight states and the District of Columbia under the following banners: A&P, Pathmark, Waldbaum's, The Food Emporium, Super Foodmart, Super Fresh, and Food Basics.
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