The Food Emporium Could Be Up for Sale

Great Atlantic & Pacific Tea Co. (GAP), owner of the A&P supermarket chain, may sell its Food Emporium stores as the 151-year-old company continues to try to turn around its finances by cutting costs and revamping leadership.

The Montvale, New Jersey-based company is considering selling the New York-area chain in an effort to generate cash. It has hired investment bank Peter J. Solomon to find potential buyers, the Wall Street Journal reported earlier today, citing people familiar with the process. Private-equity firms Angelo Gordon & Co. and Sterling Investment Partners are among potential buyers of the chain, which could fetch more than $200 million, the Journal reported.

A&P, which was founded in 1859 and has 48,000 employees, is among a group of old-line supermarket chains that have been beset by the combination of growing competition from both higher-end grocery companies such as Whole Foods and general retailers like Wal-Mart Stores (WMT), which has expanded its food offerings.

Great Atlantic's Turnaround

Last month, Great Atlantic, which has 429 stores in eight states, said it would close 25 stores this year as part of its efforts to help cut its losses. For the quarter ended June 19, Great Atlantic's loss widened 88% to $122.6 million after same-store sales declined 7.2%. The company's cash balance was down 32% from the previous quarter to $171 million.

Competing supermarket chain Supervalu (SVU) same-store sales also fell 7.2% for its most recently-completed quarter, while Safeway's (SWY) second-quarter comparable store sales were down 2.5%.

"Other companies have come into the marketplace that have addressed the needs of American shoppers," said Harry Balzer, chief industry analyst at NPD Group. In order to compete, companies like Great Atlantic must either invest in new ways to attract shoppers or cut prices.

The potential sale of Food Emporium, which has 17 stores in New York City and one in New Canaan, Connecticut, would be part of a turnaround effort Great Atlantic began when it hired former Wild Oats Chief Operating Officer Sam Martin to succeed Ron Marshall as president and CEO in late July. The company said at the time that it would try to cut operating costs, secure additional financing and boost its cash balance.

Representatives for Great Atlantic, whose chains also include Waldbaum's, Pathmark and Best Cellars, didn't immediately respond to a request for comment today.