retail news in context, analysis with attitude

The Great Atlantic & Pacific Tea Co. (A&P) yesterday filed for Chapter 11 bankruptcy with plans "to sell or close its remaining stores," according to the Wall Street Journal story. It did so "just three years after emerging from a previous trip through bankruptcy," and after years of mismanagement and misjudgments that seemed to make it less competitive with every decision.

"A&P, which has about 28,500 employees, said it has so far found bidders for 120 of its 296 grocery stores, and will continue to seek buyers for many of the rest," the Journal writes. "It also plans to close 25 underperforming stores."

The story goes on to report that "A&P said it has existing bidders for its 120 stores including Acme Markets Inc., Stop & Shop Supermarket Co. and Key Food Stores Co-operative Inc. for an aggregate purchase price of almost $600 million. Ahold NV, the Dutch owner of Stop & Shop, said Monday it plans to acquire 25 A&P stores in the Greater New York area for $146 million."

The Journal goes on: "A&P exited its last chapter 11 in the hands of investors including supermarket mogul Ron Burkle, whose Yucaipa Cos. led a $490 million financing package that the company called its only alternative to full liquidation. A&P had hoped that bankruptcy would better position it to compete. It renegotiated labor costs with unions, and adjusted food and supply-chain costs with vendors. It also planned to remodel its outdated stores and modernize its technology. But sales fell 6% to $5.5 billion in the latest fiscal year after a 7.6% drop the year before."

The New York Times writes that "none of the bidders have agreed to assume the employees’ collective bargaining agreements and pensions, A&P said in its court filings. The company said it was 'committed to engaging in direct and comprehensive negotiations” with its unions'."

A&P CEO Paul Hertz described the moves as the best way to "preserve as many jobs as possible" and "maximize value for all stakeholders ... While the decision to close some stores is always difficult, these actions will enable the company to refocus its efforts to ensure the vast majority of A&P stores continue operating under new owners as a result of the court-supervised process."
KC's View:
Can anyone actually be surprised by this? A&P has been around a long time, sure, but much of its recent past has seemed marked by an inability not just to compete, but to even recognize that companies top-heavy with administration, light on strategy and tactics, and with no apparent sense of how both the marketplace and consumers have changed, have little chance of surviving.

I just hope that whoever buys all these stores, they are able to bring some real innovative and disruptive thinking to the marketplace, and an ability to implement on promises made to consumers.

The A&P story should serve as a warning to every retailer that no matter how big or ubiquitous you may be, you are only as effective as you are today and tomorrow.

Dead company walking? Hell, this dead company is crawling toward an ignominious end.