MONTVALE, N.J. -- A&P here said last week it had a profitable third quarter excluding one-time charges, a development that could lead to a break-even year, demonstrating concretely the positive effects of the company's long-term restructuring efforts.
After charges relating to A&P's previously announced intention to close 39 underperforming stores, the company posted a net loss of $92.4 million for the 12-week quarter, ending Dec. 1.
However, Christian Haub, chief executive officer, said A&P is certain it will cycle through these charges by the conclusion of fiscal 2001, ending Feb. 23. Haub also said that debt restructuring will help the company cut operating costs in the future.
"We recently strengthened the company's financial flexibility through the issuance of new 10-year notes used to retire other debt. Our previously announced asset disposition program is on schedule, and we expect to have a majority of the 39 stores closed by fiscal year end. We are looking to break even by year's end, even with a profitable third quarter," Haub said in a conference call.
Beth Culligan, chief operating officer, specified that by the end of fiscal 2001, 30 of the 39 stores will be closed. Culligan also said the company plans to open a total of 15 new stores in fiscal 2001, and is maintaining an aggressive store-renovation program.
In addition to strengthening the store base, Culligan said A&P plans to continue its cost-cutting measures. Culligan said the company expects zero overhead growth in 2002.
Mitch Goldstein, senior vice president and treasurer, said the company is continuing to cut costs by reducing its capital expenditures. Goldstein said capital expenditures were $41 million lower in the quarter compared to the previous third quarter. Goldstein also said that after the issuing of the 10-year notes, the company has completed the overhaul of its debt burden.
"We now have in place the right financing for A&P to move forward," Goldstein said.
Jack Murphy, an equity analyst with Credit Suisse First Boston, New York, told SN he feels that the results indicate A&P is headed in the right direction.
"I think the quarter was pretty good. Most charges were non-cash, which is not a major problem from an earnings standpoint. I also don't see a lot of evidence of a trend towards increased competition from a promotional standpoint. The earnings improvements are more based on fixing internal problems, they are not sales driven, and I think the company is on track," Murphy said.
Mark Husson, an equity analyst with Merrill Lynch, New York, said A&P's gains are another step in its lengthy recovery efforts.
"I think the results are better than the investor reaction may suggest," he said, referring to a 50-cent drop in A&P's stock the morning after the results were announced.
"Though sales for December were weaker than their usual trend, it was a warm month with no snowstorms which usually leads to stockpiling," Husson added. "I still believe it is a company operating in markets insulated against supercenter and major chain competition for the most part."
For the quarter, sales were up 4% to $2.5 billion. Same-store sales were up 3.1%, marking 14 consecutive weeks of same-store sales gains. The company posted a net loss of $2.41 per share, compared with a net loss of 37 cents per share in the previous third quarter.
Year-to-date, sales were up 5% to $8 billion, and comparable-store sales rose 3.2%. The company experienced a net loss of $102.8 million, compared to a net loss of $14.3 million in the comparable period last year, and a loss of $2.68 per share, compared with a loss of 37 cents in the comparable period last year.
