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The Great Atlantic & Pacific Tea Co. (A&P) this morning released its first quarter financial results, saying that Q1 sales were $2.9 billion versus $1.7 billion last year. Comparable store sales increased 3.2%, which excludes sales for Pathmark stores acquired in December 2007. Comparable store sales for Pathmark, measured during the same period, increased 3.1%.

According to the statement released by the company, “For the first quarter, excluding non-operating items, adjusted income from operations and adjusted EBITDA were $16 million and $96 million, respectively, and include $22 million of integration synergies. This compares to an adjusted loss from operations of $8 million and adjusted EBITDA of $39 million in last year’s first quarter.”

Eric Claus, president/CEO at A&P, said that “the first quarter of 2008 clearly demonstrates our continuing progression in operating improvement with the achievement of our fourth straight quarter of comparable store sales of over 3%. Further, Pathmark is already achieving positive results with comparable store sales climbing above 3% for the first time in many years. The Company is also well underway with the completion of the Pathmark integration, as many of the planned milestones have been achieved. As of the end of the first quarter, our annualized run-rate of synergies is approximately $100 million.

“This quarter was particularly significant in that we announced an integral step in our strategic transformation to improve market share, sales and sustainable profitability – the conversion of the majority of SuperFresh stores in the Philadelphia market to the recently premiered Price Impact format under the Pathmark Sav-A-Center banner and a number of SuperFresh locations retaining the Fresh format with significant upgrades.”

KC's View:
I had the opportunity to spend about four hours with Eric Claus earlier this week, and we looked at a number of A&P’s stores – among them an A&P Fresh, a price-impact Food Basics, and a newly renovated Pathmark unit.

Now, to be honest, I’ve written some far-from-complimentary things about A&P over the years…but I have to say that I was very impressed with what I saw during our store tours. I especially liked the Food Basics store, which strikes me as a sales machine…in the right locations, with this economy, these things can be an enormous source of profit for A&P.

I also have found through a variety of conversations – both during the store tours and subsequently – that many of the folks at Pathmark are very happy with the way the integration of that chain by A&P has been going. They seem to feel that the management is being responsive and focused, and that there is less bureaucracy to cut through to get things done.

Much of the credit for this goes to Claus, who pretty much everybody says has been a real game-changer at A&P. (Chairman Christian Haub gets a lot of credit for letting Claus do what needed to be done to turn A&P around, by the way.) And I’ll tell you something else – I liked him a lot. He is serious but not reverent, he seems both hard-nosed and compassionate, he isn’t interested in excuses, he is extremely focused on results, and he has a real authenticity when he walks through the stores talking to customers and the people on the ground.

All of this is good news for A&P. The game is just beginning, of course, and much work remains to be done, and there will be no dearth of events and competitors that will challenge the company.

But my sense is that the company is on the right road, headed in the right direction.