INTRODUCTION

The following Management's Discussion and Analysis is intended to help the reader understand the financial position, operating results, and cash flows of The Great Atlantic and Pacific Tea Company, Inc. It should be read in conjunction with our consolidated financial statements and the accompanying notes ("Notes"). It discusses matters that Management considers relevant to understanding the business environment, financial position, results of operations and our Company's 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 November 29, 2008 and December 1, 2007.
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 2008 to assist in understanding our business.
o Review of Continuing Operations and Liquidity and Capital Resources -- a discussion of results for the 12 weeks ended November 29, 2008 compared to the 12 weeks ended December 1, 2007; results for the 40 weeks ended November 29, 2008 compared to the 40 weeks ended December 1, 2007; current and expected future liquidity; and the impact of various market risks on our Company.
o Critical Accounting Estimates -- a discussion of significant estimates made by Management.
o Market Risk -- a discussion of the impact of market changes on our consolidated financial statements.

BASIS OF PRESENTATION

The accompanying consolidated financial statements of The Great Atlantic & Pacific Tea Company, Inc. for the 12 and 40 weeks ended November 29, 2008 and December 1, 2007 are unaudited and, in the opinion of management, contain all adjustments that are of a normal and recurring nature necessary for a fair statement of financial position and results of operations for such periods. The consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in our Fiscal 2007 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 and all of our subsidiaries.

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 eight U.S. states and the District of Columbia. Our business consists strictly of our retail operations, which totaled 444 stores as of November 29, 2008.

During the second quarter ended September 6, 2008, our chief operating decision maker changed the manner by which our results are evaluated, therefore, our reportable segments have been revised to be consistent with the way we currently manage our business. Accordingly, we have revised our segment reporting to report in

five operating segments: Fresh, Price Impact, Gourmet, Other and our investment in Metro, Inc. The Other segment includes our Food Basics and Liquor businesses. Our investment in Metro, Inc. represents our former economic interest in Metro, Inc. The criteria necessary to classify the Midwest and Greater New Orleans area as discontinued were satisfied in fiscal 2007 and these operations have been reclassified as such in our Consolidated Statements of Operations for the 12 and 40 weeks ended November 29, 2008 and December 1, 2007.

RECENT ANNOUNCEMENTS

On March 7, 2008, our Company entered into a definitive agreement with C&S Wholesale Grocers, Inc. ("C&S") whereby C&S will provide warehousing, logistics, procurement and purchasing services (the "Services") in support of the Company's entire supply chain. This agreement replaces and supersedes three (3) separate wholesale supply agreements under which the parties have been operating. The term of the agreement is ten and one-half (10-1/2) years, which includes a six-month "ramp-up" period during which the parties will transition to the new contractual terms and conditions. The agreement provides that the actual costs of performing the services shall be reimbursed to C&S on an "open-book" or "cost-plus" basis, whereby the parties will negotiate annual budgets that will be reconciled against actual costs on a periodic basis. The parties will also annually negotiate services specifications and performance standards that will govern warehouse operations. The agreement defines the parties' respective responsibilities for the procurement and purchase of merchandise intended for use or resale at the Company's stores, as well as the parties' respective remuneration for warehousing and procurement/purchasing activities. In consideration for the services it provides under the agreement, C&S will be paid an annual fee and will have incentive income opportunities based upon A&P's cost savings and increases in retail sales volume.

On May 7, 2008, the 4,657,378 Series A warrants, scheduled to expire on June 9, 2008, were exercised by Yucaipa Corporate Initiatives Fund I, L.P., Yucaipa American Alliance Fund I, L.P. and Yucaipa American Alliance (Parallel) Fund I, L.P. Our Company opted to settle the Series A warrants in cash totaling $45.7 million rather than issuing additional common shares.

On September 27, 2008, our Company agreed to sell C&S all general merchandise, heath beauty and cosmetics, seasonal grocery and other such merchandise warehoused at our distribution center located in Edison, New Jersey. The cost of this inventory was approximately $29.9 million and we have repurchased all of the inventory at the end of our third quarter of fiscal 2008. No gain, loss or revenue was recorded on the sale.

OPERATING RESULTS

Despite the challenging economic environment, our Company has delivered another quarter of improved operating performance. Our format strategy continues to be successful as it allows us to be relevant in every market we serve. The Pathmark integration has been completed and while there have been some challenges, we are already realizing many of the synergies from this strategic acquisition.

At the end of the third quarter, our Company's run rate of synergies was approximately $140 million since our acquisition of Pathmark, solidifying that the original target of $150 million will be achieved as anticipated. We realized approximately $30 million during the third quarter of fiscal 2008, comprised of reduced administrative costs ($18 million), reduced merchandise costs ($7 million) as well as reductions in store operating and marketing and advertising costs ($5 million).

