MONTVALE, N.J. -- As the new president and chief operating officer of A&P, Christian W.E. Haub knows he is taking the helm of a company in the midst of stormy seas.
The 1,190-store chain based here is trying to right itself after several quarters of declining sales and earnings.
But Haub, who was named president of A&P in December at the age of 29, is undaunted by the size of the challenge that trimming the sails at A&P might require. He told SN in an interview
that he has a clear strategy in mind that will lead to the kind of adjustments A&P needs to make and the course he intends to set to revitalize its operations.
"My vision is to return A&P to the leadership position it had and I think it deserves.
"I mainly want to define this by the way the customer sees us," Haub said. "I think it's most important that the company focus on the consumer and develop into a company that is going to be the leader in every market it operates in, defined by the customer choosing us over the alternative." Haub is the youngest son of Erivan Haub, principal owner of Tengelmann Group. Tengelmann, a food retailer based in Muelheim, Germany, owns 52% of A&P.
Haub, who previously had been a corporate vice president responsible for real estate and development, succeeded James Wood as president and currently reports to Wood. Wood continues as chairman and chief executive officer of A&P, the nation's fifth-largest chain, with annual volume of $10.5 billion. At the time Haub was named president and chief operating officer, Wood signed a contract calling for him to remain chairman and CEO until April 1998.
As for Haub, he will continue to oversee real estate and development along with responsibility for advertising and marketing. He also plans to be involved with technology.
The key going forward for A&P, according to a plan Haub said was developed with Wood, is to put more focus on meeting the needs of the consumer. To do this, Haub said A&P must:
· Become more price-competitive and, more important, maintain consistent promotional programs.
· Build larger stores with expanded health and beauty care departments and pharmacies wherever possible. The goal is to reach 50 new stores per year later this decade.
· Use available technology to enhance marketing programs such as clipless coupons and savings club cards.
· Improve customer service, especially at the checkout.
"We have never lost sight of the consumer, but it may not have been the No. 1 priority and the focus of everything we were doing," he said in the interview. "We have to realize that, going forward, that has to be the case."
A&P prospered in the 1980s by acquiring regional chains and building its top-line sales. Recently, however, many of those markets have been hit hard by recession. In addition to its core A&P stores in the New York metropolitan area, A&P operates Super Fresh in Philadelphia and Baltimore; Miracle Food Mart, A&P and Dominion stores in Ontario; Farmer Jack and A&P stores in Michigan; Kohl's units in Wisconsin, and A&P stores in Atlanta, a division that grew in size last year with the acquisition of Big Star stores from Grand Union Co., Wayne, N.J.
It also owns Waldbaum's and Food Emporium in the New York area, where it has a leading market share of about 22%. It has strong market shares in Ontario, where a recent strike at the Miracle Food Mart operation closed 63 stores for three months, and in the Detroit region, where A&P runs slightly higher than Kroger for the leading position, with a mid-to-high 20% market share.
Through the recent economic downturn, A&P has seen both its top-line sales and same-store results decline through several quarters. Earnings, too, have fallen, dropping to 1 cent per share in the recent third quarter and 61 cents through 40 weeks.
In 1989 and 1990, A&P reported annual earnings per share of $3.84 and $3.95, respectively.
Over the past couple years, which Haub acknowledged were difficult for A&P, the company has had to simultaneously focus on operating in a recession, reducing costs and closing outdated stores. The chain has been closing stores at the rate of about 50 per year in the 1990s.
In the past year, however, A&P put programs in place intended to get it more focused on the consumer and become "much more aggressive" with its sales and features, Haub said. Those programs began to bear fruit in the fourth quarter, which ended Feb. 27.
"We are going to be able to report a positive identical-store sales report for the fourth quarter [excluding Canada], which is a significant improvement for us since we have been trending negative for quite some time," Haub said. "I think a lot of things we have done have led to a significant improvement in our sales performance."
Michigan is one area where A&P has noticed recent favorable sales trends through the past three to six months, which Haub said is a result of more consistent sales programs, better customer service and remodeling programs.
Some traditional A&P stores also have been converted to the Farmer Jack banner, a move that Haub said has been extremely successful, with sales almost doubling in some cases. Additional conversions to Farmer Jack are being considered.
Haub said A&P is striving to be competitive with all operators in a given market. To achieve this it must offer more competitive prices and maintain the consistency of those pricing programs.
In Philadelphia, for example, a strong feature program offered over an extended period of time has proved successful, Haub said. Waldbaum's, too, has lowered prices, especially on items consumers buy most often, and the stores are now among the most price-competitive in their markets.
"The most important thing about [promotions] is that, over the long term, we stay consistent," he said. "I think over time we will see the customer rewarding us for that."
To improve customer service, A&P added two or three express checkouts at some stores. The program began with Waldbaum's and has been extended to stores in areas including Michigan.
Baggers are put on the regular lanes to make them move quicker, too. The program has been successful -- Haub said slow checkouts are a main customer complaint -- and A&P expects to roll it out in additional areas.
The next move is to begin building new stores in the 50,000-to 60,000-square-foot range. The average size of an A&P unit now is about 34,000 square feet.
The larger stores will accommodate better perishables presentations, more service departments, full-line grocery sections and expanded health-and-beauty care.
"My idea, long-term, is to provide the full-service supermarket as well as the drug store that people want to see all in one store," Haub said.
The company's capital plan calls for opening 35 stores in 1994, compared with about 20 in 1993. About three-fourths of 1994's new stores should be in the 50,000- to 60,000-square-foot range.
Haub said he believes A&P's pipeline will be large enough to accommodate an increased number of new stores in 1995, possibly as many as 40 to 45. "Our goal is to get to the number of 50 new stores per year," he said.
At the same time, the store's annual closings of units will be gradually reduced from about 50 now to the 30-40 range in a few years. About 50 stores will be closed in 1994, and roughly 40-45 are set for closing in 1995. With fewer closings, the store's expansion plans will allow A&P to maintain its net store count, but increase square footage slightly.
In visiting the different divisions of the company, Haub said he has been getting a lot of support from managers and employees. Support from all levels of the company will be critical, he said, for him to change the operational philosophy of A&P.
In terms of working with Wood, Haub said he "is very comfortable" with their relationship. "I know I have his full support on all the things I want to accomplish. It's a great opportunity for me to work with him. He has such great experience and has enjoyed a lot of success."
Securities analysts have had mixed recommendations on A&P. Some predict the stock, which trades in the high $20 range, has absorbed all the bad news and has good upside potential. Others maintain the company underspent on its store base in the late 1980s and may have trouble keeping pace with better-prepared competitors.
Ed Comeau, a securities analyst at Lehman Bros., New York, said he agreed with Haub that A&P must present a more consistent price image to the consumer.
Comeau said the company's store-expansion program will "certainly get A&P going in the right direction," but it will take time to upgrade the existing store base. The company made big acquisitions, but it wasn't always buying companies with a "pristine store base," he said.
"They should have been more rigorous in their replacement and remodeling program," he said. Given the increasingly tough competition and other factors, it will be a challenge for A&P to get back to the $4 earnings-per-share level it achieved in 1990.