Great Atlantic & Pacific Tea Posts Third-Quarter Loss

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On January 8, 2009, Great Atlantic & Pacific Tea. (GAP Quote) posted Q3 FY08 net loss of $13.63 million or $1.61 per share compared to profit of $57.31 million or $1.35 per share a year ago. The year-ago results had benefited from a gain of $106.05 million from the sale of Metro Inc. shares. Loss from continuing operations totaled $2.99 million or $1.35 per share against profit of $73.08 million or $1.73 per share in the prior year's quarter. The latest quarterly consensus estimate was of loss of $0.35 per share.

Great Atlantic's revenue for Q3 FY08 surged 69.5% on the back of a 1.9% growth in comparable store sales and acquisition of Pathmark stores. Revenue grew to $2.12 billion from $1.25 billion in the prior year's quarter. In addition, comparable store sales of Pathmark declined 0.5% year-over-year. Segment-wise, sales at Fresh fell 2.9% to $1.07 billion. Price Impact generated revenue of $924.37 million compared to $32.59 million a year earlier. Gourmet sales and other revenue increased 6.6% and 11.4% to $67.15 million and 58.07 million, respectively. At the same time, the cost of merchandise sold rose 68.0% to $1.46 billion from $869.45 million. Subsequently, gross profit margin widened 63 basis points to 31.14% from 30.51% in the last year's quarter. Furthermore, interest expense more than doubled to $36.73 million from $14.50 million a year ago.

During Q2 FY08, GAP operated 444 stores compared to 322 stores in the year-ago quarter. The company realized approximately $30.00 million of synergies from the acquisition during the quarter comprised of reduced administrative; merchandise; and store operating, marketing and advertising costs.

Looking forward, GAP continues to expect positive cash flow starting fourth quarter of FY08. Furthermore, the company plans to spend around $130.00 million during FY09 for capital expenditures.

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