UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

Mark One

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                       For Quarter Ended December 4, 2004

                                       OR

[   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                  For the transition period from _____ to _____

                          Commission File Number 1-4141

                 THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
               --------------------------------------------------
               (Exact name of registrant as specified in charter)

          Maryland                                           13-1890974
-------------------------------                       -------------------------
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                             Identification No.)


                                 2 Paragon Drive
                           Montvale, New Jersey 07645
                    ----------------------------------------
                    (Address of principal executive offices)

                                 (201) 573-9700
               Registrant's telephone number, including area code


Indicate by check mark whether the Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange  Act of
1934  during the  preceding  12 months (or for such  shorter  period  that the
Registrant  was  required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.  YES  [X]           NO [   ]

Indicate by check mark  whether the  Registrant  is an  accelerated  filer
(as defined in Rule 12b-2 of the  Exchange  Act.  YES [X] NO [   ]

As of January 6, 2004 the Registrant had a total of 38,625,019 shares of common
stock - $1 par value outstanding.


<PAGE>


                         PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements

                 The Great Atlantic & Pacific Tea Company, Inc.
                      Statements of Consolidated Operations
           (Dollars in thousands, except share and per share amounts)
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                        12 Weeks Ended                            40 Weeks Ended
                                            --------------------------------------    -------------------------------------
<S>                                         <C>                 <C>                   <C>                 <C>

                                                                   Nov. 29, 2003                              Nov. 29, 2003
                                                                   (As Restated                               (As Restated
                                               Dec. 4, 2004        See Note 3)           Dec. 4, 2004         See Note 3)
                                            ------------------  ------------------    ------------------  -----------------
Sales                                            $  2,523,759      $    2,484,612        $    8,294,617      $   8,177,893
Cost of merchandise sold                           (1,827,221)         (1,795,687)           (5,982,570)        (5,874,725)
                                                 ------------      --------------        --------------      -------------
Gross margin                                          696,538             688,925             2,312,047          2,303,168
Store operating, general and administrative
    expense                                          (748,447)           (771,367)           (2,417,084)        (2,416,262)
                                                 ------------      --------------        ---------------     -------------
Loss from operations                                  (51,909)            (82,442)             (105,037)          (113,094)
Interest expense                                      (19,218)            (18,383)              (68,146)           (61,212)
Interest income                                           485                  80                 2,094              1,434
Minority interest in earnings of consolidated
    franchisees                                         2,815                (205)                1,097                (33)
                                                 ------------      ---------------       --------------      --------------
Loss from continuing operations before
    income taxes                                      (67,827)           (100,950)             (169,992)          (172,905)
(Provision for) benefit from income taxes              (4,924)             28,127                (8,768)            22,360
                                                 -------------     --------------        ---------------     -------------
Loss from continuing operations                       (72,751)            (72,823)             (178,760)          (150,545)
Discontinued operations (Note 5):
    Income (loss) from operations of discontinued
       businesses, net of tax benefit of $0 and
       $798 for the 12 weeks ended
       12/4/04 and 11/29/03, respectively, and tax
       benefit of $0 and $22,494 for the 40 weeks
       ended 12/4/04 and 11/29/03, respectively           110              (1,102)                 (929)           (31,064)
    (Loss) gain on disposal of discontinued
       operations, net of tax provision of $0 and
       $35,235 for the 12 weeks ended
       12/4/04 and 11/29/03, respectively, and
       tax provision of $0 and $67,088 for the
       40 weeks ended 12/4/04
       and 11/29/03, respectively                      (2,702)             48,658                (2,702)            92,647
                                                 -------------     --------------        ---------------     -------------
    (Loss) income from discontinued operations         (2,592)             47,556                (3,631)            61,583
                                                 -------------     --------------        --------------      -------------
Cumulative effect of change in accounting
    principle - FIN 46-R, net of tax                        -                   -                     -             (8,047)
                                                 ------------      --------------        --------------      -------------
Net loss                                         $    (75,343)     $      (25,267)       $     (182,391)     $     (97,009)
                                                 ============      ==============        ==============      =============

Net (loss) income per share - basic and diluted:
    Continuing operations                        $      (1.89)    $         (1.89)       $       (4.64)      $       (3.90)
    Discontinued operations                             (0.07)               1.23                (0.10)               1.60
    Cumulative effect of a change in accounting
       principle - FIN 46-R                                  -                  -                    -               (0.21)
                                                 -------------     ---------------       --------------      --------------
Net loss per share - basic and diluted           $      (1.96)    $         (0.66)       $       (4.74)      $       (2.51)
                                                 =============     ===============       ==============      =============

Weighted average number of common shares
    outstanding                                    38,553,356          38,517,218            38,530,519         38,516,489
Common stock equivalents                              255,997             446,307               298,054            405,797
                                                -------------      --------------        --------------      -------------
Weighted average number of common and
    common equivalent shares outstanding           38,809,353          38,963,525            38,828,573         38,922,286
                                                =============      ==============        ==============      =============

</TABLE>


                          See Notes to Quarterly Report


<PAGE>
                 The Great Atlantic & Pacific Tea Company, Inc.
      Statements of Consolidated Stockholders' Equity and Comprehensive Income
              (Dollars in thousands, except share and per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                  Accumulated
                                          Common Stock           Additional                          Other               Total
                                 -----------------------------     Paid-in      Accumulated     Comprehensive        Stockholders'
                                     Shares         Amount         Capital        Deficit        (Loss)/Income           Equity
                                 --------------  -------------  -------------   -------------  -----------------   ---------------
<S>                              <C>             <C>            <C>             <C>            <C>                 <C>

40 Week Period Ended
December 4, 2004
----------------
Balance at beginning of period       38,518,905    $    38,519    $   459,579     $   (78,100)     $   (27,239)       $   392,759
Net loss                                                                             (182,391)                           (182,391)
Other comprehensive income                                                                              40,754             40,754
Stock options exercised                  38,674             38            540                                                 578
                                   ------------    -----------    -----------     -----------      -----------        -----------
Balance at end of period             38,557,579    $    38,557    $   460,119     $  (260,491)     $    13,515        $   251,700
                                   ============    ===========    ===========     ============     ===========        ===========

40 Week Period Ended
November 29, 2003
As Restated - See Note 3
------------------------
Balance at beginning of period,
     as previously stated            38,515,806    $    38,516    $   459,411     $    61,387      $   (61,123)       $   498,191
Add adjustment for the cumulative
     effect on prior years of
     applying retroactively the
     new method of accounting
     for inventory (LIFO to FIFO)                                                      17,462                              17,462
                                   ------------    -----------    -----------     -----------      -----------        -----------
Balance at beginning of period,
     as adjusted                     38,515,806         38,516        459,411          78,849          (61,123)           515,653
Net loss                                                                              (97,009)                            (97,009)
Other comprehensive income                                                                              45,390             45,390
Stock options exercised                   1,412              1             11                                                  12
                                   ------------    -----------    -----------     -----------      -----------        -----------
Balance at end of period             38,517,218    $    38,517    $   459,422     $   (18,160)     $   (15,733)       $   464,046
                                   ============    ===========    ===========     ===========      ===========        ===========

Comprehensive loss
------------------

<CAPTION>
                                                        12 Weeks Ended                            40 Weeks Ended
                                            --------------------------------------    -------------------------------------
<S>                                         <C>                 <C>                   <C>                 <C>

                                                                   (As Restated                              (As Restated
                                                                    See Note 3)                               See Note 3)
                                               Dec. 4, 2004        Nov. 29, 2003         Dec. 4, 2004        Nov. 29, 2003
                                            ------------------  ------------------    ------------------  -----------------
Net loss                                         $   (75,343)        $   (25,267)           $  (182,391)       $   (97,009)
                                                 -----------         -----------            -----------        -----------
Foreign currency translation adjustment               27,999              18,503                 40,196             48,475
Net unrealized gain (loss) on derivatives,
     net of tax                                          104                (418)                   558             (3,085)
                                                 -----------         -----------           ------------        -----------
Other comprehensive income                            28,103              18,085                 40,754             45,390
                                                 ------------        -----------           ------------        -----------
Total comprehensive loss                         $   (47,240)        $    (7,182)           $  (141,637)       $   (51,619)
                                                 ===========         ===========            ===========        ===========

<CAPTION>

Accumulated Other Comprehensive Loss Balances
---------------------------------------------
<S>                                                               <C>             <C>                <C>               <C>
                                                                                                                        Accumulated
                                                                     Foreign      Net Unrealized        Minimum           Other
                                                                    Currency        (Loss) Gain         Pension        Comprehensive
                                                                   Translation    on Derivatives       Liability       (Loss) Income
                                                                  ------------    --------------     ------------      -------------
Balance at February 28, 2004, As Restated - See Note 3            $   (23,892)      $     (158)      $    (3,189)      $   (27,239)
Current period change                                                  40,196              558                 -            40,754
                                                                  -----------       ----------       -----------       -----------
Balance at December 4, 2004                                       $    16,304       $      400       $    (3,189)      $    13,515
                                                                  ===========       ==========       ============      ===========

Balance at February 22, 2003                                      $   (62,496)      $    3,015       $    (1,642)      $   (61,123)
Current period change, As Restated                                     48,475           (3,085)                -            45,390
                                                                  -----------       -----------      -----------       -----------
Balance at November 29, 2003, As Restated                         $   (14,021)      $      (70)      $    (1,642)      $   (15,733)
                                                                  ============      ===========      ============      ============

</TABLE>
                          See Notes to Quarterly Report
<PAGE>


                 The Great Atlantic & Pacific Tea Company, Inc.
                           Consolidated Balance Sheets
                   (Dollars in thousands except share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>


                                                                                                            February 28, 2004
                                                                                December 4,                   (As Restated
                                                                                   2004                        See Note 3)
                                                                           --------------------           --------------------
<S>                                                                        <C>                            <C>

ASSETS
Current assets:
      Cash and cash equivalents                                                   $     176,694                 $      297,008
      Accounts receivable, net of allowance for doubtful accounts
         of $5,772 and $6,316 at December 4, 2004 and
         February 28, 2004, respectively                                                136,308                        171,835
      Inventories                                                                       816,497                        694,120
      Prepaid expenses and other current assets                                          60,904                         33,796
                                                                                  -------------                 --------------
         Total current assets                                                         1,190,403                      1,196,759
                                                                                  -------------                 --------------
Non-current assets:
      Property:
         Property owned                                                               1,369,458                      1,405,925
         Property leased under capital leases                                            59,917                         65,632
                                                                                  -------------                 --------------
      Property - net                                                                  1,429,375                      1,471,557
      Other assets                                                                      128,535                        115,500
                                                                                  -------------                 --------------
Total assets                                                                      $   2,748,313                 $    2,783,816
                                                                                  =============                 ==============

LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
      Current portion of long-term debt                                           $       2,277                 $        2,271
      Current portion of obligations under capital leases                                10,311                         15,901
      Accounts payable                                                                  588,073                        480,712
      Book overdrafts                                                                   116,799                         96,273
      Accrued salaries, wages and benefits                                              171,050                        177,142
      Accrued taxes                                                                      70,663                         74,698
      Other accruals                                                                    220,539                        236,238
                                                                                  -------------                 --------------
         Total current liabilities                                                    1,179,712                      1,083,235
                                                                                  -------------                 --------------
Non-current liabilities:
      Long-term debt                                                                    835,317                        823,738
      Long-term obligations under capital leases                                         74,859                         73,980
      Other non-current liabilities                                                     401,690                        402,932
      Minority interest in consolidated franchisees                                       5,035                          7,172
                                                                                  -------------                 --------------
Total liabilities                                                                     2,496,613                      2,391,057
                                                                                  -------------                 --------------
      Commitments and contingencies
Stockholders' equity:
      Preferred stock--no par value; authorized - 3,000,000
         shares; issued - none                                                                -                              -
      Common stock--$1 par value; authorized - 80,000,000
         shares; issued and outstanding  - 38,557,579 and 38,518,905
         shares at December 4, 2004 and February 28, 2004,  respectively                 38,557                         38,519
      Additional paid-in capital                                                        460,119                        459,579
      Accumulated other comprehensive income (loss)                                      13,515                        (27,239)
      Accumulated deficit                                                              (260,491)                       (78,100)
                                                                                  --------------                --------------
Total stockholders' equity                                                              251,700                        392,759
                                                                                  -------------                 --------------
Total liabilities and stockholders' equity                                        $   2,748,313                 $    2,783,816
                                                                                  =============                 ==============


</TABLE>

                          See Notes to Quarterly Report

<PAGE>

                 The Great Atlantic & Pacific Tea Company, Inc.
                      Statements of Consolidated Cash Flows
                             (Dollars in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>


                                                                                              40 Weeks Ended
                                                                             -------------------------------------------------
                                                                                                             Nov. 29, 2003
                                                                                                             (As Restated
                                                                                  Dec. 4, 2004                See Note 3)
                                                                             ----------------------     ----------------------
<S>                                                                          <C>                        <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                                           $  (182,391)              $   (97,009)
   Adjustments to reconcile net loss to net cash used in
         operating activities:
       Midwest long lived asset / goodwill impairment charge                               34,688                    60,082
       Other property impairments                                                           2,048                       466
       Asset disposition initiative                                                        (1,709)                   (5,354)
       Depreciation and amortization                                                      206,373                   214,953
       Deferred income taxes                                                                  431                     7,729
       Loss (gain) on disposal of owned property                                            3,381                      (138)
       Loss (gain) on sale of discontinued operations                                       2,702                  (159,735)
       Minority interest                                                                   (2,745)                     (874)
       Cumulative effect of change in accounting principle - FIN 46-R                           -                     8,047
   Other changes in assets and liabilities:
       Decrease in receivables                                                             39,527                    15,469
       Increase in inventories                                                            (98,337)                  (31,944)
       Increase in prepaid expenses and other current assets                              (26,523)                  (29,571)
       (Increase) decrease in other assets                                                (22,666)                    8,879
       Increase in accounts payable                                                        79,389                     9,144
       (Decrease) increase in accrued salaries, wages, benefits and taxes                 (19,257)                    5,263
       (Decrease) increase in other accruals                                              (25,835)                    2,114
       Decrease in other non-current liabilities                                           (8,353)                  (21,297)
       Other operating activities, net                                                      3,777                    (2,237)
                                                                                      -----------               ------------
Net cash used in operating activities                                                     (15,500)                  (16,013)
                                                                                      ------------              ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Expenditures for property                                                             (150,146)                 (109,124)
   Proceeds from disposal of property                                                      15,665                   252,068
                                                                                      -----------               -----------
Net cash (used in) provided by investing activities                                      (134,481)                  142,944
                                                                                      ------------              -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Principal payments on revolving lines of credit                                              -                  (135,000)
   Proceeds from long-term borrowings                                                      19,321                        16
   Principal payments on long-term borrowings                                              (5,883)                   (1,095)
   Principal payments on capital leases                                                   (10,136)                  (10,406)
   Increase in book overdrafts                                                             19,677                    22,230
   Deferred financing fees                                                                   (965)                     (539)
   Proceeds from exercises of stock options                                                   233                        12
                                                                                      -----------               -----------
Net cash provided by (used in) financing activities                                        22,247                  (124,782)

   Initial impact of FIN 46-R                                                                   -                    20,921
   Effect of exchange rate changes on cash and cash equivalents                             7,420                    14,390
                                                                                      -----------               -----------
Net (decrease) increase in cash and cash equivalents                                     (120,314)                   37,460
Cash and cash equivalents at beginning of period                                          297,008                   199,014
                                                                                      -----------               -----------
Cash and cash equivalents at end of period                                            $   176,694               $   236,474
                                                                                      ===========               ===========
</TABLE>

                          See Notes to Quarterly Report
<PAGE>

                 The Great Atlantic & Pacific Tea Company, Inc.
                   Notes to Consolidated Financial Statements
            (Dollars in thousands, except share and per share amounts)
                                   (Unaudited)


1.   Basis of Presentation

The accompanying Statements of Consolidated Operations and Statements of
Consolidated Cash Flows of The Great Atlantic & Pacific Tea Company, Inc.
("We," "Our," "Us" or "Our Company") for the 12 and 40 weeks ended December 4,
2004 and November 29, 2003, and the Consolidated Balance Sheets at December 4,
2004 and February 28, 2004, are unaudited and, in the opinion of Management,
contain all adjustments that are of a normal and recurring nature necessary to
present fairly the financial position and results of operations for such
periods. The accompanying consolidated financial statements also include the
impact of adopting Financial Accounting Standards Board ("FASB") Interpretation
No. 46 ("FIN 46-R"), "Consolidation of Variable Interest Entities - an
interpretation of `Accounting Research Bulletin No. 51'," EITF Issue No. 03-10,
"Application of EITF Issue No. 02-16, Accounting by a Customer (Including a
Reseller) for Certain Consideration Received from a Vendor, by Resellers to
Sales Incentives Offered to Consumers by Manufacturers" ("EITF 03-10"), and the
change in our method of valuing certain of our inventories from the last-in,
first-out ("LIFO") method to the first-in, first-out ("FIFO") method. The
consolidated financial statements should be read in conjunction with the
consolidated financial statements and related notes contained in our Fiscal 2003
Annual Report on Form 10-K. Interim results are not necessarily indicative of
results for a full year.

The consolidated financial statements include the accounts of our Company, all
majority-owned subsidiaries and franchise operations. Significant intercompany
accounts and transactions have been eliminated. Certain reclassifications have
been made to prior year amounts to conform to current year presentation.


2.   Impact of New Accounting Pronouncements

In December 2003, the FASB issued SFAS 132-R, "Employer's Disclosure about
Pensions and Other Postretirement Benefits" ("SFAS 132-R"). SFAS 132-R requires
new annual disclosures about the type of plan assets, investments strategy,
measurement date, plan obligations, and cash flows as well as the components of
the net periodic benefit cost recognized in interim periods. The new annual
disclosure requirements apply to fiscal years ending after December 15, 2003,
except for the disclosure of expected future benefit payments, which must be
disclosed for fiscal years ending after June 15, 2004. Interim period
disclosures are generally effective for interim periods beginning after December
15, 2003. We have included the disclosures required by SFAS 132-R, including
expected future benefit payments, in our consolidated financial statements for
the year ended February 28, 2004. We have also included all newly required
interim period disclosures for the 12 and 40 weeks ended December 4, 2004 and
November 29, 2003 in Note 8 - Retirement Plans and Benefits.

In December 2003, the United States enacted into law the Medicare Prescription
Drug Improvement and Modernization Act of 2003 (the "Act"). The Act establishes
a prescription drug benefit under Medicare, known as "Medicare Part D," and a
Federal subsidy to sponsors of retiree health care benefit plans that provide a
benefit that is at least actuarially equivalent to Medicare Part D. In May 2004,
the FASB issued FASB Staff Position No. FAS 106-2, "Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003" ("FAS 106-2"). Refer to Note 8 - Retirement Plans and
Benefits regarding the impact of adoption of FAS 106-2 in our consolidated
financial statements.

In December 2004, the FASB issued SFAS 123R (revised 2004), "Share-Based
Payment" ("SFAS 123R"), which requires companies to expense the value of
employee stock options and similar awards. SFAS 123R is effective for all public
companies no later than the first interim or annual period beginning after June
15, 2005 (the quarter ended September 10, 2005 for our Company) and applies to
all outstanding and unvested share-based payment awards at a company's adoption
date. Our Company is currently assessing the impact of this statement on our
consolidated financial statements.

Refer to Note 3 - Restatement and Changes in Accounting regarding the impact of
adoption of FIN 46-R and EITF 03-10 in our consolidated financial statements.


3.   Restatement and Changes in Accounting

FIN 46-R
--------
In December 2003, the FASB issued revised Interpretation No. 46, "Consolidation
of Variable Interest Entities - an interpretation of `Accounting Research
Bulletin No. 51'". FIN 46-R addresses the consolidation of entities whose equity
holders have either (a) not provided sufficient equity at risk to allow the
entity to finance its own activities or (b) do not possess certain
characteristics of a controlling financial interest. FIN 46-R requires the
consolidation of these entities, known as variable interest entities ("VIE's"),
by the primary beneficiary of the entity. The primary beneficiary is the entity,
if any, that is subject to a majority of the risk of loss from the VIE's
activities, is entitled to receive a majority of the VIE's residual returns, or
both. FIN 46-R applies immediately to variable interests in VIE's created or
obtained after January 31, 2003. For variable interests in a VIE created before
February 1, 2003, FIN 46-R applies to VIE's no later than the end of the first
reporting period ending after March 15, 2004 (the quarter ended June 19, 2004
for our Company).

Based upon the new criteria for consolidation of VIE's, we have determined that
(i.) all of our franchised stores do not have sufficient equity at risk to allow
them to finance their own activities, (ii.) we absorb the expected losses of all
of our franchised stores, and (iii.) we have a de facto agency relationship with
the franchisees in which the franchisees cannot sell, transfer, or encumber its
interests in the franchise without our prior approval. Therefore, we are deemed
the primary beneficiary and accordingly have included the franchisee operations
in our consolidated financial statements as of February 23, 2003. As permitted
by FIN 46-R, our Company elected to restate fiscal 2003's consolidated financial
statements for the impact of adopting this interpretation for comparability
purposes.

As of December 4, 2004, we served 42 franchised stores in Canada. These
franchisees are required to purchase inventory from our Company, which acts as a
wholesaler to the franchisees. We had sales to these franchised stores of $161
million and $187 million for the 12 weeks ended December 4, 2004 and November
29, 2003, respectively, and $600 million and $615 million for the 40 weeks
December 4, 2004 and November 29, 2003, respectively. In addition, we sublease
the stores and lease the equipment in the stores to the franchisees. We also
provide merchandising, advertising, bookkeeping and other consultative services
to the franchisees for which we receive a fee, which primarily represents the
reimbursement of costs incurred to provide such services.

<PAGE>

Prior to February 23, 2003, we held, as assets, inventory notes collateralized
by the inventory in the stores and equipment lease receivables collateralized by
the equipment in the stores. The current portion of the inventory notes and
equipment leases, net of allowance for doubtful accounts, had been included in
"Accounts receivable" on our Consolidated Balance Sheets, while the long-term
portion of the inventory notes and equipment leases had been included in "Other
assets" on our Consolidated Balance Sheets. The repayment of these inventory
notes and equipment leases had been dependent upon positive operating results of
the stores. To the extent that the franchisees incurred operating losses, we had
established an allowance for doubtful accounts. We assessed the sufficiency of
the allowance on a store by store basis based upon the operating results and the
related collateral underlying the amounts due from the franchisees. In the event
of default by a franchisee, we reserved the option to reacquire the inventory
and equipment at the store and operate the franchise as a corporate owned store.
The cumulative effect adjustment of $8.0 million primarily represents the
difference between consolidating these entities as of February 23, 2003 and the
allowance for doubtful accounts that was provided for these franchises at that
date.

Also refer to Note 11 - Commitments and Contingencies regarding our settlement
of a class action lawsuit relating to our Canadian franchise business.

EITF 03-10
----------
In November 2003, the Emerging Issues Task Force confirmed as a consensus EITF
Issue No. 03-10, "Application of EITF Issue No. 02-16, Accounting by a Customer
(Including a Reseller) for Certain Consideration Received from a Vendor, by
Resellers to Sales Incentives Offered to Consumers by Manufacturers". The
provisions of EITF 03-10 became effective for our Company in the first quarter
of fiscal 2004. EITF 03-10 provides guidance for the reporting of vendor
consideration received by a reseller as it relates to manufacturers' incentives,
such as rebates or coupons, tendered by consumers. Vendor incentives should be
included in revenues only if defined criteria are met. As such, our Company will
continue to record as part of revenues manufacturers' coupons that can be
presented at any retailer that accepts coupons. However, in the case of vendor
incentives that can only be redeemed at a Company retail store, such
consideration would be recorded as a decrease in cost of sales. As permitted by
the transition provisions of EITF 03-10, we have reclassified prior year's sales
and cost of sales for comparative purposes in this report. Implementation of
EITF 03-10 has no effect on gross margin dollars, net income or cash flows, but
certain vendor coupons or rebates that had been recorded in sales in the past
are currently being recognized as a reduction of cost of sales. The
implementation of EITF 03-10 has resulted in decreases in both sales and cost of
sales of $11.8 million and $9.5 million for the 12 weeks ended December 4, 2004
and November 29, 2003, respectively, and $39.4 million and $34.3 million for the
40 weeks ended December 4, 2004 and November 29, 2003, respectively.

Inventory
---------
At February 28, 2004, approximately 6% of our inventories, relating to all
merchandise sold in our Waldbaums and Farmer Jack banners, that were acquired
during the past two decades, were valued at the lower of cost or market using
the LIFO method. During the first quarter of fiscal 2004, we changed our method
of valuing these inventories from the LIFO method to the FIFO method. We believe
that the new method is preferable because the FIFO method produces an inventory
value on our Consolidated Balance Sheets that better approximates current costs.
In addition, under FIFO, the flow of costs is generally more consistent with our
physical flow of goods. The adoption of the FIFO method will enhance
comparability of our financial statements by conforming all of our inventories
to the same accounting method. Our Company applied this change by retroactively
restating our consolidated financial statements as required by Accounting
Principles Board Opinion No. 20, "Accounting Changes," which resulted in an
increase to retained earnings as of February 23, 2003 of approximately $17.5
million.

<PAGE>


Overall Impact
--------------
The following tables reflect the impact of the adoption of (i.) FIN 46-R on our
Canadian operations, including the impact of all elimination entries relating to
the consolidation of the franchisees, (ii.) EITF 03-10 on our U.S. ($7.0 million
and $21.8 million for the 12 and 40 weeks ended December 4, 2004, respectively,
as compared to $5.9 million and $24.1 million for the 12 and 40 weeks ended
November 29, 2003, respectively) and Canadian ($4.8 million and $17.6 million
for the 12 and 40 weeks ended December 4, 2004, respectively, as compared to
$3.5 million and $10.2 million for the 12 and 40 weeks ended November 29, 2003,
respectively) operations, and (iii.) the change in our method of valuing certain
of our inventories from the LIFO method to the FIFO method on our U.S.
operations in our Statements of Consolidated Operations and Consolidated Balance
Sheets for the periods presented. Note that the adoption of EITF 03-10 only
impacts our Statements of Consolidated Operations. Furthermore, the change in
our method of valuing certain of our inventories impacts our Consolidated
Balance Sheets and had a $0 and $1.1 million impact on our Statements of
Consolidated Operations for the 12 and 40 weeks ended November 29, 2003,
respectively.

