A&P has insisted that its investments in its price positioning will, in time, attract greater customer numbers.
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The US retailer, which operates Pathmark supermarkets, yesterday (20 October) posted a 3.8% fall in second-quarter like-for-like sales. Total sales slid to US$2.1bn, down from $2.2bn last year.
Speaking during a conference call with analysts, Christian Haub, executive chairman and acting CEO, said that the company needed to “transform” the business in order to win back sales momentum and grow profitability.
Haub, part of the family that runs A&P parent Tengelmann, the German conglomerate, assumed the responsibilities of CEO following the departure of Eric Claus, which was also announced yesterday.
A&P is currently seeking a replacement for Claus, and Haub said that the new CEO would need to understand the need to usher in radical changes at the supermarket operator. “Tinkering with the business is not enough,” he insisted.
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By GlobalData“We today compete in a world where we compete with warehouse clubs and discounters and hard discounters and different formats. We’ve been working in a transformation strategy with some very good success in the past, but also with some challenges. We need to further transform the business,” he said.
A&P has been investing heavily in lowering prices in an attempt to win customers and improve its price positioning relative to the competition and Haub said that sales and promotions were “significantly up” on the year.
“Our price investments were necessary and have put us into a much more competitive situation. There is clearly reaction by competition – everybody is investing in price and promotion, so there is really a flurry of activity out there and to brake through to consumers in meaningful way is clearly challenging,” he acknowledged.
Haub indicated that these efforts have met with a degree of success, but have also been negatively impacted by the economic downturn.
“We’re all trying to figure out how much the economic headwinds might be masking the progress that might be going on. Customer perception is something that we know from experience doesn’t turn overnight,” he said.
According to Haub, A&P has witnessed a drastic change in consumer behaviour in the wake of the downturn. Consumers, he said, are in a “massive spirit” of trading down.
“Consumers are clearly navigating the stores to find the best value. There is great discipline in terms of shopping lift – consumers are holding back on making any impulse or discretionary purchases when they are going through our stores so a lot of the old merchandising techniques today are just not as successful as they used to be,” he cautioned.
