MONTVALE, N.J. — Few companies in food retailing are likely to face as many challenges this year as A&P, and the eyes of the industry will be on Sam Martin.
Martin is the chief executive officer appointed by A&P last summer to take the reins at a company reeling from a severe slowdown in sales, heavy losses, mounting debt and high costs. Shortly before year-end, the retailer filed for Chapter 11 bankruptcy protection.
While the events in bankruptcy court may ultimately decide the fate of A&P, a turnaround at the store level will be a vital part of any outcome. Martin upon his appointment last year detailed a four-point plan for a “revenue-driven turnaround,” which sought to raise money through the sale of non-core options and sale-leasebacks, while lowering structural operating costs. Operationally, the turnaround sought to improve the value proposition for shoppers and build loyalty and customer experience behind strong store-brand identities.
“I firmly believe that this turnaround will strengthen A&P's operating foundation and improve our performance,” he said upon taking the job last year. “I have faced similar situations in my career and have successfully navigated through them.”
Martin has more than 30 years of management experience in the food retail industry with increasing responsibilities encompassing operations, merchandising and supply chain. Prior to joining A&P, Martin served as chief operating officer at office supply firm OfficeMax, Naperville, Ill.
At OfficeMax, Martin was responsible for domestic and international contract and retail merchandising operations, supply chain and communications. Sources said Martin helped to distinguish the chain from competitor Office Depot, and lay the groundwork for a five-year turnaround plan that seeks to transform the company from a traditional office supply superstore and supplier to an office effectiveness and efficiency solutions company.
Prior to that, Martin was appointed as chief operating officer of Wild Oats Markets — a position he held for a little more than a year before the natural-food retailer merged with Whole Foods Market. He was also a former executive with ShopKo and Toys “R” Us, and spent 24 years at Fred Meyer.
A&P's challenges will require Martin to make some bold and difficult decisions, observers said. One analyst who asked not to be identified said A&P could close dozens of stores and still be left with a store base requiring considerable investment to match the performance of its peers.
“I could see them closing up to 100 stores, and in order to keep those other 300 stores open and running and competitive, they would have to spend $600 million to $900 million,” the analyst said. “Just look at how much other companies coming out of bankruptcy have spent, like Winn-Dixie. Nobody will shop at a dirty and dark store.”
Others have pointed to challenges in the supply chain, ranging from an unfavorable supply contract to in-stock issues at stores. The latter has been at the root of customer defections, according to Burt P. Flickinger III, managing director of Strategic Research Group, New York.
“Sam Martin's biggest challenge is to fix the in-stocks and try to get shoppers back who left because of the tremendous amount of out-of-stocks at the stores during 2009 and 2010, both on promoted products and regular products,” said Flickinger. “Customer counts have continued to drop as the out-of-stocks were pronounced as compared to key competitors.”
A&P has identified changes to its supply agreements a key aspect of its Chapter 11 proceedings. Last week, for example, the company said it would shift delivery services for Pathmark to C&S Wholesale Grocers to cut costs.
