WHITE SULPHUR SPRINGS, W.Va. -- A&P Co., Montvale, N.J., will soon chalk up four consecutive quarters of same-store sales increases, for the first time this decade.
And, the sales growth signals that the massive efforts aimed at turning the long-lagging company around are paying off, Christian W.E. Haub, president and chief executive officer, said last week.
Haub's assertion came during a session at the Grocery Manufacturers of America executive conference here. "For the first time this decade we've achieved four consecutive quarters of positive comparable-store sales [counting soon-to-be-issued quarterly numbers]," he told the session.
"I think that's an early result of some of the changes we've made, and how we are much more focused on the top line now. We're gaining confidence in our ability to change," he said.
And, he said, change is an imperative for A&P, and change must be sweeping. In a frank assessment of A&P's recent history, Haub acknowledged that A&P has stumbled badly by almost any measure, whether it be store facilities, store cleanliness, out of stocks, buying practices or merchandising. "Looking back at the last 10 years, our performance has declined and it has declined substantially, especially looking at how we have been performing against where the industry has been going.
"Consumers, in the last five years, and probably in the next five years going forward, are getting constantly more demanding," he said. "They always look for better value, better service, and more personalized service. And they have more choice in shopping for food than they ever had before."
But, in the face of that, A&P failed to measure up, he said. "Many of our competitors have been building modern, one-stop shopping supermarkets for most of this decade. A&P only started to focus on the large-store format in the latter part of this decade. So we still have a lot of work to do to bring our store base to a competitive place which will allow us to compete with everybody in the marketplace."
So, the decision was made to renew the store base with a particular emphasis on superstores. In recent time, A&P has opened about 100 new stores, many of them superstores, and plans to open some 175 to 200 superstores in the next three years.
A&P also decided to exit markets in which the chain could never achieve a No. 1 or 2 share position, and to close stores that didn't contribute to that goal. So, the chain recently exited the markets of Richmond, Va., and Atlanta.
"We decided to leave Richmond and Atlanta because we had a market position that was far below those of the two market leaders, and it would have take enormous amounts of capital to try to compete in those markets going forward and to be successful in achieving our strategic objective of being No. 1 or 2 in the market. So it was the right decision for us to leave these markets and reinvest the resources.
"And, we're investing a lot of money in our existing store base. We have a lot of good locations, and a lot of opportunities for enlarging existing stores, and make them equivalent to our new superstores. We will spend altogether, with our new stores, about $1.5 billion over the next few years.
"As we look at the store program, looking at the years of 1998 and 1999, we will change a full one-third of our volume base in 24 months. That counts the stores we will be closing and the new stores we'll be putting in. I think that best demonstrates the magnitude of what we're doing."
And, Haub specified, A&P is ready to make opportunistic acquisitions that could help further the goal of building share in existing markets.
Are these goals worth the investment?
"One statistic I like to look at is that our average sale per customer [chainwide] is significantly below industry average," he said. "But at the 100 or so new stores we've opened over the last three or four years, we are at or above industry average, which is about 50% to 60% above our company average. So it really shows what potential we have once we improve our store base. We do sell a lot more to the customer in the right type of environment."
Haub specified, though, that the right environment calls for more than a modern store. Here are some of the other challenges A&P faces, and how they are being met:
Customer and worker relationships: "We want to exceed customers' expectations. Our opportunity is great because we are starting from a low base. When looking at our customer data, it's pretty obvious that our customer service was not up to snuff. Our operating standards concerning cleanliness and in-stock positions were not necessarily competitive as compared to other chains and other stores in the marketplace.
"We haven't delivered on customer expectations in the past. We now have a great opportunity to exceed their expectations, and then start building on top of that. We want to build a relationship-centered customer-service culture and process. Service is the No. 1 complaint our customers have. We're now involving our people in what could be potential solutions of customer-service problems."
Buying and merchandising: "One of the most fundamental changes we've made at A&P has to do with the buying side of the business. We [previously] incentivised our buyers to bring the most money in [through buying] and not to worry about how we would sell all the product. So we would end up, many times, with buying the wrong product for the wrong reason and stuffing our stores with product that the people in the stores didn't know how to sell.
"Moving away from that, we now incentivise our buyers to focus on those products customers want most."
Inventory management: "We're implementing category-management best practices. We've made a lot of progress in some of our markets like Farmer Jack [in the Midwest] and Canada. Now we can apply some of those successes to the remaining parts of our business.