The Great Atlantic & Pacific Tea Company (NYSE: GAP), better known as SuperFresh and Pathmark grocery stores, is in the midst of a remodel and turnaround that seems to be working.

It is, however, a bit difficult to parse an earnings release that states "our annualized run-rate of synergies is approximately $100 million." Good thing that the "format driven capital investment program" continues to improve. Clearly, CEO Eric Claus wants investors to believe these factoids are positive and meaningful pieces of information.

In more concrete terms, same store sales are up 3% and the company is remodeling many of its locations in the New York-New Jersey area in order to expand its market share. Sales increased $1.2 billion to $2.9 billion, so the trend is in the right direction. Quarterly adjusted income from operations was $16 million, compared to an $8 million adjusted loss from operations one year ago. 1Q loss per share was $0.51 compared to $1.54 loss per share one year ago.

Given the steep rise in food prices, forecast to worsen into the winter, A&P is well positioned to attract value-driven grocery shoppers. The stock has recently fallen under $18, though it is inching back up today.

Mammoth grocery-store chain The Kroger Co. (NYSE: KR) recently posted very solid third quarter (3Q) results. Total sales increased 10% to $16 billion for the quarter. This marks the 10th quarter in a row that Kroger has posted sales increases of at least 3%. Year-to-date (YTD) total sales increased 7.6% to $53 billion. 3Q net earnings were equally impressive, $253.8 million or $0.37 per diluted share. This represents a $39 million improvement over 3Q 2006 net earnings. Grocery stores have notoriously low profit margins, so it speaks well of Kroger management that Kroger earned these good numbers while increasing profit margins slightly, expanding capital investment to $555 million, growing its own line of organic goods, while simultaneously decreasing general administrative expenses.

YTD net earnings stand at $857.6 million or $1.22 per diluted share, a 20% increase over 2006 results. Given the strong comparable stores sales growth, Kroger CEO David Dillon has raised FY 2007 guidance to reflect 5% overall sales growth, which will exceed the previous guidance figure of $1.67 per diluted share. Kroger repurchased 16.5 million shares in 3Q 2007, for a total of $442 million, with $200 million leftover for 4Q buybacks.

Investors were perhaps hoping for even better news from Kroger. The stock lost over 8% of its value in the previous week, and closed at $25.88 on 19 December, down $0.29.

Grocery store chain Winn Dixie Stores Inc. (NASDAQ: WINN) is emerging from bankruptcy with remodeled stores, better shopping conditions and product mix, improved customer service, and strict attention to cost management. Same store sales for 1Q 2008 are essentially flat, but the company posted a huge reduction in net loss, $800,000, down from $24.6 million net loss one year ago, a $23.8 million improvement. Net income for 1Q 2008 was $1.6 billion, up $11 million. Gross profits increased $22 million to $446.4 million, and the 30 remodeled stores have registered increased foot traffic. Winn Dixie plans to remodel a total of 75 stores in 2008.

Winn Dixie is also focusing on cost control as it emerges from Chapter 11. Administrative and promotional expenses have been slashed, as have costs at the company's distribution facilities. Winn Dixie still faces significant capital expenditures for store remodeling, at least $140 million. Legal costs to emerge from bankruptcy will run in the $5 million to $7 million range.

Even in the midst of a difficult and complex multi-year turnaround, Winn Dixie has acted to gain the goodwill of consumers and investors. Winn Dixie remodeled and reopened one of the first full-service grocery stores in lower east side New Orleans to help the city rebuild. The company is on the front lines in the fight against breast cancer, providing educational materials in its stores and sponsoring free mammograms for women without access to health care services.

The stock currently trades around $19. Given the success of the company's turnaround thus far, this is a stock for bargain hunters to investigate.

The best way to beat Wal-Mart (NYSE: WMT) is to avoid trying to copy it, and some grocery stores are finally figuring that out. After years of trying to compete with the big box on price, which is impossible, they're now trying to offer consumers what Wal-Mart can't offer: A less hectic shopping environment, better service, and a generally more pleasant experience. And they're finding out that many, many consumers are willing to pay a a little extra for that.

Grocers are finding that they can beat Wal-Mart with services like prepared foods, and consumers like that stores like Kroger (NYSE: KR) and Safeway (NYSE: SWY) are rarely out of stock on items, a common problem at Wal-Mart supercenters. Some consumers are also realizing that by following the weekly specials, they can sometimes save money by shopping at traditional grocery stores.

The moral of the story is clear: Most mom and pop stores, and even huge chains like Kroger, will never really be able to compete with Wal-Mart on price. So why bother trying? When a Wal-Mart opens up nearby, they will lose some customers. But there is an ample market for quality service and a good shopping experience, the two things that Wal-Mart really can't provide.

