MONTVALE, N.J. — A&P here last week acknowledged that it has scrapped its “Lower Price Project” program, saying the effort to introduce everyday low prices at its A&P, Waldbaums and Super Fresh stores failed to catch on with consumers and subsequently hurt profits.
A&P launched the “Price Project” in the spring of 2010, lowering everyday prices on some 10,000 items in the store in place of previously offered discounts and coupons, and supporting the effort with an advertising campaign starring television host Kelly Ripa. The program was discontinued this June after failing to arrest sales and customer-count declines in stores, the company said in quarterly results filed last week.
A&P has been operating under Chapter 11 bankruptcy protection since December. It is counting on new supply and labor agreements struck during bankruptcy to improve performance, but acknowledged progress on those fronts has been slower than anticipated.
“We have noted that the improvements originally anticipated from our turnaround strategy are taking longer to realize than originally anticipated and has negatively impacted our profitability and cash flows from operations,” the company said in the filing.
A&P reported a loss of $157.2 million on sales of $2.2 billion for the 16-week first quarter that ended June 18. Comparable-store sales declined by 4.2%, with fresh (A&P), Pathmark, and other (Food Basics and wine and spirits) divisions all operating at a loss. The gourmet division, which operates the Food Emporium banner in New York, showed a $6.4 million profit on flat sales of $82.8 million, but gross margins in that division declined.
A&P during the quarter closed 32 underperforming stores in its fresh and Pathmark divisions and announced the exit of 25 additional Super Fresh stores in Maryland and Washington, D.C. Twelve of those stores were subsequently sold with the remaining 13 closed.
Gross margin of $622.2 million decreased 189 basis points to 27.89% of sales for the quarter, due mainly to the failure of the Lower Price Project, the company said.
Fresh stores, which turned a $13.4 million profit in the first quarter a year ago, lost $19.4 million during the quarter as sales fell by $151 million to $1.1 billion, a result of store closures and comp declines. Store closures and lower comps dropped Pathmark's sales by $180.3 million to $931 million. That division showed a $54.3 million loss in the quarter.