Supervalu will continue to focus on value pricing, hyperlocal merchandising in fiscal 2013

Company reports Q4, full-year results

MINNEAPOLIS — Looking ahead to fiscal 2013, Supervalu will continue its focus on "hyperlocal" merchandising, value-driven pricing and its transformational remodels to build on its momentum coming out of fiscal 2012. "For us momentum is just starting to build," Craig Herkert, Supervalu president and CEO, told analysts Tuesday morning. "We enter the new fiscal year as a leaner company together with a business strategy" that will drive results, he added.

In late morning trading, shares of Supervalu were up almost 9% to $5.77.

"Hyperlocal will be our true point of differentiation," Herkert said. The strategy in the past year has reinvigorated store staff, Herkert said, and increased customer engagement. "This is a major cultural shift for our company, but one that store teams have genuinely embraced."

That “hyperlocal” retailing concept empowers store directors to utilize tools and insights within their immediate trade areas. Local operators are helping to define the assortment, pricing, promotions and services to the neighborhood.

In addition to facilitating a local product assortment, Supervalu has also worked on lowering its price profile. In September, Supervalu introduced its “Fresh Produce, Fresh Prices” initiative, which effectively lowered the everyday price on around 200 key produce items.

Supervalu's value proposition may be most apparent across its produce department, which makes up as much as 10% of total sales and represents a key driver of store choice for most shoppers. More than 200 items were reduced by up to 20% across all stores by January 2012. Since first implemented during the third quarter, unit sales are already up 300 basis points.

Through 2013, Supervalu will focus marketing on wooing existing shoppers to spend more, Herkert said. "Over time we would expect to generate incremental traffic as secondary shoppers shop with more frequency," he said.

Supervalu reported full-year net sales of $36.1 billion, down 3.7%, and a net loss of $1.04 billion, or $4.91 per diluted share. Same-store sales were down 2.8%, representing an improvement of 300 basis points over fiscal 2011. Customer count was down 3.9% and average ticket was up 1.1%.

The company expects to generate fiscal 2013 earnings per diluted share within a range of $1.27 to $1.42. “We are committed to fair price plus promotions and will intensify our efforts as we enter the second year of our business transformation," Herkert stated. "As we move into fiscal 2013, we see another year of improving identical store sales and will continue to take appropriate steps to deliver greater value to our customers and move closer to becoming America’s neighborhood grocer."

Net sales for the 52-week fiscal year are estimated to be between $35 billion and $35.5 billion, which includes the reduction of approximately $500 million in sales from the sale of the majority of the company’s fuel centers. Identical store sales growth, excluding fuel, is projected to be negative 1% to negative 2%. Debt reduction is estimated to be approximately $400 to $450 million and capital spending is projected to be approximately $675 million. Supervalu expects to complete approximately 100 store remodels and increase Save-A-Lot’s store count by approximately 50 stores, including licensed locations.

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