We maintained all necessary liquidity during the third quarter of fiscal 2008 with availability of $77.6 million under our Credit Agreement and invested cash available to reduce borrowings and/or for future operations of $46 million as of November 29, 2008.

Fresh Format
(A&P, Waldbaum's and SuperFresh)
Our Fresh Format continues to deliver strong sales and strong earnings growth that more than triple the prior year. Our Fresh Team has been working hard to deliver a superior store experience and our stores and performance illustrates their effectiveness.

Price Impact
(Pathmark and Pathmark Sav-A-Center)
Our Price Impact format's top line was softer than expected due to promotional activity during the November holiday. Having acquired Pathmark almost a year ago, we have experienced some challenges with the integration and operations of the business. Since the second quarter, we have experienced significant improvements in our gross margin rate, with the exception of stock losses in our center store, which have increased with the declining economy. In addition, we have incurred higher labor costs, both in productive and fringe costs. We have improved gross margin rates by increasing merchandising income as a result of the proper people and strategies being in place and improvements to system and process issues. In-stock positions have also improved dramatically in the third quarter. We are currently working to reduce stock losses and increase labor efficiencies by executing strategies that improved results in our other formats and we are confident that this format is on track to deliver promising results although there can be no assurance that this will happen.

Gourmet
(The Food Emporium)
Our Gourmet stores located in Manhattan continue to produce significant growth in sales and segment income despite the crisis driven through Wall Street. This banner is delivering top line sales growth that exceeds the industry average and a bottom line that is 24% better than the prior year. We believe the Gourmet Team's commitment to new product innovation and better store standards is delivering on customer and financial expectations.

Other
(Food Basics, Best Cellars and A&P Liquors)
Our Discount business operating under the Food Basics banner is realizing growth in both sales and segment income. This business is doing extremely well as it is a particularly relevant format during this challenging economic environment. The Food Basics banner is realizing tremendous growth, with double digit comparable sales and a bottom line that outpaces the prior year as well as our internal expectations. We believe this format has much future growth potential.

Additionally we have opened two new A&P Best Cellars stand alone liquor stores in West Orange, NJ and Riverside, CT and expect to commence more in-store renovations to come.

OUTLOOK

This has been a very turbulent year with an unprecedented challenging economic environment. Despite this challenge, we continued to deliver solid overall results in our third quarter of fiscal 2008 with solid sales and improved earnings year-over-year while at the same time completing the integration of the Pathmark acquisition. We believe combining with Pathmark has strengthened our Company and positioned us well to withstand economic challenges. Additionally, we realized significant synergies from the acquisition which we believe will continue into 2009 and provide the necessary resources to effectively compete in this difficult environment.

We expect that in 2009 the US retail market will face one of the most difficult and challenging years as our customers will have lower disposable income. However, we believe our Company is preparing for the challenges ahead shifting our strategy to meet the demands of our customers who have lowered their weekly shopping budget while, still providing high quality, nutritious foods. Our comprehensive new private label program is a critical component of our strategy as well as strategic store conversions.

In 2009, we will celebrate our historic 150th anniversary. We believe that our strong strategic position in the Northeast, our successful format strategy and our resolve to implement strategic changes, positions us to effectively manage the challenging economic environment and remain cautiously optimistic in our long-term prospects. We recognize that this recession has been projected to worsen and have consequently been tailoring new merchandising strategies that we will employ to be more effective offering cost-effective alternatives for our customers.

We believe that our present cash resources, including invested cash on hand, available borrowings from our $675 million Credit Agreement and other sources, are sufficient to meet our needs. Based on information available to us, as of our filing date, we have no indication that the financial institutions acting as lenders under our $675 million Credit Agreement would be unable to fulfill their commitments. However, given the current economic environment and credit risk market crisis, there is no assurance that this may not change in the foreseeable future.

Various factors could have a negative effect on our Company's financial position and results of operations. These include, among others, the following:

o Our retail food business and the grocery retailing industry continues to experience aggressive competition from mass merchandisers, warehouse clubs, drug stores, convenience stores, discount merchandisers, dollar stores, restaurants, other retail chains, nontraditional competitors and emerging alternative formats in the markets where we have retail operations. Competition with these outlets is based on price, store location, advertising and promotion, product mix, quality and service. Some of these competitors may have greater financial resources, lower merchandise acquisition costs and lower operating expenses than we do, and we may be unable to compete successfully in the future. Price-based competition has also, from time to time, adversely affected our operating margins. Competitors' greater financial strengths enable them to participate in aggressive pricing strategies selling inventory below costs to drive overall increased sales. Our continued success is dependent upon our ability to effectively 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 our market share of sales, thus reducing margins.