<TABLE>
<CAPTION>

                                                       Consolidated
                                                        A&P for the                                       Consolidated
                                                      12 weeks ended      Impact of       Impact of        A&P for the
                                                       Dec. 4, 2004      adoption of     adoption of     12 weeks ended
                                                     prior to changes      FIN 46-R       EITF 03-10       Dec. 4, 2004
                                                     ----------------  -------------    -------------    ---------------

<S>                                                  <C>               <C>              <C>              <C>

Sales                                                $   2,493,587     $      41,940    $     (11,768)    $   2,523,759
Cost of merchandise sold                                (1,828,670)          (10,319)          11,768        (1,827,221)
                                                     -------------     --------------   -------------     -------------
Gross margin                                               664,917            31,621                -           696,538
Store operating, general and administrative
   expense                                                (719,775)          (28,672)               -          (748,447)
                                                     -------------     -------------    -------------     -------------
(Loss) income from operations                              (54,858)            2,949                -           (51,909)
Interest expense                                           (19,218)                -                -           (19,218)
Interest income                                              1,595            (1,110)               -               485
Minority interest in earnings of consolidated
   franchisees                                                   -             2,815                -             2,815
                                                     -------------     -------------    -------------     -------------
(Loss) income from continuing operations
   before income taxes                                     (72,481)            4,654                -           (67,827)
Provision for income taxes                                  (4,759)             (165)               -            (4,924)
                                                     --------------    -------------    -------------     --------------
   (Loss) income from continuing operations                (77,240)            4,489                -           (72,751)

Discontinued operations:
   Income from operations of discontinued
     businesses, net of tax                                    110                 -                -               110
   Loss on disposal of discontinued operations,
     net of tax                                             (2,702)                -                -            (2,702)
                                                     --------------    -------------    -------------     --------------
   Loss from discontinued operations                        (2,592)                -                -            (2,592)
                                                     --------------    -------------    -------------     --------------
Net (loss) income                                    $     (79,832)    $       4,489    $           -     $     (75,343)
                                                     =============     =============    =============     =============

Depreciation                                         $     (61,852)    $      (1,002)   $           -     $     (62,854)
                                                     -------------     -------------    -------------     -------------

</TABLE>

<PAGE>


<TABLE>
<CAPTION>


                                                       Consolidated
                                                          A&P as                                            Consolidated
                                                        previously                                             A&P as
                                                     reported for the   Impact of           Impact of     Restated for the
                                                      12 weeks ended   adoption of         adoption of     12 weeks ended
                                                       Nov. 29, 2003      FIN 46-R         EITF 03-10       Nov. 29, 2003
                                                     ----------------  ---------------  ----------------  -----------------
<S>                                                  <C>               <C>              <C>               <C>

Sales                                                $   2,465,295     $      28,762    $      (9,445)    $   2,484,612
Cost of merchandise sold                                (1,809,234)            4,102            9,445        (1,795,687)
                                                     --------------    -------------    -------------     -------------
Gross margin                                               656,061            32,864                -           688,925
Store operating, general and
   administrative expense                                 (740,493)          (30,874)               -          (771,367)
                                                     --------------    -------------    -------------     -------------
(Loss) income from operations                              (84,432)            1,990                -           (82,442)
Interest expense                                           (18,383)                -                -           (18,383)
Interest income                                              1,384            (1,304)               -                80
Minority interest in earnings
   of consolidated franchisees                                   -              (205)               -              (205)
                                                     -------------     --------------   -------------     --------------
(Loss) income from continuing
   operations before income taxes                         (101,431)              481                -          (100,950)
Benefit from (provision for)
    income taxes                                            28,773              (646)               -            28,127
                                                     -------------     --------------   -------------     -------------
   Loss from continuing operations                         (72,658)             (165)               -           (72,823)

Discontinued operations:
   Loss from operations of discontinued
      businesses, net of tax                                (1,102)                -                -            (1,102)
   Gain on disposal of discontinued
     operations, net of tax                                 48,658                 -                -            48,658
                                                     -------------     -------------    -------------     -------------
   Income from discontinued operations                      47,556                 -                -            47,556
                                                     -------------     -------------    -------------     -------------
Cumulative effect of change in
   accounting principle -
   FIN 46-R, net of tax                                          -                 -                -                 -
                                                     -------------     -------------    -------------     -------------
Net loss                                             $     (25,102)    $        (165)   $           -     $     (25,267)
                                                     ==============    ==============   =============     ==============

Depreciation                                         $     (63,383)    $      (1,239)   $           -     $     (64,622)
                                                     --------------    -------------    -------------     -------------


</TABLE>


<PAGE>
<TABLE>
<CAPTION>


                                                       Consolidated
                                                        A&P for the                                      Consolidated
                                                      40 weeks ended      Impact of       Impact of       A&P for the
                                                       Dec. 4, 2004     adoption of     adoption of      40 weeks ended
                                                     prior to changes     FIN 46-R       EITF 03-10       Dec. 4, 2004
                                                     ----------------  --------------   -------------    ---------------

<S>                                                  <C>               <C>              <C>              <C>

Sales                                                $   8,213,930     $     120,112    $     (39,425)    $   8,294,617
Cost of merchandise sold                                (6,015,168)           (6,827)          39,425        (5,982,570)
                                                     -------------     --------------   -------------     -------------
Gross margin                                             2,198,762           113,285                -         2,312,047
Store operating, general and administrative
   expense                                              (2,315,175)         (101,909)               -        (2,417,084)
                                                     -------------     -------------    -------------     -------------
(Loss) income from operations                             (116,413)           11,376                -          (105,037)
Interest expense                                           (68,146)                -                -           (68,146)
Interest income                                              5,698            (3,604)               -             2,094
Minority interest in earnings of consolidated
   franchisees                                                   -             1,097                -             1,097
                                                     -------------     -------------    -------------     -------------
(Loss) income from continuing operations
   before income taxes                                    (178,861)            8,869                -          (169,992)
Provision for income taxes                                  (7,229)           (1,539)               -            (8,768)
                                                     -------------     -------------    -------------     -------------
   (Loss) income from continuing operations               (186,090)            7,330                -          (178,760)

Discontinued operations:
   Loss from operations of discontinued
     businesses, net of tax                                   (929)                -                -              (929)
   Loss on disposal of discontinued operations,
     net of tax                                             (2,702)                -                -            (2,702)
                                                     --------------    -------------    -------------     --------------
   Loss from discontinued operations                        (3,631)                -                -            (3,631)
                                                     --------------    -------------    -------------     -------------
Net (loss) income                                    $    (189,721)    $       7,330    $           -     $    (182,391)
                                                     =============     =============    =============     =============

Depreciation                                         $    (202,775)    $      (3,598)   $           -     $    (206,373)
                                                     -------------     -------------    -------------     -------------

</TABLE>


<PAGE>

<TABLE>
<CAPTION>


                                     Consolidated
                                        A&P as                                                               Consolidated
                                      previously                                                                A&P as
                                    reported for the     Impact of        Impact of        Change from      Restated for the
                                    40 weeks ended      adoption of      adoption of         LIFO to      40 weeks ended
                                     Nov. 29, 2003       FIN 46-R        EITF 03-10           FIFO          Nov. 29, 2003
                                    ---------------  ----------------  ---------------  ----------------  -----------------
<S>                                 <C>              <C>               <C>              <C>               <C>

Sales                               $   8,112,825    $      99,347     $     (34,279)   $           -     $   8,177,893
Cost of merchandise sold               (5,918,669)           8,606            34,279            1,059        (5,874,725)
                                    --------------   -------------     -------------    -------------     -------------
Gross margin                            2,194,156          107,953                 -            1,059         2,303,168
Store operating, general
   and administrative expense          (2,311,960)        (104,302)                -                -        (2,416,262)
                                    --------------   -------------     -------------    -------------     -------------
(Loss) income from operations            (117,804)           3,651                 -            1,059          (113,094)
Interest expense                          (61,212)               -                 -                -           (61,212)
Interest income                             5,296           (3,862)                -                -             1,434
Minority interest in earnings
   of consolidated franchisees                  -              (33)                -                -               (33)
                                    -------------    --------------    -------------    -------------     --------------
(Loss) income from continuing
   operations before income taxes        (173,720)            (244)                -            1,059          (172,905)
Benefit from (provision for)
 income taxes                              23,625           (1,265)                -                -            22,360
                                    -------------    --------------    -------------    -------------     -------------
   (Loss) income from continuing
     operations                          (150,095)          (1,509)                -            1,059          (150,545)

Discontinued operations:
   Loss from operations of
     discontinued businesses,
     net of tax                           (31,064)               -                 -                -           (31,064)
   Gain on disposal of
     discontinued operations,
     net of tax                            92,647                -                 -                -            92,647
                                    -------------    -------------     -------------    -------------     -------------
   Income from discontinued
     operations                            61,583                -                 -                -            61,583
                                    -------------    -------------     -------------    -------------     -------------
Cumulative effect of change in
   accounting principle -
   FIN 46-R, net of tax                         -           (8,047)                -                -            (8,047)
                                    -------------    --------------    -------------    -------------     --------------
Net (loss) income                   $     (88,512)   $      (9,556)    $           -    $       1,059     $     (97,009)
                                    ==============   ==============    =============    =============     ==============

Depreciation                        $    (209,075)   $      (4,327)    $           -    $           -     $    (213,402)
                                    --------------   -------------     -------------    -------------     -------------


</TABLE>


<PAGE>

<TABLE>
<CAPTION>

                                                         Consolidated
                                                            A&P at                 Impact of             Consolidated
                                                       December 4, 2004           adoption of               A&P at
                                                      prior to adoption            FIN 46-R            December 4, 2004
                                                     --------------------    --------------------    ------------------

<S>                                                  <C>                     <C>                     <C>

ASSETS
Current assets:
   Cash and cash equivalents                         $          157,741      $           18,953      $          176,694
   Accounts receivable                                          153,967                 (17,659)                136,308
   Inventories                                                  795,747                  20,750                 816,497
   Prepaid expenses and other current assets                     60,595                     309                  60,904
                                                     ------------------      ------------------      ------------------
   Total current assets                                       1,168,050                  22,353               1,190,403
                                                     ------------------      ------------------      ------------------
Non-current assets:
   Property:
     Property owned                                           1,356,773                  12,685               1,369,458
     Property leased under capital leases, net                   59,917                       -                  59,917
                                                     ------------------      ------------------      ------------------
   Property, net                                              1,416,690                  12,685               1,429,375
   Other assets                                                 155,483                 (26,948)                128,535
                                                     ------------------      ------------------      ------------------
Total assets                                         $        2,740,223      $            8,090      $        2,748,313
                                                     ==================      ==================      ==================

LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
   Current portion of long term debt                 $            2,277      $                -      $            2,277
   Current portion of obligations under capital
     leases                                                      10,311                       -                  10,311
   Accounts payable                                             587,501                     572                 588,073
   Book overdrafts                                              116,799                       -                 116,799
   Accrued salaries, wages and benefits                         169,001                   2,049                 171,050
   Accrued taxes                                                 67,373                   3,290                  70,663
   Other accruals                                               218,680                   1,859                 220,539
                                                     ------------------      ------------------      ------------------
   Total current liabilities                                  1,171,942                   7,770               1,179,712
                                                     ------------------      ------------------      ------------------
Non-current liabilities:
   Long-term debt                                               835,317                       -                 835,317
   Long-term obligations under capital leases                    74,859                       -                  74,859
   Other non-current liabilities                                402,586                    (896)                401,690
   Minority interest in consolidated franchisees                      -                   5,035                   5,035
                                                     ------------------      ------------------      ------------------
Total liabilities                                             2,484,704                  11,909               2,496,613
                                                     ------------------      ------------------      ------------------
   Commitments and contingencies
Stockholders' equity:
   Preferred stock                                                    -                       -                       -
   Common stock                                                  38,557                       -                  38,557
   Additional paid-in capital                                   460,119                       -                 460,119
   Accumulated other comprehensive income (loss)                 14,916                  (1,401)                 13,515
   Accumulated deficit                                         (258,073)                 (2,418)               (260,491)
                                                     ------------------      ------------------      ------------------
Total stockholders' equity                                      255,519                  (3,819)                251,700
                                                     ------------------      ------------------      ------------------
Total liabilities and stockholders'equity            $        2,740,223      $            8,090      $        2,748,313
                                                     ==================      ==================      ==================


</TABLE>
<PAGE>

<TABLE>
<CAPTION>


                                                                                                             Consolidated
                                                 Consolidated          Impact of          Impact of             A&P as
                                                    A&P at            adoption of        change from          Restated at
                                               February 28, 2004       FIN 46-R          LIFO to FIFO      February 28, 2004
                                               -----------------  ------------------  ------------------  ------------------
<S>                                            <C>                <C>                 <C>                 <C>

ASSETS
Current assets:
   Cash and cash equivalents                     $   276,151         $    20,857        $         -         $   297,008
   Accounts receivable                               190,737             (18,902)                 -             171,835
   Inventories                                       654,344              22,491             17,285             694,120
   Prepaid expenses and other current assets          33,651                 145                  -              33,796
                                                 -----------         -----------        -----------         -----------
   Total current assets                            1,154,883              24,591             17,285           1,196,759
                                                 -----------         -----------        -----------         -----------
Non-current assets:
   Property:
     Property owned                                1,383,702              22,223                  -           1,405,925
     Property leased under capital leases, net        65,632                   -                  -              65,632
                                                 -----------         -----------        -----------         -----------
   Property, net                                   1,449,334              22,223                  -           1,471,557
   Other assets                                      154,904             (39,404)                 -             115,500
                                                 -----------         -----------        -----------         -----------
Total assets                                     $ 2,759,121         $     7,410        $    17,285         $ 2,783,816
                                                 ===========         ===========        ===========         ===========

LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
   Current portion of long term debt             $     2,271         $         -        $         -         $     2,271
   Current portion of obligations under capital
     leases                                           15,901                   -                  -              15,901
   Accounts payable                                  477,536               3,176                  -             480,712
   Book overdrafts                                    96,273                   -                  -              96,273
   Accrued salaries, wages and benefits              176,812                 330                  -             177,142
   Accrued taxes                                      69,217               5,481                  -              74,698
   Other accruals                                    235,910                 328                  -             236,238
                                                 -----------         -----------        -----------         -----------
   Total current liabilities                       1,073,920               9,315                  -           1,083,235
                                                 -----------         -----------        -----------         -----------
Non-current liabilities:
   Long-term debt                                    823,738                   -                  -             823,738
   Long-term obligations under capital leases         73,980                   -                  -              73,980
   Other non-current liabilities                     401,659               1,273                  -             402,932
   Minority interest in consolidated franchisees           -               7,172                  -               7,172
                                                 -----------         -----------        -----------         -----------
Total liabilities                                  2,373,297              17,760                  -           2,391,057
                                                 -----------         -----------        -----------         -----------
   Commitments and contingencies
Stockholders' equity:
   Preferred stock                                         -                   -                  -                   -
   Common stock                                       38,519                   -                  -              38,519
   Additional paid-in capital                        459,579                   -                  -             459,579
   Accumulated other comprehensive loss              (26,637)               (602)                 -             (27,239)
   Accumulated deficit                               (85,637)             (9,748)            17,285             (78,100)
                                                 -----------         -----------        -----------         -----------
Total stockholders' equity                           385,824             (10,350)            17,285             392,759
                                                 -----------         ------------       -----------         -----------
Total liabilities and stockholders'equity        $ 2,759,121         $     7,410        $    17,285         $ 2,783,816
                                                 ===========         ===========        ===========         ===========

</TABLE>

<PAGE>

4.   Income Taxes

The income tax provision recorded for the 40 weeks ended December 4, 2004 and
November 29, 2003 reflects our estimated expected annual tax rates applied to
our respective domestic and foreign financial results.

SFAS No. 109 "Accounting for Income Taxes" ("SFAS 109") provides that a deferred
tax asset is recognized for temporary differences that will result in deductible
amounts in future years and for carryforwards. In addition, SFAS 109 requires
that a valuation allowance be recognized if, based on the weight of available
evidence, it is more likely than not that some portion or all of the deferred
tax asset will not be realized. Based upon our continued assessment of the
realization of our U.S. deferred tax asset and our historic cumulative losses,
we concluded that it was appropriate to record a valuation allowance in an
amount that would reduce our U.S. deferred tax asset to the amount that is more
likely than not to be realized. For the 12 and 40 weeks ended December 4, 2004,
the valuation allowance was increased by $34.2 million and $74.5 million,
respectively. To the extent that our U.S. operations generate sufficient taxable
income in future periods, we will reverse the income tax valuation allowance. In
future periods, U.S. earnings or losses will not be tax effected until such time
as the certainty of future tax benefits can be reasonably assured.

Further, in accordance with SFAS 109, income from discontinued operations can be
tax effected under certain circumstances. As a result, we taxed the income from
discontinued operations for the 40 weeks ended November 29, 2003 at our
incremental statutory tax rate. The tax provision for discontinued operations of
$34.4 million and $44.6 million for the 12 and 40 weeks ended November 29, 2003,
respectively, was completely offset by a tax benefit from continuing operations.

For the third quarter of fiscal 2004, our effective income tax rate of 7.2%
changed from the effective income tax rate of (27.8%) in the third quarter of
fiscal 2003 as follows:


<TABLE>
<CAPTION>


                                                               12 Weeks Ended
                                    --------------------------------------------------------------------
                                           December 4, 2004                     November 29, 2003
                                    ---------------------------------  ---------------------------------

<S>                                 <C>                  <C>           <C>                  <C>

                                                         Effective       Tax Benefit        Effective
                                     Tax Provision       Tax Rate        (Provision)        Tax Rate
                                    ---------------  ----------------  --------------   ----------------
United States                       $      (1,035)           1.5%      $      33,060          (32.7%)
Canada                                     (3,889)           5.7%             (4,933)           4.9%
                                    ---------------  ----------------  --------------   ----------------
                                    $      (4,924)           7.2%      $      28,127          (27.8%)
                                    ===============  ================  ==============  =================

</TABLE>


The change in our effective tax rate was primarily due to the absence of a tax
benefit recognized from continuing operations. As discussed above, $34.4 million
of benefit was recognized in the third quarter of fiscal 2003 as compared to the
third quarter of fiscal 2004, where no benefit was recognized. The remaining
provisions recorded in the U.S. of $1.0 million and $1.4 million for the third
quarters of fiscal 2004 and 2003, respectively, represent state and local taxes.


<PAGE>

For the 40 weeks ended December 4, 2004, our effective income tax rate of 5.1%
changed from the effective income tax rate of (12.9%) for the 40 weeks ended
November 29, 2003 as follows:


<TABLE>
<CAPTION>

                                                               40 Weeks Ended
                                    --------------------------------------------------------------------
                                           December 4, 2004                     November 29, 2003
                                    ---------------------------------  ---------------------------------

<S>                                 <C>                  <C>           <C>                 <C>

                                                         Effective       Tax Benefit        Effective
                                     Tax Provision       Tax Rate        (Provision)        Tax Rate
                                    ---------------  ----------------  ---------------  ----------------
United States                       $      (3,450)           2.0%      $      40,967          (23.7%)
Canada                                     (5,318)           3.1%            (18,607)          10.8%
                                    ---------------  ----------------  ---------------  ----------------
                                    $      (8,768)           5.1%      $      22,360          (12.9%)
                                    ===============  ================  ===============  ================

</TABLE>


The change in our effective tax rate was primarily due to the absence of a tax
benefit recognized from continuing operations. As discussed above, $44.6 million
of benefit was recognized for 40 weeks ended November 29, 2003 as compared to
the 40 weeks ended December 4, 2004, where no benefit was recognized. The
remaining provisions recorded in the U.S. of $3.5 million and $3.6 million for
the 40 weeks ended December 4, 2004 and November 29, 2003, respectively,
represent state and local taxes. In addition, the change in our effective tax
rate was partially offset by the impact of the lower mix of Canadian income from
continuing operations as a percentage of our Company's loss from continuing
operations for the 40 weeks ended December 4, 2004 as compared to the 40 weeks
ended November 29, 2003.

At December 4, 2004 and February 28, 2004, we had a net current deferred tax
asset which is included in "Prepaid expenses and other current assets" on our
Consolidated Balance Sheet totaling $11.9 million and $8.9 million,
respectively, and a net non-current deferred tax liability which is included in
"Other non-current liabilities" on our Consolidated Balance Sheet totaling $25.9
million and $22.5 million, respectively.


5.        Valuation of Goodwill and Long Lived Assets

Goodwill
--------
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets" ("SFAS 142"). As disclosed previously, goodwill will no longer be
amortized but will be subject to impairment tests on an annual basis and
whenever events or circumstances occur indicating that the goodwill may be
impaired. SFAS 142 was effective for our Company on February 24, 2002. We
completed our initial impairment review during the second quarter of fiscal 2002
and concluded a transitional impairment charge from the adoption of the standard
was not required.

In accordance with the standard, we selected our fiscal fourth quarter to
conduct our annual impairment test for goodwill. However, through the third
quarter of fiscal 2003, we experienced operating losses for the past two years
for one of our Midwest asset groups, which we believe is a triggering event
under SFAS 144 for potential impairment of the asset group's long lived assets.
In addition, the triggering event under SFAS 144 also triggered testing the
Midwest's goodwill for potential impairment under SFAS 142.

<PAGE>


To assess the Midwest's goodwill for impairment under SFAS 142, we performed an
assessment of the carrying value of the reporting unit to determine if the fair
value of the reporting unit was below its carrying value. The fair value of the
Midwest reporting unit was determined through internal analysis and a
valuation performed by an independent third party appraiser, primarily using the
discounted cash flow approach based on forward looking information regarding
revenues and costs of the Midwest. This valuation was based on a number of
estimates and assumptions, including the projected future operating results of
the Midwest, discount rate, and long term growth rate. As a result of this
review, we determined that the fair value of the Midwest was below its carrying
value and that the carrying value of the reporting unit goodwill exceeded its
implied fair value (defined as the fair value of the reporting unit less the
fair value of all assets and liabilities other than goodwill). Further, based
upon the analysis, we concluded that the Midwest's goodwill was entirely
impaired and we recorded an impairment charge of $27.0 million as a component of
operating income in "Store operating, general and administrative expense" in our
Statements of Consolidated Operations for the 12 and 40 weeks ended November 29,
2003.

Long-Lived Assets
-----------------
In accordance with Statement of Financial Accounting Standards No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"),
we review the carrying values of our long-lived assets for possible impairment
whenever events or changes in circumstances indicate that the carrying amount of
assets may not be recoverable. Such review is primarily based upon groups of
assets and the undiscounted estimated future cash flows from such assets to
determine if the carrying value of such assets is recoverable from their
respective cash flows. If such review indicates an impairment exists, we measure
such impairment on a discounted basis using a probability weighted approach and
a risk free rate.

During the third quarter of fiscal 2003 and in connection with the goodwill
impairment test discussed above, we reviewed the carrying value of all of the
Midwest's long-lived assets for potential impairment under SFAS 144. We
estimated the Midwest's future cash flows from its long-lived assets, primarily
equipment and leasehold improvements, based on internal analysis and valuations
performed by an independent third party appraiser. For those asset groups for
which the carrying value was not recoverable from their future cash flows, we
determined the fair value of the related assets based on the same analysis,
primarily using the discounted cash flow approach. As a result of this review,
we recorded an impairment charge for the Midwest's long-lived assets of $33.1
million as a component of operating income in "Store operating, general and
administrative expense" in our Statements of Consolidated Operations for the 12
and 40 weeks ended November 29, 2003.

During the third quarter of fiscal 2004, we updated our review of the carrying
value of several of the Midwest's long-lived assets for potential impairment
under SFAS 144 as we experienced operating losses for the past two years for
several of our Midwest asset groups. We estimated the Midwest's future cash
flows from their long-lived assets, primarily equipment and leasehold
improvements, based on internal analysis and valuations performed by an
independent third party appraiser. For those asset groups for which the carrying
value was not recoverable from their future cash flows, we determined the fair
value of the related assets based on the same analysis, primarily using the
discounted cash flow approach. As a result of this review, we recorded
impairment charges for the Midwest's long-lived assets of $34.7 million, which
are recorded as a component of operating income in "Store operating, general and
administrative expense" in our Statements of Consolidated Operations for the 12
and 40 weeks ended December 4, 2004.

<PAGE>


Our impairment reviews may also be triggered by appraisals of or offers for our
long-lived assets we receive in the normal course of business. During the 40
weeks ended December 4, 2004, we recorded an impairment loss of $0.9 million
related to certain idle property that, based upon new information received about
such assets, including an appraisal and an offer, was impaired and written down
to its net realizable value. This amount was included in "Store operating,
general and administrative expense" in our Statements of Consolidated
Operations. There were no such amounts recorded during the 40 weeks ended
November 29, 2003.

We also review assets in stores planned for closure or conversion for impairment
upon determination that such assets will not be used for their intended useful
life. During the 12 and 40 weeks ended December 4, 2004, we recorded impairment
losses on property, plant and equipment of $2.7 million and $3.5 million,
respectively, compared to nil and $19.4 million during the 12 and 40 weeks ended
November 29, 2003, respectively. Of these amounts, $0.4 million and $1.2 million
for the 12 and 40 weeks ended December 4, 2004, respectively, and $0.5 million
for the 40 weeks ended November 29, 2003 related to United States stores that
were or will be closed in the normal course of business, and $1.7 million for
the 12 and 40 weeks ended December 4, 2004 related to United States property
held as part of our 2001 Asset Disposition and are included in "Store operating,
general and administrative expense" in our Statements of Consolidated
Operations. The remaining impairment losses we recorded of $0.6 million for both
fiscal 2004 period presented and $18.9 million for the 40 weeks ended November
29, 2003 periods presented related to stores closed as a result of our exit of
the Kohl's business and are included in our Statements of Consolidated
Operations under the caption "Gain on disposal of discontinued operations, net
of tax" (see Note 6 of our Consolidated Financial Statements). The effects of
changes in estimates of useful lives were not material to ongoing depreciation
expense.

If current operating levels and trends continue, there may be additional future
impairments on long-lived assets, including the potential for impairment of
assets that are held and used.


6.       Discontinued Operations

In February 2003, we announced the sale of a portion of our non-core assets,
including nine of our stores in northern New England and seven stores in
Madison, Wisconsin. In March 2003, we entered into an agreement to sell an
additional eight stores in northern New England.

Also, during fiscal 2003, we adopted a formal plan to exit the Milwaukee,
Wisconsin market, where our remaining 23 Kohl's stores were located, as well as
our Eight O'Clock Coffee business, through the sale and/or disposal of these
assets.

Upon the decision to sell these stores, we applied the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144") to these properties
held for sale. SFAS 144 requires properties held for sale to be classified as a
current asset and valued on an asset-by-asset basis at the lower of carrying
amount or fair value less costs to sell. In applying those provisions, we
considered, where available, the binding sale agreements related to these
properties as an estimate of the assets' fair value.

We have accounted for all of these separate business components as discontinued
operations in accordance with SFAS 144. In determining whether a store or group
of stores qualifies as discontinued operations treatment, we include only those
stores for which (i.) the operations and cash flows will be eliminated from our
ongoing operations as a result of the disposal and (ii.) we will not have any
significant continuing involvement in the operations of the stores after the
disposal. In making this determination, we consider the geographic location of
the stores. If stores to be disposed of are replaced by other stores in the same
geographic district, we would not include the stores as discontinued operations.

<PAGE>


Amounts in the financial statements and related notes for all periods shown have
been reclassified to reflect the discontinued operations. Summarized below are
the operating results for these discontinued businesses, which are included in
our Statements of Consolidated Operations, under the caption "Income (loss) from
operations of discontinued businesses, net of tax" for the 12 and 40 weeks
ending December 4, 2004 and November 29, 2003, and the results of disposing
these businesses which are included in "(Loss) gain on disposal of discontinued
operations, net of tax" on our Statements of Consolidated Operations for the 12
and 40 weeks ending December 4, 2004 and November 29, 2003.


