Great Atlantic And Pacific Supermarket Chain Files Chapter 11, Cites Excess Leverage And Margin Pressures Among Bankruptcy Causes

Tyler Durden's picture

And another one bites the dust. Montvale, NJ based grocery chain Great Atlantic and Pacific has filed for bankruptcy, pretty much as had been expected for the past week. The 101-year-old operator of 395 supermarkets and other
stores, filed for bankruptcy after failing to turn around its
business amid increased competition from wholesale clubs and
drugstores. A&P, based in Montvale, New Jersey, listed assets of $2.5
billion and debts of $3.2 billion in its Chapter 11 filing today
in U.S. Bankruptcy Court in White Plains, New York. The company
has 41,000 employees, 95 percent of whom are covered by union
agreements, according to the filing. And among the reasons for the filing, most notably ridiculous leverage incurred with the stupid purchase of Pathmark 3 years prior, is, you guess it: margin pressure. "Margin pressure imposed by declining operating cashflow has amplified the bottom line effects of the Debtors’ leveraged balance sheet and significant legacy costs....A&P, like many supermarket operators, continues to cope with the recent economic decline and reduced customer spending while running on narrow profit margins and facing intense competition." What? Reduced consumer spending? Margin pressure? Huh? Not according to the Chairman, who says inflation and margin collapse is merely in the eye of the beholder: the economic central planners would never allow this, and any bankruptcies that prove the contrary should be ignored and promptly forgotten.

Expect some serious weakness in grocery and supermarket stores tomorrow as a little piece of reality creeps it way into what we earlier classified as one of the most overbought markets in the five years.

Full first day affidavit below. Read it closely - many more such comparables will soon come to the fore as the Chairman succeeds in pushing input costs higher.