NEW YORK -- A&P could convert up to 20% of its 400 conventional U.S. store base to the Food Basics format within three to four years, Mitchell Goldstein, senior vice president and chief financial officer, told an investors conference here.
as converted 25 U.S. stores to Food Basics in the last year: half in the New York-Philadelphia market and half in the Detroit-Toledo, Ohio, area, Goldstein said. A&P has been operating the discount format in Canada for 10 years, where 100 of its 240 stores carry the Food Basics banner, he added.
Speaking at the 4th annual Goldman Sachs Small-Cap Consumer-Retail Conference, Goldstein said A&P is opening 30 to 35 Food Basics a year in Canada, "so we're confident our organization can do what it needs to do to make sure the model matures so we hit a home run with each conversion, and our plan for the U.S. is to proceed slowly.
"What we've found in Canada is the discount model has become attractive to a wider audience over time. We hope it will self-perpetuate itself in the U.S. as people become more aware of it."
With Brian Piwek, who once headed A&P's Canadian operation, overseeing U.S. stores, "we have someone who understands how the discount business works," Bill Moss, vice president and treasurer, pointed out.
Goldstein said converting a conventional A&P to a Food Basics involves lowering the store's gross margin target from 30% to 17% to 18%, and labor costs from 15% to 16% down to 5% to 7%.
Asked about the success of A&P's effort to reposition the Michigan-based Farmer Jack chain with a stronger fresh image, Goldstein said, "We've seen a steady improvement in sales over the past year, but it's a long-term recovery, and we're hopeful we'll see ongoing improvements over time."