<TABLE>
<CAPTION>

                                                       12 Weeks ended December 4, 2004
                                    --------------------------------------------------------------------
                                                                            Eight
                                       Northern                            O'Clock
                                      New England         Kohl's            Coffee            Total
                                    ---------------  ----------------  ---------------  ----------------

<S>                                 <C>              <C>               <C>              <C>

Income (loss) from operations of
     discontinued businesses
Sales                               $           -    $           -     $           -    $           -
Operating expenses                              5              137               (32)             110
                                    -------------  ------------------  ---------------  -------------
Income (loss) from operations of
   discontinued businesses, before
   tax                                          5              137               (32)             110
Tax provision                                   -                -                 -                -
                                    ---------------  ----------------  ---------------  -------------
Income (loss) from operations of
   discontinued businesses, net of
   tax                              $           5    $         137     $         (32)   $         110
                                    ===============  ================  ===============  =============

Disposal related costs included in operating expenses above:
-----------------------------------------------------------
Non-accruable closing costs         $           7    $         (11)    $         (32)   $         (36)
Reversal of previously accrued
   occupancy related costs                      -              354                 -              354
Interest accretion on present value of
   future occupancy costs                      (2)            (206)                -             (208)
                                    ---------------  ----------------  ---------------  -------------
Total disposal related costs        $           5    $         137     $         (32)   $         110
                                    ---------------  ----------------  ---------------  -------------

Loss on disposal of discontinued
     businesses
Property impairments                $           -    $        (602)    $           -    $        (602)
Loss on sale of business                        -                -            (2,100)          (2,100)
                                    ---------------  ----------------  ---------------  --------------
Loss on disposal of discontinued
   businesses, before tax                       -             (602)           (2,100)          (2,702)
Tax provision                                   -                -                 -                -
                                    ---------------  ----------------  ---------------  -------------
Loss on disposal of discontinued
   businesses, net of tax           $           -    $        (602)    $      (2,100)   $      (2,702)
                                    ===============  ================  ===============  ==============

</TABLE>
<PAGE>


<TABLE>
<CAPTION>



                                                      12 Weeks ended November 29, 2003
                                    --------------------------------------------------------------------
                                                                            Eight
                                       Northern                            O'Clock
                                      New England         Kohl's            Coffee            Total
                                    ---------------  ----------------  ---------------  ----------------

<S>                                 <C>              <C>               <C>              <C>

(Loss) income from operations of
     discontinued businesses
Sales                               $           -    $           -     $      21,192    $      21,192
Operating expenses                            (48)          (3,663)          (19,381)         (23,092)
                                    -------------  ---------------     ---------------  -------------
(Loss) income from operations of
   discontinued businesses, before
   tax                                        (48)          (3,663)            1,811           (1,900)
Tax benefit (provision)                        20            1,539              (761)             798
                                    ---------------  ----------------  ---------------  -------------
(Loss) income from operations of
   discontinued businesses, net of
   tax                              $         (28)   $      (2,124)    $       1,050    $      (1,102)
                                    ===============  ================  ===============  ==============

Disposal related costs included in operating expenses above:
-----------------------------------------------------------
Occupancy related costs             $           -    $      (3,000)    $           -    $      (3,000)
Reversal of previously accrued
   occupancy related costs                      -            4,458                 -            4,458
Severance and benefits                          -               66                 -               66
Non-accruable inventory costs                (175)            (318)                -             (493)
Non-accruable closing costs                   130           (4,689)           (2,391)          (6,950)
Interest accretion on present value
   of future occupancy costs                   (3)            (180)                -             (183)
                                    ---------------  ----------------  ---------------  ----------------
Total disposal related costs        $         (48)   $      (3,663)    $      (2,391)   $      (6,102)
                                    ---------------  ----------------  ---------------  ----------------


Gain on disposal of
       discontinued businesses
Gain on sale of fixed assets        $           -    $       6,445     $      77,448    $      83,893
Fixed asset impairments                         -                -                 -                -
                                    ---------------  ----------------  ---------------  ----------------
Gain on disposal of
   discontinued businesses, before
   tax                                          -            6,445            77,448           83,893
Tax provision                                   -           (2,707)          (32,528)         (35,235)
                                    ---------------  ----------------  ---------------  ----------------
Gain on disposal of discontinued
   businesses, net of tax           $           -    $       3,738     $      44,920    $      48,658
                                    ===============  ================  ===============  ================


</TABLE>

<PAGE>


<TABLE>
<CAPTION>




                                                       40 Weeks ended December 4, 2004
                                    --------------------------------------------------------------------
                                                                            Eight
                                       Northern                            O'Clock
                                      New England         Kohl's            Coffee            Total
                                    ---------------  ----------------  ---------------  ----------------

<S>                                 <C>              <C>               <C>              <C>

Income (loss) from operations of
     discontinued businesses
Sales                               $           -    $           -     $           -    $           -
Operating expenses                            333             (637)             (625)            (929)
                                    -------------  ---------------     ---------------  -------------
Income (loss) from operations of
   discontinued businesses, before
   tax                                        333             (637)             (625)            (929)
Tax provision                                   -                -                 -                -
                                    ---------------  ----------------  ---------------  -------------
Income (loss) from operations of
   discontinued businesses, net of
   tax                              $         333    $        (637)    $        (625)   $        (929)
                                    ===============  ================  ===============  =============

Disposal related costs included in operating expenses above:
-----------------------------------------------------------
Severance and benefits              $       (326)    $           -     $           -    $        (326)
Reversal of previously accrued
   occupancy related costs                      -              354                 -              354
Non-accruable closing costs                   667             (401)             (625)            (359)
Interest accretion on present value
   of future occupancy costs                   (8)            (590)                -             (598)
                                    ---------------  ----------------  ---------------  -------------
Total disposal related costs        $         333    $        (637)    $        (625)   $        (929)
                                    ---------------  ----------------  ---------------  -------------

Loss on disposal of discontinued
     businesses

Property impairments                $           -    $        (602)    $           -    $        (602)
Loss on sale of business                        -                -            (2,100)          (2,100)
                                    ---------------  ----------------  ---------------  --------------
Loss on disposal of discontinued
   businesses, before tax                       -             (602)           (2,100)          (2,702)
Tax provision                                   -                -                 -                -
                                    ---------------  ----------------  ---------------  -------------
Loss on disposal of discontinued
   businesses, net of tax           $           -    $        (602)    $      (2,100)   $      (2,702)
                                    ===============  ================  ===============  ==============


</TABLE>


<PAGE>


<TABLE>
<CAPTION>


                                                      40 Weeks ended November 29, 2003
                                    --------------------------------------------------------------------
                                                                            Eight
                                       Northern                            O'Clock
                                      New England         Kohl's            Coffee            Total
                                    ---------------  ----------------  ---------------  ----------------

<S>                                 <C>              <C>               <C>              <C>

(Loss) income from operations of
     discontinued businesses
Sales                               $      32,726    $     123,229     $      65,265    $     221,220
Operating expenses                        (43,512)        (179,528)          (51,738)        (274,778)
                                    -------------  ---------------     ---------------  -------------
(Loss) income from operations of
   discontinued businesses, before
   tax                                    (10,786)         (56,299)           13,527          (53,558)
Tax benefit (provision)                     3,932           24,055            (5,493)          22,494
                                    ---------------  ----------------  ---------------  -------------
(Loss) income from operations of
   discontinued businesses, net of
   tax                              $      (6,854)   $     (32,244)    $       8,034    $     (31,064)
                                    ===============  ================  ===============  ==============

Disposal related costs included in operating expenses above:
-----------------------------------------------------------
Pension withdrawal liability        $           -    $      (6,500)    $           -    $      (6,500)
Occupancy related costs                    (3,993)         (28,387)                -          (32,380)
Reversal of previously accrued
   occupancy related costs                      -            4,458                 -            4,458
Non-accruable inventory costs                (175)          (2,307)                -           (2,482)
Non-accruable closing costs                (2,984)          (6,526)           (3,834)         (13,344)
Gain on sale of inventory                   1,645                -                 -            1,645
Severance and benefits                     (2,635)          (8,349)                -          (10,984)
Interest accretion on present value
   of future occupancy costs                   (3)            (180)                -             (183)
                                    ---------------  ----------------  ---------------  --------------
Total disposal related costs        $      (8,145)   $     (47,791)    $      (3,834)   $     (59,770)
                                    ---------------  ----------------  ---------------  --------------


Gain (loss) on disposal of
       discontinued businesses
Gain on sale of fixed assets        $      85,983    $      15,272     $      77,448    $     178,703
Fixed asset impairments                         -          (18,968)                -          (18,968)
                                    -------------    -------------     ---------------  ----------------
Gain (loss) on disposal of
   discontinued businesses, before
   tax                                     85,983           (3,696)           77,448          159,735
Tax provision                             (30,997)          (3,563)          (32,528)         (67,088)
                                    -------------    ----------------  ---------------  ----------------
Gain (loss) on disposal of
   discontinued businesses,
   net of tax                       $      54,986    $      (7,259)    $      44,920    $      92,647
                                    =============    ================  ===============  ================


</TABLE>


<PAGE>

Northern New England
--------------------
As previously stated, as part of our strategic plan we decided, in February
2003, to exit the northern New England market by closing and/or selling 21
stores in that region in order to focus on our core geographic markets. As a
result of these sales, we generated proceeds of $117.5 million, resulting in a
gain of $86.0 million ($55.0 million after tax). This gain was included in
"(Loss) gain on disposal of discontinued operations, net of tax" on our
Statements of Consolidated Operations for the 40 weeks ended November 29, 2003.
In addition, as part of the exit of this business, we reported a loss of $10.8
million ($6.9 million after tax) for the 40 weeks ended November 29, 2003, which
was included in "Income (loss) from operations of discontinued businesses, net
of tax" on our Statements of Consolidated Operations for those periods. During
the 12 and 40 weeks ended December 4, 2004, we recorded gains of nil and $0.3
million, respectively, primarily due to favorable results of winding down this
business. This amount is included in "Income (loss) from operations of
discontinued businesses, net of tax" in our Statements of Consolidated
Operations.

The following table summarizes the reserve activity related to the exit of the
northern New England market since the charge was recorded:


<TABLE>
<CAPTION>

                                                                     Severance
                                                                        and
                                           Occupancy                 Benefits               Total
                                           ---------                 ---------            --------

<S>                                        <C>                       <C>                  <C>

   Fiscal 2003 charge (1)                    $3,993                   $2,670               $6,663
   Additions (2)                                  6                        -                    6
   Utilization (3)                           (3,547)                  (2,612)              (6,159)
                                            --------                  -------             --------
   Balance at
       February 28, 2004                        452                       58                  510
   Additions (2)                                  8                      326                  334
   Utilization (3)                             (127)                    (384)                (511)
                                            --------                  -------             --------
   Balance at
       December 4, 2004                     $   333                   $    -              $   333
                                            =======                   ======              ========

   (1) The fiscal 2003 charge to occupancy consists of $4.0 million related to
       future expected occupancy costs such as rent, common area maintenance and
       real estate taxes. The fiscal 2003 charge to severance and benefits of
       $2.7 million related to severance to be paid to employees terminated as a
       result of our exit from the northern New England market.
   (2) The additions to occupancy represents the interest accretion on future
       occupancy costs which were recorded at present value at the time of the
       original charge.
   (3) Occupancy utilization represents vacancy related payments for closed
       locations. Severance and benefits utilization represents payments made to
       terminated employees during the period.

</TABLE>


As of December 4, 2004, we had paid approximately $3.0 million in severance and
benefits costs, which resulted from the termination of approximately 300
employees.

At December 4, 2004, $0.1 million of the northern New England exit reserves was
included in "Other accruals" and $0.2 million was included in "Other non-current
liabilities" on our Consolidated Balance Sheets. We have evaluated the liability
balance of $0.3 million as of December 4, 2004 based upon current available
information and have concluded that it is appropriate. We will continue to
monitor the status of the vacant properties and adjustments to the reserve
balance may be recorded in the future, if necessary.

Kohl's Market
-------------
As previously stated, as part of our strategic plan we decided to exit the
Madison and Milwaukee, Wisconsin markets, which comprised our Kohl's banner.

<PAGE>


As a result of the Madison sales, we generated proceeds of $20.1 million,
resulting in a gain of $8.8 million ($5.6 million after tax). This gain was
included in "(Loss) gain on disposal of discontinued operations, net of tax" on
our Statements of Consolidated Operations for the 40 weeks ended November 29,
2003.

As a result of the decision to exit Milwaukee, we estimated the assets' fair
market value using a probability weighted average approach based upon expected
proceeds and recorded impairment losses on the property, plant and equipment at
the remaining Kohl's locations of nil and $18.9 million during the 12 and 40
weeks ended November 29, 2003, respectively. Further, during the 12 and 40 weeks
ended December 4, 2004, we recorded additional impairment losses of $0.6 million
as a result of originally estimated proceeds on the disposal of these assets not
being achieved. This net loss is also included in "(Loss) gain on disposal of
discontinued operations, net of tax" on our Statements of Consolidated
Operations for those periods.

As a result of the closure and impending sale of certain Milwaukee locations, we
recorded exit costs net of the results of these businesses while they were open
of $3.7 million and $56.3 million for the 12 and 40 weeks ended November 29,
2003. These charges are detailed in the tables above and are included in "Income
(loss) from operations of discontinued businesses, net of tax" in our
Statements of Consolidated Operations for those periods. During the 12 and 40
weeks ended December 4, 2004, we recorded a gain of $0.1 million and a charge of
$0.6 million, respectively, primarily due to residual benefits and costs of
winding down this business.

The following table summarizes the reserve activity since the charge was
recorded:

<TABLE>
<CAPTION>


                                                         Severance
                                                            and            Fixed
                                       Occupancy         Benefits         Assets            Total
                                       ---------       -----------      -----------     -----------

<S>                                    <C>             <C>              <C>             <C>

   Fiscal 2003 charge (1)                 $25,487        $13,062           $18,968        $57,517
   Additions (2)                              352              -                 -            352
   Utilization (3)                         (5,342)        (8,228)          (18,968)       (32,538)
   Adjustments (4)                         (1,458)             -                 -         (1,458)
                                         --------       --------           -------        --------
   Balance at
       February 28, 2004                   19,039          4,834                 -         23,873
   Additions (2)                              538             52               602          1,192
   Utilization (3)                         (2,512)        (2,174)             (602)        (5,288)
   Adjustments (4)                           (354)             -                 -           (354)
                                         --------       --------          --------        -------

   Balance at
       December 4, 2004                  $ 16,711       $  2,712          $      -        $19,423
                                         ========       ========          ========        =======

   (1) The fiscal 2003 charge to occupancy consists of $25.5 million related to
       future occupancy costs such as rent, common area maintenance and real
       estate taxes. The fiscal 2003 charge to severance and benefits of $13.1
       million related to severance costs of $6.6 million and costs for future
       obligations for early withdrawal from multi-employer union pension plans
       and a health and welfare plan of $6.5 million. The fiscal 2003 charge to
       property of $18.9 million represents the impairment losses at certain
       Kohl's locations.
   (2) The additions to occupancy and severance and benefits represent the
       interest accretion on future occupancy costs and future obligations for
       early withdrawal from multi-employer union pension plans which were
       recorded at present value at the time of the original charge. The
       addition to fixed assets represents additional impairment losses recorded
       as a result of originally estimated proceed on the disposal of these
       assets not being achieved.
   (3) Occupancy utilization represents vacancy related payments for closed
       locations such as rent, common area maintenance, real estate taxes and
       lease termination payments. Severance and benefits utilization represents
       payments made to terminated employees during the period and payments for
       pension withdrawal.
   (4) At each balance sheet date, we assess the adequacy of the balance to
       determine if any adjustments are required as a result of changes in
       circumstances and/or estimates. During fiscal 2003, we recorded net
       adjustments of $1.5 million primarily related to reversals of previously
       accrued occupancy related costs due to favorable results of terminating
       and subleasing certain locations of $4.5 million offset by additional
       vacancy accruals of $3.0 million. During the 12 and 40 weeks ended
       December 4, 2004, we recorded a reversal of previously accrued occupancy
       related costs due to favorable results of terminating leases.

</TABLE>

<PAGE>


As of December 4, 2004, we had paid approximately $10.4 million of the total
original severance and benefits charge recorded, which resulted from the
termination of approximately 2,000 employees. The remaining severance liability
relates to future obligations for early withdrawal from multi-employer union
pension plans which will be paid by mid-2006, and individual severance payments
which will be paid by the end of fiscal 2004.

At December 4, 2004, $5.7 million of the Kohl's exit reserves was included in
"Other accruals" and $13.7 million was included in "Other non-current
liabilities" on our Consolidated Balance Sheets. We have evaluated the liability
balance of $19.4 million as of December 4, 2004 based upon current available
information and have concluded that it is appropriate. We will continue to
monitor the status of the vacant properties and adjustments to the reserve
balance may be recorded in the future, if necessary.

Eight O'Clock Coffee
--------------------
During the 12 and 40 weeks ended November 29, 2003, we completed the sale of our
Eight O'Clock Coffee business, generating gross proceeds of $107.5 million and a
net gain after transaction related costs of $75.1 million ($43.5 million after
tax). The sale of the coffee business also included a contingent note for up to
$20.0 million, the value and payment of which is based upon certain elements of
the future performance of the Eight O'Clock Coffee business and therefore is not
included in the gain. During the 12 and 40 weeks ended November 29, 2003, we
incurred costs of $2.4 million and $3.8 million related to the sale, which was
included in "Income (loss) from operations of discontinued businesses, net of
tax" on our Statements of Consolidated Operations. During the 12 and 40 weeks
ended December 4, 2004, we incurred costs of $2.1 million which consisted of a
post-sale working capital settlement between the buyer and our Company for which
the amount was not determinable at the time of the sale. This amount is included
in "(Loss) gain on disposal of discontinued operations, net of tax" in our
Statements of Consolidated Operations. Further, during the 40 weeks ended
December 4, 2004, we incurred costs of $0.6 million related to winding down this
business subsequent to its sale and included this amount in "Income (loss) from
operations of discontinued businesses, net of tax" in our Statements of
Consolidated Operations.


7.  Asset Disposition Initiative

Overview
--------
In fiscal 1998 and 1999, we announced a plan to close two warehouse facilities
and a coffee plant in the U.S., a bakery plant in Canada and 166 stores
including the exit of the Richmond, Virginia and Atlanta, Georgia markets
(Project Great Renewal). In addition, during the third quarter of fiscal 2001,
we announced that certain underperforming operations, including 39 stores (30 in
the United States and 9 in Canada) and 3 warehouses (2 in the United States and
1 in Canada) would be closed and/or sold, and certain administrative
streamlining would take place (2001 Asset Disposition). During the fourth
quarter of fiscal 2003, we announced an initiative to close 6 stores and convert
13 stores to our Food Basics banner in the Detroit, Michigan and Toledo, Ohio
markets (Farmer Jack Restructuring).

Presented below is a reconciliation of the charges recorded on our Consolidated
Balance Sheets, Statements of Consolidated Operations and Statements of
Consolidated Cash Flows for the 12 and 40 weeks ended December 4, 2004 and
November 29, 2003. Present value ("PV") interest represents interest accretion
on future occupancy costs which were recorded at present value at the time of
the original charge. Non-accruable items represent charges related to the
restructuring that are required to be expensed as incurred in accordance with
SFAS 146 "Accounting for Costs Associated with Exit or Disposal Activities".


<PAGE>
<TABLE>
<CAPTION>

                                 12 Weeks Ended December 4, 2004                  12 Weeks Ended November 29, 2003
                         ----------------------------------------------  ------------------------------------------------
                          Project      2001         Farmer                 Project       2001         Farmer
                           Great       Asset         Jack                   Great        Asset         Jack
                          Renewal   Disposition  Restructuring   Total     Renewal    Disposition  Restructuring  Total
                          -------   -----------  ------------- --------  -----------  -----------  ------------- --------

<S>                       <C>       <C>          <C>           <C>       <C>          <C>          <C>           <C>

   Balance Sheet accruals
   ----------------------
   PV interest           $    418   $       553  $       154  $   1,125  $       655  $       532  $         -  $   1,187
                         --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------
   Total accrued to
     balance sheets           418           553          154      1,125          655          532            -      1,187
                         --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------

   Occupancy reversals          -       (4,488)            -    (4,488)            -            -            -          -
   Additional occupancy
     accrual                    -             -            -          -            -          991            -        991
   Additional severance         -             -            -          -            -          535            -        535
   Adjustments to
                         --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------
     balance sheets             -       (4,488)            -    (4,488)            -        1,526            -      1,526
                         --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------

   Non-accruable items
     recorded on Statements
     of Operations
     -------------
   Property writedowns          -         1,709            -      1,709            -            -            -          -
   Inventory markdowns          -             -            -          -            -            -            -          -
   Closing costs                -             -            -          -            -            -            -          -
                         --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------
   Total non-accruable
     items                      -         1,709            -      1,709            -            -            -          -
                         --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------

     Less PV interest        (418)        (553)         (154)    (1,125)        (655)       (532)            -     (1,187)
                         ---------  -----------  ------------ ---------- ------------ -----------  -----------  ----------
Total amount recorded on
     Statements of
     Operations and
     Statements of Cash
     Flows excluding
     PV interest         $      -   $   (2,779)  $         -  $ (2,779)  $         -  $     1,526  $         -  $   1,526
                         ========   ===========  ===========  =========  ===========  ===========  ===========  =========


</TABLE>
<PAGE>

<TABLE>
<CAPTION>

                                 40 Weeks Ended December 4, 2004                  40 Weeks Ended November 29, 2003
                         ----------------------------------------------  ------------------------------------------------
                          Project       2001       Farmer                  Project        2001        Farmer
                           Great       Asset        Jack                    Great         Asset        Jack
                          Renewal    Disposition Restructuring   Total     Renewal     Disposition Restructuring  Total
                         --------   ------------ ------------- --------  -----------  ------------ ------------- --------

<S>                      <C>        <C>          <C>           <C>       <C>          <C>          <C>           <C>


   Balance Sheet accruals
   PV interest           $  1,494   $     1,902  $       534  $   3,930  $     2,075  $     2,232  $         -  $   4,307
                         --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------
   Total accrued to
     balance sheets         1,494         1,902          534      3,930        2,075        2,232            -      4,307
                         --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------

   Occupancy reversals          -       (4,488)            -    (4,488)            -       (6,778)           -     (6,778)
   Additional occupancy
     accrual                    -             -            -          -            -          991            -        991
   Additional severance         -             -            -          -            -        1,490            -      1,490
                          --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------
   Adjustments to
     balance sheets             -       (4,488)            -    (4,488)            -       (4,297)           -     (4,297)
                          --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------

   Non-accruable items
     recorded on Statements
     of Operations
   Property writedowns          -         1,709           90      1,799            -          422            -        422
   Inventory markdowns          -             -          291        291            -            -            -          -
   Closing costs                -             -          689        689            -            -            -          -
                         --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------
   Total non-accruable
     items                      -         1,709        1,070      2,779            -          422            -        422
                         --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------

     Less PV interest      (1,494)      (1,902)         (534)    (3,930)      (2,075)     (2,232)            -     (4,307)
                         ---------  -----------  ------------ ---------- ------------ -----------  -----------  ---------
   Total amount recorded
     on Statements of
     Operations and
     Statements of Cash
     Flows excluding
     PV interest         $      -   $   (2,779)  $     1,070  $ (1,709)  $         -  $   (3,875)  $         -  $ (3,875)
                         ========   ===========  ===========  =========  ===========  ===========  ===========  =========

</TABLE>



Project Great Renewal
---------------------
In May 1998, we initiated an assessment of our business operations in order to
identify the factors that were impacting our performance. As a result of this
assessment, in fiscal 1998 and 1999, we announced a plan to close two warehouse
facilities and a coffee plant in the U.S., a bakery plant in Canada and 166
stores (156 in the United States and 10 in Canada) including the exit of the
Richmond, Virginia and Atlanta, Georgia markets. As of December 4, 2004, we had
closed all stores and facilities related to this phase of the initiative.

<PAGE>


The following table summarizes the activity related to this phase of the
initiative over the last three fiscal years:

<TABLE>
<CAPTION>

                                    Occupancy                 Severance and Benefits                    Total
                         ------------------------------   ------------------------------  -------------------------------
                           U.S.      Canada      Total      U.S.      Canada      Total      U.S.      Canada      Total
                         --------   --------   --------   --------   --------   --------  ---------  ---------  ---------

<S>                      <C>        <C>        <C>        <C>        <C>        <C>       <C>        <C>        <C>

     Balance at
       February 24, 2001 $ 82,189   $    672   $ 82,861   $  2,721   $      -   $  2,721  $  84,910  $     672  $  85,582
     Addition (1)           3,500        318      3,818          -          -          -      3,500        318      3,818
     Utilization (2)      (22,887)      (415)   (23,302)      (544)         -       (544)   (23,431)      (415)   (23,846)
                         --------   --------   --------   --------   --------   --------  ---------  ---------  ---------
     Balance at
       February 23, 2002 $ 62,802   $    575   $ 63,377      2,177   $      -   $  2,177     64,979        575     65,554
     Addition (1)           2,861        298      3,159          -          -          -      2,861        298      3,159
     Utilization (2)      (13,230)      (386)   (13,616)      (370)         -       (370)   (13,600)      (386)   (13,986)
     Adjustments (3)       (3,645)         -     (3,645)       639          -        639     (3,006)         -     (3,006)
                         ---------  --------   ---------  --------   --------   --------  ---------  ---------  ---------
     Balance at
       February 22, 2003 $ 48,788   $    487   $ 49,275   $  2,446   $      -   $  2,446  $  51,234  $     487  $  51,721
     Addition (1)           2,276        372      2,648          -          -          -      2,276        372      2,648
     Utilization (2)      (19,592)      (407)   (19,999)      (289)         -       (289)   (19,881)      (407)   (20,288)
                         --------   --------   --------   --------   --------   --------  ---------  ---------  ---------
     Balance at
       February 28, 2004 $ 31,472   $    452   $ 31,924   $  2,157   $      -   $  2,157  $  33,629  $     452  $  34,081
     Addition (1)           1,477         17      1,494          -          -          -      1,477         17      1,494
     Utilization (2)       (3,887)      (177)    (4,064)      (526)         -       (526)    (4,413)      (177)    (4,590)
                         --------   --------   --------   ---------  --------   --------  ---------  ---------  ---------
     Balance at
       Dec. 4, 2004      $ 29,062   $    292   $ 29,354   $  1,631   $      -   $  1,631  $  30,693  $     292  $  30,985
                         ========   ========   ========   ========   ========   ========  =========  =========  =========


(1)  The additions to store occupancy of $3.8 million, $3.2 million and $2.6
     million during fiscal 2001, 2002 and 2003, respectively, and $1.5 million
     during the 40 weeks ended December 4, 2004 represent the interest accretion
     on future occupancy costs which were recorded at present value at the time
     of the original charge.
(2)  Occupancy utilization of $23.3 million, $13.6 million and $20.0 million for
     fiscal 2001, 2002 and 2003, respectively, and $4.1 million during the 40
     weeks ended December 4, 2004 represents payments made during those periods
     for costs such as rent, common area maintenance, real estate taxes and
     lease termination costs. Severance utilization of $0.5 million, $0.4
     million and $0.3 million for fiscal 2001, 2002 and 2003, respectively, and
     $0.5 million during the 40 weeks ended December 4, 2004 represents payments
     to individuals for severance and benefits, as well as payments to pension
     funds for early withdrawal from multi-employer union pension plans.
(3)  At each balance sheet date, we assess the adequacy of the balance to
     determine if any adjustments are required as a result of changes in
     circumstances and/or estimates. We have continued to make favorable
     progress in marketing and subleasing the closed stores. As a result, during
     fiscal 2002, we recorded a reduction of $3.6 million in occupancy accruals
     related to this phase of the initiative. Further, we increased our reserve
     for future minimum pension liabilities by $0.6 million to better reflect
     expected future payouts under certain collective bargaining agreements.



</TABLE>


We paid $96.8 million of the total occupancy charges from the time of the
original charges through December 4, 2004 which was primarily for occupancy
related costs such as rent, common area maintenance, real estate taxes and lease
termination costs. We paid $29.9 million of the total net severance charges from
the time of the original charges through December 4, 2004, which resulted from
the termination of approximately 3,400 employees. The remaining occupancy
liability of $29.4 million relates to expected future payments under long term
leases and is expected to be paid in full by 2020. The remaining severance
liability of $1.6 million primarily relates to expected future payments for
early withdrawals from multi-employer union pension plans and will be fully paid
out by 2020.

