Supervalu leaders outline strategy for business
MINNEAPOLIS — Supervalu's new leaders unveiled their vision for a smaller, more efficient company during a presentation to lenders last week.
The company, which recently announced plans to sell off several retail brands — including its Albertson's, Jewel-Osco, Acme, Shaw's and Star Market stores — said it's keeping its strongest brands and planning several cost-saving moves.
Going forward, Minneapolis-based Supervalu will have three business segments:
— The Save-A-Lot discount food chain with more than 1,300 stores in 35 states.
— Five regional brands, including Cub Foods, Shop 'n Save, Farm Fresh, Shoppers and Hornbacher's.
— A wholesale distribution business serving about 2,500 independent retailers nationwide.
That business has 19 distribution centers, including the Supervalu distribution center in Urbana and the W. Newell & Co. produce distribution center in Champaign.
Once the divestiture of stores is complete, Supervalu figures its sales and earnings will be only about half of what they were previously.
The company projects $17.2 billion in sales and $745 million in earnings before interest, taxes, depreciation and amortization.
Nearly half the sales and about a third of the earnings come from the distribution business serving independent retailers.
In the presentation, Supervalu called itself the third-largest food wholesaler in the country — and the largest one that's a public company.
Regionally, Supervalu is the top wholesaler in the North and West region and the Midwest and Southeast region — and the No. 2 wholesaler in the East.
Of the independent retailers Supervalu serves, regional chains with 10 or more stores make up about 46 percent of the business.
Retailers with two to nine stores account for another 35 percent, while single-store retailers make up the remaining 19 percent.
Supervalu characterized its independent business segment as "a stable business with strong operations."
Forty-four percent of its top 25 customers have been clients for 20 or more years, the company said in a filing with the Securities & Exchange Commission.
Supervalu said it has "excess capacity" in its distribution centers. That gives it the opportunity to grow business in existing facilities, the company told lenders.
In the presentation, Supervalu said there's also opportunity to grow the Save-A-Lot chain.
That chain, founded in 1977, is headquartered in St. Louis. Supervalu claims Save-A-Lot has the most stores of any "hard-discount grocery banner," with competitors that include Aldi, Bottom Dollar and Trader Joe's.
The chain is served by its own network of 16 distribution centers employing more than 7,000 non-union workers. That network also has "excess capacity," the company said.
Save-A-Lot tends to operate outside urban areas. Only 7 percent of the stores are in urban locations, 13 percent are in suburban spots, 32 percent are considered "exurban" and the remaining 48 percent are rural.
Save-A-Lot stores are generally about 15,000 square feet, and 90 percent of the locations are leased. Many of the buildings previously housed other stores.
Supervalu's third segment — the regional retailers — were characterized by the company as "attractive regional banners with limited price investment necessary to improve operating trends."
— The 70-store Cub Foods chain, the market leader in the Minneapolis-St. Paul area. Forty-four of the stores are owned by Supervalu, while 26 are franchise stores.
— The 56-store Shoppers chain, considered the "value leader" in the Washington, D.C./Baltimore area.
— The 42-store Shop 'n Save chain, which holds the No. 3 spot in the St. Louis market.
— The 43-store Farm Fresh chain, which is No. 3 in the eastern Virginia market that includes Norfolk, Portsmouth and Newport News.
— The six-store Hornbacher's chain, which is the market leader in Fargo, N.D.
About 80 percent of those stores were either new or remodeled in the last seven years.
Those chains could lend themselves to new store growth "without risking market saturation," Supervalu said.
Supervalu's new leadership team — which includes incoming CEO Sam Duncan and incoming Chairman Bob Miller — said it expects $250 million of cost savings in the first two years, with more than half of that achieved in the first year.
The company said it's looking for additional places for savings, including:
— "Right-sizing (the) organization for ongoing operations."
— Streamlining processes.
— Cutting what it pays for professional fees and services.
— Trimming costs in maintenance and information technology.