When looking at ways to compete, companies have to ask themselves "What can I do that my competitor can't?" After finally realizing that they won't win in a price-war with Wal-Mart, they've given up that battle. And that just might be the first step toward victory.

Who says you can't save the planet and be stylish?

Last month, the city of San Francisco banned the use of nonbiodegradable plastic grocery bags, and other metropolitan areas are considering similar proposals. Just in time, designers Hermes and Stella McCartney have gotten into the reusable grocery-tote business, created for shoppers who need to show off their haute couture while they dash out for Romaine and instant oatmeal. The Hermes version will hit U.S. stores this summer. Made of "hand-wrought" silk, it carries a price tag of $960 (roughly equal to the amount I spend on groceries over the course of six months). McCartney's offering is a bargain, at just $495 for organic canvas.

A fan of committing to help the environment without the highway robbery? For 60 bucks, you can get a FEED Bag, the proceeds from which provide enough nourishment for one child for an entire school year (where, exactly, do the profits for the Hermes and McCartney bags wind up?). Endorsed by first niece Lauren Bush, the FEED Bag craze seems to be sweeping the nation; there's a four-to-six week wait for the canvas tote on Amazon.com (NASDAQ: AMZN).

For the bargain price of $1.99 each, you can pick up a reusable canvas tote or two at Trader Joe's. Next time I'm at my favorite natural-foods chain, I must remember to do so. I already have a great one, five years old and solid as ever, from The Strand. And it didn't even cost me a week's paycheck.

Beth Gaston Moon is an analyst at Schaeffer's Investment Research.

Grocery stores are no strangers to leveraged buyouts. Back in the roaring 1980s, they were a juicy target for private equity firms.

Well, according to a piece in the Wall Street Journal, we may see a comeback in activity in the sector. The paper says that Kroger (NYSE: KR) is a buyout target.

I can see why. In light of the competition – such as from Wal-Mart Stores, Inc.(NYSE: WMT) – there is lots of pressure on traditional grocery stores to make changes. Also, valuations are reasonable.

Kroger certainly has a big footprint. There are 2,468 stores in 31 states (with more than two dozen brands such as Ralph's and Fred Meyer). The company is either ranked #1 or #2 in 38 of its 44 biggest markets.

Lately, Kroger's stock price has been rallying and sports a market cap of $20 billion. If you throw in the long term debt, the company has an enterprise value of $27 billion. That means the company is selling at about 8X EBITDA, which is at a level where a deal can get done.

Who are the buyers? None were mentioned. Although, it looks like Goldman Sachs (NYSE: GS) is the financial advisor for Kroger.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Kohlberg Kravis Roberts seems to be popping up everywhere lately. On the heels of the group's $44 billion dollar offer for TXU, KKR is now expressing interest [subscription required] in J Sainsbury, Great Britain's third largest supermarket chain. The firms are attracted by the stable cash flows and frequently large property holdings that these companies offer. Here is a list of some of the top American grocery chains. Which of these, if any, do you think will be interesting to private equity firms?

Safeway Inc. (NYSE:SWY): Operates roughly 1,775 stores in California, Oregon, Washington, Alaska, Colorado, Arizona, Texas, the Chicago metropolitan area and the Mid-Atlantic region. The company boasts a solid return on equity and a P/E of 21.

Kroger Co. (NYSE:KR): This company fought off a KKR-led buyout attempt in 1988 with a $40 per share dividend. Is it the 1980s again? Will KKR return with a vengeance? This could be the stuff movies are made of!

SuperValu Inc. (NYSE:SVU): Will this look like a super value to a private equity firm? The company has a heavier debt load and a lower return on equity than Safeway and Kroger, but perhaps someone will see an opportunity for improvement.

Grocery stores are a boring business to most investors. It is exactly that predictability that may make them attractive buyout candidates.

Whole Foods Market, Inc. (NASDAQ:WFMI) was reinstated as outperform on 11-10-06. This stock is very attractive to me based on the things I've read about it. If the analyst's assertions are true, and WFMI's stock lost value based on a simple change in management focus from business operations to maintaining share price, then what should be happening in timely fashion will be a moderated climb back up to WFMI's fair market value. Salim Haji, an excellent writer over at The Motley Fool, offers the opinion that this stock has an intrinsic value in the $50 to $60 range.

With additional consideration of the fact that WFMI is undertaking a strategic stock buy back program, if I was looking for some fun places to play with some funds, this would be one of them. It is my opinion that this stock deserves some close attention right now. I think it is headed back up. One other thing I take into consideration about this situation is the possibility that Wal-Mart is going to fall flat on its corporate face with its "organic" food roll out. If that happens, (and I think it will), then Whole Foods Market will add even a bit more sparkle to my eye!

You can learn more about organic foods at About Organics.