<PAGE>

None of these stores were open during the 12 and 40 weeks ended December 4, 2004
and November 29, 2003. As such, there was no impact on the Statements of
Consolidated Operations from the 166 stores included in this phase of the
initiative.

At December 4, 2004 and February 28, 2004, approximately $5.5 million and $6.5
million, respectively, of the reserve was included in "Other accruals" and the
remaining amount was included in "Other non-current liabilities" on the
Company's Consolidated Balance Sheets.

Based upon current available information, we evaluated the reserve balances as
of December 4, 2004 of $31.0 million for this phase of the asset disposition
initiative and have concluded that they are appropriate to cover expected future
costs. The Company will continue to monitor the status of the vacant properties
and adjustments to the reserve balances may be recorded in the future, if
necessary.

2001 Asset Disposition
----------------------
During the third quarter of fiscal 2001, the Company's Board of Directors
approved a plan resulting from our review of the performance and potential of
each of the Company's businesses and individual stores. At the conclusion of
this review, our Company determined that certain underperforming operations,
including 39 stores (30 in the United States and 9 in Canada) and 3 warehouses
(2 in the United States and 1 in Canada) should be closed and/or sold, and
certain administrative streamlining should take place. As of December 4, 2004,
we had closed all stores and facilities related to this phase of the initiative.

The following table summarizes the activity related to this phase of the
initiative recorded on the Consolidated Balance Sheets since the announcement of
the charge in November 2001:


<TABLE>
<CAPTION>


                                    Occupancy                 Severance and Benefits                    Total
                         ------------------------------   ------------------------------  -------------------------------
                           U.S.      Canada      Total      U.S.      Canada      Total      U.S.      Canada      Total
                         --------   --------   --------   --------   --------   --------  ---------  ---------  ---------

<S>                      <C>        <C>        <C>        <C>        <C>        <C>       <C>        <C>        <C>

     Original charge     $ 78,488   $  1,968   $ 80,456   $ 15,688   $  7,747   $ 23,435  $  94,176  $   9,715  $ 103,891
     Addition (1)           1,653         20      1,673          -          -          -      1,653         20      1,673
     Utilization (2)       (1,755)       (51)    (1,806)    (1,945)      (946)    (2,891)    (3,700)      (997)    (4,697)
     Adjustments (3)            -          -          -          -       (584)      (584)         -       (584)      (584)
                         --------   --------   --------   --------   --------   --------  ---------  ---------  ---------
     Balance at
       February 23, 2002 $ 78,386   $  1,937   $ 80,323     13,743   $  6,217   $ 19,960  $  92,129  $   8,154  $ 100,283
     Addition (1)           4,041         49      4,090      2,578        966      3,544      6,619      1,015      7,634
     Utilization (2)      (18,745)    (1,642)   (20,387)   (12,508)    (6,952)   (19,460)   (31,253)    (8,594)   (39,847)
     Adjustments (3)      (10,180)         -    (10,180)         -        250        250    (10,180)       250     (9,930)
                         ---------  --------   ---------  --------   --------   --------  ---------  ---------  ---------
     Balance at
       February 22, 2003 $ 53,502   $    344   $ 53,846   $  3,813   $    481   $  4,294  $  57,315  $     825  $  58,140
     Addition (1)           2,847          3      2,850          -          -          -      2,847          3      2,850
     Utilization (2)       (9,987)      (974)   (10,961)    (2,457)    (1,026)    (3,483)   (12,444)    (2,000)   (14,444)
     Adjustments (3)       (6,778)     1,002     (5,776)       955        603      1,558     (5,823)     1,605     (4,218)
                         --------   --------   --------   --------   --------   --------  ---------  ---------  ---------
     Balance at
       February 28, 2004 $ 39,584   $    375   $ 39,959   $  2,311   $     58   $  2,369  $  41,895  $     433  $  42,328
     Addition (1)           1,902          -      1,902          -          -          -      1,902          -      1,902
     Utilization (2)       (3,804)      (375)    (4,179)      (178)       (58)      (236)    (3,982)      (433)    (4,415)
     Adjustments (3)       (4,488)         -     (4,488)         -          -          -     (4,488)         -     (4,488)
                         ---------  --------   ---------  --------   --------   --------  ---------- ---------  ---------
     Balance at
       Dec. 4, 2004      $ 33,194   $      -   $ 33,194   $  2,133   $      -   $  2,133  $  35,327  $       -  $  35,327
                         ========   ========   ========   ========   ========   ========  =========  =========  =========


</TABLE>


<PAGE>

<TABLE>

<CAPTION>
<S>     <C>


(1)      The additions to store occupancy of $1.7 million, $4.1 million and
         $2.9 million during fiscal 2001, 2002 and 2003, respectively, and $1.9
         million during the 40 weeks ended December 4, 2004 represent the
         interest accretion on future occupancy costs which were recorded at
         present value at the time of the original charge.  The addition to
         severance of $3.5 million during fiscal 2002 related to retention and
         productivity incentives that were expensed as earned.
(2)      Occupancy utilization of $1.8 million, $20.4 million and $11.0 million
         during fiscal 2001, 2002 and 2003, respectively, and $4.2 million
         during the 40 weeks ended December 4, 2004 represent payments made
         during those periods for costs such as rent, common area maintenance,
         real estate taxes and lease termination costs. Severance utilization of
         $2.9 million, $19.5 million and $3.5 million during fiscal 2001, 2002
         and 2003, respectively, and $0.2 million during the 40 weeks ended
         December 4, 2004 represent payments made to terminated employees during
         the period.
(3)      At each balance sheet date, we assess the adequacy of the reserve
         balance to determine if any adjustments are required as a result of
         changes in circumstances and/or estimates. Under Ontario provincial
         law, employees to be terminated as part of a mass termination are
         entitled to receive compensation, either worked or paid as severance,
         for a set period of time after the official notice date. Since such
         closures took place later than originally expected, less time remained
         in the aforementioned guarantee period. As a result, during fiscal
         2001, we recorded an adjustment to severance and benefits of $0.6
         million related to a reduction in the severance payments required to be
         made to certain store employees in Canada. Further, during fiscal 2002,
         we recorded adjustments of $10.2 million related to reversals of
         previously accrued occupancy related costs due to the following:

o        Favorable results of assigning leases at certain locations of $3.6
         million;
o        The decision to continue to operate one of the stores previously
         identified for closure due to changes in the competitive
         environment in the market in which that store is located of $3.3
         million; and
o        The decision to proceed with development at a site that we had
         chosen to abandon at the time of the original charge due to
         changes in the competitive environment in the market in which that
         site is located of $3.3 million.

         During fiscal 2003, we recorded net adjustments of $5.8 million related
         to reversals of previously accrued occupancy costs due to favorable
         results of subleasing, assigning and terminating leases. We also
         accrued $1.6 million for additional severance and benefit costs that
         were unforeseen at the time of the original charge. Finally, during the
         12 and 40 weeks ended December 4, 2004, we recorded adjustments of $4.5
         million related to the reversals of previously accrued occupancy costs
         due to the disposals and subleases of locations at more favorable terms
         than originally anticipated at the time of the original charge.


</TABLE>


We paid $38.3 million ($35.3 million in the U.S. and $3.0 million in Canada) of
the total occupancy charges from the time of the original charges through
December 4, 2004 which was primarily for occupancy related costs such as rent,
common area maintenance, real estate taxes and lease termination costs. We paid
$26.1 million ($17.1 million in the U.S. and $9.0 million in Canada) of the
total net severance charges from the time of the original charges through
December 4, 2004, which resulted from the termination of approximately 1,100
employees. The remaining occupancy liability of $33.2 million primarily relates
to expected future payments under long term leases through 2017. The remaining
severance liability of $2.1 million relates to expected future payments for
severance and benefits payments to individual employees and will be fully paid
out by 2006.

At December 4, 2004 and February 28, 2004 approximately $7.1 million and $12.0
million of the reserve, respectively, was included in "Other accruals" and the
remaining amount was included in "Other non-current liabilities" on the
Company's Consolidated Balance Sheets.



<PAGE>


Included in the Statements of Consolidated Operations for the 12 and 40 weeks
ended December 4, 2004 and November 29, 2003 are the sales and operating results
of the 39 stores that were identified for closure as part of this asset
disposition. The results of these operations are as follows:

<TABLE>
<CAPTION>


                                                           12 Weeks Ended                     40 Weeks Ended
                                                   -------------------------------    -------------------------------
                                                   Dec. 4, 2004      Nov. 29, 2003    Dec. 4, 2004      Nov. 29, 2003
                                                   ------------      -------------    -------------     -------------
<S>                                                <C>               <C>              <C>               <C>


                  Sales                            $           -     $           -    $           -     $         316
                                                   =============     =============    =============     =============

                  Operating loss                   $           -     $           -    $           -     $         (72)
                                                   =============     =============    =============     ==============


</TABLE>


Based upon current available information, we evaluated the reserve balances as
of December 4, 2004 of $35.3 million for this phase of the asset disposition
initiative and have concluded that they are appropriate to cover expected future
costs. The Company will continue to monitor the status of the vacant properties
and adjustments to the reserve balances may be recorded in the future, if
necessary.

Farmer Jack Restructuring
-------------------------
As previously stated, during the fourth quarter of fiscal 2003, we announced an
initiative to close 6 stores and convert 13 stores to our Food Basics banner in
the Detroit, Michigan and Toledo, Ohio markets. In addition to the charge of
$37.7 million related to the last phase of this initiative ($2.2 million in
"Cost of merchandise sold" and $35.5 million in "Store operating, general and
administrative expense" in our Statements of Consolidated Operations for fiscal
2003), excluding PV interest, we recorded costs in the 12 and 40 weeks ended
December 4, 2004 of nil and $1.1 million ($0.3 million in "Cost of merchandise
sold" and $0.8 million in "Store operating, general and administrative
expense"), respectively, as follows:

                                     12 Weeks Ended             40 Weeks Ended
                                    December 4, 2004           December 4, 2004
                                 ----------------------     ------------------
   Occupancy related                  $            -           $            -
   Severance and benefits                          -                        -
   Property writedowns                             -                       90
   Inventory markdowns                             -                      291
   Nonaccruable closing costs                      -                      689
                                      --------------           --------------
        Total charges                 $            -           $        1,070
                                      ==============           ==============

As of December 4, 2004, we had closed all 6 stores and successfully completed
the conversions related to this phase of the initiative. The following table
summarizes the activity to date related to the charges recorded for the
aforementioned initiatives all of which were in the U.S. The table does not
include property writedowns as they are not part of any reserves maintained on
the balance sheet. It also does not include non-accruable closing costs and
inventory markdowns since they are expensed as incurred in accordance with
generally accepted accounting principles.


<PAGE>

<TABLE>
<CAPTION>

                                                          Severance
                                                             and
                                          Occupancy        Benefits           Total
                                        ------------    -------------      ----------

<S>                                     <C>             <C>                <C>

     Original charge (1)                $     20,999    $       8,930      $   29,929
     Addition (1)                                 56                -              56
     Utilization (2)                          (1,093)          (4,111)         (5,204)
                                        ------------    -------------      ----------
     Balance at
        February 28, 2004               $     19,962    $       4,819      $   24,781
     Addition (1)                                534                -             534
     Utilization (2)                          (3,719)          (4,775)         (8,494)
                                        ------------    -------------      ----------
     Balance at
        Dec. 4, 2004                    $     16,777    $          44      $   16,821
                                        ============    =============      ==========

(1)      The original charge to occupancy during fiscal 2003 represents charges
         related to closures and conversions in the Detroit, Michigan market of
         $21.0 million. The additions to occupancy during fiscal 2003 and the 40
         weeks ended December 4, 2004 represent interest accretion on future
         occupancy costs which were recorded at present value at the time of the
         original charge. The original charge to severance during fiscal 2003 of
         $8.9 million related to individual severings as a result of the store
         closures, as well as a voluntary termination plan initiated in the
         Detroit, Michigan market.
(2)      Occupancy utilization of $1.1 million and $3.7 million during fiscal
         2003 and the 40 weeks ended December 4, 2004, respectively, represents
         payments made for costs such as rent, common area maintenance, real
         estate taxes and lease termination costs. Severance utilization of $4.1
         million and $4.8 million during fiscal 2003 and 40 weeks ended December
         4, 2004, respectively, represent payments made to terminated employees
         during the period.

</TABLE>


We paid $4.8 million of the total occupancy charges from the time of the
original charge through December 4, 2004 which was primarily for occupancy
related costs such as rent, common area maintenance, real estate taxes and lease
termination costs. We paid $8.9 million of the total net severance charges from
the time of the original charges through December 4, 2004, which resulted from
the termination of approximately 300 employees. The remaining occupancy
liability of $16.8 million relates to expected future payments under long term
leases and is expected to be paid out in full by 2014. The remaining severance
liability of less than $0.1 million relates to expected future payments for
severance and benefits to individual employees and will be fully paid out by
mid-2005.

Included in the Statements of Consolidated Operations for the 12 and 40 weeks
ended December 4, 2004 and November 29, 2003 are the sales and operating results
of the 6 stores that were identified for closure as part of this phase of the
initiative. The results of these operations are as follows:

<TABLE>
<CAPTION>


                                                           12 Weeks Ended                     40 Weeks Ended
                                                   -------------------------------    -------------------------------
                                                    Dec. 4, 2004     Nov. 29, 2003     Dec. 4, 2004     Nov. 29, 2003
                                                    --------------   -------------    ------------------------------

<S>                                                 <C>              <C>               <C>              <C>


                  Sales                            $           -     $      12,588    $       2,433     $      41,944
                                                   =============     =============    =============     =============

                  Operating loss                   $           -     $     (1,877)    $         (47)    $      (6,626)
                                                   =============     =============    ==============    ==============

</TABLE>


At December 4, 2004 and February 28, 2004, approximately $3.0 million and $9.0
million, respectively, of the liability was included in "Other accruals" and the
remaining amount was included in "Other non-current liabilities" on our
Consolidated Balance Sheets.


We have evaluated the liability balance of $16.8 million as of December 4, 2004
based upon current available information and have concluded that it is
appropriate. We will continue to monitor the status of the vacant properties and
adjustments to the reserve balance may be recorded in the future, if necessary.


8.  Retirement Plans and Benefits

Defined Benefit Plans
We provide retirement benefits to certain non-union and union employees under
various defined benefit plans. Our defined benefit pension plans are
non-contributory and benefits under these plans are generally determined based
upon years of service and, for salaried employees, compensation. We fund these
plans in amounts consistent with the statutory funding requirements. The
components of net pension cost were as follows:


<TABLE>
<CAPTION>

                                                                             For the 12 Weeks Ended
                                                              -----------------------------------------------------
                                                                 December 4, 2004               November 29, 2003
                                                              ---------------------          -----------------------
                                                                U.S.         Canada            U.S.        Canada
                                                              ---------    ---------         --------     ----------

<S>                                                           <C>          <C>               <C>          <C>

Service cost                                                  $   1,309    $   2,113         $    742     $   1,574
Interest cost                                                     2,773        3,161            2,068         2,668
Expected return on plan assets                                   (3,199)      (4,090)          (4,867)       (3,428)
Amortization of unrecognized net transition asset                    (3)           -               (3)         (100)
Amortization of unrecognized net prior service cost                  39          117               34            76
Amortization of unrecognized net loss                                78          464            2,510           132
Administrative expenses and other                                     -           68                -            57
                                                              ---------    ---------         --------     ---------
     Net pension cost                                         $     997    $   1,833         $    484     $     979
                                                              =========    =========         ========     =========


                                                                             For the 40 Weeks Ended
                                                                ---------------------------------------------------
                                                                 December 4, 2004               November 29, 2003
                                                                -------------------            --------------------
                                                                U.S.         Canada            U.S.        Canada
                                                                -------    ---------         --------     ---------

Service cost                                                  $   4,363    $   6,662         $  2,473     $   5,248
Interest cost                                                     9,243        9,964            6,896         8,893
Expected return on plan assets                                  (10,662)     (12,892)         (16,225)      (11,425)
Amortization of unrecognized net transition asset                    (9)           -              (10)         (334)
Amortization of unrecognized net prior service cost                 130          369              111           253
Amortization of unrecognized net loss                               260        1,462            8,368           441
Administrative expenses and other *                               2,825          212                -           191
                                                              ---------    ---------         --------     ---------
     Net pension cost                                         $   6,150    $   5,777         $  1,613     $   3,267
                                                              =========    =========         ========     =========


</TABLE>

* During fiscal 2004, it came to our attention that one of our Taft-Hartley U.S.
defined benefit pension plans that was previously recorded off balance sheet as
a multiemployer plan was entirely sponsored by our Company. In accordance with
SFAS 87, "Employers' Accounting for Pensions" ("SFAS 87"), the funded status of
single employer defined benefit plans is to be recorded on balance sheet with
net pension income or cost recorded each quarter since the adoption of SFAS 87.
Given (i.) the lack of employee data needed to calculate the funded status of
the plan at each balance sheet date since the adoption of SFAS 87, (ii.) the
inability to determine if the plan would have had unrecognized actuarial gains
and losses during the past several years in question, and (iii.) as the
difference between actual net pension cost recognized in our Statements of
Consolidated Operations and net pension cost that should have been recorded per
SFAS 87 was not significant to each of the past three years, an adjustment of
$2.8 million was made to record the plan's funded status (i.e., net liability)
at the latest measurement date on our Consolidated Balance Sheet. The impact of
this adjustment was not significant to the individual quarters in fiscal 2004 as
well as to the prior periods to which it relates.

<PAGE>


Contributions
We previously disclosed in our consolidated financial statements for the year
ended February 28, 2004, that we expected to contribute $2.0 million in cash to
our defined benefit plans in fiscal 2004. During the 12 weeks ended December 4,
2004, we contributed approximately $0.6 million to our defined benefit plans.
We plan to contribute approximately $3.2 million to our plans in the fourth
quarter of fiscal 2004.


Postretirement Benefits
We provide postretirement health care and life benefits to certain union and
non-union employees. We recognize the cost of providing postretirement benefits
during employees' active service periods. The components of net postretirement
benefits (income) cost are as follows:

<TABLE>
<CAPTION>



                                                                             For the 12 Weeks Ended
                                                              -----------------------------------------------------
                                                                 December 4, 2004               November 29, 2003
                                                              ----------------------         ----------------------
                                                                U.S.         Canada            U.S.        Canada
                                                              ----------   ---------         --------     ---------

<S>                                                           <C>          <C>               <C>          <C>


Service cost                                                  $      66    $      60         $     54     $      86
Interest cost                                                       268          161              298           233
Prior service cost                                                 (311)        (128)            (305)           (8)
Amortization of (gain) loss                                        (110)          87              (83)           68
                                                              ---------    ---------         ---------    ---------
     Net postretirement benefits (income) cost                $     (87)   $     180         $    (36)    $     379
                                                              ==========   =========         =========    =========


                                                                             For the 40 Weeks Ended
                                                              -----------------------------------------------------

                                                                 December 4, 2004               November 29, 2003
                                                              ----------------------         ----------------------
                                                                U.S.         Canada            U.S.        Canada
                                                              ---------    ---------         --------     ---------

Service cost                                                  $     220    $     189         $    181     $     286
Interest cost                                                       927          509              993           776
Prior service cost                                               (1,036)        (405)          (1,016)          (28)
Amortization of (gain) loss                                        (304)         273             (277)          227
                                                              ---------    ---------         ---------    ---------
     Net postretirement benefits (income) cost                $    (193)   $     566         $   (119)    $   1,261
                                                              ==========   =========         =========    =========

</TABLE>



In December 2003, the United States enacted into law the Medicare Prescription
Drug Improvement and Modernization Act of 2003 (the "Act"). The Act establishes
a prescription drug benefit under Medicare, known as "Medicare Part D," and a
Federal subsidy to sponsors of retiree health care benefit plans that provide a
benefit that is at least actuarially equivalent to Medicare Part D. In May 2004,
the FASB issued FASB Staff Position No. FAS 106-2, "Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003" ("FAS 106-2"), which is effective for public
companies the first interim or annual period beginning after June 15, 2004 (the
quarter ended September 11, 2004 for our Company).

<PAGE>

We performed a measurement of the effects of the Act on our accumulated
postretirement benefit obligation ("APBO") as of April 20, 2004 for a closed
group of retirees. Our Company and our actuarial advisors determined that, based
on regulatory guidance currently available, benefits provided by the plan were
at least actuarially equivalent to Medicare Part D, and, accordingly, we expect
to be entitled to the Federal subsidy in all years after 2005.

We are adopting the provisions of the Act prospectively beginning in our second
quarter of fiscal 2004 and have incorporated the required disclosure provisions
into our consolidated financial statements. As a result of the Act, our APBO as
of the beginning of the second quarter decreased by $1.9 million. This change in
the APBO due to the Act is treated as an actuarial gain. In measuring the $1.9
million APBO impact of the Act, we projected that the future Federal subsidies
we would receive approximates 25% of our Company's projected prescription drug
costs under our plan.

The effect of applying FAS 106-2 had no cumulative effect on our Company's
retained earnings as of February 28, 2004. Accordingly, we reported net
postretirement benefits income of $72 and $144 for the 12 and 40 weeks ended
December 4, 2004, respectively, representing the third quarter's and year to
date's portion of the annual reduction under the Act. Had the effect of FAS
106-2 been applied retroactively to the beginning of fiscal 2004, net
postretirement benefits income for the first quarter ended June 19, 2004 would
have increased by $96.


9.   Stock Based Compensation

We apply the intrinsic value-based method of accounting prescribed by Accounting
Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB
25") with pro forma disclosure of compensation expense, net income or loss and
earnings or loss per share as if the fair value based method prescribed by SFAS
123, "Accounting for Stock-Based Compensation" ("SFAS 123") and SFAS 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure" ("SFAS
148") had been applied.

Had compensation cost for our stock options been determined based on the fair
value at the grant dates for awards under those plans consistent with the fair
value methods prescribed by SFAS 123 and SFAS 148, our net loss and net loss per
share would have been increased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>

                                                         12 Weeks Ended                          40 Weeks Ended
                                               -----------------------------------    -----------------------------------
                                                                    Nov. 29, 2003                           Nov. 29, 2003
                                                Dec. 4, 2004        (As Restated)       Dec. 4, 2004        (As Restated)
                                               ---------------    ----------------    ---------------     -----------------

<S>                                            <C>                <C>                 <C>                 <C>

Net loss, as reported:                         $      (75,343)    $       (25,267)    $     (182,391)     $      (97,009)
     Deduct:  Total stock-based employee
         compensation expense determined
         under fair value based method for
         all awards, net of related tax effects          (836)             (1,373)            (2,981)             (4,916)
                                               ---------------    ----------------    ---------------     ---------------
     Pro forma net loss                        $      (76,179)    $       (26,640)    $     (185,372)     $     (101,925)
                                               ===============    ================    ===============     ===============

    Net loss per share - basic and diluted:
         As reported                           $        (1.96)      $     (0.66)      $        (4.74)     $        (2.51)
         Pro forma                             $        (1.98)      $     (0.69)      $        (4.81)     $        (2.65)

</TABLE>



The pro forma effect on net loss and net loss per share may not be
representative of the pro forma effect in future years because it includes
compensation cost on a straight-line basis over the vesting periods of the
grants.

<PAGE>

The fair value of the option grants was estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:

<TABLE>
<CAPTION>


                                                         12 Weeks Ended                          40 Weeks Ended
                                               -----------------------------------    -----------------------------------
                                                   Dec. 4,            Nov. 29,             Dec. 4,            Nov. 29,
                                                    2004                2003                2004                2003
                                               ---------------    ----------------    ---------------     ---------------

<S>                                            <C>                <C>                 <C>                 <C>

         Expected life                             7 years             7 years             7 years             7 years

         Volatility                                  53%                 52%                 53%                 50%

         Risk-free interest rate range              3.89%            3.68%-4.00%         3.20%-4.41%         2.71%-4.01%

</TABLE>


Refer to Note 1 - Impact of New Accounting Pronouncements regarding
discussion of the FASB's recent issuance of SFAS 123R on our consolidated
financial statements.


10.  Operating Segments

Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance. Our chief operating decision maker is our Chairman of the
Board and Chief Executive Officer.

We currently operate in two reportable segments: United States and Canada. The
segments are comprised of retail supermarkets in the United States and Canada.
The accounting policies for the segments are the same as those described in the
summary of significant accounting policies included in our Fiscal 2003 Annual
Report. We measure segment performance based upon income (loss) from operations.

Interim information on segments is as follows:

<TABLE>
<CAPTION>



                                                     12 Weeks Ended                              40 Weeks Ended
                                        ----------------------------------------    ---------------------------------------
                                                                 Nov. 29, 2003                               Nov. 29, 2003
                                           Dec. 4, 2004          (As Restated)         Dec. 4, 2004          (As Restated)
                                        ------------------    ------------------    -----------------     -----------------

<S>                                     <C>                   <C>                   <C>                   <C>

Sales
     United States                      $        1,672,206    $        1,703,888    $       5,610,316     $       5,679,046
     Canada                                        851,553               780,724            2,684,301             2,498,847
                                        ------------------    ------------------    -----------------     -----------------
         Total Company                  $        2,523,759    $        2,484,612    $       8,294,617     $       8,177,893
                                        ==================    ==================    =================     =================

Sales by category
     Grocery (1)                        $        1,677,798    $        1,681,699    $       5,457,961     $       5,460,097
     Meat (2)                                      527,035               506,191            1,731,513             1,654,417
     Produce (3)                                   318,926               296,722            1,105,143             1,063,379
                                        ------------------    ------------------    -----------------     -----------------
         Total Company                  $        2,523,759    $        2,484,612    $       8,294,617     $       8,177,893
                                        ==================    ==================    =================     =================

Depreciation and amortization
     United States                      $           46,964    $           51,078    $         157,328     $         170,481
     Canada                                         15,890                13,544               49,045                42,921
                                        ------------------    ------------------    -----------------     -----------------
         Total Segments                             62,854                64,622              206,373               213,402
              Discontinued operations                 -                     -                     -                   1,551
                                        ------------------    ------------------    -----------------     -----------------
                  Total Company         $           62,854    $           64,622    $         206,373     $         214,953
                                        ==================    ==================    =================     =================


</TABLE>
<PAGE>

<TABLE>
<CAPTION>


                                                     12 Weeks Ended                              40 Weeks Ended
                                        ----------------------------------------    ---------------------------------------
                                                                 Nov. 29, 2003                               Nov. 29, 2003
                                           Dec. 4, 2004          (As Restated)         Dec. 4, 2004          (As Restated)
                                        ------------------    ------------------    -----------------     -----------------

<S>                                     <C>                   <C>                   <C>                   <C>

(Loss) from operations
     United States                      $          (60,188)   $          (96,124)   $        (110,968)    $        (164,672)
     Canada                                          8,279                13,682                5,931                51,578
                                        ------------------    ------------------    -----------------     -----------------
         Total Company                  $          (51,909)   $          (82,442)   $        (105,037)    $        (113,094)
                                        ==================    ===================   ==================    ==================

(Loss) from continuing
   operations before income taxes
     United States                      $          (77,399)   $         (112,890)   $        (172,382)    $        (219,369)
     Canada                                          9,572                11,940                2,390                46,464
                                        ------------------    ------------------    ------------------    -----------------
         Total Company                  $          (67,827)   $         (100,950)   $        (169,992)    $        (172,905)
                                        ==================    ==================    =================     =================

Capital expenditures
     United States                      $           25,613    $           17,987    $          92,277     $          64,301
     Canada                                         27,091                15,273               57,869                44,823
                                        ------------------    ------------------    -----------------     -----------------
         Total Company                  $           52,704    $           33,260    $         150,146     $         109,124
                                        ==================    ==================    =================     =================

(1)  The grocery category includes grocery, frozen foods, dairy, general
     merchandise/health and beauty aids, liquor, pharmacy and fuel.
(2)  The meat category includes meat, deli, bakery and seafood.
(3)  The produce category includes produce and floral.

