MONTVALE, N.J. — A&P remains bullish on the prospects for its Food Basics hard-discount banner, despite closing two of its 11 locations last month.
The retailer here confirmed closures of Food Basics stores in Dumont, N.J., and Glassboro, N.J. Lauren LaBruno, a spokeswoman for the chain, confirmed — and later retracted — plans to close a third location in Wallington, N.J., citing “new opportunities” there. LaBruno also said A&P had closed Super-Fresh locations in Newark, Del., and Bristol, Pa., and a Food Emporium location in Great Neck, N.Y., in recent weeks.
“These stores have been underperformers for quite some time, and despite the best efforts of our management and employees and our increased competitive and promotional programs, these stores were not able to generate satisfactory operating results,” LaBruno told SN.
While the Food Basics closures came as a minor surprise to some observers who have often heard A&P management laud the performance of its fledging discount banner, these same observes noted that being able to churn poor performers from the portfolio was a sign of strength. With the recent addition of the Pathmark banner, more closures are in fact likely.
“They've never been able to cull their store base of the weaker stores, because they needed the top line to leverage their fixed costs,” said Karen Short, an analyst for Freidman Billings Ramsey, New York. “Now that's not quite the case, since they obviously have a much larger revenue base.”
Though A&P declined to comment on its plans for possible store closures related to the integration of Pathmark, one source estimated the combined the companies have as many as two dozen markets where the company could benefit by closing one location. Those spots include East Brunswick and Wall, N.J.
A&P officials thus far have steadfastly maintained that the A&P and Pathmark banners — and Food Basics for that matter — serve distinct market segments that do not directly compete. They noted that a new A&P fresh store in West New York, N.J., had almost no impact on a neighboring Pathmark, but instead battled for sales with a nearby Whole Foods.
Officials of A&P have spoken highly of Food Basics, which the company envisions as a conversion option for conventional stores serving lower-income areas, as well as a low-cost expansion vehicle. Eric Claus, chief executive officer of A&P, in an October conference call described the performance of the stores as “astounding” in their ability to reverse trends at stores that were formerly big money-losers for A&P. Reviewing the most recent quarterly results in January, Claus said Food Basics turned its third consecutive quarter of improved bottom-line performance.
“It's doing better,” Perry Caicco, an analyst with CIBC World Markets, Toronto, told SN last week. “It's still obviously not the most profitable thing they have, but it's been doing better.”