A&P Still Eyeing Consolidation

NEW YORK -- The Great Atlantic & Pacific Tea Co. is still in the mood to merge in its core Northeast markets, according to Christian Haub, executive chairman of the board, who spoke the Goldman Sachs 13th Annual Global Retailing Conference here.

Haub characterized such an eventuality as "another key to success in the future, especially in the Northeast." He also said the company is "making really good progress" under the stewardship of c.e.o. and president, Eric Claus, and remains steadfast in its commitment to turnaround its business organically, through internal improvements.

Although Haub declined to give specifics on any consolidation plans, he said it was possible that A&P could consolidate in other Northeast markets and then eventually "backfill" into the highly fragmented New York market.

He additionally noted that the company could potentially enter into an agreement to jointly purchase equipment with Montreal-based grocer Metro, which bought the company's Canadian division last year and in which A&P holds a 16 percent share, and said he was "open" to monetizing A&P's investment in Metro.

In addition to consolidation, Haub noted that the retailer's current goals were to achieve leading market share positions, increase its sales per square foot, achieve sustainable profitability by fiscal 2007, and upgrade 70 percent of its stores to one of its three new formats -- fresh, gourmet, or discount -- by 2008.

As well as the fresh format, which the bulk of A&P's stores will convert to and which has provided sales lifts in the "high teens" for already converted units, Haub mentioned that three Food Basics locations would open this weekend, and that the inaugural gourmet store, a Food Emporium "under the bridge on 59th Street" in Manhattan, was slated to open in November.

Additionally, the company plans to roll out a hybrid fresh/discount format for its troubled Farmer Jack banner in the Detroit area, which, Haub conceded, "continues to be a challenging market." In response to an audience question on the ultimate disposition of Farmer Jack in the event of consolidation, however, he said that the company in that case would look to "divest our non-Northeast business."
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