2nd UPDATE: Great A&P Names New CEO, Reports Wider 1Q Loss
July 23 2010 - 3:46PM
Dow Jones News
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 on
weakening sales and margins.
The Montvale, N.J., company named Sam Martin president and chief
executive, replacing Ron Marshall, who had joined A&P in
January. Martin assumes a company dealing with declining sales, the
need for more liquidity and losses in 33 of the past 40 quarters,
according to CapitalIQ.
In addition, A&P shares hit a multidecade low Friday,
falling as much as 36% to $2.50. The stock recently traded at
$2.61, down 33%.
"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," A&P
Executive Chairman Christian Haub said.
A&P also swung to a working capital deficit, where current
assets of $846 million are less than current liabilities of $897
million. Working capital deficits can signal impending liquidity
concerns.
The company said it is looking to augment its liquidity. A&P
has operating losses and $155.3 million of convertible notes coming
due in June 2011, but only $171 million in cash at June 19. The
company plans to raise capital through its bank facility, by using
sale-leaseback transactions with the real estate it owns, and
selling assets it considers non-core.
In addition to improving its balance sheet, A&P also seeks
to continue to improve customer experience while lowering
structural and operating costs. "There's a lot more we can do with
assortments, with customer service, with in-stock, and all of those
things," Haub said.
Martin, who left his post as chief operating officer at No. 3
office-supply chain OfficeMax Inc. (OMX) earlier this week, was
unavailable for comment Friday. Martin has been described as a good
store operator who doesn't have an ego but isn't a big-picture
thinker. He had been wooed by several retailers, including discount
chains, an industry recruiter said.
Before joining OfficeMax in 2007, Martin was a senior executive
at Wild Oats until its acquisition by Whole Foods Market Inc.
(WFMI). Wild Oats' largest shareholder at the time was supermarket
magnate Ron Burkle's Yucaipa Cos., which also is a large investor
in A&P. Yucaipa officials, including Burkle, weren't
immediately available for comment.
Martin becomes the fourth A&P CEO in less than a year. The
grocery chain fired Eric Claus in October, and Haub became interim
CEO until Marshall arrived in January. A&P--which operates
A&P stores as well as Pathmark, Waldbaum and Food Emporium,
among other banners--has 429 stores in eight states, mostly in the
Northeast.
As many sectors have seen improvement 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.
In the first quarter ended June 19, A&P reported a loss of
$122.6 million, or $4.83 a share, compared with a prior-year loss
of $65.2 million, or $3.64 a share. Revenue decreased 8% to $2.56
billion, and same-store sales fell 7.2%.
Analysts polled by Thomson Reuters had estimated a loss of 70
cents a share on revenue of $2.6 billion.
Haub said that so far in the second quarter, "trends have
improved slightly," and that A&P isn't "experiencing any
further deterioration."
Martin's base salary will be at least $1 million, according to a
company filing Friday with the Securities and Exchange Commission,
which is at least $250,000 more than Marshall's base salary last
year. Martin also will get 1.5 million restricted A&P shares
and stock options, plus a $276,000 payment in February if he
remains CEO or leaves under certain circumstances.
-By Maxwell Murphy, Dow Jones Newswires; 212-416-2171;
maxwell.murphy@dowjones.com
(Joann Lublin and Jodi Xu contributed to this article.)
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