A&P Reduces Q3 Loss

"I'm encouraged by the progress our new management team has made in reducing costs, Christian Haub, A&P's executive chairman, told analysts in Friday's webcast. "I'm also encouraged by improving sales trends, especially through the latter stages of Q3, and our results were significantly improved. That's a positive sign that we are on track to achieve our profitability objectives."

The new management team Haub referred to included the late October appointment of Brenda Galgano as SVP/CFO, succeeding Mitchell O. Goldstein, and the appointment in late November of Jennifer MacLeod to the new position of SVP of marketing and communications.

And the quarterly results came on the basis of total US sales for Q3 of $1.58 billion, compared to FY 2004's $1.67 billion, a drop company officials attribute in part to the effects of this past year's hurricanes on the southern US. Total reported Q3 2004 sales of $2.52 billion, meanwhile, included $850 million generated by A&P Canada, which was sold off last summer.

US total comparable store sales rose 1.8% compared to one year earlier. But excluding the New Orleans market, same-store sales decreased by 0.3%, company officials reported. The hurricane season also had an impact on the company's reported Q3 EBITDA of a negative $35 million--that number included charges of $13 million related to store closures in New Orleans related to Hurricane Katrina. Other charges included $19 million tied to Midwest operations exit costs and $15 million in restructuring costs tied to the company's cost reduction initiatives.

For the 40 weeks ended Dec. 3, A&P reported US sales of $5.41 billion compared to $5.61 a year earlier. Total sales fell to $7.13 billion from $8.29 billion, again related to a large extent to the exit of A&P Canada from the company's operating results. Net income for the period was $432 million, or $10.62 per share, compared to a loss of $182 ($4.74 per share), with the proceeds of the sale of A&P Canada--reported as $1.5 billion--largely responsible for that leap.

"I'm proud of our team's execution of cost management, operating and selling strategies in Q3, president/CEO Eric Claus told analysts on Friday. "Our store-level initiatives are clearly resonating with our customers. Although just under way, these practices took hold as the quarter progressed, resulting in sales growth highlighted by a robust holiday sales performance.

"We are pleased with the top-to-bottom line traction achieved so soon," Claus continued. "Going forward, we plan to continue to improve operating results by further reducing costs, while marketing aggressively and investing in our store facilities to bring them to new quality standards."

Besides the A&P brand, the company operates more than 400 stores in nine states and DC under the Waldbaum's, Food Emporium, Super Foodmart, Super Fresh, Farmer Jack, Sav-A-Center and Food Basics flags.