A&P Bankrupt: Grocer Files For Chapter 11 Bankruptcy

PORTLAND, Ore. — The Great Atlantic & Pacific Tea Co., once the nation's largest grocer, has filed for Chapter 11 bankruptcy protection as it struggles with enormous debt and increased competition from low-priced peers.

The 151-year-old company, based in Montvale, N.J., operates 395 stores around the Northeast under the A&P, Waldbaum's, The Food Emporium, Super Fresh, Pathmark and Food Basics grocery stores banners.

The filing was widely anticipated. The company – known to most as A&P – has been bleeding red ink for some time. According to the filing submitted late Sunday in bankruptcy court in White Plains, N.Y., the company listed total debts of more than $3.2 billion and assets of about $2.5 billion.

A&P, like most grocers, is struggling with the weak economy, reduced spending by consumers and intense competition. The company said aggressive competition from non-traditional food retailers like warehouse clubs, discount chains such as Wal-Mart Stores Inc., and dollar stores have compounded the problem.

The company reported revenue of $9.5 billion in 2008, which fell to $8.8 billion in 2009. And while the 2010 fiscal year is still under way, in its most recent quarter A&P reported that its net loss had doubled as revenue continued to sink.

The company said all of its stores are fully stocked and open for business and loyalty programs and other promotions will continue.

It is also struggling with pension costs, the weight of "dark" stores, where it has stopped operating but is still responsible for the lease and a contract with C&S Wholesale Grocers Inc., which provides the majority of its inventory, which it has been unable to negotiate down to lower costs.

According to the filing, A&P has secured $800 million in debtor-in-possession financing through J.P. Morgan Chase & Co. and will continue to focus on its turnaround plan while under bankruptcy protection. The company has brought in new management, sold 32 underperforming stores since this summer and drastically cut costs. The grocer said it could not complete this process without the protection.

The company's stock price fell more than 67 percent on Friday and trading was halted in the afternoon.

A&P is one of the oldest supermarket operators in the country. Its first store was in New York City and sold tea, coffee and spices. It expanded across the nation and by the 1930s was the largest grocer in the country.

Germany's Tengelmann Group is A&P's largest shareholder with about 42 percent of its stock. Activist investor Ron Burkle of the Yucaipa Cos. investment firm is also a large holder.

Comments

[blurredmolly]

07:08 PM on 12/15/2010

Another notch in Walmart's belt.

[ZenSufi]

04:50 PM on 12/14/2010

A&P used to be all other South, 30 years ago.

[bdl0715]

01:06 PM on 12/14/2010

I thought A & P went out of business decades ago. I live in Illinois and I haven't seen one of their stores in at least 35 years.

[Olderandwiser55]

12:24 AM on 12/14/2010

This is a "reorganization". The bloomberg article will tell you more. The Tengelmann Group is a holding company based in Mülheim an der Ruhr(germany) owns most of the company.Tengelmann, which has had an A&P stake since 1979, owns about 40 percent of the company. The stake had a value of about $64 million when markets closed Dec. 9, according to data compiled by Bloomberg. A&P’s second-largest stockholder is Aletheia Research & Management. Holding more than 5 percent of its voting securities are GAMCO Investors, Bank of America Corp., DBD Cayman Islands and Yucaipa Cos. LLC. Ron Burkle’s Yucaipa Cos. also owns all of A&P’s series A-Y preferred stock.

A Yucaipa spokesman, Frank Quintero, didn’t immediately return a call for comment.

Goldman Sachs Group Inc. is the largest holder of the company’s 6.75 percent notes and 5.125 percent notes due in 2011. Elliott & Page Ltd. is the largest holder of 11.375 percent notes due in 2015, according to Bloomberg data.

not exactly your grandmother's grocery store..

[AbeMartin]

07:58 AM on 12/14/2010

A&P's business plan has been out-of-date since Huntington Hartford was running the hoary old business into the ground while trying to inhale the world's cocaine supply during the 1970's.  Most of the stores under their umbrella continue to look just like the old labeled A&P's.  Big drafty stores with vaulted ceilings, poor lighting to make certain that the customers, meat and vegetables look grey, and lots and lots of brand selections that no longer reflect what people are eating.  Trader Joe's, Kroger and Whole Foods have been dancing around them for years.  Burkle & the rest of the financiers have no idea how to operate a retail food business.

[AbeMartin]

08:55 AM on 12/14/2010

Update and correction.  I was absolutely incorrect about Ronald Burkle's experience in retail groceries.  According to his bio in Wiki, his first job was working as a bag boy at his dad's market in California.  Subsequently, "Burkle has served as Chairman of the Board and controlling shareholder of numerous companies, including  Golden State Foods, Dominick's, Fred Meyer, Ralphs, and Food4Less."

[Cougar29]

09:14 PM on 12/13/2010

Unions did em in...$17 per hour to bag groceries is nutz..

[snesich]

10:27 PM on 12/13/2010

Screw that BS. I'm tired of obtuse, uninformed right-wingers blaming "unions" for everything bad in this country.

Apparently, "Cougar29" doesn't realize that in the 1950's---at the peak of union membership in the USA---we had outstanding economic conditions, a strong middle class, and a relatively small gap between the richest 1% and the rest of us. As unions declined---and as Republicans did everything possible to destroy them---the economy as a whole got worse. And the middle class struggled more than ever.

Strong unions guaranteed not only a living wage and good benefits for their members but they also set the bar for all non-union companies and their employees as well. When unions were strong, no company could afford to pay its workers the slave wages that the Walmarts of today pay on a regular basis. If they did, their workers would go elsewhere.

You want a society where the richest elite owns almost everything and the rest of us struggle? If so, bash the unions and make sure they can't organize any workers. Then you'll get what we have today.