o Our in-store pharmacy business is also subject to intense competition. In particular, an adverse trend for drug retailing has been significant growth in mail-order and internet-based prescription processors. Pharmacies are exposed to risks inherent in the packaging and distribution of pharmaceuticals and other healthcare products. In addition, the conversion of various prescription drugs to over-the-counter medications, the withdrawal of certain drugs from the market and changes in third party reimbursement levels for prescription drugs, including changes in Medicare Part D or state Medicaid programs, may have a material adverse effect on our business. Failure to properly adhere to Federal, State and local government rules and regulations, applicable Medicare and Medicaid regulations could result in the imposition of civil as well as criminal penalties.

o The retail food and food distribution industries, and the operation of our businesses, specifically in the New York -- New Jersey and Philadelphia regions, are sensitive to a number of economic conditions and other factors such as (i.) food price deflation or inflation, (ii.) softness in local and national economies, (iii.) increases in commodity prices, (iv.) the availability of favorable credit and trade terms, (v.) changes in business plans, operations, results and prospects, (vi.) potential delays in the development, construction or start-up of planned projects, and (vii.) other economic conditions that may affect consumer buying habits. Any one or more of these economic conditions can affect our retail sales, the demand for products we distribute to our retail customers, our operating costs and other aspects of our business.

o Acts of war, threats of terror, acts of terror or other criminal activity directed at the grocery or drug store industry, the transportation industry, or computer or communications systems, could increase security costs, adversely affect our operations, or impact consumer behavior and spending as well as customer orders. Other events that give rise to actual or potential food contamination, drug contamination, or food-borne illness could have an adverse effect on our operating results.

o We could be adversely affected if consumers lose confidence in the safety and quality of the food supply chain. Adverse publicity about these types of concerns, whether or not valid, could discourage consumers from buying products in our stores. The real or perceived sale of contaminated food products by us could result in a loss of consumer confidence and product liability claims, which could have a material adverse effect on our sales and operations.

o Our operations subject us to various laws and regulations relating to the protection of the environment, including those governing the management and disposal of hazardous materials and the cleanup of contaminated sites. Under some environmental laws, such as the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, also known as CERCLA or the Superfund law, and similar state statues, responsibility for the entire cost of cleanup of a contaminated site can be imposed upon any current or former site owners or operators, or upon any party who sent waste to the site, regardless of the lawfulness of the original activities that led to the contamination. From time to time we have been named as one of many potentially responsible parties at Superfund sites, although our share of liability has typically been de minimis. Although we believe that we are currently in substantial compliance with applicable environmental requirements, future developments such as more aggressive enforcement policies, new laws or discoveries of unknown conditions may require expenditures that may have a material adverse effect on our business and financial condition.

o Our capital expenditures could differ from our estimate if development and remodel costs vary from those budgeted, or if performance varies significantly from expectations or if we are unsuccessful in acquiring suitable sites for new stores.

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 reduce shrink in our stores, (iii.) our success in generating efficiencies in our supporting activities, and (iv.) our ability to eliminate or maintain a minimum level of supply and/or quality control problems with our vendors.

o The 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 some 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 and the extent to which trustees of the plans reduce the costs of future service benefits.

o We are currently required to acquire a majority of our saleable inventory from one supplier, C&S Wholesale Grocers, Inc. Although there are a limited number of distributors that can supply our stores, we believe that other suppliers could provide similar product on reasonable terms. However, a change in suppliers could cause a delay in distribution and a possible loss of sales, which would affect operating results adversely.

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.

o Following the closing of the acquisition of Pathmark, Tengelmann, A&P's former majority stockholder, owned beneficially and of record a substantial percentage of our common stock on a fully diluted basis. As a result of this equity ownership and our stockholder agreement with Tengelmann, Tengelmann has the power to significantly influence the results of stockholder votes and the election of our board of directors, as well as transactions involving a potential change of control of our Company. Tengelmann may support strategies and directions for our Company which are in its best interests but which are opposed to other stockholder interests.

o Our substantial indebtedness could impair our financial condition. Our indebtedness could make it more difficult for us to satisfy our obligations, which could in turn result in an event of default on our obligations, require us to dedicate a substantial portion of our cash flow from operations to debt service payments, thereby reducing the availability of cash for working capital, capital expenditures,

acquisitions, or other general corporate purposes, impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, or other general corporate purposes, diminish our ability to withstand a downturn in our business, the industry in which we operate or the economy generally, limit our flexibility in planning for, or reacting to, changes in the economy, our business and the industry in which we operate, and place us at a competitive disadvantage compared to competitors that have proportionately less debt. Our $675 million Credit Agreement contains restrictive covenants customary for facilities of that type which limit our ability to incur additional debt, pay dividends, grant additional liens, make investments and take other actions. These restrictions may limit our flexibility to undertake future financings and take other actions. If we are unable to meet our debt service obligations, we could be forced to repay our indebtedness prior to its scheduled maturity, restructure or refinance our indebtedness, seek additional equity capital or sell assets and may force liquidity issues. We may be unable to obtain debt and/or equity financing or sell assets on satisfactory terms, or at all. In addition, our Credit Agreement bears interest at a variable rate. If market interest rates increase, such variable-rate debt will have higher debt service requirements, which could adversely affect our cash flow. While we may enter into agreements limiting our exposure to higher interest rates, any such agreements may not offer complete protection from this risk.

