Supervalu Continues to Fight Losses

About a month since the close of the deal that created a new, leaner Supervalu Inc., the Minneapolis-based grocery operator continues to post losses that have haunted the company for multiple consecutive quarters.

Supervalu reported fourth quarter fiscal 2013 net sales of $3.89 billion (down 2.3 percent) and a net loss of $1.41 billion, or $6.65 per diluted share. The decrease in net sales primarily reflects a decline in identical store sales of 4.1 percent for Retail Food and 2.6 percent for Save-A-Lot network identical store sales, the company reported.

Fourth quarter Retail Food net sales were $1.09 billion compared to $1.14 billion last year, a decline of 4.4 percent, primarily reflecting identical store sales of negative 4.1 percent driven by competitive pressures in certain markets and a lower level of promotional spending.

Retail Food adjusted operating loss was $31 million, or 2.8 percent of net sales, compared to $42 million, or 3.6 percent of net sales, last year. The improvement is being credited to Supervalu's cost-cutting initiatives that were partially offset by the impact of negative same-store sales.

“This past quarter was largely about transitioning the company for the future, and I am proud of the many things we accomplished in my first 60 days,” said Sam Duncan, Supervalu’s president and CEO.

Part of that transition will be shifting more decision-making from corporate headquarters to local stores, Duncan said during this week's earnings call.  "There is no way anybody here in Minneapolis can tell somebody at Farm Fresh in Virginia the type of items they need to run in their ads for the customers -- it just won't work," he said.

This decentralization plan was a key reason behind last month's layoff of 1,100 workers, including 600 at HQ. "It was very apparent our corporate staff needed a significant overhaul," Duncan said. "We didn't need as many employees for the smaller company, and decentralized decision-making meant fewer jobs at headquarters."

Q4 Save-A-Lot net sales were $969 million compared to $984 million last year, a decrease of 1.5 percent, reflecting the impact from network same-store sales of negative 2.6 percent partially offset by the benefit from net new store openings.

“I brought in Ritchie Casteel as Save-A-Lot’s new president and CEO, and he has already right-sized that organization’s overhead and, along with me, met with a number of licensees to understand what we can do to help drive sales and improve the overall operating model.”

Q4 Independent Business net sales were $1.83 billion compared to $1.86 billion last year, a decrease of 1.3 percent. This decline reflects a lower level of new business during the quarter which resulted from a challenging affiliation environment since the company announced it would review strategic alternatives.

Adjusted Q4 losses from continuing operations were $30 million, or 14 cents per diluted share; adjusted earnings were $5 million, or 2 cents per diluted share.

“In the Independent Business, I am very pleased that Janel Haugarth will continue to lead this very important part of our company and am especially grateful for the support we have received from our retailers," Duncan said. "I have talked and visited with a number of them and we have established a new National Retailer Advisory Group to facilitate feedback and information sharing."

Commenting on the Retail Food segment, Duncan added, “Our banner presidents and their leadership teams are in place and have begun to execute on our decentralized model, with greater autonomy and accountability. They are energized by this change and excited to drive sales and cash in their stores.”

Duncan said the company has "taken the necessary steps to right-size our corporate overhead and move specific responsibilities into our business segments." Simplifying Supervalu's technology needs is "an important part of the strategy going forward," he said, noting that new chief information officer Randy Burdick "has a proven history of success." Also key to the management team as Supervalu aims to improve its fresh offerings and drive private label growth, Duncan added, are Mark Van Buskirk, EVP of merchandising, marketing and pharmacy; and Steve Fox, SVP of food merchandising.

“My focus now is on the customer and driving sales increases in all our business units. I am excited to be leading this company and believe that operating results can be improved,” Duncan said.

Supervalu Inc. operates 3,420 stores composed of 1,900 independent stores serviced primarily by the company’s food distribution business; 1,331 Save-A-Lot stores, of which 950 are operated by licensee owners; and 191 traditional retail grocery stores.