Submitted by Jen Jones on Mon, 12/13/2010 - 12:19pm
The recession seems to just keep coming. Most recently, the country’s widespread, historic economic struggle has taken as victim The Great Atlantic & Pacific Tea Co.
More commonly known as A&P Grocery, the struggling business filed for Chapter 11 bankruptcy in New York last week. The company also owns Waldbaums and Super Fresh. However, those brands are not often found in North Carolina. A&P is a prominent, low-price grocer throughout the New York Tri-State region, an area from which many Triangle resident hail.
The company is literally a part of American history after being founded in the mid-1800s. In the years just after the depression, A&P stores numbered almost 16,000 and were widely recognized. Upon news of the Chapter 11 bankruptcy filing, shares of the company’s stock fell below the $1 mark.
Competition is as much to blame as the economy, actually. However, a stronger economic climate would have certainly allowed the grocer to better sustain itself in the midst of an increase in budget-minded family food stores.
At one time the company was the largest grocer company in the United States. It’s bankruptcy paperwork detailed around $2.5 billion in assets accompanied by more than $3.2 billion in debt.
The company and its stores will remain operational and at full service throughout the bankruptcy as a result of JP Morgan Chase supplying $800 million in financing, which is pending court approval.
In 2007, the company acquired the Pathmark chain of retailers to further bolster its market presence as the northeast’s most recognized lost-cost food store. The timing of that $1.4 billion acquisition, as companies of all shapes and sizes around the country found out that year, was not on target. Despite $9 billion in sales in early 2010, it was losing millions every week.
With $100 million available in cash, the company’s outlook on its ability to handle significant 2011 debt deadlines began to darken. It also had to face a $13.4 million interest payment come mid-December or risk serious threats to the terms of its senior debt, a consequence that would raise serious doubts about the company’s ability to handle its post-bankruptcy strategy.
Contributing to A&P’s financial situation is the rise of large wholesalers like Sam’s Club and B&J’s Wholesale Club. Beyond that, non-traditional consumer good stores have entered the grocery sector already able to match the prices and selection of smaller regional chains like A&P.
Target and Walmart, for example, now offer fully-stocked aisles of foodstuffs, creating immense challenges for the traditional food stores like A&P, but also for Food Lion, Harris Teeter and Piggly Wiggly. Essentially, the grocery store industry was ambushed.
A number of other corporate agreements had created added financial strain, according to the company’s CEO. Having to continue to real estate leases in locations where the company decided to close stores amounted to millions in losses. The company also had less than positive relationships with its primary wholesaler and its transportation provider. Moreover, like many companies, decreased revenue puts added pressure on employee salaries and pension funding.
Kroger Co., which runs Kroger grocery stores across North Carolina, is currently one of the country’s top five companies in the industry. Low price stalwart ALDI, a German company, which has a number of Triangle locations, is one of the largest grocery companies in the world.
Given the recession, low-price groceries has become a priority for families around the country looking for additional ways to cut back on every day expenses.
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