A&P's Haub Outlines Growth Plans at CIBC Conference

MARCH 02, 2006 -- MONTVALE, N.J. -- Christian Haub, executive chairman of the board of the Great Atlantic & Pacific Tea Co., painted the picture of a conventional supermarket chain in a determined fight to reinvent itself--and even floated the possibility of consolidation with a local competitor--during a presentation yesterday at the CIBC World Markets Ninth Annual Retail Conference in Toronto.

Haub said a major plank in his company's operating strategy is to regroup under three distinctive formats: Gourmet, discount Food Basics, and perishables-intensive Fresh Markets. A&P, based here, projects that by 2008 it will have 24 Gourmet stores, 108 Food Basics stores, 170 Fresh stores, and just 118 conventional stores for a total of 420 units. As it stands now the chain consists of 407 units: 11 Food Basics, 30 Fresh Stores, and 366 conventional stores. These changes are in line with the company's goal of upgrading 70 percent of its stores to one of its three new formats.

Additional elements of A&P re-engineering plan are:

--Improve store operations by implementing operations and merchandising standards, focusing field and store management, and driving top-line sales; and reduce labor costs by cutting overtime spend and premium hours, and bringing down the productive labor rate.

--Drive sales through merchandising and marketing vehicles including price reductions, a price-freeze program, and weekly auctions.

--Realize cost reductions through such vehicles as an agreement with Keene, N.H.-based wholesaler C&S, which will result in $40 million of annualized savings, beginning in Fiscal 2006.

Haub said A&P's objectives for 2006 through 2008 include achieving the No. 1 or No. 2 position in each market, and increasing sales per square foot in all store formats.

He cited a strong management team, focused capital spending on the three formats, and fresh training and resources as among the factors that would be instrumental in A&P's attainment of its objectives.

Of perhaps particular interest to his audience in Canada, Haub also noted that the integration of A&P Canada, acquired last July by Metro, in which A&P holds a 16 percent equity ownership, was proceeding on track and "realizing significant synergies."

Haub further raised as future issues for the company consolidation in the Northeastern United States, which he said the company was gearing up to participate in, and the expansion of Food Basics to other markets once it has achieved the desired success in the Northeast, as well as the perennial specter of Wal-Mart, which A&P hopes to stave off in its core market through the differentiation point of its Fresh stores and its Food Basics concept. He concluded that with a strong balance sheet and a solid foundation for turnaround now in place, A&P was poised to "grow [its] business and to take advantage of future strategic opportunities."

During a brief Q&A session following the presentation, Haub noted that, as retail analysts such as Perry Caicco of CIBC World Markets have speculated, consolidation with fellow Northeastern supermarket chain Pathmark would be a good fit "on a strategic basis," adding that the two companies would "have to see how it can be put together."

A&P operates 407 stores in nine states and the District of Columbia under the following banners: A&P, Waldbaum's, The Food Emporium, Super Foodmart, Super Fresh, Farmer Jack, Sav-A-Center, and Food Basics.
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