Supervalu Slows Price Cuts, Posts Loss

MINNEAPOLIS — Supervalu [2] here said Thursday it is rethinking its aggressive price-reduction efforts and weighing a more "holistic" approach to value.

The revised effort comes as Supervalu posted a loss of $111 million in the fiscal second quarter on a 4.6% decline in sales, to $8 billion. Same-store sales in the company’s retail food division fell 4.3% for the quarter, and same-store sales in the Save-A-Lot division were down 3.7%.

The loss for the 12-week quarter, which ended Sept. 8, was mostly due to non-cash charges for asset impairment and previously announced store closures. The operating loss in the quarter totaled $41 million, vs. operating income of $216 million in the year-ago quarter. Net income was $60 million in the year-ago period.

Retail segment sales were down 7.3% to $5.2 billion, due in part to the disposition of fuel centers, which added about $158 million in sales last year.

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Wayne Sales, Supervalu’s chairman, president and chief executive officer, said the company was “pleased with the initial results” of its price investments in the Jewel-Osco division in Chicago, but he added that Supervalu is “assessing its on-going approach to price investments, its value proposition and how it goes to market.”

“We're developing strategic plans that will help differentiate our stores and build upon our strengths, our people, products, our services and our convenient locations, so that we can begin to attract customers back to our stores,” he said. “Competitive pricing is only one component of articulating a total value proposition and delighting our customers and keeping them coming back to our stores."

He noted that about 90 basis points of the same-store sales decline was a result of strategic lowering of prices and increasing promotional activity.

The Save-A-Lot limited-assortment store division posted operating earnings of $18 million for the quarter, including $16 million in pre-tax charges primarily related to store closure costs. Excluding those costs, operating earnings were $34 million, vs. $50 million a year ago. Sales were up 0.1%, to $973 million. The same-store sales were weakest in the corporate stores, largely driven by customer count erosion, Sales explained.

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“As we are doing with the retail food stores, we are taking a fresh look at our strategic initiatives to ensure ourselves that we are taking the appropriate steps to drive this business forward. The team has been testing several traffic-driving ideas in one market that is showing an encouraging initial results and which we plan to implement more broadly in the coming quarters.”

In the company’s wholesaling division serving independent retailers, operating earnings were down about 10.7%, to $50 million, on a sales increase of about 1.1%, to $1.87 billion.

In addition, Supervalu said it has named Janel Haugarth to lead its independent business organization, succeeding Leon Bergmann, who is leaving the company effective Oct. 19. Haugarth is a 35-year veteran of the company  who led the  supply chain services division from 2006-2011 and was the executive vice president of merchandising and logistics from 2011-2012. Bergmann joined the company in January 2011 as group vice president of independent sales, marketing and merchandising and was named president of the organization in July of that year.

The company also confirmed reports that it had received “indications of interest and is in active dialogue with several parties” related to its strategic review for the potential sale of assets.

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