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Striving for market leadership.

Talk about turnarounds. In just three years. A&P has transformed itself from a retailing basket case into one of the most sought after supermarket stocks in the country. Solidly profitable and restructured with a sound basis for long-term growth, the Montvale, N.J.-based company is now actively pursuing its former status as an industry leader.

In the fiscal year that ended last February, A&P racked up earnings of $47.6 million on sales of $5.2 billion, reflecting hearty increases of 52% and 13%, respectively, over the totals for fiscal 1982. Any doubts that wo consecutive years of profitability were a fluke were erased in the first quarter this year, as earnings climbed 22% over the comparable period last year. This past summer, A&P's bottom line got more good news by way of a court decision involving $275 million in excess pension funds.

Since fiscal 1981, the year A&P suffered an operating loss of close to a quarter of a billion dollars, roughly 500 stores have been shuttered or sold. No longer burdened with these profit-draining units, as well as its money-losing processing facilities, the company entered 1984 lean and mean and financially revitalized. Today, A&P is in the second leg of a massive rebuilding program that calls for expansion in existing markets and penetration into new operating regions.

"We will continue to strive, either through internal marketing improvements or acquisitions, to increase sales," President James Wood told a jubilant audience of shareholders recently. A major step in that direction took place last year when the company puchased Wisconsin-based Kohl's Food Stores, enabling A&P to reenter a marketplace that it had abandoned several years earlier.

It was a lack of control of labor costs, of course, that brought A&P to the edge of bankruptcy a few years back. Saddled with a disproportionate number of senior employees, the company's labor to sales ratio has historically run markedly higher than the rest of the indutry. Unique contract agreements, along with better overall control of labor costs, has brought rates much closer to the average.

While keeping its options open for future expansion into new marketing areas, A&P is focusing most of its attention on increasing its market share in existing markets. Currently in the second year of a bold three-year capitl plan, the company expects to spend more than $100 million this year to remodel 125 stores and open more than 40 new units. In 1983, A&P spent just under $80 million for 77 remodels and 36 new stores. The windfall from the pension plan decision is expected to support--and possibly speed up--A&P's capital expenditure program and fuel its acquisition plans.

Currently, A&P operates slightly over 1,000 food stores, a far cry from the 16,000 units that were under its wing back in the 1930s. Three-quarters of the stores--located in 26 states--fly the A&P banner. The company also operates some 57 Super Fresh Food Markets, which are primarily former A&P stores located in Philadelphia, Delaware and southern New Jersey. A&P's Family Center subsidiary operates about two-dozen 55,000-square-foot combination stores in and around Florida. The company also has a warehouse store subsidiary, Super Plus, which has eight units, six in Chicago. The Canadian operation has just over 100 stores. The Kohl's acquisition, expected to add roughly half a billion dollars in sales to the company, rounds out the store count.

Despite the diversity in formats, most of the attention these days is focused on A&P's new superstore prototype, scheduled to open this month in allendale, N.J. while elements of the prototype have already surface in varying respects in a number of remodels this year, the Allendale unit incorporates all of the departments and decor that the company is counting on to symbolize the present--and future--A&P.
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Publication:Progressive Grocer
Date:Oct 1, 1984
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