Supervalu Cites Promo Prowess

MINNEAPOLIS — Tapping into what he called the game-ification of shopping, Supervalu's president and chief executive officer last week said that innovative promotions are prompting customer excitement at the company's beleaguered banners. New marketing tactics tested in the second quarter, like a Sizzlin' Summer Giveaway collect-and-win promotion, are helping drive customer engagement, said Craig Herkert

MINNEAPOLIS — Tapping into what he called the “game-ification of shopping,” Supervalu [4]'s president and chief executive officer last week said that innovative promotions are prompting customer excitement at the company's beleaguered banners.

New marketing tactics tested in the second quarter, like a “Sizzlin' Summer Giveaway” collect-and-win promotion, are helping drive customer engagement, said Craig Herkert [5] in a conference call with analysts discussing results for the period.

“Our customers are beginning to respond favorably to the more relevant merchandising and assortment that they are seeing in our stores,” he said. “And we've introduced new consumer promotions to drive them into our stores and experience our enhanced offering.”

The Sizzlin' Summer game, which was used at Albertsons stores in the company's Intermountain West division and at the Acme banner in Philadelphia, incentivized customers with game tickets for buying certain items, will be rolled out to three additional markets this fall, he said.

Other promotions included a “Plenty for Twenty” ad campaign at Cub Foods in the Minneapolis market, which had a social media component as well as customers were encouraged to tell their own stories of meal-savings strategies through Facebook.

“Both Plenty for Twenty and Sizzlin' Summer were well received and drove sales in many fresh departments,” Herkert said.

Although the company did swing to a profit, reporting $60 million in net income, same-store sales were still negative for the 12-week quarter, which ended Sept. 10. The 3.8% negative comps represented an improvement over the preceding quarter, however, and provided an indication that the company was making progress at slowing its traffic deterioration.

“I am pleased with the progress we are making,” said Herkert, citing its “hyper-local” merchandising efforts and shrink reduction, in addition to improved marketing and promotion.

In addition to the Sizzlin' Summer and Plenty for Twenty campaigns, Supervalu also introduced a “fair price plus” initiative at its Jewel-Osco chain in Chicago aimed at improving its value perception for produce. Pricing on about 200 items has been adjusted, the company said.

“There's a lot of enthusiasm around this effort, and we're looking forward to having it in most of our banners prior to the end of the year,” Herkert said.

Still, same-store sales for the quarter, which ended Sept. 10, were down 1.8% for the quarter, and total revenues fell 2.6%, to $8.4 billion.

Basket size increased 200 basis points on a year-over-year basis, driven by product-cost inflation of 4.5%, partially offset by a 2.5% decrease in the average number of items per transaction. Same-store customer counts were down 3.8% compared with the year-ago second quarter.

At the company's limited-assortment Save-A-Lot division, identical-store sales were up 3%, although the company reduced the number of planned net openings for the banner to about 80-90, vs. previous projections of 160.

Through the 28-week first half, net income totaled $134 million on sales of $19.5 billion, vs. a loss of $1.4 billion in the year-ago span on sales of $20.2 billion.

“Although the company appears to be making very gradual progress with volumes, we saw several areas of concern in the quarter,” said Karen Short, a New York-based analyst at BMO Capital Markets.

She cited a 2.5% decrease in the number of items per basket, the declining traffic and weaker margins in the wholesale divison among her concerns.

Q2 RESULTS

Qtr Ended 9/10/11 9/11/10
Sales $8.4B $8.7B
Change -2.6%
Comp-store -1.8%*
Net Income $60M ($1.5B)**
Change N/A
Inc/Share 28 cents ($6.94)
28 Weeks 2011 2010
Sales $19.5B $20.2B
Change -3.3%
Comp-store N/A%
Net Income $134M ($1.4B)
Change N/A
Inc/Share 63 cents $6.63
* EXCLUDING GAS.
**REFLECTS A $1.6 BILLION GOODWILL WRITE-DOWN AND OTHER ONE-TIME CHARGES.