Market Segments - Discount Grocery Chains
Betting that consumer thriftiness won't be going away anytime soon, Supervalu Inc. Chief Executive Craig Herkert Tuesday unveiled plans to double the size of the underperforming grocer's discount chain Save-A-Lot to about 2,400 stores over five years.
"This is not an abandonment of traditional grocery; this is an acceleration of Save-A-Lot," Mr. Herkert, a former Wal-Mart Stores Inc. executive hired in May, told analysts during Supervalu's fiscal second-quarter earnings call.
Supervalu's main business will remain its chain of traditional supermarkets, including Albertson's, Jewel-Osco and Farm Fresh. Save-A-Lot's 1,180 stores have a similar format to that of discount-store chain Aldi U.S., selling a limited number of items, mostly private label, at lower prices every day versus a discount model used by traditional grocers.
Supervalu, the nation's fourth-largest U.S. food retailer by sales, Tuesday reported profit for the quarter ended Sept. 12 of $74 million, or 35 cents a share, down 42% from $128 million, or 60 cents a share, a year earlier. Total revenue fell 7.5% to $9.46 billion.
Supervalu has struggled to capitalize on its national scale since it acquired more than 1,100 Albertson's stores in 2006. A more centralized purchasing structure for the chain's 2,500 stores and the 1,800 supermarkets it supplies as a wholesaler should drive down nondiscounted, or everyday, prices of national-branded items. Mr. Herkert called the disparity between discounted and nondiscounted prices "out of whack."
"There is no single pill we get to take to get this right.
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Posted by staff at October 21, 2009 12:36 PM