Great Atlantic & Pacific Tea Co. (GAP) named its second chief executive in fewer than six months as the troubled supermarket operator reported a wider fiscal first-quarter loss with both sales and margins weakening.

A&P stock lost almost a third of its value in early Friday trading, falling at one point to $2.73 per share, the lowest A&P, which celebrated its sesquicentennial last year, has seen its stock price in at least 25 years.

Revenue fell more than 7%, adjusted earnings fell nearly 77% and its loss from continuing operations doubled from the year-earlier period. Further, it swung to a working capital deficit, where current assets are less than current liabilities, a condition that can raise liquidity concerns. Its gross margin slipped slightly to 29.8% while its operating, general and administrative costs rose nearly two percentage points to 32%.

Sam Martin, who left his post as chief operating officer at No. 3 office-supply chain OfficeMax Inc. (OMX) earlier this week, was named A&P's president and chief executive. He replaces Ron Marshall, who left struggling book chain Borders Group Inc. (BGP) in late January after a one-year stint, to help A&P, which has reported a net loss for eight straight quarters, fix itself.

Martin will now oversee the turnaround A&P announced along with results and his appointment, its latest effort to make money at the A&P, Pathmark, Waldbaum's, Food Emporiums and other supermarket banners it owns.

A&P, a fraction of the size it was when it was the nation's largest food retailer in the mid-1900s, operates most of its stores in the metropolitan New York City area--perhaps the most cut-throat supermarket battleground in North America. Its struggles aren't new, and it has posted a net loss in 33 of the past 40 quarters, according to CapitalIQ.

Despite the working capital deficit and just $171 million in cash at June 19, A&P said it had first-quarter liquidity of $253 million, and is taking steps to "augment" that. In addition to improving customer experience while lowering structural and operating costs, A&P is looking at raising capital, including through its bank facility, by using sale-leaseback transactions with the real estate it owns and through the sale of assets it considers non-core.

Prior to joining OfficeMax in 2007, Martin was an executive at Wild Oats until its acquisition by Whole Foods Market Inc. (WFMI), and before that held positions with retailer Shopko Stores, toy merchant Toys 'R' Us and supermarket Fred Meyer, now owned by Kroger Co. (KR).

Marshall is credited for improving Borders' financial health and paring its debt load. He joined Borders from the private equity firm he founded several years ago, and prior to that he was the CEO of Nash Finch Co. (NAFC), a $5 billion food distributor. He also was the chief financial officer of Pathmark in the late 1990s.

Marshall, reached by telephone late Thursday, declined comment on his short stay at A&P. Language in the A&P press release indicates it was the company's decision, and analyst Karen Short at BMO Capital Markets said Marshall "has a reputation for being abrasive," but "he gets the job done."

A&P Executive Chairman Christian Haub has been said to be difficult to work with, and as A&P's 2007 Pathmark acquisition continued to weigh on performance, he replaced former CEO Eric Claus with himself a few months before hiring Marshall. Haub is the scion of the family that controls Germany's Tengelmann grocery empire, which bought a controlling interest in A&P decades ago and has little to show for it.

Haub said Friday, "Although we are clearly disappointed with our performance in the first quarter, we are confident that we now have the right leadership in place to drive this operational and revenue-driven turnaround effort and make A&P a great company again."

Another large investor is supermarket magnate Ron Burkle's Yucaipa Cos. Burkle perhaps took a shine to Martin as Wild Oats' largest shareholder at the time it was acquired. A&P and Yucaipa weren't immediately available for comment.

As many sectors have seen improvement since this year, the supermarket business has lagged as customers changed their shopping habits due to the recession. Supermarket operators have been cutting prices to attract consumers and analysts believe the change might be longstanding.

For the quarter ended June 19, the operator of A&P, Waldbaum's, the Food Emporium and other supermarket chains reported a loss of $122.6 million, or $4.83 cents a share, compared with a prior-year loss of $65.2 million, or $3.64 a share. Revenue decreased to $2.56 billion from $2.79 billion and same-store sales decreased 7.2%.

Analysts polled by Thomson Reuters most recently estimated a loss of 70 cents a share and $2.6 billion in revenue from its 429 stores in eight states.

Standard & Poor's Ratings Services in June downgraded New Jersey-based A&P's junk ratings on the company to highly speculative territory, citing the supermarket chain's refinancing risk.

-By Maxwell Murphy, Dow Jones Newswires; 212-416-2171; maxwell.murphy@dowjones.com

   (Jodi Xu and Tess Stynes contributed to this piece.)
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