What will become of Supervalu?

Discuss this poll 7

on Jul 20, 2012

A lot of really good people. I hope they can pull it together. I am pulling for them.

on Jul 17, 2012

But it's an inconsistent lousy operation

on Jul 13, 2012

At least the Titanic had a band playing on the deck!!

on Jul 13, 2012

There is also the possibility that Walmart might acquire the Sav-a-Lot stores and turn them into neighborhood markets. This would even more negatively SuperValu's retailers. They are circling the drain.

on Jul 13, 2012

As a former Save-A-Lot New Store/Real Estate Development Manager of 5 years, I can tell you that the 70% of the stores owned and operated by independent Save-A-Lot Licensee's would not allow for a purchaser whom did not have their interest; consquently, I believe that they would prohibit Wal-Mart from acquring the SAL Banner, as the above-comment speculated. Out of the 1500 or so SAL locations, only about 400 are corporately owned by Supervalu - the balance are independently owned under License Agreements from Save-A-Lot/Supervalu.

It was also reported that SAL would be reporting earnings separately and apart from Supervalu's long-standing method of Consolidated Statements. This announcement, to report separately, on this, its only subsidiary, provides a glimpse into the internal thinking and a read between the lines: Given that it is a wholly owned subsidary and not a division, has its own suppy chain (not SVU), and is practically the only banner making money for them, there is a tremendous value between the warehouses; trucks; its IP and Private Label, etc.. plus the value in their corporately owned store leases, it'll be the first banner to be acquired.

The smart money might be on former and existing senior management to be the buyer for SAL- however, to be competitive, their EDLP model and the ability to attract new customers has to be fixed. It's not enough to only be able to attract the median income HH earner of <$45K; and only operate primarily in the Urban Cores; not when ALDI, their closest competitor, has figured out how to enter trade areas and straddle both spectrums of HH median incomes of <$60K. This is due in large part because Aldi has a two price point model - a Premium Private Label brand, which allows for a slightly higher price, and a lower priced price-impact selection. In fact some of what you might find in a Trader Joe's (their sister operation), will appear as the Premium Label on the shelves in an Aldi. Moreover, addtional competition from Bottom Dollar, Valu-King, Kroger's new roll-out called Ruler's and Shop-Rite's Price-Rite Banners all play into the perceived valuation of the SAL banner.

And then you have Ron Burkle at Juacipa, who is looking to find another West Coast type roll-up opportunity, either in the Mid-west or East Coast. I think with the latest Supervalu news, it's no longer a probability vs the possibility, in the extreme.

Interesting times in our business - especially from a Supermarket Real Estate perspective, which is my bailywick.

Thanks for all my Supermarket real Estate colleagues whom read and/or reply to this post.

Michael Romelotti
Director, Supermarket Leasing and Development
Sears Holdings Corp

on Jul 13, 2012

Save-A-Lot stores are two small for Walmart to do anything with

on Jul 13, 2012

Many Save-a-lots are larger than the grocery departments of the local Walmart with a better selection.

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