<CAPTION>

                                                                                                          February 28, 2004
                                                                                        December 4,          (As Restated
                                                                                           2004               See Note 3)
                                                                                    -----------------     -----------------
<S>                                                                                 <C>                   <C>

Total assets
     United States                                                                  $       1,894,757     $       2,011,165
     Canada                                                                                   853,556               772,651
                                                                                    -----------------     -----------------
         Total Company                                                              $       2,748,313     $       2,783,816
                                                                                    =================     =================


</TABLE>


11.  Commitments and Contingencies

On October 1, 2004, our Company announced that we had reached a settlement,
subject to court approval, of the previously disclosed Canadian class action
lawsuit, captioned 1176560 Ontario Limited, 1184883 Ontario Inc. and 1205427
Ontario Limited vs. The Great Atlantic & Pacific Company of Canada Limited;
Ontario Superior Court of Justice, Court File No. 02 CV-227777CP, which was
filed by certain franchisees of our Food Basics discount grocery operations in
Ontario, Canada. The settlement was approved by the Canadian court on October 4,
2004. Under the terms of the settlement, A&P Canada agreed to make payment for
damages as well the repurchase of the franchise shares. In addition, A&P Canada
is required to pay other settlement expenses, including the calculated net book
value of the repurchased franchises, expected to be finalized during the fourth
quarter of fiscal 2004. The settlement and repurchase transaction closed during
the third quarter of this fiscal year and the recorded pre-tax loss was
approximately $26.1 million. Of this amount, $24.7 million was recorded in the
second quarter ended September 11, 2004, and $1.4 million was recorded in the
third quarter ended December 4, 2004. The additional $1.4 million mainly
represents legal and other professional fees incurred in the third quarter ended
December 4, 2004 as well as changes in estimate on the net settlement amount.
This estimate is subject to change based upon the finalization of the net
settlement amount expected during the fourth quarter of fiscal 2004.

<PAGE>


As previously disclosed, the dismissal by the United States District Court for
the District of New Jersey of the amended securities class action Complaint
filed against our Company and certain of our officers and directors in In re The
Great Atlantic & Pacific Tea Company, Inc. Securities Litigation, No. 02 CV 2674
(D.N.J.) (FSH), was affirmed in July 2004 by the United States Court of Appeals
for the Third Circuit. The deadline by which plaintiffs could have filed with
the United States Supreme Court a petition seeking a writ of certiorari
challenging the Third Circuit's ruling expired in early October 2004 without
plaintiffs having made such a filing.

We are subject to various other legal proceedings and claims, either asserted or
unasserted, which arise in the ordinary course of business. We are also subject
to certain environmental claims. While the outcome of these claims cannot be
predicted with certainty, Management does not believe that the outcome of any of
these legal matters will have a material adverse effect on our consolidated
results of operations, financial position or cash flows.








<PAGE>


ITEM 2 - Management's Discussion and Analysis of Financial Condition and
         Results of Operations

INTRODUCTION
------------
This Management's Discussion and Analysis describes matters considered by
Management to be significant to understanding the financial position, results of
operations and liquidity of our Company, including a discussion of the results
of continuing operations as well as liquidity and capital resources. These items
are presented as follows:

o    Basis of Presentation - a discussion of our Company's results during the
     12 and 40 weeks ended December 4, 2004 and November 29, 2003.
o    Overview - a general description of our business; the value drivers of our
     business; measurements; opportunities; challenges and risks; and
     initiatives.
o    Outlook - a discussion of certain trends or business initiatives for the
     remainder of fiscal 2004 that Management wishes to share with the reader to
     assist in understanding the business.
o    Results of Continuing Operations and Liquidity and Capital Resources - a
     discussion of the following:
     - Results for the 12 weeks ended December 4, 2004 compared to the 12 weeks
       ended November 29, 2003 and results for the 40 weeks ended December 4,
       2004 compared to the 40 weeks ended November 29, 2003;
     - The Company's Asset Disposition Initiative; and
     - Current and expected future liquidity.
o    Critical Accounting Estimates - a discussion of significant estimates made
     by Management.


BASIS OF PRESENTATION
---------------------
The accompanying consolidated financial statements of The Great Atlantic &
Pacific Tea Company, Inc. for the 12 and 40 weeks ended December 4, 2004 and
November 29, 2003 are unaudited and, in the opinion of Management, contain all
adjustments that are of a normal and recurring nature necessary to present
fairly the financial position and results of operations for such periods. The
accompanying consolidated financial statements also include the impact of
adopting FIN 46-R, EITF 03-10, and the change in our method of valuing certain
of our inventories from the LIFO method to the FIFO method during the first
quarter of fiscal 2004. The consolidated financial statements should be read in
conjunction with the consolidated financial statements and related notes
contained in our Fiscal 2003 Annual Report on Form 10-K. Interim results are not
necessarily indicative of results for a full year.

The consolidated financial statements include the accounts of our Company, all
majority-owned subsidiaries, and franchise operations.

OVERVIEW
--------
The Great Atlantic & Pacific Tea Company, Inc., based in Montvale, New Jersey,
operates conventional supermarkets, combination food and drug stores and
discount food stores in 10 U.S. states, the District of Columbia and Ontario,
Canada. The Company's business consists strictly of its retail operations, which
totaled 650 stores as of December 4, 2004.

<PAGE>

U.S. retail operations consist of four regions: New York/New Jersey/southern New
England under the A&P, Waldbaum's, The Food Emporium and Food Basics banners;
Philadelphia/Baltimore/Washington, D.C. under the Super Fresh and Food Basics
banners; Detroit/Toledo under the Farmer Jack and Food Basics banners, and New
Orleans under the Sav-A-Center banner.

A&P Canada, based in Toronto, Ontario, operates five banner groups across the
Province, with stores operating under the A&P, Dominion, Food Basics, Ultra Food
& Drug and The Barn Market trade names. A&P Canada also serves as a franchisor
to certain Food Basics stores in Ontario.

The Company remained unprofitable overall in the third quarter, with essentially
flat sales resulting from a difficult business environment that affected our
business and most other retail sectors. Despite those conditions, we maintained
our market share.

While not satisfied with the overall results, we continue to focus on
merchandising and operating improvements in the U.S., our rigorous management of
expenses, and investment and liquidity throughout the Company.

A&P Canada achieved a solid quarter, driven by the growing consumer impact and
results of our fresh food marketing initiatives in mainstream stores, coupled
with the improving trend in our discount Food Basics operations. In addition,
during the quarter, we completed the acquisition of 24 previously franchised
Food Basics stores in Ontario, and look for those stores to improve going
forward under corporate management. A&P Canada's profits were down year on year
primarily due to an internal charge for Corporate and IT services which was
increased significantly during last year's fourth quarter.

Our U.S. banner operations maintained emphasis on improved merchandising and
store operating fundamentals, expense management and productivity measures, the
improvement of the U.S. Food Basics operation and the initial rollout of our new
Fresh Market concept, with stores opening with elements of that fresh format in
each of our banners.

On November 4, 2004, we announced the consolidation of the previous corporate
and U.S. business management teams into one unified organization affecting U.S.
operations only. That was followed in December by a major reorganization of the
Company's U.S. administration, support services and operating staff.

We believe these actions will strengthen central management control,
substantially reduce costs, and simplify our organizational structure. We hope
these changes will also remove barriers to achieving profitability.

On the financial side, we maintained close management of cash flow, capital
spending and debt levels, in order to ensure sufficient liquidity to operate and
invest strategically in the business. In particular, we continue to manage
capital spending closely and spent below our previously planned levels
consistent with our goal to preserve cash.

Along with the significant cost benefits we anticipate with the reorganization
of the Company, day-to-day expense reduction remains a high priority as we
continue seeking ways to improve labor productivity, administrative, advertising
and occupancy expenses, and the cost of merchandise, supplies and services.
<PAGE>

OUTLOOK
-------
Our short-term outlook remains conservative, with leading economic indicators
showing few signs of significant improvement, particularly in our markets. With
no major upturn in consumer confidence envisioned, our expectation is that
competition for consumer food dollars will remain intense, among both
conventional supermarket operators and other retail segments now marketing food.

Accordingly, we remain focused on the strategies and initiatives that we hope
will restore sustainable profitability in the U.S., and drive additional growth
in Canada, which are as follows:

o    Move forward in the U.S. with an organization more focused on controlling
     costs, strengthening mainstream banner operations with an improved Fresh
     marketing format, and sharpening the merchandising and operating efficiency
     of the U.S. Food Basics discount business;

o    In Canada, sustain and grow our positive operating trends with continued
     Fresh Box development in mainstream banners, and the renewed and more
     aggressive discount impact of Food Basics, and

o    Maintain focus on liquidity, emphasizing cash flow generation, and expense
     control.

While we hope our profits will improve, various factors could cause us to fail
to achieve this goal. These include, among others, the following:

o    Actions of competitors could adversely affect our sales and future profits.
     The grocery retailing industry continues to experience fierce competition
     from other food retailers, super-centers, mass merchandiser clubs,
     warehouse stores, drug stores and restaurants. Our continued success is
     dependent upon our ability to compete in this industry and to reduce
     operating expenses, including managing health care and pension costs
     contained in our collective bargaining agreements. The competitive
     practices and pricing in the food industry generally and particularly in
     our principal markets may cause us to reduce our prices in order to gain or
     maintain share of sales, thus reducing margins.

o    Changes in the general business and economic conditions in our operating
     regions, including the rate of inflation, population growth, the nature
     and extent of continued consolidation in the food industry and employment
     and job growth in the markets in which we operate, may affect our ability
     to hire and train qualified employees to operate our stores. This would
     negatively affect earnings and sales growth.  General economic changes may
     also affect the shopping habits and buying patterns of our customers,
     which could affect sales and earnings.  We have assumed economic and
     competitive situations will not change significantly for the balance of
     fiscal 2004 and will not worsen in fiscal 2005 and 2006. However, we
     cannot fully foresee the effects of changes in economic conditions,
     inflation, population growth, customer shopping habits and the
     consolidation of the food industry on A&P's business.

o    Our capital expenditures could differ from our estimate if we are
     unsuccessful in acquiring suitable sites for new stores, if development and
     remodel costs vary from those budgeted, or if changes in financial markets
     negatively affect our cost of capital or our ability to access capital. Our
     present pace of spending indicates our capital expenditures will be
     somewhat less than our original estimates for the year.
<PAGE>

o    Our ability to achieve our profit goals will be affected by (i.) our
     success in executing category management and purchasing programs that we
     have underway, which are designed to improve our gross margins and reduce
     product costs while making our product selection more attractive to
     consumers, (ii.) our ability to achieve productivity improvements and
     shrink reduction in our stores, (iii.) our success in generating
     efficiencies in our distribution centers and our administrative offices,
     and (iv.) our ability to eliminate or maintain a minimum level of supply
     and/or quality control problems with our vendors.

o    The vast majority of our employees are members of labor unions. While we
     believe that our relationships with union leaderships and our employees are
     satisfactory, we operate under collective bargaining agreements which
     periodically must be renegotiated. In the coming year, we have several
     contracts expiring and under negotiation. In each of these negotiations
     rising health care and pension costs will be an important issue, as will
     the nature and structure of work rules. We are hopeful, but cannot be
     certain, that we can reach satisfactory agreements without work stoppages
     in these markets. However, the actual terms of the renegotiated collective
     bargaining agreements, our future relationships with our employees and/or a
     prolonged work stoppage affecting a substantial number of stores could have
     a material effect on our results.

o    The amount of contributions made to our pension and multi-employer plans
     will be affected by the performance of investments made by the plans as
     well as the extent to which trustees of the plans reduce the costs of
     future service benefits.

o    We have estimated our exposure to claims, administrative proceedings and
     litigation and believe we have made adequate provisions for them, where
     appropriate. Unexpected outcomes in both the costs and effects of these
     matters could result in an adverse effect on our earnings.

Other factors and assumptions not identified above could also cause actual
results to differ materially from those set forth in the forward-looking
information. Accordingly, actual events and results may vary significantly from
those included in or contemplated or implied by forward-looking statements made
by us or our representatives.





<PAGE>


RESULTS OF CONTINUING OPERATIONS AND LIQUIDITY AND CAPITAL RESOURCES
--------------------------------------------------------------------

Our consolidated financial information presents the income related to our
operations of discontinued businesses separate from the results of our
continuing operations. The discussion and analysis that follows focuses on
continuing operations.

12 WEEKS ENDED DECEMBER 4, 2004 COMPARED TO THE 12 WEEKS ENDED NOVEMBER 29,
2003
---------------------------------------------------------------------------

OVERALL
-------
Sales for the third quarter of fiscal 2004 were $2.5 billion consistent with the
third quarter of fiscal 2003; comparable store sales, which includes stores that
have been in operation for two full fiscal years and replacement stores,
decreased (1.0%). Net loss per share - basic and diluted for the third quarter
of fiscal 2004 was $1.96 compared to $0.66 for the third quarter of fiscal 2003.


<TABLE>
<CAPTION>


                                            12 Weeks           12 Weeks
                                              Ended              Ended            Favorable /
                                          Dec. 4, 2004       Nov. 29, 2003       (Unfavorable)         % Change
                                       ----------------     ---------------     --------------     ----------------

<S>                                    <C>                  <C>                 <C>                <C>

Sales                                   $     2,523.8       $     2,484.6       $       39.2                 1.6%
(Decrease) increase  in comparable
      store sales  for Company-operated
     stores                                     (1.0%)                1.2%               NA                   NA
Loss from continuing operations                 (72.8)              (72.8)              -                    0%
(Loss) income from discontinued
     operations                                  (2.6)               47.6              (50.2)             (105.5%)
Net loss                                        (75.3)              (25.3)             (50.0)             (197.6%)
Net loss per share                              (1.96)              (0.66)             (1.30)             (197.0%)


</TABLE>



SALES
-----
       Sales for the third quarter of fiscal 2004 of $2,523.8 million increased
$39.2 million or 1.6% from sales of $2,484.6 million for third quarter of fiscal
2003. The higher sales were due to an increase in Canadian sales of $70.9
million partially offset by a decrease in U.S. sales of $31.7 million. The
increase in Canadian sales was primarily due to the favorable impact of the
Canadian exchange rate. The following table presents sales for each of our
operating segments for the third quarter of fiscal 2004 and the third quarter of
fiscal 2003:


<TABLE>
<CAPTION>

                                        12 Weeks Ended         12 Weeks Ended
                                         Dec. 4, 2004           Nov. 29, 2003      (Decrease) Increase       % Change
                                      -----------------     --------------------   -------------------      ------------

<S>                                   <C>                   <C>                              <C>            <C>

United States                         $     1,672.2         $      1,703.9         $          (31.7)            (1.9%)
Canada                                        851.6                  780.7                     70.9              9.1
                                      -----------------     -----------------      --------------------    ----------------
Total                                 $     2,523.8         $      2,484.6         $           39.2              1.6%
                                      =================     =================      ====================    ================


</TABLE>

<PAGE>

The following details the dollar impact of several items affecting the increase
in sales by operating segment from the third quarter of fiscal 2003 to the third
quarter of fiscal 2004:

<TABLE>
<CAPTION>



                                           Impact of      Impact of       Foreign       Comparable
                                              New          Closed        Exchange          Store
                                            Stores         Stores          Rate            Sales         Total
                                        -------------  --------------  -------------  -------------  -----------
<S>                                     <C>            <C>             <C>            <C>            <C>

United States                           $      71.2    $     (70.2)    $       -      $     (32.7)   $     (31.7)
Canada                                        110.8         (112.2)           61.1           11.2           70.9
                                        -------------  --------------  -------------  -------------  ----------------
       Total                            $     182.0    $    (182.4)    $      61.1    $     (21.5)   $      39.2
                                        =============  ==============  =============  =============  ================

</TABLE>


The decrease in U.S. sales was primarily attributable to the closing of
22 stores since the beginning of the third quarter of fiscal 2003, of which 14
were closed in fiscal 2004, decreasing sales by $70.2 million, and the decrease
in comparable store sales for the third quarter of fiscal 2004 of $32.7 million
or -1.9% as compared with the third quarter of fiscal 2003. This decrease was
partially offset by the opening or re-opening of 18 new stores since the
beginning of the third quarter of fiscal 2003, of which 16 were opened or
re-opened in fiscal 2004, increasing sales by $71.2 million. Included in the 28
stores closed since the beginning of the third quarter of fiscal 2003 were 6
stores closed as part of the asset disposition initiative as discussed in Note 7
of our Consolidated Financial Statements.

The increase in Canadian sales was primarily attributable to the opening
or re-opening of 11 stores since the beginning of the third quarter of fiscal
2003, of which 5 were opened or re-opened in fiscal 2004, increasing sales by
$110.8 million, the favorable effect of the Canadian exchange rate, which
increased sales by $61.1 million, and the increase in comparable store sales for
the third quarter of fiscal 2004 of $11.2 million or 1.4% for Company-operated
stores and franchised stores combined, as compared to the third quarter of
fiscal 2003. These increases were partially offset by the closure of 16 stores
since the beginning of the third quarter of fiscal 2003, of which 11 were closed
in fiscal 2004, decreasing sales by $112.2 million.

Average weekly sales per supermarket for the U.S. were approximately $319,100
for the third quarter of fiscal 2004 versus $320,900 for the corresponding
period of the prior year, an decrease of 0.6% primarily due to the overall
decrease in comparable store sales. Average weekly sales per supermarket for
Canada were approximately $299,500 for the third quarter of fiscal 2004 versus
$265,100 for the corresponding period of the prior year, an increase of 13.0%.
This increase was primarily due to the increase in the Canadian exchange rate
and higher comparable store sales.


GROSS MARGIN
------------
The following table presents gross margin dollar results and gross margin as a
percentage of sales by operating segment for the third quarter of fiscal 2004 as
compared to the third quarter of fiscal 2003. Gross margin as a percentage of
sales decreased 13 basis points to 27.60% for the third quarter of fiscal 2004
from 27.73% for the third quarter of fiscal 2003. This 13 basis point decrease
was caused primarily by the increase in Canadian sales as a percentage of our
total as Canada has a lower gross margin rate. We believe the impact on margin
for changes in costs and special reductions was not significant.


<PAGE>

<TABLE>
<CAPTION>

                                          12 Weeks Ended                                    12 Weeks Ended
                                         December 4, 2004                                  November 29, 2003
                           --------------------------------------------      --------------------------------------------
<S>                        <C>                         <C>                   <C>                         <C>

                               Gross Margin            Rate to Sales%             Gross Margin            Rate to Sales%
                               ------------            --------------             ------------            --------------

United States                  $      491.2                  29.38%               $      500.5                  29.38%
Canada                                205.3                  24.11                       188.4                  24.13
                               --------------          ---------------            --------------          ---------------
       Total                   $      696.5                  27.60%                     $688.9                 27.73%
                               ==============          ===============            ==============          ===============

</TABLE>


The following table details the dollar impact of several items affecting the
gross margin dollar increase (decrease) from the third quarter of fiscal 2003 to
the third quarter of fiscal 2004:

<TABLE>
<CAPTION>


                                Sales Volume         Gross Margin Rate            Exchange Rate              Total
                             ------------------      -----------------          -----------------       ---------------

<S>                          <C>                     <C>                        <C>                     <C>


United States                  $       (9.3)           $           -             $           -            $     (9.3)
Canada                                  1.5                      0.5                      14.9                  16.9
                               ----------------        ----------------           --------------          -------------

Total                          $       (7.8)           $         0.5              $       14.9            $      7.6
                               ================        ================           ==============          =============

</TABLE>


STORE OPERATING, GENERAL AND ADMINISTRATIVE EXPENSE
---------------------------------------------------
The following table presents store operating, general and administrative expense
("SG&A"), by operating segment, in dollars and as a percentage of sales for the
third quarter of fiscal 2004 compared with the third quarter of fiscal 2003.
SG&A expense was $748.5 million or 29.66% for the third quarter of fiscal 2004
as compared to $771.4 million or 31.05% for the third quarter of fiscal 2003.

<TABLE>
<CAPTION>


                                          12 Weeks Ended                                    12 Weeks Ended
                                         December 4, 2004                                  November 29, 2003
                               ---------------------------------------            -----------------------------------------
                                    SG&A                Rate to Sales%                 SG&A                 Rate to Sales%
                               --------------          ---------------            --------------          -----------------
<S>                            <C>                     <C>                        <C>                     <C>

United States                  $      551.5                  32.98%               $      596.7                  35.02%
Canada                                197.0                  23.13                       174.7                  22.38
                               --------------          ---------------            --------------          -----------------
       Total                   $      748.5                  29.66%               $      771.4                  31.05%
                               ==============          ===============            ==============          ==============

</TABLE>



The decrease in total SG&A as a percentage of sales is primarily driven by lower
Midwest impairment charges (refer to Note 5 - Valuation of Goodwill and Long
Lived Assets for further discussion of the charges) and strict cost containment
in the U.S.

The U.S. had overall favorability of 204 basis points. The favorability is
primarily driven by a lower Midwest goodwill and property impairment charge of
$25.4 million, a reduction in the vacation accrual of $8.6 million due to a
change in the vacation entitlement policy, and very tight cost controls.
Categories in which the U.S. experienced cost improvements include advertising
due to less spend, labor, and corporate administrative expenses due to increased
information technology charges to Canada. The favorability in the U.S. was
partially offset by $3.8 million of severance and other charges relating to the
previously noted administrative reorganization.

<PAGE>

The increase in SG&A in Canada of $22.3 million is primarily due to an increase
in the Canadian exchange rate of $10.3 million and an increase in labor of $10.0
million mainly due to increased sales.

We also review assets in stores planned for closure or conversion for impairment
upon determination that such assets will not be used for their intended useful
life. During the 12 weeks ended December 4, 2004, we recorded impairment losses
on property, plant and equipment of $2.1 million compared to nil during the 12
weeks ended November 29, 2003. Of this amount, $0.4 million for the 12 weeks
ended December 4, 2004 related to United States stores that were or will be
closed in the normal course of business and $1.7 million for the 12 weeks ended
December 4, 2004 related to United States property held as part of our 2001
Asset Disposition and are included in "Store operating, general and
administrative expense" in our Statements of Consolidated Operations. The
effects of changes in estimates of useful lives were not material to ongoing
depreciation expense. If current operating levels and trends continue, there may
be additional future impairments on long-lived assets, including the potential
for impairment of assets that are held and used.


INTEREST EXPENSE
----------------
Interest expense of $19.2 million for the third quarter of fiscal 2004
increased from the prior year amount of $18.4 million due primarily to higher
interest expense resulting from our on-balance sheet financing obligations (sale
leaseback of Company-owned properties) entered into in the fourth quarter of
fiscal 2003 of approximately $4.1 million. This impact was partially offset by
lower interest from lower borrowings of approximately $3.3 million.


INCOME TAXES
------------
The provision for income taxes from continuing operations for the third quarter
of fiscal 2004 was $4.9 million (a $1.0 million provision for our U.S.
operations and a $3.9 million provision for our Canadian operations) compared to
a $28.1 million benefit from income taxes from continuing operations for the
third quarter of fiscal 2003 (a $33.0 million benefit from our U.S. operations
and a $4.9 million provision for our Canadian operations). Our U.S. tax
provision for continuing operations for the third quarter of fiscal 2003 was
offset by a tax benefit provided on discontinued operations of $34.4 million in
accordance with Statement of Financial Accounting Standards 109, "Accounting for
Income Taxes". Consistent with prior year, we continue to record a valuation
allowance in an amount that would reduce our U.S. deferred tax asset to the
amount that is more likely than not to be realized.


<PAGE>


For the third quarter of fiscal 2004, our effective income tax rate of 7.2%
changed from the effective income tax rate of (27.8%) in the third quarter of
fiscal 2003 as follows:

<TABLE>
<CAPTION>


                                                               12 Weeks Ended
                                    --------------------------------------------------------------------
                                           December 4, 2004                     November 29, 2003
                                    ---------------------------------  ---------------------------------
<S>                                 <C>               <C>              <C>              <C>

                                                         Effective       Tax Benefit        Effective
                                     Tax Provision       Tax Rate        (Provision)        Tax Rate
                                    ---------------  ----------------  ---------------  ----------------
United States                       $      (1,035)           1.5%      $      33,060          (32.7%)
Canada                                     (3,889)           5.7%             (4,933)           4.9%
                                    ---------------  ----------------  ---------------  ----------------
                                    $      (4,924)           7.2%      $      28,127          (27.8%)
                                    ===============  ================  ===============  ================

</TABLE>


The change in our effective tax rate was primarily due to the absence of a tax
benefit recognized from continuing operations. As discussed above, $34.4 million
of benefit was recognized in the third quarter of fiscal 2003 as compared to the
third quarter of fiscal 2004, where no benefit was recognized. The remaining
provisions recorded in the U.S. of $1.0 million and $1.4 million for the third
quarters of fiscal 2004 and 2003, respectively, represent state and local taxes.


DISCONTINUED OPERATIONS
-----------------------
Beginning in the fourth quarter of fiscal year 2002 and in the early part of the
first quarter of fiscal 2003, we decided to sell our operations located in
Northern New England and Wisconsin, as well as our Eight O'Clock Coffee
business. These asset sales are now complete.


