MONTVALE, N.J. -- In a move that observers said will better dress the Farmer Jack division for a sale and exit a challenging inner-city market, A&P here said it would close 14 of its underperforming Midwest stores -- including all but one of its Food Basics discount stores in Ohio and Michigan.
A&P said late last month that it would close 12 Food Basics -- all three in Toledo, Ohio, and nine of its 10 in the Detroit area -- as well as two Farmer Jack conventional stores in Southfield and Waterford Township, Mich., within 90 days. The Food Basics locations were all former Farmer Jack stores that A&P converted to the discount format early last year in an attempt to reverse their fortunes. The remaining Food Basics not scheduled to close was a newly developed location in Dearborn Heights, Mich.
The closings, which A&P acknowledged, but said it would not elaborate on until an earnings call this week, come amid widespread speculation that the retailer is attempting to sell its remaining 86 Ohio and Michigan Farmer Jack units.
Mitch Goldstein, A&P's executive vice president and chief financial officer, recently acknowledged that converting struggling Farmer Jack locations to the Food Basics format did not provide the financial and performance boost A&P hoped it would, but blamed poor locations and not a flaw in the discount strategy (SN, April 25).
"Just because they changed the name on the store, and changed some of the commodities and some of the prices, you haven't changed the customer mix by any stretch. My sense was those Farmer Jack stores were just not in good locations, and that is probably one of the main reasons that Food Basics couldn't survive," said Jim McTevia, chairman of McTevia & Associates, an Eastpointe, Mich.-based consultant.
McTevia said a troubled economy in Michigan and Detroit made things especially difficult. He called Michigan "absolutely the worst state in the country as far as economics is concerned," and Detroit "the second-worst city" in the nation.
A gloomy outlook by automakers Ford and General Motors has sent ripples across the Detroit economy, reports said. "What can you expect? It's hard for any retailer to survive in that market," McTevia said.
David Livingston, a consultant in Pewaukee, Wis., said A&P had difficulty executing a price concept, saying the stores were larger and required more employees than discount competitors like Save-A-Lot and Aldi.
Published reports said one Food Basics in Dearborn Heights would be converted to a Farmer Jack. An A&P spokeswoman, however, would not confirm that to SN.
Despite numerous reports, A&P has also yet to confirm publicly whether it is attempting to sell the entire Farmer Jack region. Observers said closing underperforming units may make the chain more attractive to go to a single buyer, although observers told SN that a piecemeal sale would be more likely.
"My hunch is the [Farmer Jack stores] will be cherry picked. They may sell in a batch, but whoever buys them will cherry pick and probably get rid of the bad locations," McTevia said.