(FORTUNE Magazine) – ASK SUPERMARKET executives who regularly clang shopping carts with the Great Atlantic & Pacific Tea Co. how much of a competitor it is and the answer is mostly, ''Not much.'' Maybe they haven't noticed the chronic money loser rack up profits in each of the last four years. Maybe they haven't watched A&P make impressive acquisitions. Maybe they haven't seen the glitzy new store concepts the company has developed. Maybe they have. Either these executives know their onions or they are grossly shortweighting A&P's capability. Not surprisingly, A&P chief executive James Wood, 56, likes the latter interpretation. ''They're about five years out of date,'' he says testily. It's been almost seven years since A&P's majority owner, Tenglemann Warenhandelsgesellschaft, a privately held German grocery store company, brought Wood in to run the troubled supermarket. The easygoing Englishman put the Tea Co. in the black by dumping hundreds of derelict stores -- a tactic used unsuccessfully by three C.E.O.s before him -- renovating 75% of the survivors, building over 100 new ones, and buying about 400 more. He is organizing the stores around three main formats -- roughly good, better, and best. So what has all the effort produced? By nearly every measure A&P is still a laggard. Wood has jacked up sales per square foot a healthy 17% to $239 since 1982, but the company still trails the industry average by $199. Sales per store per week are $130,000, vs. the $206,500 national average. A&P also trails the industry in store size, inventory turnover, and pretax profit margins. BUT ONE THING at A&P is well above average: Wood's compensation. To lure him away from competitor Grand Union Co., where he was chief executive, Tenglemann Chairman Erivan Haub offered Wood about 1.8 million ''phantom'' shares in A&P, promising to pay the stock price less $4 per share at the time the contract expires in 1990. Under an amendment to the contract, Haub has begun giving Wood a down payment of $25 million in $5-million annual installments. In addition, A&P pays Wood a $660,000 salary and 1% of pretax profits. The total came to $1.9 million last year. The supermarket industry is in the throes of consolidation, and A&P has used tax credits and an overfunded pension pool to go shopping. Wood spent over $500 million to acquire companies and stores that brought in more than $3 billion of A&P's $7.4 billion in estimated revenues for the fiscal year ended in February. He purchased 63 Kohl's supermarkets in Wisconsin and 92 Dominion stores in Ontario. (A&P's highly profitable Canadian operation produces 22% of sales and 39% of earnings.) Since last summer Wood has bought Shopwell/Food Emporium and Waldbaum's, two prominent New York City-area chains. Though A&P has been unsuccessful in its quest of other chains, including Von's Grocery Co. in California and Star Market Co. in Massachusetts, the company is still on the prowl. Acquisitions have made A&P a heavyweight in New York, at $18 billion the largest U.S. grocery market. In Waldbaum's the company has acquired a store with sickly earnings but a healthy reputation among consumers -- Wood says he may turn some larger A&Ps into Waldbaum's. Shopwell, which lost money last year, is most notable for its Food Emporium stores, a chain that caters to the food fancies of the trendy. In other areas, such as Michigan, Georgia, and Virginia, A&P is a distant second at best. A&P had been in the forefront in Atlanta, but Kroger has leapfrogged everyone to claim 30% of the market; A&P has about 10%. Kroger chairman Lyle Everingham echoes the popular industry sentiment: ''A&P is running better stores in Atlanta, but it is not much of a factor.'' A&P's merchandising strategy attempts to provide a supermarket for every kind of shopper: stark black-and-white Future-stores, with the latest in gourmet departments and electronic services, for exclusive neighborhoods; conventional A&Ps (called Superfresh stores in Philadelphia and Washington) for middle-class markets; and full-service, warehouse-style Sav-A-Centers, where shoppers have come to expect them. The Futurestores and the Sav-A-Centers embrace the two hottest formats in the industry: gourmet food stores and high-volume warehouse outlets, sometimes called megastores, often as large as 100,000 square feet. But A&P's Futurestore does not have the panache of such retailers as Boston's J. Bildner & Sons, which not only offers more gourmet merchandise but will cook and deliver it. And the Sav-A-Center warehouse store is a mini-megastore at 40,000 square feet. Analysts say this kind of middling approach cheers A&P's rivals. Steve Nicolet, president of Supermarket Insights, a monthly video magazine, . says: ''A&P thinks the broad appeal of the stores makes them attractive -- and less vulnerable -- everywhere. Competitors see the new formats as neither fish nor fowl.'' William I. Walsh, author of The Rise & Decline of the Great Atlantic & Pacific Tea Company, and a former A&P executive, says: ''The company is still drifting as a merchandiser.'' A&P, however, is firm that it does not want to offer the lowest prices around. To Wood, the industry's favorite maxim -- that high sales volume driven by low prices will solve all problems -- is overstated. At Grand Union, he started Basics Food Warehouse, a chain of bare-bones stores that got plenty of volume but hardly any profit. Most are gone. At A&P he inherited and subsequently interred SuperPlus, another no-frills format, and a low-price policy for conventional stores that almost buried the company. ''In no way will we make ourselves as vulnerable as we were in those days,'' says Wood. Currently A&P has a ''no complaint'' policy -- prices just low enough so that shoppers do not feel gouged. Wood maintains that the industry has changed over the past seven years. He says: ''It's ceased to be a price business. Everybody in the New York market trades at the same price, within 1%. But the guy who's got the best lever on his economics, on his costs, is the one who wins at the end of the game.'' Wood's pricing philosophy may puzzle shoppers who expect the Futurestore to offer better-quality, higher-priced groceries than either the standard A&P or the Sav-A-Centers. The products and the prices at all three stores are basically the same -- even when the stores are near one another. WOOD BELIEVES this strategy will bring better economies of scale. He has revived A&P's once legendary ability to take advantage of deals and to buy merchandise efficiently, and is managing costs directly, not counting on volume to carry the day. The company is centralizing information systems and cash control among its assorted divisions. A&P does not always pass along its savings to consumers, a practice that has helped lift gross profit margins nearly two points to 24% this year, the industry average. Wood's bottom-line approach is more common in Europe, where the competition is less fierce than in the U.S. and managers spend more time looking at the numbers than the knockwurst. The Great Atlantic & Pacific Tea Co. has not been great since the 1950s, a status Wood wants to correct. He says: ''We really haven't got a blue-chip company, and that's my target.'' The stock is selling for 10 times earnings, far less than the multiple of 17 or 18 that Wall Street favorites command. A&P does have its rooters. Says Edward F. Carroll, vice president of Gintel Equity Management, a mutual fund company: ''We think they've done extremely well in the environment they have been under.'' To get where Wood wants to go, A&P has to do much better.

CHART: INVESTOR'S SNAPSHOT GREAT A&P TEA CO.

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