Changes Take Time: Supervalu VP

Supervalu, Minneapolis, is trying to boost declining identical-store sales by recalibrating its ads with pricing that is more appropriate and acceptable to consumers, but that takes time, David Oliver, vice president, investor relations, said here last week. Speaking at an investment conference sponsored by Canaccord Adams, Vancouver, British Columbia, Oliver said ID sales, which were down

NEW YORK — Supervalu, Minneapolis, is trying to boost declining identical-store sales by recalibrating its ads “with pricing that is more appropriate and acceptable to consumers,” but that takes time, David Oliver, vice president, investor relations, said here last week.

Speaking at an investment conference sponsored by Canaccord Adams, Vancouver, British Columbia, Oliver said ID sales, which were down 3.2% in the first quarter, “experienced a dramatic drop-off in the back half of the first quarter, in the May-June timeframe, and that has continued into the second quarter, with a run rate of negative 4.2%.

“We are just simply too dependent on the high-low marketing approach, and we are paying the price for being too promotional,” Oliver explained.

“But when you look at trying to recalibrate your ad plans, you have a lead time of eight to 10 weeks to make adjustments, so if we can work our way through this, some of the drop-off, or disinflation, that we had in the first quarter — much of which was directly attributable to produce and dairy alone — should [dissipate].”

In other remarks:

  • Oliver said private-label penetration at Supervalu is running at 17% to 17.5% — up from 15% in 1999 — with a target of 19% penetration by the end of the current fiscal year.

  • The decision to sell 36 Albertsons stores in Salt Lake City to Associated Food Stores was made “[because] those locations were deemed non-strategic to our ongoing operations and are now being monetized,” Oliver said.

    “Supervalu will regularly review its asset base and take action, including both acquisitions and divestitures when deemed appropriate.”

  • The decision to reduce capital spending for fiscal 2010 by $50 million, to $700 million — compared with $1.3 billion in fiscal 2008 and $1.2 billion in 2009 — “was driven by inadequate returns on many of our existing capital projects and the need to address other issues in our stores that will also improve the stores,” Oliver explained.

“We believe we have significant sales-building opportunities today by focusing on programs that resonate with consumers. Our issue is execution, not the physical condition of our stores.”