Commercial Real Estate Detonates A&P Results

Now that's one big fat "oops". From A&P's (GAP) earning press release:

Sales for the third quarter were $2.0 billion versus $2.1 billion last year. Comparable store sales decreased 5.8%. For the third quarter, excluding non-operating items, adjusted EBITDA was $36 million versus $78 million last year. Adjusted loss from operations was $20.1 million versus adjusted income from operations of $17.4 million in last year’s third quarter. The non-operating items excluded from adjusted income from operations are listed on Schedule 3 of the press release and adjusted EBITDA is reconciled to net cash from operating activities on Schedule 4. For the third quarter, reported loss from continuing operations was $502.4 million which includes charges of $412.6 million for goodwill, trademark and long-lived asset impairment and $16 million for mark to market adjustments related to financial liabilities. Loss from continuing operations in the comparable period of the prior year totaled $3.8 million, and included income of $23 million for mark to market adjustments related to financial liabilities.

Comparable store sales down about 6%, but the real "gotcha" is found in the "embedded loss" issues. Good will, trademark and long-lived asset impairment?

Is that latter category a mark-to-market on the value of their real estate?

Christian Haub, Executive Chairman of the Board, said, “The US food retail market continues to face one of the most difficult and challenging environments in many years which analysts expect will extend through the first half of 2010. Unemployment, deflation and the resulting price competition combined with consumers’ drastic changes in spending behavior has severely impacted both our industry and our business.

DEFLATION?

You mean deflation of commercial and residential real estate, along with deflating wages, yes?

I think so.

Funny how during the boom there weren't any CEOs talking about how wonderful the inflation in commercial and residential real estate, nor were they pointing to the salutary impact this had on holding up wages against a flood of illegal immigrants and off-shoring our production!

Welcome to reality A&P; yesterday found the market deflating your stock price too, currently trading $10.22, down from $12.88 at Monday's close.

Disclosure: No position