A&P Files for Bankruptcy

As it’s officially known, The Great Atlantic & Pacific Tea Company (GAP), or A&P, has filed for bankruptcy.

The Great Atlantic & Pacific Tea Co., the 101-year-old U.S. operator of almost 400 supermarkets under names including Waldbaum’s, The Food Emporium and Pathmark, sought bankruptcy protection after failing to successfully compete with wholesale clubs and drugstores.

The retailer, which also runs stores under its own name, Super Fresh and Food Basics, had $8.8 billion in sales for the year ended in February, according to its website. Yesterday, it listed assets of $2.5 billion and debt of $3.2 billion in a Chapter 11 filing in U.S. Bankruptcy Court in White Plains, New York. A shift in consumer spending at wholesale clubs, supercenters and drugstores hurt sales in the quarter ended Sept. 11, A&P said in a regulatory filing.

“We have taken this difficult but necessary step to enable A&P to fully implement our comprehensive financial and operational restructuring,” Chief Executive Officer Sam Martin said in a statement yesterday. “We could not complete our turnaround without availing ourselves of Chapter 11.”

This is a sad day, but honestly, things weren’t looking so good on Friday when the shares dropped by 67%. That’s usually a bad sign.

Jim Cramer called A&P exactly right over a year ago: “This one is bad. Why would I want to be on the worst operator in the group? That one is a sell, sell, sell.”

A&P has a long and proud history. The company actually was the darling of Wall Street at the beginning of the depression since it was one of the very few companies that continued to do well.

Benjamin Graham famously used the example of A&P in his book the Intelligent Investor (pages 200 to 203).

Posted by on December 13th, 2010 at 8:42 am


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