[NYprairiedog]

07:42 AM on 12/14/2010

Oh sure, unions workers make TOO much money so rather than raising all boats to meet them, you want to sink everyone. THAT INCLUDES YOU! Why do you want to help the ultra-rich have cheap servants? If you insist that lower wages are the answer, you just go ahead and reduce your own. Leave the rest of us to get on trying to improve our lives, trying to save what it means to be middle class. Go back to living a pre-union life... 6 12-hour work days a week, no paid sick time, no paid holidays, no paid vacation, no way to save for the days you are too old to work. And if you think that having your own company will help, guess again. Cause you don't want the rest of us to earn enough to buy what you sell.

[TexasDem0]

04:36 PM on 12/13/2010

Another institution falls.

[Sparks Magoo]

02:31 PM on 12/13/2010

And in deep economic turmoil, people once again understand the value of a home garden.

I think it was Jefferson who said that.

[Sparks Magoo]

02:28 PM on 12/13/2010

A&P has one of the most heavily unionized work forces in the business, with 95 percent of its workers covered under collective bargaining agreements. It said in its filing it would seek to work with the unions to lower those costs.

And you think they can compete with other grocers who do no have the same costs and can charge a bit less? In this economy people are price shopping hard. Path mart (A&P) (around here) is the last place anyone shops. Everyone knows that !

It's labor that is killing them when compared to their competitors... Union costs again....

[snesich]

10:29 PM on 12/13/2010

So everyone should work for Walmart, or the equivalent and try to raise a family on $9.00 a hour with crappy benefits?

Are you lacking a heart or a head or both, when you spit on unions and working people?

[catbite]

10:36 PM on 12/13/2010

good argument.

[Sparks Magoo]

01:11 PM on 12/14/2010

People can work where they want. All I point out is that they are going bankrupt and there will eventually be no union job. There are many out there that will shop where they get the best price and that unions scale is a problem.

I'm not making the rules here so not sure why you think I have no heart, I'm just pointing out the obvious. See the big guy if you have any complaints...

[Olderandwiser55]

12:14 AM on 12/14/2010

Baloney, the grocery stores in my area are unionized and some still do very well but best if they don't try to be a big box store.

They won't be happy until people are so anti-union they are happy to work at walmart with no desire for a pension or benefits or a living wage.

[BigGuy]

12:42 PM on 12/13/2010

A & P's going through bankruptcy for many reasons.

The firm paid too much for Pathmark and has debt that's high cost. Their Food Emporium chain in Manhattan faces much competition from Whole Foods and Trader Joes. But competition isn't really the problem -- reduced aggregate demand is the main problem.

The recession has reduced demand for their goods, especially the most profitable goods they sell. Supermarkets make their biggest profits from consumers' discretionary spending, especially by men. Most people have really reduced their discretionary spending. Even wealthy people here in NYC have done so. The wealthy show sympathy with those who are suffering by choosing some less expensive goods. When they reduce their grocery bills a tiny bit, it makes them feel better. Buying Quaker Oats, instead of "McCann's Steel Cut Irish Oatmeal" cost less and is buying the domestic good instead of the import. Buying "America's Choice" Oatmeal (A & P's private label) costs even less, and is sacrificing the ego gratification of buying a name brand.

When a million households worth over a million that are all earning over $100,000 per year decide to trade down, their local grocer -- the A & P and the chains it's acquired -- suffer.

[AbeMartin]

08:06 AM on 12/14/2010

The supermarkets are also being undercut by discount grocers like Aldi, Save-A-Lot and Dollar Tree.  Before the economy collapsed, outlets like these were patronized primarily by people with fixed incomes, those receiving food stamps (EB) and temporary aid to needy families (TANF) and seniors trying to get by on Social Security and/or modest pension checks.

Now, when you drive by the stores the lots are filled not just with Toyota Corollas and ten year old Ford F150's, but newer BMW's, Mercedez-Benz, and Lexus sedans.

[IronLogic]

12:09 PM on 12/13/2010

I work for Supervalu and we're in a similar situation...

[BrightNBeautiful]

11:07 AM on 12/13/2010

This indeed is terrible news for people on the East Coast! I grew up being sent by my Auntie to A&P with a shopping list of items to buy. Love their coffee also...A&P is an institution...sorry it's may go the way of Cushmans' Bakery and other good stores that have good memories for my sister and I as children.

[JScott]

10:49 AM on 12/13/2010

You mean it's still around. In the west tho we never had em. But I do remember Alpha Beta, Shopping Bag, Boys Mkts, but I think they are all gone now too.

[banker67]

10:29 AM on 12/13/2010

My first question: How much are the top 500 A&P executives earning?
The only subject that never gets mentioned in business stories is the percentage of profit being sucked out by over-paid management.
I truly believe that in some industries, especially carpet companies, it is the astronomical payouts to top managers and owners that drives production overseas, and compels management to actually recruit illegal workers to replace local employees.
It's not the cost of labor or material; it's just insatiable greed at the top.
Let's start reporting how much top executives and stockholders take out before we discuss whether a floor worker has to take a cut to $5 and hour, or give up health coverage.

[catbite]

10:38 PM on 12/13/2010

It's all the same. Millionaires have 95% of the money, the middle and lower classes, broke.
the Executives make 95% of the salaries, the middle management and workers, broke.
somehow we have to break this pattern.

[Bonnie Brill]

10:19 AM on 12/13/2010

Weren't they suppose to merge with Stop & Shop?

Would have been an interesting shopping experience at "Stop & P"

[pepimartinez]

10:14 AM on 12/13/2010

That's really sad to hear, I shop at A&P all the time :-(