A&P Bankruptcy Was a Long Time Coming
The Great Atlantic & Pacific Tea Co., or A&P, has filed for Chapter 11 bankruptcy protection. The legendary grocer, which was the biggest in the country from the 1920s-1960s, plans to keep all of its stores open during the reorganization. From the AP:
According to the filing submitted late Sunday in U.S. 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 nontraditional food retailers like warehouse clubs, discount chains such as Wal-Mart Stores Inc., and dollar stores have compounded the problem.
It is also struggling with pension costs, lease costs for store locations it has closed, 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. A&P also 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.
A&P started as a mail-order tea business in the 1870s. Its first general grocery store opened in 1912. A&P’s decline arguably started in the 1970s, so this bankruptcy has been a very long time coming.
A&P, in an attempt to stem losses, closed 25 stores this September. Many of these stores were former Pathmark stores, a company that A&P merged with in 2007, then basically followed into the ground with poor sales and bad debt.
A&P put itself in a position where it couldn’t compete with megaretailers like Wal-Mart and Target, who now offer the same foods at a lower price, according to this New Jersey Star-Ledger article. Combining limited selection with high prices and poor employee morale, then merging with the failing Pathmark, was not a real competitive strategy.
Unlike many companies that have gone bankrupt during this recession, A&P had it coming for a long time.