MONTVALE, N.J. — It's looking more and more like Pathmark will be running A&P and not the other way around.
The appointment last week of Mark Kramer as A&P's new senior vice president of operations is the latest evidence of the influence, which began a year ago when former Pathmark owner Yucaipa Cos. reinvested in A&P, and continued earlier this year when Ron Marshall was installed as the company's new chief executive officer.
Like Marshall, Kramer is a Pathmark veteran. He served for more than 20 years in various management positions at Pathmark, but left the company upon its 2007 acquisition by A&P. Most recently, Kramer was working as a regional operations vice president with Camp Hill, Pa.-based drug chain Rite Aid — a retailer that absorbed a number of former Pathmark executives.
Kramer is taking over a position vacated by Paul Wiseman, who left the company. Wiseman had come to A&P in 1995 from its former Canadian operation and was a former colleague of Eric Claus, the CEO of A&P who was let go last year. Other members of Claus's senior executive team, including Allan Richards (senior vice president of human resources) and Jennifer MacLeod (senior vice president of marketing and communications), have left the company in recent months.
The switch from control of A&P-bred leaders to those with Pathmark heritage comes as the company tries a second time to realize the strategic benefits of their merger. Errors in executing a strategic plan at Pathmark and poor momentum heading into the economic downturn triggered big losses and reduced sales volumes at the chain, despite an effort to position the stores around price.
“Converting Pathmark store management to A&P operational store management, even with the best intentions, dialed down the volumes and played right into ShopRite and Stop & Shop's hands,” Burt P. Flickinger III, managing director at Strategic Resource Group, New York, told SN. “They have been dancing on the tables in celebration as Pathmark has struggled more and more every quarter.”
According to some sources, changes in processes enacted by A&P met with resistance in the Pathmark camp. A&P, for example, insisted on centralizing label printing and distribution, a task that had previously been done in-store as needed at Pathmark.
“Pathmark managers were used to having systems at the store level to print their own labels. A&P didn't have this capability and so moved them onto the A&P system that had all labels shipped to the store — for all their stores and banners,” Karen Short, a New York-based analyst at BMO Capital Markets, told SN last week. “Managers were spending a couple hours a week sorting through all these labels looking for the ones that were relevant to them.”
According to Short, such small changes contributed to an overall erosion of the merchant culture at Pathmark.
Kramer may be looked to rekindle that spirit. Observers describe him as a “street-smart” operations executive known for strong relations with store managers and employees.
“Kramer is a guy who will roll up his sleeves and spend 90% of his time with store employees, listening to them and effecting changes in how they run stores,” Harvey Gutman, a former Pathmark executive who now runs Brookside Advisors, a consulting group in Marlboro, N.J., told SN. “He will soon have the confidence of the store teams, if he doesn't already.”
A&P is expected to report its fourth-quarter and fiscal year earnings next month. Analysts are not expecting abrupt change from results during the first three quarters of the fiscal year, which included steep drops in comparable sales as well as write-downs. But the event should prompt the first public comments from Marshall since he took office in early February.
One observer, who asked not to be identified, said he expected Marshall would outline a lengthy turnaround plan while emphasizing financial discipline. A&P under previous leadership was criticized for spending too freely on some projects.
“Marshall's smart enough to know this won't be a quick fix,” the source said. “It will be a matter of getting the blocking and tackling right and he'll formulate a strategy, get the tactics in place and go from there. I don't think there will be any major changes, other than being more aggressive about seeing a return on investments and being more prudent on merchandising programs.”
Short said she expected the message would be “there is a lot of opportunity to fix the business,” but predicted Marshall's influence would reflect more in results for the fiscal first quarter. “I don't know if he'll talk about culture,” she added, “but he's obviously done a lot to restate Pathmark's importance in the organization.”