Trade
APP.com. David P. Wills. The Great Atlantic & Pacific Tea Co., at one time the nation's largest grocer but now the embattled parent company of A&P and Pathmark, has filed for Chapter 11 bankruptcy protection, done in by more nimble competitors, warehouse clubs and Walmart.
The filing, made on Sunday, will lead to an operational and financial restructuring at A&P, the company said. It comes after the Montvale-based chain installed a new executive team, cut expenses, tried unsuccessfully to raise money and sold or closed 32 stores, including its Pathmark store in Marlboro, part of a failed attempt at a turnaround.
The company listed $2.5 billion in assets and $3.2 billion in liabilities, according to court papers.
It was "difficult but necessary," said Sam Martin, A&P president and chief executive officer, in a statement Sunday. "While we have made substantial progress on the operational and merchandising aspects of our turnaround plan, we concluded that we could not complete our turnaround without availing ourselves of Chapter 11."
All of its stores will remain open and fully staffed and stocked, the company said. It has arranged $800 million in financing to pay local suppliers, vendors and employees.
With 395 stores in eight states and Washington, D. C., A&P has a sizable presence at the Jersey Shore, listing 10 A&P supermarkets, six Pathmark stores and one Super Fresh in Monmouth and Ocean counties.
The filing is a low note for one of the country's oldest grocers. Founded in 1859 and named the Great American Tea Co. before its name changed to The Great Atlantic & Pacific Tea Co. in 1869, it grew to 15,737 small stores and more than a $1 billion in sales by the 1930s.
It later consolidated into larger supermarkets and has, over the years, shrunk considerably. In 1979, the Tengelmann Group of Germanybecame its majority shareholder.
The company has struggled for several years. "The significant economic downturn in recent years has created one of the most difficult operating environments for businesses in generations," Brace said. "A&P, like many supermarket operators, continues to cope with the recent economic decline and reduced customer spending while running on narrow profit margins and facing intense competition."
Besides supermarket chains such as ShopRite and Wegmans, A&P saw a second competitive front from discount stores such as Target, Dollar Tree and Walmart, as well as warehouse clubs like Costco and BJ's Wholesale Club.
Supermarket analyst Bill Bishop cited poor leadership coupled with tough times for A&P's troubles. "There is less spending around as a result of the economy, and there is more competition," said Bishop, chairman of Willard Bishop, a consulting firm in Barrington, Ill."It's in effect a musical chairs where the weakest person is the one that loses, and that is what we've got here."
Whatever the outcome of the Chapter 11 proceedings, A&P will not look the same as it does now. For instance, it will likely have far fewer stores, Bishop said. "It'll be a vague shadow of what Great Atlantic & Pacific Tea Co. is." But he doesn't see other supermarket chains rushing in to fill A&P's place. The area already has strong retailers like ShopRite and Wegmans, he said.
The opportunity will be for niche players, such as Whole Foods or other opportunistic smaller companies, not large supermarket chains like Cincinnati-based Kroger. "Over the last 10 years, the amount of business that has been done by traditional supermarkets has continued to shrink and that will continue . . . as other types of retailers take hold," Bishop said.
Article: http://www.app.com/article/20101213/BUSINESS/12130339/A-P-s-Chapter-11-b...
