MINNEAPOLIS -- Despite "disappointing and unacceptable" earnings over the past 18 months, Supervalu here expects its Advantage Project to have a positive effect on business by fiscal 1997, company executives told shareholders at the annual meeting here last week.
Benefits from the previously disclosed Advantage re-engineering program will come through such current initiatives as the regionalization of Supervalu's marketing and distribution organizations and a full rollout of new pricing and category management systems, said Michael W. Wright, chairman, president and chief executive officer.
"We've spent the last two years developing a comprehensive plan of change that's been very expensive, but we believe we have the strategies and capabilities in place to turn industry trends to our competitive advantage," he said.
"Last year was a year of investment and intensive planning, and fiscal 1996 will see the implementation of those strategies and the beginning of our ability to reap the benefits of the plan."
According to Jeffrey C. Girard, executive vice president and chief financial officer, the positive changes should begin to show up in earnings by fiscal 1997.
The company said net earnings for the quarter fell 9.2% to $46 million, including after-tax expenses from Advantage of $3.3 million (compared with expenses of $2.3 million a year ago).
Sales for the quarter fell 0.4%
to $4.97 billion, with food distribution sales down 1.9% to $4.4 billion and retail food sales up 11.5% to $1.3 billion. To avoid double-counting sales from its wholesale division to its corporate retail division, Supervalu said it eliminated $734 million in sales for the quarter.
The company also reported that same-store sales dropped 1.1%.
During the meeting, Jeffrey Noddle, executive vice president and president and chief operating officer of wholesale food companies, disclosed several new developments under Advantage:
Construction of the company's first regional distribution center in Anniston, Ala., is under way. A second regional center will be located in Perryman, Md., to service the Northeast, and Supervalu is deciding where to locate a third regional facility in the Midwest.
Supervalu has decided to add a seventh marketing region to the six it previously disclosed. That region will be in New England. Specific sites for the regions -- which, in addition to New England, include the Southeast, North, Northeast, Midwest, Central and Northwest -- have not yet been determined.
The Southeast, the Midwest and the New England regional offices will open this year with three others due to follow in fiscal 1997 and a seventh in 18 to 24 months.
Supervalu began testing its new pricing and information technology systems last month in Denver, "and the early results look good," Noddle said.
Discussing Supervalu's new market-driving capabilities under Advantage, Phillip A. Dabill, executive vice president and president of the retail services and corporate strategies group, said the use of category management will allow the company to cluster retail operators into geographic marketing groups to improve its buying clout.
It will also improve distribution efficiencies and allow the company to employ more sophisticated marketing services, he said. Dabill added that category management should be in place at Supervalu by calendar 1997.
Larry Anderson, executive vice president and chief operating officer of retail food companies, said Supervalu will focus on building sales in four retail formats -- price superstores, supercenters, limited assortment stores and combination stores -- "because no one format can appeal broadly enough to all consumer preferences."
Anderson disclosed Supervalu's expansion plans for three of the formats through the remainder of the year:
Among price superstores, the company plans to build four new corporate Cub stores and two franchised Cubs. It also intends to build one new Shop 'n Save and remodel four others.
Among supercenters, Supervalu plans to build one new bigg's store and remodel four existing units.
As for limited assortment stores, the company plans to add 20 corporate Save-A-Lot stores and 80 licensed units.
Supervalu did not disclose plans for new or remodeled combination stores.
Anderson also said Supervalu plans to make "acquisitions that fit the characteristics of our growth formats."