A&P CANADA BEGINS STORE CONVERSATIONS

ELLIOT ZWIEBACH

MONTVALE, N.J. -- In an effort to turn its Canadian operations around following "substantial losses," A&P is now enacting a previously announced store conversion plan for Ontario.

The company plans to convert an initial group of 25 stores in Ontario to a new low-cost format called Super Fresh "to more aggressively address competition." The Canadian stores flying the Super Fresh banner will be a cross between a warehouse store and a conventional supermarket, with a lower wage scale, in contrast to the full-service Super Fresh stores A&P operates in the United States, Michael J. Rourke, senior vice president of communications and corporate affairs, told SN. The chain also has three full-service Super Fresh units in Canada that will maintain that name, although they will not adopt the new low-cost format, he added. Five A&P stores in the Greater Toronto area were converted to the Super Fresh banner on Dec. 2, and another 20 in the same region are expected to be converted by the end of A&P's fiscal year on Feb. 25, Rourke said. Additional units may be converted, depending on the success of the first group, he added. While most of the first group of 25 stores currently operate under the A&P name, later conversions may include some Dominion and Miracle Food Mart stores, Rourke said. The conversions were a key element in a labor agreement that A&P reached with the United Food and Commercial Workers' Union last summer.

Prior to the conversion of the five stores, A&P operated 195 units in Canada, including 94 A&Ps, 63 Miracle Food Marts, 35 Dominions and three conventional Super Fresh.

In a press release last week, the chain said its Canadian operations, all located in Ontario, have experienced "substantial losses" as a result of an influx of low-cost competition over the past four years, as well as the effect of a 14-week strike at its Miracle Food Mart division that ended last February. A&P said last week the store conversions will result in an em-

See A&P, Page 45

which the company plans to take a third-quarter charge estimated at $25 million. That charge will cover an unspecified number of buyouts following the conversion of the first group of 25 stores, as well as potential buyouts following two more future conversion moves, Rourke said. He declined to say how many employees had opted to accept a severance package rather than a lower wage rate. A&P said results for the quarter, which ended Dec. 3, will be released between Dec. 15 and 20. A&P said losses in Canada will also result in noncash after-tax charges during the quarter of approximately $160 million, including the writeoff of goodwill, previously recognized tax benefits and certain long-lived assets of its Canadian subsidiary. A&P said the store conversion costs and extraordinary charges will require it to renegotiate relevant covenants with its bank lenders. "The company believes these renegotiations will be achieved on satisfactory terms," the press release noted. Joseph Ronning, a securities analyst with Brown Brothers Harriman & Co., New York, said the decision to convert more stores to a low-price format different from the low-cost Miracle Mart format shows A&P's three-tiered pricing strategy in Canada has proven unsuccessful. "A&P's strategy in Ontario has been to blanket the market at three separate levels, with Miracle Mart at the low-price end, A&P in the middle and Dominion at the high end," Ronning said. "This move to convert additional stores to a new low-price format is a recognition that the Ontario market has shifted more toward the low-cost/low-price format."