ANALYSTS REMAIN CAUTIOUS

DAVID ORGEL

PARK RIDGE, N.J. -- While the financial community foresees stability in some of A&P's supermarket businesses, some analysts are cautious about the company's growth outlook and its strategies in certain problem markets.

"I'm reluctant to say the worst is behind them," said Ed Comeau, a securities analyst with Lehman Bros., New York, interviewed last week after the A&P annual meeting here.

"The problem areas, except for Atlanta, seem to have the makings of a better year. But for the last two years they said they were on the brink of getting problems behind them. It seems like the same story. So we have to be cautious. This year probably some things will stabilize, but I don't have a high degree of confidence."

Comeau said the company could probably get near the $2-a-share level by 1996 "if there's no other blowup and if Canada can get to a modest level of profitability." A&P's charman and chief executive officer, James Wood, told shareholders that the $2 level will be an initial target for the company, although he wouldn't give a time-frame for achieving that level. Karen Sack, a retail analyst with Standard & Poor's, New York, said she believed the worst may be over for the company, but added, "How much better things get will remain to be seen. Maybe they'll do $2 a share by 1996 or 1997. I'm taking a wait-and-see attitude, and I'd like to give it another quarter or two to see."

Following the meeting, Sack changed her recommendation for A&P from sell to hold, based on the price of the stock, which closed at 21 3/4 on the New York Stock Exchange last Tuesday, the day of the annual meeting, unchanged from the day before. "I don't think the price is going to go any lower," she said.

Rick Church, an analyst with Smith Barney, New York, has been recommending the A&P stock for some time, and continues to see "reasonably compelling value there." "Management doesn't get a lot of credit, but they did open a lot of new stores and remodels," Church said. "They've had a lot of things overshadow the good things. They still need to upgrade the overall image with the customer base, and Christian Haub [the new president and chief operating officer] is starting to change that."

Analysts were particularly reserved about A&P's prospects in the Atlanta market, where the company acquired 48 Big Star units last year and is melding them into its existing A&P operations. "They're targeting a tough market," said Jonathan Ziegler, an analyst with Salomon Bros., New York. "It will be a tough challenge against Kroger and Publix. I don't see a fast turnaround there. Kroger will try to enhance its market share."

Comeau said the Atlanta situation "will get worse before it gets better."

Sack said A&P will likely exit the Atlanta market if it hasn't successfully developed that business within two years. In the Canada market, Comeau assessed that "at least the magnitude of losses will be less and we'll probably see some level of profitability over the next year or two. But I can't envision it coming back for a long time."

The U.S. market "is a touch better but not terrific, and I'm concerned about competition in New York, Connecticut and Atlanta," Comeau added. However, Comeau noted, the consolidation of various banner labels into a unified America's Choice private label was an important action by the company. "America's Choice by itself won't lift them, but it was a smart move."