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Sales tools, localized marketing and inflation driving Supervalu comps

BY Michael Johnsen

MINNEAPOLIS — Hyper-local initiatives and the rollout of sales tools at Supervalu, along with inflation, are helping to drive better-than-expected comparable sales for the company’s second-quarter results, Supervalu reported Wednesday morning.

Through hyper-local initiatives, store directors now control half of the promotional space within the store, Supervalu reported during an analyst conference call. "We’ll continue to emphasize the unique nature of each store," said Craig Herkert, Supervalu president and CEO. Herkert identified an Albertsons in Cheyenne, Wyo., that dressed up its store and store associates during the Cheyenne Frontier Days, a 10-day rodeo event in September that attracts upward of 70,000 tourists. Because of the merchandising ceded to the store director — bottled water was moved to the checkstand, for example — the store realized a significant uplift in comparable sales, particularly in snack foods and beverages.

"Our 8 Plays to Win strategy is gaining traction, and we remain on plan with our business transformation," Herkert stated. "Increased discipline and analytical tools are helping to advance hyper-local retailing initiatives, which are starting to have a positive impact on our customers’ shopping experience," he said. The company has been rolling out sales tools — in-stock management, space allocation and promotional effectiveness — that are assisting perishable positions across 69% of its store base and nonperisable positions across 74% of its store base. Supervalu plans to have these inventory management tools implemented across its entire store base by the end of the year.

According to a Deutsche Bank research note issued Tuesday, the in-stock management tool analyzes scanner data over a trailing 13-week period and identifies eight to 10 potential out-of-stocks weekly. Improved out-of-stocks is expected to improve sales and customer satisfaction. The space allocation tool uses seasonal information to determine unit movement for certain items over a specific time frame. This information enables store-level associates to better allocate shelf space, expanding facings for better-selling items.

Supervalu realized a 0.6% gain in customer count from first quarter 2012 to the second quarter ended Sept. 10, and an average ticket increase of 1.5%. Same-store sales were up 2.1% in those sequential quarters, and gross profit was down 0.1%. Private-label penetration was up 60 basis points to 19%.

According to Herkert, those results were aided by inflation but also reflected positive traffic trends borne from the 8 Plays to Win strategy — an eight-piece strategy that includes simplifying processes and funding across the company, delivering better value and customer service through neighborhood marketing, and an emphasis on "fresh" and a commitment to growing its Save-a-Lot discount banner and its wholesale service to independent grocers. "While consumers remain cautious and the competitive environment remains challenging, we expect to see continued improvement in ID sales trends this quarter, helped by a pickup in food inflation and traction from the rollout of the aforementioned new tools/processes," noted Charles Grom, Deutsche Bank research analyst.

Supervalu reported second quarter fiscal 2012 net sales of $8.4 billion, down 3.6% compared to the same quarter last year, and net earnings of $60 million, or $0.28 per diluted share. The results exceeded analyst estimates of $0.21 per diluted share. "The upside was driven by better-than-expected [same-store] sales … and gross margin," said Edward Kelly, Credit Suisse analyst. "We believe much of the improvement in sales has been inflation driven, and price increases appear to have peaked. The consumer is also a concern. Consequently, current trends seem to be the realistic run-rate for now."

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Preliminary injunctive relief denied in WAG/ESI dispute

BY Michael Johnsen

DEERFIELD, Ill. — According to a statement issued by Walgreens Wednesday morning, the arbitrator in the Express Scripts/Walgreens suit issued a ruling Sunday denying the parties’ requests for preliminary injunctive relief.

The arbitrator will consider the underlying merits of the parties’ claims at a future date, Walgreens reported.

Express Scripts filed suit against the Chicago-based pharmacy on Sept. 7, seeking relief from Walgreens’ informing patients that the Walgreens pharmacy base will not be part of the Express Scripts pharmacy network at the top of the year, and that Walgreens has been working toward keeping those patients.

The U.S. District Court for the Northern District of Illinois on Sept. 15 ruled that the suit will be halted pending private arbitration.

According to a District Court filing Tuesday, an initial status hearing is set before magistrate judge Maria Valdez on Nov. 3.

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NACDS to Senate: Prevent move to ‘personal importation’ of prescription drugs

BY Antoinette Alexander

ALEXANDRIA, Va. — An amendment to the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations bill that would prohibit the FDA from preventing an individual not in the business of importing a prescription drug from importing prescription drugs from Canada, has sparked concern with the National Association of Chain Drug Stores.

In a letter to U.S. Sen. David Vitter, R-La., NACDS urged the U.S. Senate to consider the patient safety consequences of allowing "personal importation" of prescription drugs and to refrain from moving to such a system through an amendment to the legislation that allocates funds to the FDA.

"NACDS shares your goal of reducing the cost of prescription drugs," NACDS wrote. "However, we do not believe that consumer safety can be ensured under a prescription drug reimportation system. In addition to questions concerning the safety and effectiveness of imported drugs, individuals who obtain medications through personal importation are less likely to benefit from the professional services of their local licensed pharmacist. Prescription drug misuse and nonadherence accounts for as much as $290 billion dollars annually; therefore, it is more important than ever to foster relationships between patients and pharmacists.

"Additionally, NACDS is very concerned about the growing problem of illegal Internet drug sellers. Your amendment would allow for re-imported drugs to be sold over such websites, yet illegitimate websites are not pharmacies, and are not licensed in the United States. They often ship unapproved, counterfeit, mislabeled or adulterated products presenting serious health and safety concerns. We would welcome the opportunity to work with you on developing policy solutions that target these illegitimate drug sellers at chokepoints and construct appropriate barriers to the illicit activities."

As alternatives for helping to reduce healthcare costs, NACDS urged support for S. 274, the Medication Therapy Management Empowerment Act of 2011, which it believes would improve Medicare’s utilization of pharmacist-patient interactions to help patients take medications appropriately, and S.1356, the Affordable Medicines Utilization Act, which would encourage states to increase Medicaid generic dispensing rates.


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