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A&P Reorganization Targets 'Significant Cost Reductions, Improved Execution'

MONTVALE, N.J. -- The Great Atlantic & Pacific Tea Company, Inc. initiated what it terms the next step of a reorganization that began in early November to reduce overhead costs by about $50 million in fiscal 2005, and $25 million in fiscal 2006.

The company did not specify what measures it was taking to lower operating expenses, and a spokesman did not return a call seeking further information. Reports circulated, however, claiming middle managers were being let go.

In addition to substantially improving efficiency, A&P said the reorganization will strengthen senior management control, focus local banners strictly on operating and customer service execution, and promote the rollout of its fresh and discount retail strategies.

The chain said it expects to incur cash transition charges of up to $10 million over the next year as the changes are implemented, and anticipates that the approximately $4 million will be charged against third quarter earnings, which are scheduled to be reported on January 7.

The Newark Star-Ledger on Thursday quoted an official from Little Falls, N.J.-based United Food and Commercial Workers Local 464A -- which represents about 8,000 A&P workers, in addition to retail personnel at Shop Rite, Foodtown, Kings, Pathmark, Waldbaum’s, Food Emporium, Gristede's, Stop & Shop, and others -- as saying that an unknown number of middle management employees had been laid off. No UFCW members were reportedly let go.

In a memorandum released last month, Christian Haub, chairman and c.e.o., had said A&P would embark on a reorganization, which would include a shuffling of executives.

In the latest statement, Haub said, "Over the past two years, we have stabilized our U.S. operations and maintained the success of A&P Canada. We must now accelerate our improvement to reach and surpass breakeven performance as rapidly as possible, and drive the execution of our promising fresh market and discount retail strategies throughout our store network. These difficult but necessary actions, aligned with the unification of our U.S. management organization, will give us the cost structure and capability to execute those strategies profitably."

A&P has lost $447.5 million since 2002. In the past six years, the chain has closed stores, warehouses and exited several markets around the country. It has also let go more than 5,100 workers and paid out more than $64 million in severance during that period, according to regulatory filings.

The Star-Ledger said the company employs about 74,000 workers, about 11 percent of which are not represented by unions.

Founded in 1859, A&P, one of the nation's first supermarket chains, operates 649 stores in 10 states, the District of Columbia and Ontario, Canada under 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.

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