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A&P Reports Wider Loss in 3Q

MONTVALE, N.J. - Shares of The Great Atlantic & Pacific Tea Co. fell on Friday morning, but picked up in late-day trading after the company said impairment and reorganization charges pushed fiscal third-quarter results to a deeper-than-expected loss.

During a conference call with investors, chairman and c.e.o. Christian Haub warned that the competitive pressures the chain is experiencing in the U.S. are expected to continue.

Montvale, N.J.-based A&P reported a loss of $73 million, or $1.89 per share -- triple last year's loss of $25.3 million, or 66 cents per share. Shares rose 23 cents, or 2.6 percent, to close at $9.16 Friday on the New York Stock Exchange.

Total sales at A&P, Waldbaum, Food Emporium, and other stores were up modestly to $2.52 billion from $2.48 billion a year ago. Comparable-store sales fell 1 percent.

"Although we remained unprofitable overall, we maintained market share in a difficult sales environment, while achieving our second consecutive year-over-year increase in operating results," Haub said in the earnings release.

A&P said the quarter's results were hit by $40 million in charges: $35 million related to impairment charges on assets in its Midwest operations, though it did not detail what they were; $1 million for costs related to a settlement with Canadian Food Basics; and $4 million related to the reorganization announced Dec. 9.

The charges were offset by a $3 million reversal of restructuring costs taken last year, resulting in a total $37 million in charges for the third quarter.

Excluding these non-operating items, EBITDA for the quarter was $48 million as compared to $42 million for the same period last year.

Haub attributed the positive EBITDA trend to three factors: ongoing success in Canada, merchandising and operations improvements in the U.S., and rigorous management of expenses, capital spending, and liquidity.

Haub noted in a statement that the company’s Canadian operations were profitable thanks to strong results from fresh food marketing initiatives, and an improving trend in its Food Basics discount operations. A&P completed the acquisition of 24 previously franchised Canadian Food Basics stores during the quarter. Haub said the company looks forward to further improving its discount business in Canada and in the U.S.

To accelerate a return to profitability, A&P has initiated significant organizational changes in the U.S., including a management consolidation announced on Nov. 4, and the subsequent reorganization of U.S. administration, support services, and operating staff announced on Dec. 9. "This will strengthen central management control, substantially reduce costs, and drive the implementation of our Fresh and Discount retail strategies," noted Haub.

"Our near-term outlook remains conservative as we expect no major upturn in consumer confidence and spending in the U.S., and therefore no easing of competitive pressures. We will continue to manage costs, investment and liquidity closely, maintain our successful growth course in Canada, and implement our U.S. retail strategies, as the benefits of our leaner organization and cost structure materialize," Haub said.

A&P operates 650 stores in 10 states, the District of Columbia, and Ontario, Canada under the following trade names: 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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