o We are the primary obligor for a significant number of closed stores and warehouses under long-term leases primarily located in the Midwest. Our ability to sublet or assign these leases depends on the economic conditions of the real estate markets in which these leases are located. We have estimated our obligation under these leases, net of expected subleases and we have reserved for them, where appropriate. Unexpected changes in the marketplace or with individual sublessors could result in an adverse effect on our cash flow and earnings.

o Fluctuating fuel costs may adversely affect our operating costs since we incur the cost of fuel in connection with the transportation of goods from our warehouse and distribution facilities to our stores. In addition, operations at our stores are sensitive to rising utility fuel costs due to the amount of electricity and gas required to operate our stores. In the event of rising fuel costs, we may not be able to recover rising utility and fuel costs through increased prices charged to our customers. Our profitability is particularly sensitive to the cost of oil. Oil prices directly affect our product transportation costs and fuel costs due to the amount of electricity and gas required to operate our stores as well as our utility and petroleum-based supply costs; including plastic bags.

o We are subject to federal, state and local laws and regulations relating to zoning, land use, environmental protection, work place safety, public health, community right-to-know, beer and wine sales, pharmaceutical sales and gasoline station operations. A number of states and local jurisdictions regulate the licensing of supermarkets, including beer and wine license grants. In addition, under certain local regulations, we are prohibited from selling beer and wine in certain of our stores. Employers are also subject to laws governing their relationship with employees, including minimum wage requirements, overtime, working conditions, disabled access and work permit requirements. Compliance with these laws could reduce the revenue and profitability of our supermarkets and could otherwise adversely affect our business, financial condition or results of operations. In addition, any changes in these laws or regulations could significantly increase our compliance costs and adversely affect our results of operations, financial condition and liquidity.

o We have large, complex information technology systems that are important to our business operations. We could encounter difficulties developing new systems and encounter difficulties maintaining, upgrading

or securing our existing systems. Such difficulties could lead to significant expenses or losses due to disruption in our business operations.

o Our articles of incorporation permit our board of directors to issue preferred shares without first obtaining stockholder approval. If we issued preferred shares, these additional securities may have dividend or liquidation preferences senior to our common stock. If we issue convertible preferred shares, a subsequent conversion may dilute the current common stockholders' interest. Issuance of such preferred stock could adversely affect the price of our common stock.

o Current economic conditions have been, and continue to be volatile. As a result of concern about the stability of the markets and the strength of counterparties, many financial institutions have reduced and, in some cases, ceased to provide funding to borrowers. Based on information available to us, as of our filing date, we have no indication that the financial institutions acting as lenders under our Credit Agreement would be unable to fulfill their commitments. Continued turbulence in the global credit markets and U.S. economy may adversely affect our results of operations, financial condition and liquidity.

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.

RESULTS OF CONTINUING OPERATIONS AND LIQUIDITY AND CAPITAL RESOURCES

Our consolidated financial information presents the results related to our operations of discontinued businesses separate from the results of our continuing operations. The discussion and analysis that follows focus on continuing operations. All amounts are in millions, except share and per share amounts.

12 WEEKS ENDED NOVEMBER 29, 2008 COMPARED TO THE 12 WEEKS ENDED DECEMBER 1, 2007

OVERALL

Sales for the third quarter of fiscal 2008 were $2,120.9 million compared to $1,251.1 million for the third quarter of fiscal 2007 due primarily to the acquisition of Pathmark; comparable store sales, which include stores that have been in operation for two full fiscal years and replacement stores, increased 1.9%. Loss from continuing operations of $3.0 million for the third quarter of fiscal 2008 decreased from income from continuing operations of $73.1 million for the third quarter of fiscal 2007, due primarily to the gain on disposition of Metro, Inc. of $106.1 million. Loss from discontinued operations of $10.6 million for the third quarter of fiscal 2008 decreased from a loss from discontinued operations of $15.8 million for the third quarter of fiscal 2007. Net loss per share -- basic and diluted for the third quarter of fiscal 2008 was $0.26 and $1.61, respectively, compared to net income per share -- basic and diluted of $1.36 and $1.35, respectively, for the third quarter of fiscal 2007.

                                            12 Weeks                12 Weeks
. . .