Why Great Atlantic & Pacific Tea Company Has Filed Bankruptcy?
What were the main causes that Great Atlantic & Pacific Tea Company (Pathmark) has gone out of business in 2010?
The overall economic climate generally determines how well or how poorly a company does. With the economic downturn in 2007/2008, many commercial companies and retailers have suffered loss. The CEOs of these companies have been charged with the difficult decision of whether to keep the store open and weather the financial “storm”, or whether to begin making cuts. This most recent economic downturn has been significant simply because it has lasted so long. Very often in times of financial turmoil or even recession, the free market eventually “rights” itself. However the current market has continued to remain in the red for a lot longer than economists originally predicted.
Going Back in History
One of the companies affected by the economic struggle is the Great Atlantic & Pacific Tea Company. Many consumers are familiar with this company because of its host of supermarkets all across the United States. The Great Atlantic and Pacific Tea Company is the parent company of stores like A&P and Pathmark among others. Pathmark, a name that has been in business since 1968, was acquired by the Great Atlantic & Pacific Tea Company in December of 2007. Prior to the acquisition, Pathmark had already proven itself a quality supermarket – ranking #31 in the 2007 “Top 75 North American Food Retailers” report. In 2006 alone, Pathmark achieved a fiscal windfall of $4.1 billion in sales. After the acquisition, Pathmark remained strong with 132 stores across the eastern seaboard.
And The Down Slide Begins…
However, things began spiraling downward after the economic decline. Consumers began searching for frugal-friendly stores to purchase food as they had less of their income to spend. Yet Pathmark’s prices remained high and virtually untouchable to the average consumer. Pathmark and the Great Atlantic & Pacific Tea Company began losing money, customers, and eventually stores. In 2009, they closed a number of stores under both the A&P and Pathmark names. In early 2010, they closed another 25 stores across 5 states (8 of them Pathmark locations), and many more under-performing stores were closed in October of 2010.
It was in December 2010, that the Great Atlantic & Pacific Tea Company (Pathmark’s parent company), filed for bankruptcy. By this time, the company had accrued over $3 billion in debt with only $2 billion in assets. According to Consumer Reports, Pathmark was designated as the lowest rated supermarket of 2012; with many of its issues stemming from poor customer service and less-than-adequate store cleanliness. The Great Atlantic & Pacific Tea Company has said that they will continue closing any under-performing or non-core Pathmark stores in the future in an effort to cut costs and free up revenue to address their mounting debts.