CORRECT: Great A&P Names New CEO, Reports Wider 1Q Loss

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, the same base salary as in Marshall's A&P contract. 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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