<PAGE>

The income from operations of discontinued businesses, net of tax, for the third
quarter of fiscal 2004 was $0.1 million as compared to a loss from operations of
discontinued businesses, net of tax, of $1.1 million for the third quarter of
fiscal 2003 and is detailed by business as follows:

<TABLE>
<CAPTION>



                                                       12 Weeks ended December 4, 2004
                                    --------------------------------------------------------------------
                                                                            Eight
                                       Northern                            O'Clock
                                      New England         Kohl's           Coffee             Total
                                    ---------------  ----------------  ---------------  ----------------
<S>                                 <C>              <C>               <C>              <C>
Income (loss) from operations of
     discontinued businesses
Sales                               $           -    $           -     $           -    $           -
Operating expenses                              5              137               (32)             110
                                    -------------  ------------------  ---------------  -------------
Income (loss) from operations of
   discontinued businesses, before
   tax                                          5              137               (32)             110
Tax provision                                   -                -                 -                -
                                    ---------------  ----------------  ---------------  -------------
Income (loss) from operations of
   discontinued businesses, net of
   tax                              $           5    $         137     $         (32)   $         110
                                    ===============  ================  ===============  =============


Disposal related costs included in operating expenses above:
-----------------------------------------------------------
Non-accruable closing costs         $           7    $         (11)    $         (32)   $         (36)
Reversal of previously accrued
   occupancy related costs                      -              354                 -              354
Interest accretion on present value of
   future occupancy costs                      (2)            (206)                -             (208)
                                    ---------------  ----------------  ---------------  -------------
Total disposal related costs        $           5    $         137     $         (32)   $         110
                                    ---------------  ----------------  ---------------  -------------

</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                      12 Weeks ended November 29, 2003
                                    --------------------------------------------------------------------
                                                                            Eight
                                       Northern                            O'Clock
                                      New England         Kohl's           Coffee             Total
                                    ---------------  ----------------  ---------------  ----------------
<S>                                 <C>              <C>               <C>              <C>

(Loss) income from operations of
     discontinued businesses
Sales                               $           -    $           -     $      21,192    $      21,192
Operating expenses                            (48)          (3,663)          (19,381)         (23,092)
                                    -------------  ---------------     ---------------  -------------
(Loss) income from operations of
   discontinued businesses, before
   tax                                        (48)          (3,663)            1,811           (1,900)
Tax benefit (provision)                        20            1,539              (761)             798
                                    ---------------  ----------------  ---------------  -------------
(Loss) income from operations of
   discontinued businesses, net of
   tax                              $         (28)   $      (2,124)    $       1,050    $      (1,102)
                                    ===============  ================  ===============  ==============

Disposal related costs included in operating expenses above:
-----------------------------------------------------------
Occupancy related costs             $           -    $      (3,000)    $           -    $      (3,000)
Reversal of previously accrued
   occupancy related costs                      -            4,458                 -            4,458
Severance and benefits                          -               66                 -               66
Non-accruable inventory costs                (175)            (318)                -             (493)
Non-accruable closing costs                   130           (4,689)           (2,391)          (6,950)
Interest accretion on present value
   of future occupancy costs                   (3)            (180)                -             (183)
                                    ---------------  ----------------  ---------------  --------------
Total disposal related costs        $         (48)   $      (3,663)    $      (2,391)   $      (6,102)
                                    ---------------  ----------------  ---------------  --------------

</TABLE>

The loss on disposal of discontinued operations, net of tax, was $2.7 million
for the third quarter of fiscal 2004 as compared to gain on disposal of
discontinued operations, net of tax, of $48.7 million for the third quarter of
fiscal 2003 and is detailed by business as follows:

<TABLE>
<CAPTION>
                                                       12 Weeks ended December 4, 2004
                                    --------------------------------------------------------------------
                                                                            Eight
                                       Northern                            O'Clock
                                      New England         Kohl's           Coffee             Total
                                    ---------------  ----------------  ---------------  ----------------

<S>                                 <C>              <C>               <C>              <C>
Loss on disposal of discontinued
     businesses
Property impairments                $           -    $        (602)    $           -    $        (602)
Loss on sale of business                        -                -            (2,100)          (2,100)
                                    ---------------  ----------------  ---------------  --------------
Loss on disposal of discontinued
   businesses, before tax                       -             (602)           (2,100)          (2,702)
Tax provision                                   -                -                 -                -
                                    ---------------  ----------------  ---------------  -------------
Loss on disposal of discontinued
   businesses, net of tax           $           -    $        (602)    $      (2,100)   $      (2,702)
                                    ===============  ================  ===============  ==============


                                                      12 Weeks ended November 29, 2003
                                    --------------------------------------------------------------------
                                                                            Eight
                                       Northern                            O'Clock
                                      New England         Kohl's           Coffee             Total
                                    ---------------  ----------------  ---------------  ----------------
Gain on disposal of
       discontinued businesses
Gain on sale of fixed assets        $           -    $       6,445     $      77,448    $      83,893
Fixed asset impairments                         -                -                 -                -
Gain on disposal of
                                    ---------------  ----------------  ---------------  ----------------
   discontinued businesses, before
   tax                                          -            6,445            77,448           83,893
Tax provision                                   -           (2,707)          (32,528)         (35,235)
                                    ---------------  ----------------  ---------------  ----------------
Gain on disposal of discontinued
   businesses, net of tax           $           -    $       3,738     $      44,920    $      48,658
                                    ===============  ================  ===============  ================
</TABLE>
<PAGE>

40 WEEKS ENDED DECEMBER 4, 2004 COMPARED TO THE 40 WEEKS ENDED NOVEMBER 29,
2003
-----------------------------------------------------------------------------

OVERALL
-------
Sales for the 40 weeks ended December 4, 2004 were $8.3 billion, compared with
$8.2 billion for the 40 weeks ended November 29, 2003; comparable store sales,
which includes stores that have been in operation for two full fiscal years and
replacement stores, decreased (0.1%). Net loss per share - basic and diluted for
the 40 weeks ended December 4, 2004 was $4.74 compared to $2.51 for the 40 weeks
ended November 29, 2003.

<TABLE>
<CAPTION>

                                            40 Weeks           40 Weeks
                                              Ended              Ended            Favorable /
                                          Dec. 4, 2004       Nov. 29, 2003       (Unfavorable)         % Change
                                       ----------------     ---------------     --------------     ----------------

<S>                                    <C>                  <C>                 <C>                <C>

Sales                                   $     8,294.6       $     8,177.9       $      116.7                 1.4%
(Decrease) increase in comparable
     store sales  for Company- operated
     stores                                      (0.1%)               0.7%                 NA                  NA
Loss from continuing operations                (178.8)             (150.5)             (28.3)              (18.8%)
(Loss) income from discontinued
     operations                                  (3.6)               61.6              (65.2)             (105.8%)
Cumulative effect of a change in
     accounting principle - FIN 46-R                -                (8.0)               8.0               100%
Net loss                                       (182.4)              (97.0)             (85.4)              (88.0%)
Net loss per share                              (4.74)              (2.51)             (2.23)              (88.8%)

</TABLE>


SALES
-----
Sales for the 40 weeks ended December 4, 2004 of $8,294.6 million
increased $116.7 million or 1.4% from sales of $8,177.9 million for 40 weeks
ended November 29, 2003. The higher sales were due to an increase in Canadian
sales of $185.5 million partially offset by a decrease in U.S. sales of $68.8
million. The increase in Canadian sales was primarily due to the favorable
impact of the Canadian exchange rate. The following table presents sales for
each of our operating segments for the 40 weeks ended December 4, 2004 and the
40 weeks ended November 29, 2003:

<TABLE>
<CAPTION>

                                        40 Weeks Ended         40 Weeks Ended
                                         Dec. 4, 2004           Nov. 29 2003        (Decrease) Increase            % Change
                                      -----------------     -----------------      ------------------------     -----------------

<S>                                   <C>                   <C>                    <C>                             <C>

United States                         $     5,610.3         $      5,679.1         $          (68.8)                     (1.2%)
Canada                                      2,684.3                2,498.8                    185.5                       7.4
                                      -----------------     -----------------      ------------------------     ----------------
Total                                 $     8,294.6         $      8,177.9         $          116.7                       1.4%
                                      =================     =================      ========================     ================

</TABLE>


The following details the dollar impact of several items affecting the increase
in sales by operating segment from the 40 weeks ended November 29, 2003 to the
40 weeks ended December 4, 2004:


<TABLE>
<CAPTION>

                                           Impact of      Impact of       Foreign       Comparable
                                              New          Closed        Exchange          Store
                                            Stores         Stores          Rate            Sales         Total
                                        -------------  --------------  -------------  -------------  -----------

<S>                                     <C>            <C>             <C>            <C>            <C>


United States                           $     202.2    $    (231.8)    $       -      $     (39.2)   $     (68.8)
Canada                                        268.8         (267.8)          151.9           32.6          185.5
                                        -------------  --------------  -------------  -------------  ----------------
       Total                            $     471.0    $    (499.6)    $     151.9    $      (6.6)   $     116.7
                                        =============  ==============  =============  =============  ================

</TABLE>
<PAGE>

The decrease in U.S. sales was primarily attributable to the closing of 31
stores since the beginning of fiscal 2003, of which 14 were closed in fiscal
2004, decreasing sales by $231.8 million, and the decrease in comparable store
sales for the 40 weeks ended December 4, 2004 of $39.2 million or -0.7% as
compared with the 40 weeks ended November 29, 2003. These decreases were
partially offset by the opening or re-opening of 26 new stores since the
beginning of fiscal 2003, of which 16 were opened or re-opened in fiscal 2004,
increasing sales by $202.2 million. Included in the 37 stores closed since the
beginning of fiscal 2003 were 6 stores closed as part of the asset disposition
initiative as discussed in Note 7 of our Consolidated Financial Statements.

The increase in Canadian sales was primarily attributable to the opening or
re-opening of 17 stores since the beginning of fiscal 2003, of which 5 were
opened or re-opened in fiscal 2004, increasing sales by $268.8 million, the
favorable effect of the Canadian exchange rate, which increased sales by $151.9
million, and the increase in comparable store sales for the 40 weeks ended
December 4, 2004 of $32.6 million or 1.3% for Company-operated stores and
franchised stores combined, as compared to the 40 weeks ended November 29, 2003.
These increases were partially offset by the closure of 22 stores since the
beginning of 2003, of which 11 were closed in fiscal 2004, decreasing sales by
$267.8 million.

Average weekly sales per supermarket for the U.S. were approximately $322,100
for the 40 weeks ended December 4, 2004 versus $305,000 for the corresponding
period of the prior year, an increase of 5.6% primarily due to the impact of
openings and closings with net higher average weekly sales. Average weekly sales
per supermarket for Canada were approximately $282,200 for the 40 weeks ended
December 4, 2004 versus $252,900 for the corresponding period of the prior year,
an increase of 11.6%. This increase was primarily due to the increase in the
Canadian exchange rate and higher comparable store sales.


GROSS MARGIN
------------
The following table presents gross margin dollar results and gross margin as a
percentage of sales by operating segment for the 40 weeks ended December 4, 2004
as compared to the 40 weeks ended November 29, 2003. Gross margin as a
percentage of sales decreased 29 basis points to 27.87% for the 40 weeks ended
December 4, 2004 from 28.16% for the 40 weeks ended November 29, 2003. This 29
basis point decrease was caused by the increase in Canadian sales as a
percentage of our total (approximately 10 basis points) and from the increase in
U.S. Food Basics as a percentage of sales (approximately 19 basis points). We
believe the impact on margin for changes in costs and special reductions was not
significant.

<TABLE>
<CAPTION>


                                          40 Weeks Ended                                    40 Weeks Ended
                                         December 4, 2004                                  November 29, 2003
                           --------------------------------------------      --------------------------------------------

                               Gross Margin              Rate to Sales%           Gross Margin            Rate to Sales%
                               ------------              --------------           ------------            --------------
<S>                            <C>                       <C>                      <C>                     <C>


United States                  $    1,664.6                  29.67%               $    1,695.2                  29.85%
Canada                                647.4                  24.12                       608.0                  24.33
                               --------------          ---------------            --------------          --------------
       Total                   $    2,312.0                  27.87%               $    2,303.2                  28.16%
                               ==============          ===============           ===============          ==============


</TABLE>

<PAGE>

The following table details the dollar impact of several items affecting the
gross margin dollar increase (decrease) from the 40 weeks ended November 29,
2003 to the 40 weeks ended December 4, 2004:

<TABLE>
<CAPTION>


                                Sales Volume         Gross Margin Rate            Exchange Rate              Total
                             ------------------      -----------------          -----------------       ---------------

<S>                          <C>                     <C>                        <C>                     <C>

United States                  $      (20.5)           $       (10.1)             $          -            $    (30.6)
Canada                                  7.7                     (5.2)                     36.9                  39.4
                               ----------------        ----------------           --------------          -------------
Total                          $      (12.8)           $       (15.3)             $       36.9            $      8.8
                               ================        ================           ==============          =============

</TABLE>


STORE OPERATING, GENERAL AND ADMINISTRATIVE EXPENSE
---------------------------------------------------
The following table presents store operating, general and administrative expense
by operating segment, in dollars and as a percentage of sales for the 40 weeks
ended December 4, 2004 compared with the 40 weeks ended November 29, 2003. SG&A
expense was $2,417.1 million or 29.14% for the 40 weeks ended December 4, 2004
as compared to $2,416.3 million or 29.55% for the 40 weeks ended November 29,
2003.

<TABLE>
<CAPTION>


                                          40 Weeks Ended                                    40 Weeks Ended
                                           Dec. 4, 2004                                      Nov. 29, 2003
                           --------------------------------------------      --------------------------------------------
                                    SG&A               Rate to Sales%                 SG&A               Rate to Sales%
                             ------------------      ----------------           -----------------       ---------------

<S>                          <C>                     <C>                        <C>                     <C>

United States                  $    1,775.6                  31.65%               $    1,859.9                  32.75%
Canada                                641.5                  23.90                       556.4                  22.27
                               --------------          ---------------            --------------          --------------
       Total                   $    2,417.1                  29.14%               $    2,416.3                  29.55%
                               ==============          ===============            ==============          ==============


</TABLE>


The U.S. had overall favorability of 110 basis points. While part of the
improvement in the U.S. is due to the lower Midwest goodwill and property
impairment charges of $25.4 million and a reduction in the vacation accrual of
$8.6 million due to a change in the vacation entitlement policy, most of the
favorability is due to very tight cost controls. Categories in which the U.S.
experienced cost improvements include advertising due to less spend ($19.8
million), labor ($15.2 million), and corporate administrative expenses due to
increased information technology charges to Canada ($10.1 million). The
favorability in the U.S. was partially offset by $3.8 million of severance and
other charges relating to the previously noted administrative reorganization.

The increase in SG&A in Canada of $85.1 million is primarily due to the increase
in the Canadian exchange rate of $24.5 million, an increase in labor of $23.7
million due mainly to increased sales, an increase in occupancy of $13.1 million
as a result of the opening of new stores, and increased group overhead of $13.3
million mainly due to information technology costs previously charged to the
U.S. now charged to Canada, partially offset by a decrease in advertising costs
of $10.1 million due to less spend.

<PAGE>


During the 40 weeks ended December 4, 2004, we recorded an impairment loss of
$0.9 million related to certain idle property that, based upon new information
received about such assets, including an appraisal and an offer, was impaired
and written down to its net realizable value. This amount was included in "Store
operating, general and administrative expense" in our Statements of Consolidated
Operations. There were no such amounts recorded during the 40 weeks ended
November 29, 2003.

We also review assets in stores planned for closure or conversion for impairment
upon determination that such assets will not be used for their intended useful
life. During the 40 weeks ended December 4, 2004, we recorded impairment losses
on property, plant and equipment of $2.9 million compared $0.5 million during
the 40 weeks ended November 29, 2003. Of these amounts, $1.2 million for the 40
weeks ended December 4, 2004 and $0.5 million for the 40 weeks ended November
29, 2003 related to United States stores that were or will be closed in the
normal course of business and $1.7 million for the 40 weeks ended December 4,
2004 related to United States property held as part of our 2001 Asset
Disposition and are included in "Store operating, general and administrative
expense" in our Statements of Consolidated Operations. The effects of changes in
estimates of useful lives were not material to ongoing depreciation expense. If
current operating levels and trends continue, there may be additional future
impairments on long-lived assets, including the potential for impairment of
assets that are held and used.


INTEREST EXPENSE
----------------
Interest expense of $68.1 million for the 40 weeks ended December 4, 2004
increased from the prior year amount of $61.2 million due primarily to higher
interest expense resulting from our on-balance sheet financing obligations (sale
leaseback of Company-owned properties) entered into in the fourth quarter of
fiscal 2003 of approximately $13.2 million. This impact was partially offset by
lower interest from lower borrowings of approximately $6.3 million.


INCOME TAXES
------------
The provision for income taxes from continuing operations for the 40 weeks ended
December 4, 2004 was $8.8 million (a $3.5 million provision for our U.S.
operations and a $5.3 million provision for our Canadian operations) compared to
a $22.4 million benefit from income taxes from continuing operations for the 40
weeks ended November 29, 2003 (a $41.0 million benefit from our U.S. operations
and a $18.6 million provision for our Canadian operations). Our U.S. tax benefit
from continuing operations for the 40 weeks ended November 29, 2003 was offset
by a tax provision provided on discontinued operations of $44.6 million in
accordance with Statement of Financial Accounting Standards 109, "Accounting for
Income Taxes". Consistent with prior year, we continue to record a valuation
allowance in an amount that would reduce our U.S. deferred tax asset to the
amount that is more likely than not to be realized.

For the 40 weeks ended December 4, 2004, our effective income tax rate of 5.1%
changed from the effective income tax rate of (12.9%) for the 40 weeks ended
November 29, 2003 as follows:

<TABLE>
<CAPTION>


                                                               40 Weeks Ended
                                    --------------------------------------------------------------------
                                           December 4, 2004                     November 29, 2003
                                    ---------------------------------  ---------------------------------

<S>                                 <C>               <C>              <C>               <C>


                                                         Effective       Tax Benefit        Effective
                                     Tax Provision       Tax Rate        (Provision)        Tax Rate
United States                       $      (3,450)           2.0%      $      40,967          (23.7%)
Canada                                     (5,318)           3.1%            (18,607)          10.8%
                                    ---------------  ----------------  ---------------  ----------------
                                    $      (8,768)           5.1%      $      22,360          (12.9%)
                                    ===============  ================  ===============  ================

</TABLE>


<PAGE>


The change in our effective tax rate was primarily due to the absence of a tax
benefit recognized from continuing operations. As discussed above, $44.6 million
of benefit was recognized for 40 weeks ended November 29, 2003 as compared to
the 40 weeks ended December 4, 2004, where no benefit was recognized. The
remaining provisions recorded in the U.S. of $3.5 million and $3.6 million for
the 40 weeks ended December 4, 2004 and November 29, 2003, respectively,
represent state and local taxes. In addition, the change in our effective tax
rate was partially offset by the impact of the lower mix of Canadian income from
continuing operations as a percentage of our Company's loss from continuing
operations for the 40 weeks ended December 4, 2004 as compared to the 40 weeks
ended November 29, 2003.


DISCONTINUED OPERATIONS
-----------------------
Beginning in the fourth quarter of fiscal year 2002 and in the early part of the
first quarter of fiscal 2003, we decided to sell our operations located in
Northern New England and Wisconsin, as well as our Eight O'Clock Coffee
business. These asset sales are now complete.

The loss from operations of discontinued businesses, net of tax, for the 40
weeks ended December 4, 2004 was $0.9 million as compared to a loss from
operations of discontinued businesses, net of tax, of $31.1 million for the 40
weeks ended November 29, 2003 and is detailed by business as follows:

<TABLE>
<CAPTION>



                                                       40 Weeks ended December 4, 2004
                                    --------------------------------------------------------------------
                                                                            Eight
                                       Northern                            O'Clock
                                      New England         Kohl's           Coffee             Total
                                    ---------------  ----------------  ---------------  ----------------
<S>                                 <C>              <C>               <C>              <C>


Income (loss) from operations of
     discontinued businesses
Sales                               $           -    $           -     $           -    $           -
Operating expenses                            333             (637)             (625)            (929)
                                    -------------  ---------------     ---------------  -------------
Income (loss) from operations of
   discontinued businesses, before
   tax                                        333             (637)             (625)            (929)
Tax provision                                   -                -                 -                -
                                    ---------------  ----------------  ---------------  -------------
Income (loss) from operations of
   discontinued businesses, net of
   tax                              $         333    $        (637)    $        (625)   $        (929)
                                    ===============  ================  ===============  =============

Disposal related costs included in operating expenses above:
-----------------------------------------------------------
Severance and benefits              $        (326)    $          -     $           -    $        (326)
Reversal of previously accrued
   occupancy related costs                      -              354                 -              354
Non-accruable closing costs                   667             (401)             (625)            (359)
Interest accretion on present value
   of future occupancy costs                   (8)            (590)                -             (598)
                                    ---------------  ----------------  ---------------  -------------
Total disposal related costs        $         333    $        (637)    $        (625)   $        (929)
                                    ---------------  ----------------  ---------------  -------------


</TABLE>


<PAGE>

<TABLE>
<CAPTION>


                                                      40 Weeks ended November 29, 2003
                                                                            Eight
                                       Northern                            O'Clock
                                      New England         Kohl's           Coffee             Total
                                    ---------------  ----------------  ---------------  ----------------

<S>                                 <C>              <C>               <C>              <C>

(Loss) income from operations of
     discontinued businesses
Sales                               $      32,726    $     123,229     $      65,265    $     221,220
Operating expenses                        (43,512)        (179,528)          (51,738)        (274,778)
                                    -------------  ---------------     ---------------  -------------
(Loss) income from operations of
   discontinued businesses, before
   tax                                    (10,786)         (56,299)           13,527          (53,558)
Tax benefit (provision)                     3,932           24,055            (5,493)          22,494
                                    ---------------  ----------------  ---------------  -------------
(Loss) income from operations of
   discontinued businesses, net of
   tax                              $      (6,854)   $     (32,244)    $       8,034    $     (31,064)
                                    ===============  ================  ===============  ==============

Disposal related costs included in operating expenses above:
Pension withdrawal liability        $           -    $      (6,500)    $           -    $      (6,500)
Occupancy related costs                    (3,993)         (28,387)                -          (32,380)
Reversal of previously accrued
   occupancy related costs                      -            4,458                 -            4,458
Non-accruable inventory costs                (175)          (2,307)                -           (2,482)
Non-accruable closing costs                (2,984)          (6,526)           (3,834)         (13,344)
Gain on sale of inventory                   1,645                -                 -            1,645
Severance and benefits                     (2,635)          (8,349)                -          (10,984)
Interest accretion on present value
   of future occupancy costs                   (3)            (180)                -             (183)
                                    ---------------  ----------------  ---------------  --------------
Total disposal related costs        $      (8,145)   $     (47,791)    $      (3,834)   $     (59,770)
                                    ---------------  ----------------  ---------------  --------------


</TABLE>


<PAGE>

The loss on disposal of discontinued operations, net of tax, was $2.7 million
for the 40 weeks ended December 4, 2004 as compared to gain on disposal of
discontinued operations, net of tax, of $92.6 million for the 40 weeks ended
November 29, 2003 and is detailed by business as follows:


<TABLE>
<CAPTION>


                                                       40 Weeks ended December 4, 2004
                                    --------------------------------------------------------------------
                                                                            Eight
                                       Northern                            O'Clock
                                      New England         Kohl's           Coffee             Total
                                    ---------------  ----------------  ---------------  ----------------

<S>                                 <C>              <C>               <C>              <C>

Loss on disposal of discontinued
     businesses
Property impairments                $           -    $        (602)    $           -    $        (602)
Loss on sale of business                        -                -            (2,100)          (2,100)
                                    ---------------  ----------------  ---------------  --------------
Loss on disposal of discontinued
   businesses, before tax                       -             (602)           (2,100)          (2,702)
Tax provision                                   -                -                 -                -
                                    ---------------  ----------------  ---------------  -------------
Loss on disposal of discontinued
   businesses, net of tax           $           -    $        (602)    $      (2,100)   $      (2,702)
                                    ===============  ================  ===============  ==============


                                                      40 Weeks ended November 29, 2003
                                    --------------------------------------------------------------------
                                                                            Eight
                                       Northern                            O'Clock
                                      New England         Kohl's           Coffee             Total
                                    ---------------  ----------------  ---------------  ----------------
Gain (loss) on disposal of
       discontinued businesses
Gain on sale of fixed assets        $      85,983    $      15,272     $      77,448    $     178,703
Fixed asset impairments                         -          (18,968)                -          (18,968)
Gain (loss) on disposal of
                                    -------------    -------------     ---------------  ----------------
   discontinued businesses, before
   tax                                     85,983           (3,696)           77,448          159,735
Tax provision                             (30,997)          (3,563)          (32,528)         (67,088)
                                    -------------    ----------------  ---------------  ----------------
Gain (loss) on disposal of
   discontinued businesses,
   net of tax                       $      54,986    $      (7,259)    $      44,920    $      92,647
                                    =============    ================  ===============  ================


</TABLE>



ASSET DISPOSITION INITIATIVE
----------------------------

Overview
--------
In fiscal 1998 and 1999, we announced a plan to close two warehouse facilities
and a coffee plant in the U.S., a bakery plant in Canada and 166 stores
including the exit of the Richmond, Virginia and Atlanta, Georgia markets
(Project Great Renewal). In addition, during the third quarter of fiscal 2001,
we announced that certain underperforming operations, including 39 stores (30 in
the United States and 9 in Canada) and 3 warehouses (2 in the United States and
1 in Canada) would be closed and/or sold, and certain administrative
streamlining would take place (2001 Asset Disposition). During the fourth
quarter of fiscal 2003, we announced an initiative to close 6 stores and convert
13 stores to our Food Basics banner in the Detroit, Michigan and Toledo, Ohio
markets (Farmer Jack Restructuring).

<PAGE>


Presented below is a reconciliation of the charges recorded on our Consolidated
Balance Sheets, Statements of Consolidated Operations and Statements of
Consolidated Cash Flows for the 12 and 40 weeks ended December 4, 2004 and
November 29, 2003. Present value ("PV") interest represents interest accretion
on future occupancy costs which were recorded at present value at the time of
the original charge. Non-accruable items represent charges related to the
restructuring that are required to be expensed as incurred in accordance with
SFAS 146 "Accounting for Costs Associated with Exit or Disposal Activities".

<TABLE>
<CAPTION>




                                 12 Weeks Ended December 4, 2004                  12 Weeks Ended November 29, 2003
                         ----------------------------------------------  ------------------------------------------------
                          Project      2001        Farmer                  Project        2001        Farmer
                           Great       Asset        Jack                    Great         Asset        Jack
                          Renewal   Disposition Restructuring   Total      Renewal    Disposition  Restructuring  Total
                         --------   ----------- ------------- ---------  -----------  -----------  -------------  -------

<S>                      <C>        <C>         <C>           <C>        <C>          <C>          <C>            <C>


   Balance Sheet accruals
   ----------------------
   PV interest           $    418   $       553  $       154  $   1,125  $       655  $       532  $         -  $   1,187
   Total accrued to
                         --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------
     balance sheets           418           553          154      1,125          655          532            -      1,187
                         --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------

   Occupancy reversals          -       (4,488)            -    (4,488)            -            -            -          -
   Additional occupancy
     accrual                    -             -            -          -            -          991            -        991
   Additional severance         -             -            -          -            -          535            -        535
   Adjustments to
                         --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------
     balance sheets             -       (4,488)            -    (4,488)            -        1,526            -      1,526
                         --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------

   Non-accruable items
     recorded on Statements
     of Operations
     -------------
   Property writedowns          -         1,709            -      1,709            -            -            -          -
   Inventory markdowns          -             -            -          -            -            -            -          -
   Closing costs                -             -            -          -            -            -            -          -
                         --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------
   Total non-accruable
   items                        -         1,709            -      1,709            -            -            -          -
                         --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------

     Less PV interest        (418)        (553)         (154)    (1,125)        (655)       (532)            -     (1,187)
                         ---------  -----------  ------------ ---------- ------------ -----------  -----------  ----------
Total amount recorded
     on Statements of
     Operations and
     Statements of Cash
     Flows excluding
     PV interest         $      -   $   (2,779)  $         -  $ (2,779)  $         -  $     1,526  $         -  $   1,526
                         ========   ===========  ===========  =========  ===========  ===========  ===========  =========


</TABLE>

<PAGE>


<TABLE>
<CAPTION>

                                 40 Weeks Ended December 4, 2004                  40 Weeks Ended November 29, 2003
                         ----------------------------------------------  ------------------------------------------------
                          Project       2001       Farmer                  Project        2001        Farmer
                           Great       Asset        Jack                    Great         Asset        Jack
                          Renewal   Disposition Restructuring   Total      Renewal    Disposition Restructuring   Total
                         --------   ----------- ------------- ---------  -----------  ----------- ------------- ---------

<S>                      <C>        <C>         <C>          <C>         <C>          <C>         <C>           <C>

   Balance Sheet accruals
   PV interest           $  1,494   $     1,902  $       534  $   3,930  $     2,075  $     2,232  $         -  $   4,307
   Total accrued to
                         --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------
     balance sheets         1,494         1,902          534      3,930        2,075        2,232            -      4,307
                         --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------

   Occupancy reversals          -        (4,488)           -     (4,488)           -       (6,778)           -     (6,778)
   Additional occupancy
     accrual                    -             -            -          -            -          991            -        991
   Additional severance         -             -            -          -            -        1,490            -      1,490
   Adjustments to
                         --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------
     balance sheets             -        (4,488)           -     (4,488)           -      (4,297)            -     (4,297)
                         --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------

   Non-accruable items
     recorded on Statements
     of Operations
   Property writedowns          -         1,709           90      1,799            -          422            -        422
   Inventory markdowns          -             -          291        291            -            -            -          -
   Closing costs                -             -          689        689            -            -            -          -
                         --------   -----------  -----------  ---------  -----------  -----------  -----------  ---------
   Total non-accruable
     items                      -         1,709        1,070      2,779            -          422            -        422
                         --------   -----------    ---------  ---------  -----------  -----------  -----------  ---------


     Less PV interest      (1,494)      (1,902)         (534)    (3,930)      (2,075)     (2,232)            -     (4,307)
                         ---------  -----------  ------------ ---------- ------------ -----------  -----------  ---------
   Total amount recorded
     on Statements of
     Operations and
     Statements of Cash
     Flows excluding
     PV interest         $      -   $   (2,779)  $     1,070  $ (1,709)  $         -  $   (3,875)  $         -  $ (3,875)
                         ========   ===========  ===========  =========  ===========  ===========  ===========  =========

</TABLE>



Project Great Renewal
---------------------
In May 1998, we initiated an assessment of our business operations in order to
identify the factors that were impacting our performance. As a result of this
assessment, in fiscal 1998 and 1999, we announced a plan to close two warehouse
facilities and a coffee plant in the U.S., a bakery plant in Canada and 166
stores (156 in the United States and 10 in Canada) including the exit of the
Richmond, Virginia and Atlanta, Georgia markets. As of December 4, 2004, we had
closed all stores and facilities related to this phase of the initiative.

