A&P Restates Earnings

Jul 08, 2002

The Wall Street Journal reports that the Great Atlantic & Pacific Tea Co. has submitted its belated annual 10-K report filing with the Securities and Exchange Commission. The delay was due to an internal review of the company’s accounting of vendor allowances and inventory in the past. The restatement narrows its losses in 2001 and 2000, and raises its profit in 1999. A&P has been hit with several shareholder lawsuits since its announcement of the review in May.

A&P’s adjustments focused on the timing of accounting for vendor allowances. Similar to Kmart’s earnings restatement in May, A&P had booked allowances from manufacturers as profit before it actually received them. Under revised procedures, A&P will book the allowances as it receives them, during the life of a given contract with a manufacturer.

Booking vendor allowances as up-front profit is an aggressive form of accounting that has been abandoned by most grocery chains over the past five to 10 years, says Meredith Adler, an analyst at Lehman Brothers Inc.

Minneapolis grocery distributor and retailer Supervalu Inc. also recently restated its earnings for the past three years — by $17.6 million.

Moderator Comment: Does Wall Street’s concerns about the accounting practices or performance of a given retailer have any impact on if or how consumers shop in its stores?

If you’re Kmart yes. If you’re A&P then probably no.
The difference is how long company problems remain in public. Sharks aren’t
the only species that can smell blood in the water. Journalists are quite good
at it also. [George
Anderson – Moderator

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