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GAP: Merrill Slices A&P's Rating After Ugly Earnings Warning

The company is expected to lose money for the next three quarters.

Merrill Lynch cut its intermediate-term rating on supermarket operator Great Atlantic & Pacific (GAP) to reduce from neutral this morning, after the company said Wednesday night that higher utility rates and poor sales would drop second quarter earnings below analyst estimates.

Merrill Lynch also cut its long-term rating to neutral from buy.

The company, commonly called A&P, operates supermarkets under the names A&P, Waldbaum's, Food Emporium and Kohl's (not the same as


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, the department store company). A&P expects a loss of 14 to 16 cents per share for its fiscal second quarter.

First Call/Thomson Financial's

previous consensus was for earnings of 6 cents a share. Lousy sales are expected to doom the company to losses for the rest of the year, as First Call's consensus of brokers expects losses for the next three earnings reports.

Credit rating agency

Standard & Poor's

cut its rating on the company yesterday, to junk status from investment-grade status after disclosure of the earnings shortfall. The rating was cut to BB, the second-highest junk rating, from BBB-, the lowest investment-grade rating.