MONTVALE, N.J. -- A&P here last week realigned its management structure to leverage the success of its Canadian division, hoping that leadership from north of the border will revive its struggling U.S. operations.
Analysts said they expected the new head of the U.S. division, Brian Piwek, to ramp up the expansion of the Food Basics limited-assortment format and attempt to re-energize A&P's flagship stores, but they also noted that he has limited capital resources to do so. Analysts and others in the industry speculated that the company might seek to sell all or part of its operations to fund such improvements.
Piwek, a five-year veteran of A&P Canada who has presided over an impressive performance at that division, will hold the titles of president and chief executive officer, A&P U.S. His arrival at the 692-store U.S. division coincided with the departure of one of the industry's highest-ranking female executives, Elizabeth R. Culligan, who the company said left to pursue other interests.
"This was a performance-based decision," said Richard DeSanta, vice president, corporate affairs, A&P. "Given the results over the past year, given the trends, particularly in the U.S., while the Canadian company continues to do very well, the need existed to change the leadership."
Analysts said Piwek's experience is well suited to A&P's needs.
"[The U.S. division] has spent the last three or four years working on systems and distribution, and in the meantime, the store base has deteriorated rapidly," said Perry Caicco, analyst, CIBC World Markets, Toronto. "Most of their stores are in tough urban markets, in bad shape, and Brian Piwek's exact strength is working with that kind of chain."
After joining A&P Canada in 1997 from Overwaitea Foods, Vancouver, British Columbia, Piwek engineered a turnaround of A&P's Canadian operations by converting several of the company's distressed A&P stores into Food Basics. He then sold them to franchisees, and A&P began supplying them as a wholesaler.
In the meantime, he infused the company's Dominion stores with better service, presentation, selection and ambiance to appeal to customers in more upscale areas of metropolitan Toronto. The company now has 232 stores in Canada, including 13 Food Basics operated corporately and another 68 that A&P supplies as a wholesaler.
His efforts have buoyed A&P's financial reports for the past few years. In the 28-week period ended Sept. 7, the Canadian retail division posted income from operations of $28.26 million on sales of $1.02 billion. That compares with a loss from operations of $20.27 million in the U.S. division, which had sales of $4.4 billion during that period.
Bill Chisholm, analyst, Dundee Securities, said he thinks Piwek will aggressively roll out the Food Basics concept in the United States. A&P has opened three of the stores so far and recently announced plans to convert three additional A&P sites in New Jersey.
"I think what Piwek will be doing is pushing that format into the U.S.," said Chisholm. "It's one way of getting costs down and being competitive."
Caicco estimated that the Food Basics stores generate about $250,000 to $300,000 in sales per week with a minimal cost structure because of the small size -- about 25,000 square feet -- and the lack of services. About 30% to 35% of its products are private label, Caicco estimated. Unlike some limited-assortment concepts in the United States, such as Aldi, Caicco said Food Basics distinguishes itself with strong perishables departments.
Succeeding Piwek in Canada is Eric Claus, who most recently was president and chief operating officer of Co-op Atlantic, a wholesaler and retailer based in New Brunswick, Canada. Under the new structure, both Piwek and Claus report directly to Christian Haub, chairman, president and CEO of A&P. Previously, Piwek reported to Culligan.
Although analysts praised Piwek's ability to work with limited resources in reviving the Canadian stores, they said he would face a challenge in the United States because of the company's capital constraints. One option, Caicco suggested, is the sale of the Canadian division.
