A&P Scraps EDLP Project

JON SPRINGER

MONTVALE, N.J. — A&P here has scrapped its "Lower Price Project" program, saying the effort to introduce everyday low prices at its A&P, Waldbaums and SuperFresh stores failed to catch on with consumers and subsequently hurt profits.

A&P launched the "Price Project" in March of 2010, lowering everyday prices on some 10,000 items in the store in place of previously offered discounts and coupons. It supported the effort with an advertising campaign starring television host Kelly Ripa. The program was discontinued this June as profits and customer counts dropped, A&P said in quarterly financial results filed this 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 in the filing that progress 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%, and the company's 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.

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.

A&P during the quarter closed 32 underperforming stores in its fresh and Pathmark divisions and announced the exit from 25 additional Superfresh stores in Maryland and Washington, D.C. Twelve of those stores were subsequently sold, with the remaining 13 closed.