<PAGE>


The following table summarizes the activity related to this phase of the
initiative over the last three fiscal years:

<TABLE>
<CAPTION>


                                    Occupancy                 Severance and Benefits                    Total
                         ------------------------------   ------------------------------  -------------------------------
                           U.S.      Canada      Total      U.S.      Canada      Total      U.S.      Canada      Total
                         --------   --------   --------   --------   --------   --------  ---------  ---------  ---------

<S>                      <C>        <C>        <C>        <C>        <C>        <C>       <C>        <C>        <C>

     Balance at
       February 24, 2001 $ 82,189   $    672   $ 82,861   $  2,721   $      -   $  2,721  $  84,910  $     672  $  85,582
     Addition (1)           3,500        318      3,818          -          -          -      3,500        318      3,818
     Utilization (2)      (22,887)      (415)   (23,302)      (544)         -       (544)   (23,431)      (415)   (23,846)
                         --------   --------   --------   --------   --------   --------  ---------  ---------  ---------
     Balance at
       February 23, 2002 $ 62,802   $    575   $ 63,377      2,177   $      -   $  2,177     64,979        575     65,554
     Addition (1)           2,861        298      3,159          -          -          -      2,861        298      3,159
     Utilization (2)      (13,230)      (386)   (13,616)      (370)         -       (370)   (13,600)      (386)   (13,986)
     Adjustments (3)       (3,645)         -     (3,645)       639          -        639     (3,006)         -     (3,006)
                         ---------  --------   ---------  --------   --------   --------  ---------  ---------  ---------
     Balance at
       February 22, 2003 $ 48,788   $    487   $ 49,275   $  2,446   $      -   $  2,446  $  51,234  $     487  $  51,721
     Addition (1)           2,276        372      2,648          -          -          -      2,276        372      2,648
     Utilization (2)      (19,592)      (407)   (19,999)      (289)         -       (289)   (19,881)      (407)   (20,288)
                         --------   --------   --------   --------   --------   --------  ---------  ---------  ---------
     Balance at
       February 28, 2004 $ 31,472   $    452   $ 31,924   $  2,157   $      -   $  2,157  $  33,629  $     452  $  34,081
     Addition (1)           1,477         17      1,494          -          -          -      1,477         17      1,494
     Utilization (2)       (3,887)      (177)    (4,064)      (526)         -       (526)    (4,413)      (177)    (4,590)
                         --------   --------   --------   ---------  --------   --------  ---------  ---------  ---------
     Balance at
       Dec. 4, 2004      $ 29,062   $    292   $ 29,354   $  1,631   $      -   $  1,631  $  30,693  $     292  $  30,985
                         ========   ========   ========   ========   ========   ========  =========  =========  =========


(1)  The additions to store occupancy of $3.8 million, $3.2 million and $2.6
     million during fiscal 2001, 2002 and 2003, respectively, and $1.5 million
     during the 40 weeks ended December 4, 2004 represent the interest accretion
     on future occupancy costs which were recorded at present value at the time
     of the original charge.
(2)  Occupancy utilization of $23.3 million, $13.6 million and $20.0 million for
     fiscal 2001, 2002 and 2003, respectively, and $4.1 million during the 40
     weeks ended December 4, 2004 represents payments made during those periods
     for costs such as rent, common area maintenance, real estate taxes and
     lease termination costs. Severance utilization of $0.5 million, $0.4
     million and $0.3 million for fiscal 2001, 2002 and 2003, respectively, and
     $0.5 million during the 40 weeks ended December 4, 2004 represents payments
     to individuals for severance and benefits, as well as payments to pension
     funds for early withdrawal from multi-employer union pension plans.
(3)  At each balance sheet date, we assess the adequacy of the balance to
     determine if any adjustments are required as a result of changes in
     circumstances and/or estimates. We have continued to make favorable
     progress in marketing and subleasing the closed stores. As a result, during
     fiscal 2002, we recorded a reduction of $3.6 million in occupancy accruals
     related to this phase of the initiative. Further, we increased our reserve
     for future minimum pension liabilities by $0.6 million to better reflect
     expected future payouts under certain collective bargaining agreements.

</TABLE>


We paid $96.8 million of the total occupancy charges from the time of the
original charges through December 4, 2004 which was primarily for occupancy
related costs such as rent, common area maintenance, real estate taxes and lease
termination costs. We paid $29.9 million of the total net severance charges from
the time of the original charges through December 4, 2004, which resulted from
the termination of approximately 3,400 employees. The remaining occupancy
liability of $29.4 million relates to expected future payments under long term
leases and is expected to be paid in full by 2020. The remaining severance
liability of $1.6 million primarily relates to expected future payments for
early withdrawals from multi-employer union pension plans and will be fully paid
out by 2020.

<PAGE>

None of these stores were open during the 12 and 40 weeks ended December 4, 2004
and November 29, 2003. As such, there was no impact on the Statements of
Consolidated Operations from the 166 stores included in this phase of the
initiative.

At December 4, 2004 and February 28, 2004, approximately $5.5 million and $6.5
million, respectively, of the reserve was included in "Other accruals" and the
remaining amount was included in "Other non-current liabilities" on the
Company's Consolidated Balance Sheets.

Based upon current available information, we evaluated the reserve balances as
of December 4, 2004 of $31.0 million for this phase of the asset disposition
initiative and have concluded that they are appropriate to cover expected future
costs. The Company will continue to monitor the status of the vacant properties
and adjustments to the reserve balances may be recorded in the future, if
necessary.

2001 Asset Disposition
----------------------
During the third quarter of fiscal 2001, the Company's Board of Directors
approved a plan resulting from our review of the performance and potential of
each of the Company's businesses and individual stores. At the conclusion of
this review, our Company determined that certain underperforming operations,
including 39 stores (30 in the United States and 9 in Canada) and 3 warehouses
(2 in the United States and 1 in Canada) should be closed and/or sold, and
certain administrative streamlining should take place. As of December 4, 2004,
we had closed all stores and facilities related to this phase of the initiative.

The following table summarizes the activity related to this phase of the
initiative recorded on the Consolidated Balance Sheets since the announcement of
the charge in November 2001:

<TABLE>
<CAPTION>


                                    Occupancy                 Severance and Benefits                    Total
                         ------------------------------   ------------------------------  -------------------------------
                           U.S.      Canada      Total      U.S.      Canada      Total      U.S.      Canada      Total
                         --------   --------   --------   --------   --------   --------  ---------  ---------  ---------

<S>                      <C>        <C>        <C>        <C>        <C>        <C>       <C>        <C>        <C>


     Original charge     $ 78,488   $  1,968   $ 80,456   $ 15,688   $  7,747   $ 23,435  $  94,176  $   9,715  $ 103,891
     Addition (1)           1,653         20      1,673          -          -          -      1,653         20      1,673
     Utilization (2)       (1,755)       (51)    (1,806)    (1,945)      (946)    (2,891)    (3,700)      (997)    (4,697)
     Adjustments (3)            -          -          -          -       (584)      (584)         -       (584)      (584)
                         --------   --------   --------   --------   --------   --------  ---------  ---------  ---------
     Balance at
       February 23, 2002 $ 78,386   $  1,937   $ 80,323     13,743   $  6,217   $ 19,960  $  92,129  $   8,154  $ 100,283
     Addition (1)           4,041         49      4,090      2,578        966      3,544      6,619      1,015      7,634
     Utilization (2)      (18,745)    (1,642)   (20,387)   (12,508)    (6,952)   (19,460)   (31,253)    (8,594)   (39,847)
     Adjustments (3)      (10,180)         -    (10,180)         -        250        250    (10,180)       250     (9,930)
                         ---------  --------   ---------  --------   --------   --------  ---------  ---------  ---------
     Balance at
       February 22, 2003 $ 53,502   $    344   $ 53,846   $  3,813   $    481   $  4,294  $  57,315  $     825  $  58,140
     Addition (1)           2,847          3      2,850          -          -          -      2,847          3      2,850
     Utilization (2)       (9,987)      (974)   (10,961)    (2,457)    (1,026)    (3,483)   (12,444)    (2,000)   (14,444)
     Adjustments (3)       (6,778)     1,002     (5,776)       955        603      1,558     (5,823)     1,605     (4,218)
                         --------   --------   --------   --------   --------   --------  ---------  ---------  ---------
     Balance at
       February 28, 2004 $ 39,584   $    375   $ 39,959   $  2,311   $     58   $  2,369  $  41,895  $     433  $  42,328
     Addition (1)           1,902          -      1,902          -          -          -      1,902          -      1,902
     Utilization (2)       (3,804)      (375)    (4,179)      (178)       (58)      (236)    (3,982)      (433)    (4,415)
     Adjustments (3)       (4,488)         -     (4,488)         -          -          -     (4,488)         -     (4,488)
                         ---------  --------   ---------  --------   --------   --------  ---------- ---------  ---------
     Balance at
       Dec. 4, 2004      $ 33,194   $      -   $ 33,194   $  2,133   $      -   $  2,133  $  35,327  $       -  $  35,327
                         ========   ========   ========   ========   ========   ========  =========  =========  =========


<PAGE>

(1)      The additions to store occupancy of $1.7 million, $4.1 million and
         $2.9 million during fiscal 2001, 2002 and 2003, respectively, and $1.9
         million during the 40 weeks ended December 4, 2004 represent the
         interest accretion on future occupancy costs which were recorded at
         present value at the time of the original charge.  The addition to
         severance of $3.5 million during fiscal 2002 related to retention and
         productivity incentives that were expensed as earned.
(2)      Occupancy utilization of $1.8 million, $20.4 million and $11.0 million
         during fiscal 2001, 2002 and 2003, respectively, and $4.2 million
         during the 40 weeks ended December 4, 2004 represent payments made
         during those periods for costs such as rent, common area maintenance,
         real estate taxes and lease termination costs. Severance utilization of
         $2.9 million, $19.5 million and $3.5 million during fiscal 2001, 2002
         and 2003, respectively, and $0.2 million during the 40 weeks ended
         December 4, 2004 represent payments made to terminated employees during
         the period.
(3)      At each balance sheet date, we assess the adequacy of the reserve
         balance to determine if any adjustments are required as a result of
         changes in circumstances and/or estimates. Under Ontario provincial
         law, employees to be terminated as part of a mass termination are
         entitled to receive compensation, either worked or paid as severance,
         for a set period of time after the official notice date. Since such
         closures took place later than originally expected, less time remained
         in the aforementioned guarantee period. As a result, during fiscal
         2001, we recorded an adjustment to severance and benefits of $0.6
         million related to a reduction in the severance payments required to be
         made to certain store employees in Canada. Further, during fiscal 2002,
         we recorded adjustments of $10.2 million related to reversals of
         previously accrued occupancy related costs due to the following:

o        Favorable results of assigning leases at certain locations of $3.6
         million;
o        The decision to continue to operate one of the stores previously
         identified for closure due to changes in the competitive
         environment in the market in which that store is located of $3.3
         million; and
o        The decision to proceed with development at a site that we had
         chosen to abandon at the time of the original charge due to
         changes in the competitive environment in the market in which that
         site is located of $3.3 million.

         During fiscal 2003, we recorded net adjustments of $5.8 million related
         to reversals of previously accrued occupancy costs due to favorable
         results of subleasing, assigning and terminating leases. We also
         accrued $1.6 million for additional severance and benefit costs that
         were unforeseen at the time of the original charge. Finally, during the
         12 and 40 weeks ended December 4, 2004, we recorded adjustments of $4.5
         million related to the reversals of previously accrued occupancy costs
         due to the disposals and subleases of locations at more favorable terms
         than originally anticipated at the time of the original charge.

</TABLE>

We paid $38.3 million ($35.3 million in the U.S. and $3.0 million in Canada) of
the total occupancy charges from the time of the original charges through
December 4, 2004 which was primarily for occupancy related costs such as rent,
common area maintenance, real estate taxes and lease termination costs. We paid
$26.1 million ($17.1 million in the U.S. and $9.0 million in Canada) of the
total net severance charges from the time of the original charges through
December 4, 2004, which resulted from the termination of approximately 1,100
employees. The remaining occupancy liability of $33.2 million primarily relates
to expected future payments under long term leases through 2017. The remaining
severance liability of $2.1 million relates to expected future payments for
severance and benefits payments to individual employees and will be fully paid
out by 2006.

At December 4, 2004 and February 28, 2004 approximately $7.1 million and $12.0
million of the reserve, respectively, was included in "Other accruals" and the
remaining amount was included in "Other non-current liabilities" on the
Company's Consolidated Balance Sheets.

<PAGE>

Included in the Statements of Consolidated Operations for the 12 and 40 weeks
ended December 4, 2004 and November 29, 2003 are the sales and operating results
of the 39 stores that were identified for closure as part of this asset
disposition. The results of these operations are as follows:

<TABLE>
<CAPTION>



                                                           12 Weeks Ended                     40 Weeks Ended
                                                   -------------------------------    -------------------------------
                                                   Dec. 4, 2004      Nov. 29, 2003    Dec. 4, 2004      Nov. 29, 2003
                                                   ------------      -------------    -------------     -------------

<S>                                                <C>               <C>              <C>               <C>

                  Sales                            $           -     $           -    $           -     $         316
                                                   =============     =============    =============     =============

                  Operating loss                   $           -     $           -    $           -     $         (72)
                                                   =============     =============    =============     ==============


</TABLE>

Based upon current available information, we evaluated the reserve balances as
of December 4, 2004 of $35.3 million for this phase of the asset disposition
initiative and have concluded that they are appropriate to cover expected future
costs. The Company will continue to monitor the status of the vacant properties
and adjustments to the reserve balances may be recorded in the future, if
necessary.

Farmer Jack Restructuring
-------------------------
As previously stated, during the fourth quarter of fiscal 2003, we announced an
initiative to close 6 stores and convert 13 stores to our Food Basics banner in
the Detroit, Michigan and Toledo, Ohio markets. In addition to the charge of
$37.7 million related to the last phase of this initiative ($2.2 million in
"Cost of merchandise sold" and $35.5 million in "Store operating, general and
administrative expense" in our Statements of Consolidated Operations for fiscal
2003), excluding PV interest, we recorded costs in the 12 and 40 weeks ended
December 4, 2004 of nil and $1.1 million ($0.3 million in "Cost of merchandise
sold" and $0.8 million in "Store operating, general and administrative
expense"), respectively, as follows:

<TABLE>
<CAPTION>


                                                12 Weeks Ended             40 Weeks Ended
                                               December 4, 2004           December 4, 2004
                                            ----------------------     ----------------------

<S>        <C>                              <C>                        <C>

           Occupancy related                     $            -           $            -
           Severance and benefits                             -                        -
           Property writedowns                                -                       90
           Inventory markdowns                                -                      291
           Nonaccruable closing costs                         -                      689
                                                 --------------           --------------
                Total charges                    $            -           $        1,070
                                                 ==============           ==============

</TABLE>


As of December 4, 2004, we had closed all 6 stores and successfully completed
the conversions related to this phase of the initiative. The following table
summarizes the activity to date related to the charges recorded for the
aforementioned initiatives all of which were in the U.S. The table does not
include property writedowns as they are not part of any reserves maintained on
the balance sheet. It also does not include non-accruable closing costs and
inventory markdowns since they are expensed as incurred in accordance with
generally accepted accounting principles.


<PAGE>

<TABLE>
<CAPTION>
                                                         Severance
                                                            and
                                          Occupancy       Benefits            Total
                                        ------------    -------------      ----------

<S>                                     <C>             <C>                <C>

     Original charge (1)                $     20,999    $       8,930      $   29,929
     Addition (1)                                 56                -              56
     Utilization (2)                          (1,093)          (4,111)         (5,204)
                                        ------------    -------------      ----------
     Balance at
        February 28, 2004               $     19,962    $       4,819      $   24,781
     Addition (1)                                534                -             534
     Utilization (2)                          (3,719)          (4,775)         (8,494)
                                        ------------    -------------      ----------
     Balance at
        Dec. 4, 2004                    $     16,777    $          44      $   16,821
                                        ============    =============      ==========

(1)      The original charge to occupancy during fiscal 2003 represents charges
         related to closures and conversions in the Detroit, Michigan market of
         $21.0 million. The additions to occupancy during fiscal 2003 and the 40
         weeks ended December 4, 2004 represent interest accretion on future
         occupancy costs which were recorded at present value at the time of the
         original charge. The original charge to severance during fiscal 2003 of
         $8.9 million related to individual severings as a result of the store
         closures, as well as a voluntary termination plan initiated in the
         Detroit, Michigan market.
(2)      Occupancy utilization of $1.1 million and $3.7 million during fiscal
         2003 and the 40 weeks ended December 4, 2004, respectively, represents
         payments made for costs such as rent, common area maintenance, real
         estate taxes and lease termination costs. Severance utilization of $4.1
         million and $4.8 million during fiscal 2003 and 40 weeks ended December
         4, 2004, respectively, represent payments made to terminated employees
         during the period.


</TABLE>


We paid $4.8 million of the total occupancy charges from the time of the
original charge through December 4, 2004 which was primarily for occupancy
related costs such as rent, common area maintenance, real estate taxes and lease
termination costs. We paid $8.9 million of the total net severance charges from
the time of the original charges through December 4, 2004, which resulted from
the termination of approximately 300 employees. The remaining occupancy
liability of $16.8 million relates to expected future payments under long term
leases and is expected to be paid out in full by 2014. The remaining severance
liability of less than $0.1 million relates to expected future payments for
severance and benefits to individual employees and will be fully paid out by
mid-2005.

Included in the Statements of Consolidated Operations for the 12 and 40 weeks
ended December 4, 2004 and November 29, 2003 are the sales and operating results
of the 6 stores that were identified for closure as part of this phase of the
initiative. The results of these operations are as follows:

<TABLE>
<CAPTION>

                                                           12 Weeks Ended                     40 Weeks Ended
                                                   -------------------------------    -------------------------------
                                                    Dec. 4, 2004     Nov. 29, 2003     Dec. 4, 2004     Nov. 29, 2003
                                                    --------------   -------------     ------------     -------------
<S>                                                 <C>              <C>               <C>              <C>


                  Sales                            $           -     $      12,588    $       2,433     $      41,944
                                                   =============     =============    =============     =============

                  Operating loss                   $           -     $     (1,877)    $         (47)    $      (6,626)
                                                   =============     ============     =============     =============

</TABLE>

At December 4, 2004 and February 28, 2004, approximately $3.0 million and $9.0
million, respectively, of the liability was included in "Other accruals" and the
remaining amount was included in "Other non-current liabilities" on our
Consolidated Balance Sheets.

<PAGE>

We have evaluated the liability balance of $16.8 million as of December 4, 2004
based upon current available information and have concluded that it is
appropriate. We will continue to monitor the status of the vacant properties and
adjustments to the reserve balance may be recorded in the future, if necessary.



LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

CASH FLOWS
----------

The following table presents excerpts from our Consolidated Statements of Cash
Flows:

<TABLE>
<CAPTION>



                                                                                  Dec. 4, 2004               Nov. 29, 2003
                                                                                -----------------         -----------------
<S>                                                                             <C>                       <C>

Net cash used in operating activities                                           $       (15,500)          $        (16,013)
                                                                                -----------------         -----------------

Net cash (used in) provided by investing activities                             $      (134,481)          $         142,944
                                                                                -----------------         -----------------

Net cash provided by (used in) financing activities                             $        22,247           $       (124,782)
                                                                                -----------------         -----------------

</TABLE>


Net cash flow used in operating activities of $15.5 million for the 40 weeks
ended December 4, 2004 primarily reflected our net loss of $182.4 million,
adjusted for non-cash charges of $206.4 million for depreciation and
amortization and $34.7 million for the Midwest long lived assets/goodwill
impairment, a decrease in accounts receivable of $39.5 million, and an
increase in accounts payable of $79.4 million partially offset by an increase in
inventories of $98.3 million, an increase in prepaid assets and other current
assets of $26.5 million, an increase in other assets of $22.7 million, and a
decrease in other accruals of $25.8 million . Refer to Working Capital below for
discussion of changes in working capital items. Net cash flow used in operating
activities of $16.0 million for the 40 weeks ended November 29, 2003 primarily
reflected our net loss of $97.0 million adjusted for non-cash charges of $60.1
million for the Midwest long lived asset/goodwill impairment charge,
$215.0 million for depreciation and amortization and $8.0 million for the
cumulative effect of a change in accounting principle - FIN 46-R, the decrease
in receivables of $15.5 million, and the increase in accounts payable of $9.1
million, partially offset by the gain on sale of discontinued operations of
$159.7 million, the increase in inventories of $31.9 million and the increase in
prepaid expenses and other current assets of $29.6 million.

Net cash flow used in investing activities of $134.5 million for the 40 weeks
ended December 4, 2004 primarily reflected property expenditures totaling $150.1
million, which included 11 new supermarkets and 16 major remodels partially
offset by cash received from the sale of our assets of $15.6 million. For the
remainder of fiscal 2004, we have planned capital expenditures of approximately
$40 to $50 million, which relate primarily to opening one new supermarket,
converting approximately 2 to 3 stores to new banners, and enlarging or
remodeling approximately 25 supermarkets. However, year-to-date we are spending
at a rate below our plan and we may choose not to complete all projects in this
fiscal year. We currently expect to close approximately 5 - 7 stores during the
remainder of fiscal 2004. Net cash flow provided by investing activities of
$142.9 million for the 40 weeks ended November 29, 2003 primarily reflected
$252.0 million in proceeds from property disposals (most of which related to
discontinued operations), partially offset by $109.1 million used for property
expenditures, which included 14 new supermarkets and 2 major remodels or
enlargements.

<PAGE>


Net cash flow provided by financing activities of $22.2 million for the 40 weeks
ended December 4, 2004 primarily reflected an increase in book overdrafts of
$19.7 million and proceeds from long term borrowings of $19.3 million partially
offset by principal payments on capital leases of $10.1 million, payments on
long term borrowings of $5.9 million, and a decrease in deferred financing fees
of $1.0 million. Net cash flow used in financing activities of $124.8 million
for the 40 weeks ended November 29, 2003 primarily reflected $135.0 million in
payments on our revolving lines of credit and principal payments on capital
leases of $10.4 million partially offset by an increase in book overdrafts of
$22.2 million.

In the short term, we believe that our present cash resources, including
invested cash on hand, available borrowings from our revolving credit agreement
and other sources, are sufficient to meet our needs. We operate under an annual
operating plan which is reviewed and approved by our Board of Directors and
incorporates the specific initiatives we expect to pursue and the anticipated
financial results of our Company. The annual operating plan is generally
consistent with the first year of a longer term strategic plan that is approved
each year, and identifies specific initiatives and financial results, including
sales, profits and cash flow, to be achieved over a three year period.

The Fiscal 2004 annual operating plan anticipated limited profit growth from
Fiscal 2003, and called for increased capital investment to support a focused
program of remodeling existing conventional grocery stores in the U.S. and
Canada and converting certain stores to the Food Basics banner. We anticipated
that we would incur net losses and have negative operating cash flow as a result
of this plan. We also have $2.3 million of current debt maturities in Fiscal
2004. We believe that proceeds from asset sales completed in Fiscal 2003 and our
present financing plans, including, among other things, the 4 year revolving
credit agreement completed in Fiscal 2003 and planned sale-leaseback
transactions, will provide for sufficient cash availability to ensure that we
have the resources to pursue our Fiscal 2004 annual operating plan.

We are presently developing our plans for Fiscal 2005, with a strong focus on
ensuring that funding is sufficient to both pursue our plans and programs and to
refinance the $214 million bonds maturing in April 2007 which, under the terms
of our revolving credit agreement, must be refinanced six months prior to
maturity. While we believe that the funds currently available, combined with
additional funds from improved profitability and financing and operating
actions, which we believe we can pursue but which are uncertain at this time,
could be sufficient to pursue this plan, however, there is no assurance that
this will be so at this time.

Profitability and cash flow can be impacted by certain external factors such as
unfavorable economic conditions, competition, labor relations and fuel and
utility costs which could have a significant impact on cash generation. If our
profitability and cash flow do not improve in line with our plans or if they do
not otherwise provide sufficient resources to operate effectively, we anticipate
that we will be able to modify the plan, by reducing capital investments and
through other contingency actions, in order to ensure that we have appropriate
resources. However, there is no assurance that we will pursue such contingency
actions or that they will be successful in generating the resources necessary to
operate the business.

<PAGE>


WORKING CAPITAL
---------------
We had working capital of $10.7 million at December 4, 2004 compared to working
capital of $113.5 million at February 28, 2004. We had cash and cash equivalents
aggregating $176.7 million at December 4, 2004 compared to $297.0 million at
February 28, 2004. The decrease in working capital was attributable primarily to
the following:

o A decrease in cash and cash equivalents as detailed in the Consolidated
  Statements of Cash Flows;
o A decrease in accounts receivable due to the timing of receipts; and
o An increase in accounts payable (inclusive of book overdrafts) due to timing,
  seasonality and the impact of the Canadian exchange rate.

Partially offset by the following:

o An increase in inventories mainly due to seasonality and the impact of the
  Canadian exchange rate;
o An increase in prepaid expenses and other current assets mainly due to
  timing as the unamortized portion of our prepaid rent balances at December
  4, 2004 is greater than the unamortized portion of our prepaid rent
  balances at February 28, 2004; and
o A decrease in other accruals mainly due to timing.


REVOLVING CREDIT AGREEMENT
--------------------------
During fiscal 2003, we amended and restated our Secured Credit Agreement (the
"Amended and Restated Credit Agreement") and decreased our borrowing base to
$400 million. Thus, at December 4, 2004, we had a $400 million secured revolving
credit agreement with a syndicate of lenders enabling us to borrow funds on a
revolving basis sufficient to refinance short-term borrowings and provide
working capital as needed. This facility provides us with greater operating
flexibility and provides for increased capital spending. Under the terms of this
agreement, should availability fall below $50 million, a borrowing block will be
implemented which provides that no additional borrowings be made unless we are
able to maintain a fixed charge coverage ratio of 1.0 to 1.0. Although we do not
meet the required ratio at this time, it is not applicable as availability at
December 4, 2004 totaled $241.2 million. In the event that availability falls
below $50 million and we do not maintain the ratio required, unless otherwise
waived or amended, the lenders may, at their discretion, declare, in whole or in
part, all outstanding obligations immediately due and payable.

