A. & P.'s Big Close-Out

When Jonathan Scott was brought in as the first outsider ever to head the 116-year-old and no longer Great Atlantic and Pacific Tea Co., observers knew that he would swing the ax like no insider ever could. Last week, after only a month on the job, Chairman Scott, 44, took a tradition-shattering step toward revitalizing a company that long ago lost its place as the monarch of U.S. food retailing. He knew that A. & P.'s secretive, sometimes smug management had determinedly followed outmoded policies. It failed to invest in modern suburban supermarkets but held on to too many small, low-profit central city stores that seemed mustily Dickensian compared with the competition. So Scott won the board's preliminary approval to shut down fully one-third of the chain's 3,500 stores.

If the directors give their final approval, A. & P. will lose the distinction of operating the nation's largest network of food stores--its last claim to its old glory. The company was displaced as the industry's sales leader by Safeway Stores in 1973. Before A. & P. can begin its closeout, it must negotiate its way out of myriad store leases and find a way to mollify unions representing the estimated 30,000 workers whose jobs will be threatened. The stores most likely to be shuttered are small ones in the big cities of the East and Midwest.

This is A. & P.'s second major effort recently to fatten profits. Early in 1972, to boost the drooping sales, the chain began converting all its stores to discount outlets under the all-but-abandoned WEO ("Where Economy Originates") program. The first year it lost $51 million. Since 1973, it has been back in the black, but it may show a loss for its most recent quarter. Profit margins have shrunk to less than half of the 1-c- on a dollar that the company had traditionally earned. Part of the problem has been A. & P.'s inclination to stock heavily its own house brands instead of giving more shelf space to better-selling, nationally advertised food items. Top management has also taken a conservatively stingy approach to modernizing stores and warehouses; that decision cost the company customers and lowered productivity.

Image and Sales. Even before Scott's arrival from an Idaho-based supermarket chain that he headed, A. & P. had been working slowly toward improving its image and sales. In each of the last five years it has closed between 200 and 400 stores, mostly small, marginal operations. Last year it opened 113 large stores, many of them in suburbia, and it now has 160 more in the planning stages. Scott is already talking of building a string of "superstores" that will contain drug departments and general merchandise sections along with the usual meat and potatoes. Says he: "We must move ahead to complete the transition that other chains completed long ago."

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