RICHMOND, Va. -- Supervalu will focus on reducing costs, expanding price-impact formats and leveraging its size in order to maintain its growth position in the food distribution industry, Jeff Noddle, newly appointed president and chief operating officer, said here last week.
In an interview with SN at the company's annual meeting here, Noddle reaffirmed Minneapolis-based Supervalu's course while stressing the need to continue to adapt to industry changes.
"Staying with our strategy requires changes," said Noddle, who was named president June 22 and is viewed as a likely successor to chairman and chief executive officer Mike Wright, who said he would retire as CEO within the year. "We're seeing a lot of consolidation among manufacturers today, jut as we saw among retailers in the past few years.
"For Supervalu to be successful, we have to weigh in and see how these changes swirling around us affect us," he added. "Often that means opportunities for us as well as challenges."
Noddle said his goals are to deliver earnings to shareholders by leveraging Supervalu's volume while extracting working capital from the business. Supervalu will also expand its retail store base, particularly from its "price impact" stores, he said.
Noddle called Sav-A-Lot, Supervalu's limited assortment store, "one of our most exciting banners, and one which we intend to grow aggressively." The company has added 29 corporate and licensed Sav-A-Lot stores during its fiscal first quarter which ended last week. The company hopes to add 120 to 160 new Sav-A-Lot stores during the year.
"We're just at the beginning of this retail expansion," Noddle said. "There is still a long way to go."
Noddle said hand-held scanning devices and expansive prepared food offerings are some of the most innovative ideas he's seen in the grocery business recently. He said he envisions supermarkets becoming "the center of convenience" for communities, offering not only food but services.
The integration of Richfood Holdings, the Richmond-based distributor acquired by Supervalu last year, was a major theme at the shareholders meeting. It was Supervalu's first annual meeting held outside of the Twin Cities, Wright noted.
Speaking to shareholders, Wright described the Richfood acquisition as a situation where "one and one make three or four," for Supervalu.
"We have long admired Richfood and their track record," Wright said. "The combination was terrific for Supervalu for many reasons, obviously because it enhances our financial results and adds a new geographic market, but more importantly, it brought us customers that represent some of the finest independently owned chains and supermarkets in the country."
Supervalu has more than doubled sales to $20 billion since 1990, Wright added. In addition, since 1990 the company has become the largest food distributor in the U.S. and its 10th largest retailer.
Wright sad the company would continue growing by implementing its core competencies, including expertise in retail and logistics. "In a time of consolidation, national purchasing scope and leverage have emerged as the key to achieving the lowest product cost," he said. "Our $40 billion in purchase power ensures the competitiveness of our own retail operations and significantly enhances our distribution customers' ability to compete in the marketplace."
Wright however expressed disappointment in the company's stock price, which was down 24% during fiscal 2000. Wright noted many food companies were facing similar difficulties as the sector lost favor to technology stocks. "We cannot change Wall Street, but we can continue to deliver results," he said.
In other business, Lawrence A. Del Santo, William A. Holder, Susan E. Engel and Harriet Perlmutter were elected to seats on Supervalu's bard of directors, with terms expiring in 2003. Also, KMPG Peat Marwick was approved by shareholders as the company's auditors.
Supervalu said financial results for the 16-week first quarter ended June 17 showed sales up 31.5% to a record $7 billion -- the distributor's 13th consecutive quarter of record sales, it noted -- while net income was up 25.4% to $70 million, excluding the net benefit of onetime items taken in last year's first quarter.
Operating cash flow for the quarter rose 39% to $271 million after adjusting for the benefit of last year's one-time items.
Supervalu said sales in its retail food segment jumped 35% to $2.7 billion, reflecting the addition of 102 retail stores from the Richfood acquisition and 85 new store openings; however, same-store sales fell 1.2% due primarily to cannibalization. Operating earnings for the retail segment increased 38.2% to $109.4 million, the company said.
For the food distribution segment, Supervalu said sales climbed 29.3% to $4.3 billion, driven primarily by the addition of nearly 800 new customers from the Richfood acquisition and incremental volume from other new customers, principally Kmart. Operating earnings for the segment rose 41.3% to $74.9 million, the company noted.