The Amended and Restated Credit Agreement is comprised of a U.S. credit
agreement amounting to $330 million and a Canadian credit agreement amounting to
$70 million (C$83.4 million at December 4, 2004) and is collateralized by
inventory, certain accounts receivable and certain pharmacy scripts. Borrowings
under the Amended and Restated Credit Agreement bear interest based on LIBOR and
Prime interest rate pricing. This agreement expires in December 2007.

As of December 4, 2004, there were no borrowings under these credit agreements.
As of December 4, 2004, after reducing availability for outstanding letters of
credit and borrowing base requirements, we had $241.2 million available under
the Amended and Restated Credit Agreement.

Under the Amended and Restated Credit Agreement, we are permitted to make bond
repurchases and may do so from time to time in the future.

<PAGE>


PUBLIC DEBT OBLIGATIONS
-----------------------
Outstanding notes totaling $631 million at December 4, 2004 consisted of $200
million of 9.375% Notes due August 1, 2039, $217 million of 9.125% Senior Notes
due December 15, 2011 and $214 million of 7.75% Notes due April 15, 2007.
Interest is payable quarterly on the 9.375% Notes and semi-annually on the
9.125% and 7.75% Notes. The 7.75% Notes are not redeemable prior to their
maturity. The 9.375% notes can be redeemed after August 11, 2004, and the 9.125%
Notes may be redeemed after December 15, 2006. All of the notes outstanding are
unsecured obligations and were issued under the terms of our senior debt
securities indenture, which contains among other provisions, covenants
restricting the incurrence of secured debt. In addition, the 9.125% Notes
contain additional covenants, including among other things, limitations on asset
sales, on the payment of dividends, and on the incurrence of liens and
additional indebtedness. Our notes are not guaranteed by any of our
subsidiaries. Our notes are effectively subordinate to our secured revolving
credit agreement and do not contain cross default provisions.

During the third quarter of fiscal 2004, we repurchased in the open market $6
million of our 7.75% Notes due April 15, 2007. The cost of this open market
repurchase resulted in a pretax gain due to the early extinguishment of debt of
$0.8 million. In accordance with SFAS No. 145, "Rescission of FASB Statements 4,
44 and 64, Amendment of FASB 13, and Technical Corrections", this gain has been
classified within loss from operations for the 12 and 40 weeks ended December
4, 2004.

OTHER
-----
We currently have active Registration Statements dated January 23, 1998 and June
23, 1999, allowing us to offer up to $75 million of debt and/or equity
securities as of December 4, 2004 at terms contingent upon market conditions at
the time of sale.

Our Company's policy is to not pay dividends. As such, we have not made dividend
payments in the previous three years and do not intend to pay dividends in
fiscal 2004. In addition, our Company is prohibited, under the terms of our
Revolving Credit Agreement, to pay cash dividends on common shares.

We are the guarantor of a loan of $2.1 million related to a shopping center,
which will expire in 2011.

Our existing senior debt rating was Caa1 with negative implications with Moody's
Investors Service ("Moody's") and B- with negative implications with Standard &
Poor's Ratings Group ("S&P") as of December 4, 2004. Our liquidity rating was
SGL3 with Moody's as of December 4, 2004. Our recovery rating was 1 with S&P as
of December 4, 2004 indicating a high expectation of 100% recovery of our senior
debt to our lenders. Future rating changes could affect the availability and
cost of financing to our Company.


CRITICAL ACCOUNTING ESTIMATES
-----------------------------
Critical accounting estimates are those accounting estimates that we believe are
important to the portrayal of our financial condition and results of operations
and require our most difficult, subjective or complex judgments, often as a
result of the need to make estimates about the effect of matters that are
inherently uncertain.

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America ("U.S. GAAP") requires us to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

<PAGE>


Self-Insurance Reserves
-----------------------
Our Consolidated Balance Sheets include liabilities with respect to self-insured
workers' compensation and general liability claims. We estimate the required
liability of such claims on a discounted basis, utilizing an actuarial method,
which is based upon various assumptions, which include, but are not limited to,
our historical loss experience, projected loss development factors, actual
payroll and other data. The required liability is also subject to adjustment in
the future based upon the changes in claims experience, including changes in the
number of incidents (frequency) and changes in the ultimate cost per incident
(severity).

Long-Lived Assets
-----------------
We review the carrying values of our long-lived assets for possible impairment
whenever events or changes in circumstances indicate that the carrying amount of
assets may not be recoverable. Such review is primarily based upon groups of
assets and the undiscounted estimated future cash flows from such assets to
determine if the carrying value of such assets is recoverable from their
respective cash flows. If such review indicates an impairment exists, we measure
such impairment on a discounted basis using a probability weighted approach and
a risk free rate.

During the 12 and 40 weeks ended December 4, 2004, we recorded total impairment
losses on property, plant and equipment of $37.4 million and $39.1 million,
respectively. Refer to Note 5 - Valuation of Goodwill and Long-Lived Assets in
the Notes to our Consolidated Financial Statements for further discussion
relating to impairment charges recorded during the current fiscal year.

If current operating levels and trends continue, there may be additional future
impairments on long-lived assets, including the potential for impairment of
assets that are held and used.

Closed Store Reserves
---------------------
For stores closed that are under long-term leases, we record a discounted
liability using a risk free rate for the future minimum lease payments and
related costs, such as utilities and taxes, from the date of closure to the end
of the remaining lease term, net of estimated probable recoveries from projected
sublease rentals. If estimated cost recoveries exceed our liability for future
minimum lease payments, the excess is recognized as income over the term of the
sublease. We estimate future net cash flows based on our experience in and our
knowledge of the market in which the closed store is located. However, these
estimates project net cash flow several years into the future and are affected
by variable factors such as inflation, real estate markets and economic
conditions. While these factors have been relatively stable in recent years,
variation in these factors could cause changes to our estimates. As of December
4, 2004, we had liabilities for future minimum lease payments of $118 million,
which related to 54 closed stores and 74 subleased or assigned stores. Of this
amount, $22 million relates to stores closed in the normal course of business,
$79 million relates to stores closed as part of the asset disposition initiative
(see Note 7 of our Consolidated Financial Statements), and $17 million relates
to stores closed as part of our exits of the northern New England and Kohl's
businesses (see Note 6 of our Consolidated Financial Statements).

Employee Benefit Plans
----------------------
The determination of our obligation and expense for pension and other
postretirement benefits is dependent, in part, on our selection of certain
assumptions used by our actuaries in calculating these amounts. These
assumptions include, among other things, the discount rate, the expected
long-term rate of return on plan assets and the rates of increase in
compensation and health care costs. In accordance with U.S. GAAP, actual results
that differ from our Company's assumptions are accumulated and amortized over
future periods and, therefore, affect our recognized expense and recorded
obligation in such future periods. While we believe that our assumptions are
appropriate, significant differences in our actual experience or significant
changes in our assumptions may materially affect our pension and other
post-retirement obligations and our future expense.

<PAGE>


Inventories
-----------
We evaluate inventory shrinkage throughout the year based on actual physical
counts in our stores and distribution centers and record reserves based on the
results of these counts to provide for estimated shrinkage between the store's
last inventory and the balance sheet date.



ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk

MARKET RISK
-----------
Market risk represents the risk of loss from adverse market changes that may
impact our consolidated financial position, results of operations or cash flows.
Among other possible market risks, we are exposed to such risk in the areas of
interest rates and foreign currency exchange rates.

From time to time, we may enter hedging agreements in order to manage risks
incurred in the normal course of business including forward exchange contracts
to manage our exposure to fluctuations in foreign exchange rates.

Interest Rates
--------------
Our exposure to market risk for changes in interest rates relates primarily to
our debt obligations. We do not have cash flow exposure due to rate changes on
our $629.5 million in notes as of December 4, 2004 because they are at fixed
interest rates. However, we do have cash flow exposure on our committed bank
lines of credit due to our variable floating rate pricing. Accordingly, during
the 12 and 40 weeks ended December 4, 2004, a presumed 1% change in the variable
floating rate would not have impacted interest expense as there were minimal
borrowings on our committed bank lines of credit.

Foreign Exchange Risk
---------------------
We are exposed to foreign exchange risk to the extent of adverse fluctuations in
the Canadian dollar. During the 12 and 40 weeks ended December 4, 2004, a change
in the Canadian currency of 10% would have resulted in a fluctuation in net
income of $0.5 million and net loss of $0.4 million, respectively. We do not
believe that a change in the Canadian currency of 10% will have a material
effect on our financial position or cash flows.
<PAGE>


ITEM 4 - Controls and Procedures

Our Company maintains a system of internal controls and procedures designed to
provide reasonable assurance as to the reliability of our Company's published
consolidated financial statements and other disclosures included in this report.
Within the 90-day period prior to the date of this report, the Company's
Chairman of the Board and Chief Executive Officer, and Executive Vice President,
Chief Financial Officer evaluated the effectiveness of the design and operation
of the Company's disclosure controls and procedures as defined in Rules
13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based upon that
evaluation, the Company's Chairman of the Board and Chief Executive Officer, and
Executive Vice President, Chief Financial Officer concluded that our Company's
disclosure controls and procedures, which we designed to ensure that our Company
is able to collect, process and disclose required information within the time
periods specified in the Commission's rules and forms, were effective as of the
end of the period covered by this quarterly report on 10-Q.

Since the date of the most recent evaluation of our Company's internal controls
over financial reporting by our Chairman of the Board and Chief Executive
Officer, and Executive Vice President, Chief Financial Officer, there have been
no significant changes in such controls or in other factors that could have
significantly affected those controls, including any corrective actions with
regard to significant deficiencies and material weaknesses.


CAUTIONARY NOTE
---------------
This presentation may contain forward-looking statements about the future
performance of our Company, and is based on our assumptions and beliefs in light
of information currently available. We assume no obligation to update this
information. These forward-looking statements are subject to uncertainties and
other factors that could cause actual results to differ materially from such
statements including but not limited to: competitive practices and pricing in
the food industry generally and particularly in our principal markets; our
relationships with our employees; the terms of future collective bargaining
agreements; the costs and other effects of lawsuits and administrative
proceedings; the nature and extent of continued consolidation in the food
industry; changes in the financial markets which may affect our cost of capital
or the ability to access capital; supply or quality control problems with our
vendors; and changes in economic conditions, which may affect the buying
patterns of our customers.


<PAGE>


                           PART II. OTHER INFORMATION

ITEM 1 - Legal Proceedings

On October 1, 2004, our Company announced that we had reached a settlement,
subject to court approval, of the previously disclosed Canadian class action
lawsuit, captioned 1176560 Ontario Limited, 1184883 Ontario Inc. and 1205427
Ontario Limited vs. The Great Atlantic & Pacific Company of Canada Limited;
Ontario Superior Court of Justice, Court File No. 02 CV-227777CP, which was
filed by certain franchisees of our Food Basics discount grocery operations in
Ontario, Canada. The settlement was approved by the Canadian court on October 4,
2004. Under the terms of the settlement, A&P Canada agreed to make payment for
damages as well the repurchase of the franchise shares. In addition, A&P Canada
is required to pay other settlement expenses, including the calculated net book
value of the repurchased franchises, expected to be finalized during the fourth
quarter of fiscal 2004. The settlement and repurchase transaction closed during
the third quarter of this fiscal year and the recorded pre-tax loss was
approximately $26.1 million. Of this amount, $24.7 million was recorded in the
second quarter ended September 11, 2004, and $1.4 million was recorded in the
third quarter ended December 4, 2004. The additional $1.4 million mainly
represents legal and other professional fees incurred in the third quarter ended
December 4, 2004 as well as changes in estimate on the net settlement amount.
This estimate is subject to change based upon the finalization of the net
settlement amount expected during the fourth quarter of fiscal 2004.

As previously disclosed, the dismissal by the United States District Court for
the District of New Jersey of the amended securities class action Complaint
filed against our Company and certain of our officers and directors in In re The
Great Atlantic & Pacific Tea Company, Inc. Securities Litigation, No. 02 CV 2674
(D.N.J.) (FSH), was affirmed in July 2004 by the United States Court of Appeals
for the Third Circuit. The deadline by which plaintiffs could have filed with
the United States Supreme Court a petition seeking a writ of certiorari
challenging the Third Circuit's ruling expired in early October 2004 without
plaintiffs having made such a filing.

ITEM 2 - Changes in Securities

None


ITEM 3 - Defaults Upon Senior Securities

None


ITEM 4 - Submission of Matters to a Vote of Security Holders

None


<PAGE>


ITEM 5 - Other Information

None


ITEM 6 - Exhibits and Reports on Form 8-K

(a) Exhibits required by Item 601 of Regulation S-K


         EXHIBIT NO.           DESCRIPTION
           3.1                 Articles of Incorporation of The Great Atlantic
                               & Pacific Tea Company, Inc., as amended through
                               July 1987 (incorporated herein by reference to
                               Exhibit 3(a) to Form 10-K filed on May 27, 1988)

           3.2                 By-Laws of The Great Atlantic & Pacific Tea
                               Company, Inc., as amended through December 4,
                               2004 (incorporated herein by reference to
                               Exhibit 3.1 to Form 8-K filed on December 4,
                               2004)

           4.1                 Indenture, dated as of January 1, 1991 between
                               the Company and JPMorgan Chase Bank (formerly
                               The Chase Manhattan Bank as successor by merger
                               to Manufacturers Hanover Trust Company), as
                               trustee (the "Indenture") (incorporated herein
                               by reference to Exhibit 4.1 to Form 8-K)

           4.2                 First Supplemental Indenture, dated as of
                               December 4, 2001, to the Indenture, dated as of
                               January 1, 1991 between our Company and JPMorgan
                               Chase Bank, relating to the 7.70% Senior Notes
                               due 2004 (incorporated herein by reference to
                               Exhibit 4.1 to Form 8-K filed on December 4,
                               2001)

           4.3                 Second Supplemental Indenture, dated as of
                               December 20, 2001, to the Indenture between our
                               Company and JPMorgan Chase Bank, relating to the
                               9 1/8% Senior Notes due 2011 (incorporated herein
                               by reference to Exhibit 4.1 to Form 8-K filed on
                               December 20, 2001)

           4.4                 Successor Bond Trustee (incorporated herein by
                               reference to Exhibit 4.4 to Form 10-K filed on
                               May 9, 2003)

           10.1                Employment Agreement, made and entered into as of
                               the 11th day of November, 2002, by and between
                               our Company and Eric Claus, and Offer Letter
                               dated the 22nd day of October, 2002 (incorporated
                               herein by reference to Exhibit 10.1 to Form 10-Q
                               filed on January 10, 2003)

           10.2                Employment Agreement, made and entered into as of
                               the 1st day of November, 2000, by and between the
                               Company and William P. Costantini (incorporated
                               herein by reference to Exhibit 10 to Form 10-Q
                               filed on January 16, 2001)
                               ("Costantini Agreement")

           10.3                Amendment to Costantini Agreement dated April
                               30, 2002 (incorporated herein by reference to
                               Exhibit 10.7 to Form 10-K filed on July 5, 2002)

           10.4*               Confidential Separation and Release Agreement by
                               and between William P. Costantini and The Great
                               Atlantic & Pacific Tea Company, Inc. dated
                               November 4, 2004, as filed herein

           10.5                Employment Agreement, made and entered into as
                               of the 16th day of June, 2003, by and between our
                               Company and Brenda Galgano (incorporated herein
                               by reference to Exhibit 10.9 to Form 10-Q filed
                               on October 17, 2003)

           10.6                Employment Agreement, made and entered into as
                               of the 24th day of February, 2002, by and
                               between our Company and Mitchell P. Goldstein
                               (incorporated herein by reference to Exhibit
                               10.8 to Form 10-K filed on July 5, 2002)

           10.7                Employment Agreement, made and entered into as
                               of the 2nd day of October, 2002, by and between
                               our Company and Peter Jueptner (incorporated
                               herein by reference to Exhibit 10.26 to Form
                               10-Q filed on October 22, 2002)

           10.8                Offer Letter dated the 18th day of September
                               2002, by and between our Company and Peter
                               Jueptner (incorporated herein by reference to
                               Exhibit 10.10 to Form 10-Q filed on January 10,
                               2003)

           10.9                Employment Agreement, made and entered into as
                               of the 14th day of May, 2001, by and between our
                               Company and John E. Metzger, as amended February
                               14, 2002 (incorporated herein by reference to
                               Exhibit 10.13 to Form 10-K filed on July 5, 2002)

           10.10               Employment Agreement, made and entered into as of
                               the 28th day of October, 2002, by and between our
                               Company and Brian Piwek, and Offer Letter dated
                               the 23rd day of October, 2002 (incorporated
                               herein by reference to Exhibit 10.14 to Form 10-Q
                               filed on January 10, 2003)

           10.11               Supplemental Executive Retirement Plan effective
                               as of September 30, 1991 (incorporated herein by
                               reference to Exhibit 10.B to Form 10-K filed on
                               May 28, 1993)

           10.12               Supplemental Executive Retirement Plan effective
                               as of September 1, 1997 (incorporated herein by
                               reference to Exhibit 10.B to Form 10-K filed on
                               May 27, 1998)

           10.13               Supplemental Retirement and Benefit Restoration
                               Plan effective as of January 1, 2001
                               (incorporated herein by reference to
                               Exhibit 10(j) to Form 10-K filed on May 23, 2001)

           10.14               1994 Stock Option Plan (incorporated herein by
                               reference to Exhibit 10(e) to Form 10-K filed on
                               May 24, 1995)

           10.15               1998 Long Term Incentive and Share Award Plan
                               (incorporated herein by reference to Exhibit
                               10(k) to Form 10-K filed on May 19, 1999)

           10.16               2004 Non-Employee Director Compensation effective
                               as of July 14, 2004 (incorporated herein by
                               reference to Exhibit 10.15 to Form 10-Q filed on
                               July 29, 2004)

           10.17               Credit Agreement dated as of February 23, 2001,
                               among our Company, The Great Atlantic & Pacific
                               Company of Canada, Limited and the other
                               Borrowers party hereto and the Lenders party
                               hereto, The Chase Manhattan Bank, as U.S.
                               Administrative Agent, and The Chase Manhattan
                               Bank of Canada, as Canadian Administrative Agent
                               ("Credit Agreement") (incorporated herein by
                               reference to Exhibit 10 to Form 10-K filed on
                               May 23, 2001)

           10.18               Amendment No. 1 and Waiver, dated as of November
                               16, 2001 to Credit Agreement (incorporated
                               herein by reference to Exhibit 10.23 to Form
                               10-K filed on July 5, 2002)

           10.19               Amendment No. 2 dated as of March 21, 2002 to
                               Credit Agreement (incorporated herein by
                               reference to Exhibit 10.24 to Form 10-K filed on
                               July 5, 2002)

           10.20               Amendment No. 3 dated as of April 23, 2002 to
                               Credit Agreement (incorporated herein by
                               reference to Exhibit 10.25 to Form 10-K filed on
                               July 5, 2002)

           10.21               Waiver dated as of June 14, 2002 to Credit
                               Agreement (incorporated herein by reference to
                               Exhibit 10.26 to Form 10-K filed on July 5, 2002)

           10.22               Amendment No. 4 dated as of October 10, 2002 to
                               Credit Agreement (incorporated herein by
                               reference to Exhibit 10.27 to Form 10-Q filed on
                               October 22, 2002)

           10.23               Amendment No. 5 dated as of February 21, 2003 to
                               Credit Agreement (incorporated herein by
                               reference to Exhibit 10.1 to Form 8-K filed on
                               March 7, 2003)

           10.24               Amendment No. 6 dated as of March 25, 2003 to
                               Credit Agreement (incorporated herein by
                               reference to Exhibit 10.28 to Form 10-K filed on
                               May 9, 2003)

           18                  Preferability Letter Issued by
                               PricewaterhouseCoopers LLP (incorporated herein
                               by reference to Exhibit 18 to Form 10-Q filed on
                               July 29, 2004)

           23                  Consent of Independent Accountants from
                               PricewaterhouseCoopers LLP (incorporated herein
                               by reference to Exhibit 23.1 to Form 10-K filed
                               on May 21, 2004)

           31.1*               Certification of the Chief Executive Officer
                               Pursuant to Section 302 of the Sarbanes-Oxley
                               Act of 2002

           31.2*               Certification of the Chief Financial Officer
                               Pursuant to Section 302 of the Sarbanes-Oxley
                               Act of 2002

           32*                 Certification Pursuant to 18 U.S.C. Section
                               1350, as Adopted Pursuant to Section 906 of the
                               Sarbanes-Oxley Act of 2002

           * Filed with this 10-Q


(b) Reports on Form 8-K

On December 9, 2004, our Company filed a Form 8-K pursuant to which (i) it
furnished the SEC with a copy of the December 9, 2004 press release, which
announced that in conjunction with the Company's next step of its
reorganization, the Company will reduce overhead costs in its U.S. business by
an estimated $50 million during fiscal 2005 and an additional $25 million in
fiscal 2006 and incur charges of up to $10 million over the next year, and (ii)
it announced that its Board of Directors had adopted certain amendments to the
Company's By-Laws in order to replace the position of General Counsel with the
position of Chief Legal Officer and to explicitly provide for the
indemnification of directors, officers and employees of the Company in certain
instances.

On November 12, 2004, our Company filed a Form 8-K pursuant to which it
announced its entry into a Confidential Separation and Release Agreement with
William P. Costantini, the Company's Senior Vice President, General Counsel and
Secretary, who will resign, effective December 31, 2004, from his positions with
the Company.

On November 4, 2004, our Company filed a Form 8-K pursuant to which it furnished
the SEC with a copy of the November 4, 2004 press release, which announced the
promotion of Brian C. Piwek to President and Chief Operating Officer of the
Company and the resignation, in conjunction therewith, of Christian W. E. Haub
from the position of President. The Company also announced that Mr. Haub will
continue to serve as Chairman of the Board and Chief Executive Officer of the
Company.

On October 19, 2004, our Company filed a Form 8-K pursuant to which it furnished
the SEC with a copy of the October 19, 2004 press release, which announced the
Company's financial results for the quarter ended September 11, 2004.

On October 14, 2004, our Company filed a Form 8-K pursuant to which it furnished
the SEC with a copy of the October 1, 2004 press release, which announced the
settlement of a class action by 29 operating and former franchisees of the
Company's Food Basics discount grocery operations in Ontario, Canada.





<PAGE>




                 The Great Atlantic & Pacific Tea Company, Inc.



SIGNATURES
----------

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.



Dated:  January 7, 2005        By:         /s/ Brenda M. Galgano
                                  -------------------------------------------
                               Brenda M. Galgano, Senior Vice President,
                               Corporate Controller (Chief Accounting Officer)


<PAGE>


                  CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
                            Section 302 Certification

I, Christian W.E. Haub, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of The Great Atlantic &
    Pacific Tea Company, Inc.;

2.  Based on my knowledge, this quarterly report does not contain any untrue
    statement of a material fact or omit to state a material fact necessary to
    make the statements made, in light of the circumstances under which such
    statements were made, not misleading with respect to the period covered by
    this quarterly report;

3.  Based on my knowledge, the financial statements, and other financial
    information included in this quarterly report, fairly present in all
    material respects the financial condition, results of operations and cash
    flows of the registrant as of, and for, the periods presented in this
    quarterly report;

4.  The registrant's other certifying officer and I are responsible for
    establishing and maintaining disclosure controls and procedures (as defined
    in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

    a) designed such disclosure controls and procedures, or caused such
       disclosure controls and procedures to be designed under our supervision,
       to ensure that material information relating to the registrant, including
       its consolidated subsidiaries, is made known to us by others within those
       entities, particularly during the period in which this quarterly report
       is being prepared;

    b) evaluated the effectiveness of the registrant's disclosure controls and
       procedures and presented in this quarterly report our conclusion about
       the effectiveness of the disclosure controls and procedures, as of the
       end of the period covered by this quarterly report based on such
       evaluation; and

    c) disclosed in this quarterly report any change in the registrant's
       internal control over financial reporting that occurred during the
       registrant's most recent fiscal quarter (the registrant's fourth fiscal
       quarter in the case of an annual report) that has materially affected, or
       is likely to materially affect, the registrant's internal control over
       financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent functions):

    a) all significant deficiencies and material weaknesses in the design or
       operation of internal control over financial reporting which are
       reasonably likely to adversely affect the registrant's ability to record,
       process, summarize and report financial information; and

    b) any fraud, whether or not material, that involves management or other
       employees who have a significant role in the registrant's internal
       control over financial reporting.


/s/ Christian W. E. Haub                             Date:  January 7, 2005
------------------------
Christian W. E. Haub
Chairman of the Board
and
Chief Executive Officer


<PAGE>


                  CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
                            Section 302 Certification

I, Mitchell P. Goldstein, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of The Great Atlantic &
    Pacific Tea Company, Inc.;

2.  Based on my knowledge, this quarterly report does not contain any untrue
    statement of a material fact or omit to state a material fact necessary to
    make the statements made, in light of the circumstances under which such
    statements were made, not misleading with respect to the period covered by
    this quarterly report;

3.  Based on my knowledge, the financial statements, and other financial
    information included in this quarterly report, fairly present in all
    material respects the financial condition, results of operations and cash
    flows of the registrant as of, and for, the periods presented in this
    quarterly report;

4.  The registrant's other certifying officer and I are responsible for
    establishing and maintaining disclosure controls and procedures (as defined
    in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we
    have:

    a) designed such disclosure controls and procedures, or caused such
       disclosure controls and procedures to be designed under our supervision,
       to ensure that material information relating to the registrant, including
       its consolidated subsidiaries, is made known to us by others within those
       entities, particularly during the period in which this quarterly report
       is being prepared;

    b) evaluated the effectiveness of the registrant's disclosure controls and
       procedures and presented in this quarterly report our conclusion about
       the effectiveness of the disclosure controls and procedures, as of the
       end of the period covered by this quarterly report based on such
       evaluation; and

    c) disclosed in this quarterly report any change in the registrant's
       internal control over financial reporting that occurred during the
       registrant's most recent fiscal quarter (the registrant's fourth fiscal
       quarter in the case of an annual report) that has materially affected, or
       is likely to materially affect, the registrant's internal control over
       financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent functions):

    a) all significant deficiencies and material weaknesses in the design or
       operation of internal control over financial reporting which are
       reasonably likely to adversely affect the registrant's ability to record,
       process, summarize and report financial information; and

    b) any fraud, whether or not material, that involves management or other
       employees who have a significant role in the registrant's internal
       control over financial reporting.


/s/ Mitchell P. Goldstein                            Date:  January 7, 2005
-------------------------
Mitchell P. Goldstein
Executive Vice President,
Chief Financial Officer


<PAGE>



                   Certification Accompanying Periodic Report
            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
                              (18 U.S.C. ss. 1350)

The undersigned, Christian W. E. Haub, Chairman of the Board and Chief Executive
Officer of The Great Atlantic & Pacific Tea Company, Inc. ("Company"), and
Mitchell P. Goldstein, Executive Vice President and Chief Financial Officer of
the Company, each hereby certifies that (1) the Quarterly Report of the Company
on Form 10-Q for the period ended December 4, 2004 fully complies with the
requirements of Section 13(a) of the Securities Exchange Act of 1934 and (2) the
information contained in the Report fairly presents, in all material respects,
the financial condition and the results of operations of the Company.




Dated:  January 7, 2005                            /s/ Christian W. E. Haub
                                                   ------------------------
                                                   Christian W. E. Haub
                                                   Chairman of the Board
                                                   and
                                                   Chief Executive Officer




Dated:  January 7, 2005                            /s/ Mitchell P. Goldstein
                                                   -------------------------
                                                   Mitchell P. Goldstein
                                                   Executive Vice President,
                                                   Chief Financial Officer