Unload Shares of Great Atlantic & Pacific Tea

Great Atlantic & Pacific Tea's revenue during the third quarter surged 69.5% to $2.12 billion from $1.25 billion in third-quarter 2007, on the back of a 1.9% growth in comparable-store sales and acquisition of Pathmark stores. However, comparable-store sales of Pathmark declined 0.5% year over year.

Product-wise, grocery sales spiked 76.8%, to $1.51 billion, while meat sales soared 60.8%, to $388.58 million. Moreover, produce sales were $226.09 million, up 43.5% over third-quarter 2007. Segment-wise, fresh sales declined 2.9%, to $1.07 billion, due to the absence of sales from store closures.

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. Average weekly sales per supermarket rose 19.8%, to $417,800 from $348,800 a year ago, due to the acquisition of Pathmark's larger supermarkets in the fourth quarter of 2007.

Great Atlantic's gross profit margin during the latest third quarter improved 87 basis points to 33.99% from 33.12% a year ago. This is due to higher revenue having offset a 68% increase in cost of merchandise sold to $1.46 billion from $869.45 million. Store operating, general and administrative expense grew 61.0%, to $648.48 million from $402.81 million.

Conversely, operating margin improved to a positive 0.79% compared to a negative 1.32% in the third quarter of 2007. Interest expense more than doubled to $36.73 million from $14.50 million. Interest coverage ratio turned to a positive 0.45 from a negative 1.14 a year earlier.

Overall, the company swung to a net loss of $13.63 million, or $1.35 per share, compared to a net profit of $57.31 million, or $1.73 per share. The comparable quarter in the last year included a gain of $106.06 million from the sale of Metro Inc. shares. Loss from continuing operations totaled $2.99 million against net profit of $73.08 million in the prior year's quarter.