Canada’s Financial Post takes note of the fact that while the Great Atlantic & Pacific Tea Co. is considered by many in the US to be a dinosaur, those same analysts are ignorant of the strong position the company holds in Canada. For that reason, A&P’s stock price has been performing far better than many might expect, in great part because Canadian investors bought into the company realizing that it would be likely to sell of its north-of-the-border stores to raise badly needed capital.
“U.S. investors essentially wrote off A&P as a virtually worthless investment just a few years ago,” the Post writes. “Back then, mounting losses and growing competition from Wal-Mart was hammering the U.S. grocery sector. A&P was just part of a whole sector of basket cases. What the U.S. investors didn't take into account was that the Canadian operations were operating in a completely different market, one where Wal-Mart still hasn't showed up yet to wreak havoc on the competition.
“Unlike the company's money-losing U.S. operations, the Canadian stores are strong performers, generating about $163-million in earnings before interest, taxes, depreciation and amortization, according to CIBC World Markets.
“A number of Canadian investors, being based in Canada, were aware of this value and expected the parent company to eventually sell the Canadian stores in order to generate much-needed cash.” And the Post suggests that there could end up being a bidding war in Canada over the A&P stores there – a war that will only serve to make the Canadian division more profitable and attractive to investors.
“U.S. investors essentially wrote off A&P as a virtually worthless investment just a few years ago,” the Post writes. “Back then, mounting losses and growing competition from Wal-Mart was hammering the U.S. grocery sector. A&P was just part of a whole sector of basket cases. What the U.S. investors didn't take into account was that the Canadian operations were operating in a completely different market, one where Wal-Mart still hasn't showed up yet to wreak havoc on the competition.
“Unlike the company's money-losing U.S. operations, the Canadian stores are strong performers, generating about $163-million in earnings before interest, taxes, depreciation and amortization, according to CIBC World Markets.
“A number of Canadian investors, being based in Canada, were aware of this value and expected the parent company to eventually sell the Canadian stores in order to generate much-needed cash.” And the Post suggests that there could end up being a bidding war in Canada over the A&P stores there – a war that will only serve to make the Canadian division more profitable and attractive to investors.
- KC's View:
