Supervalu Turnaround Efforts Continue

With sales still in the negative column for the first quarter of its 2014 fiscal year, Supervalu this week trumpeted its Q1 highlights: closing the sale of five retail banners, refinancing $400 million in bonds, reducing the rate of sales decline in all three of its business segments, decentralizing retail operations and lowering administrative costs.

“Our first quarter was highlighted by a renewed focus on driving sales and cash in all segments of our business and I’m pleased with the progress we made, especially the sequential improvement in sales trends from the fourth quarter of fiscal 2013 in each of our business segments,” said Sam Duncan, Supervalu's president and CEO. “We have a good foundation, strong leadership team, improved debt maturity profile, and achievable goals across each operating segment.”

Supervalu reported Q1 net sales of $5.16 billion, compared to $5.24 billion last year, a decline of 1.5 percent. The decrease primarily reflects a 3 percent drop in same-store sales for Retail Food and a 1.9 percent slip for Save-A-Lot. Net earnings were $85 million, or 34 cents per diluted share.

“In the Independent Business, we reduced the rate of sales decline from the fourth quarter in spite of lower military sales. Our first National Retail Advisory Group meeting was very successful and we continue to talk with potential new customers," Duncan said. “Save-A-Lot also showed improved ID sales trends across its store network and within its corporate stores while lowering the inside margin. Save-A-Lot has made great strides on bettering its perishable offering and its overall in-store merchandising.”

Q1 Independent Business net sales were $2.46 billion compared to $2.48 billion last year, a decrease of 0.6 percent. Save-A-Lot net sales were $1.27 billion compared to $1.29 billion last year, a decrease of 1.6 percent. Identical-store sales for corporately operated stores within the Save-A-Lot network were down 1.2 percent.

"Our Retail Food banners posted a 110 basis point improvement in ID sales trends over last quarter," Duncan said. "We have completed the transition to the decentralized operating model and are focused on driving store execution and standards.”

Q1 Retail Food net sales were $1.43 billion compared to $1.47 billion last year, a decline of 2.9 percent, primarily reflecting a same-store sales drop of 3 percent. Identical store sales were driven by competitive pressures and the impact of incremental price investments.

Other Q1 highlights:

- The sale of five retail grocery banners (Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market), completed March 21. 

- Refinancing an existing $1.5 billion secured-term loan agreement, reducing  the interest rate margin from 5 percent to 4 percent.

- Issuing $400 million aggregate principal amount of 6.750 percent senior notes due in 2021, proceeds used to fund the purchase price of the $372 million aggregate principal amount of outstanding 8 percent senior notes due in 2016.

In other news, Supervalu elected the final two members to its reconstituted board of directors: Eric G. Johnson, president and CEO of Baldwin Richardson Foods Co., and Sam Duncan, Supervalu's president and CEO.

Baldwin Richardson is one of the largest African American-owned businesses in the food industry.  Johnson was CEO of Johnson Products Co. from 1989 to 1991, purchased Baldwin Ice Cream Co. in 1992 and, in 1997 completed the acquisition of Richardson Foods from Quaker Oats Co. to form Baldwin Richardson Foods, a major producer of products and ingredients for McDonald’s, Kellogg, General Mills and Frito Lay.

Minneapolis-based Supervalu Inc. operates a network of 3,420 stores composed of 1,900 independent stores serviced primarily by the company’s food distribution business; 1,332 Save-A-Lot stores, of which 957 are operated by licensee owners; and 191 traditional retail grocery stores.


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